{"id":43403,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/exchange-agreement-netselect-inc-the-enterprise-of-america.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"exchange-agreement-netselect-inc-the-enterprise-of-america","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/exchange-agreement-netselect-inc-the-enterprise-of-america.html","title":{"rendered":"Exchange Agreement – NetSelect Inc., The Enterprise of America Ltd. and Roger Scommegna"},"content":{"rendered":" EXCHANGE AGREEMENT\n\n\n THIS EXCHANGE AGREEMENT (this \"Agreement\") is made and entered into as of\nMarch 31, 1998 (the \"Effective Date\") by and among NETSELECT, INC., a Delaware\ncorporation (\"NetSelect\"), THE ENTERPRISE OF AMERICA, LTD., a Wisconsin\ncorporation (\"Enterprise\"), and ROGER SCOMMEGNA, the only shareholder of\nEnterprise (the \"Enterprise Shareholder\").\n\n RECITALS\n \n A. The parties intend that, subject to the terms and conditions of this\nAgreement, NetSelect will acquire one hundred percent (100%) of the outstanding\nshare capital of Enterprise from the Enterprise Shareholder pursuant to the\nterms and conditions set forth herein in exchange for cash and shares of\nNetSelect Common Stock, in a transaction not intended to constitute a\nreorganization within the meaning of the Internal Revenue Code of 1986, as\namended.\n\n B. Upon the effectiveness of the Exchange (as defined below), all the\noutstanding shares of Enterprise will be transferred to NetSelect in exchange\nfor cash and shares of NetSelect Common Stock, as provided in this Agreement.\n\n C. The representations and warranties of Enterprise and the Enterprise\nShareholder herein are a material inducement to NetSelect to enter into this\nAgreement.\n\n AGREEMENT\n\n NOW, THEREFORE, the parties hereby agree as follows:\n\n1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms will\nhave the meanings set forth below:\n \n 1.1 \"Closing Indebtedness\" means, collectively, (i) the indebtedness\nrepresented by the Scommegna Obligations as defined in Section 2(c) below, and\n(ii) the indebtedness of Enterprise to the Zetley & Cohn Loan Trust, with\naggregate principal and accrued interest of such indebtedness collectively\naggregating $836,433.68 as of the Closing Date.\n\n 1.2 \"Enterprise Ancillary Agreements\" means, collectively, each agreement,\ncertificate or document (other than this Agreement) which Enterprise is to enter\ninto as a party thereto, or is to otherwise execute and deliver, pursuant to or\nin connection with this Agreement.\n\n 1.3 \"Enterprise Certificates\" means the share certificates representing\nall the Enterprise Shareholder's shares of Enterprise Stock.\n\n \n 1.4 \"Enterprise Net Sales\" means net revenues after the Closing Date from\nthe business activities that were conducted by Enterprise as of the Closing Date\nas described in the business plan delivered by Enterprise to NetSelect before\nthe Closing Date, but not from new lines of business conducted by Enterprise or\nNetSelect after the Closing Date or other new or additional business activities\nconceived or engaged in by the Enterprise Shareholder or other persons who were\nemployees of Enterprise before the Closing Date. The foregoing notwithstanding,\nthe term \"Enterprise Net Sales\" shall include all revenues from the pager\noperations and print operations (as defined in Exhibit 1.4 attached hereto)\n ----------- \neither conducted by Enterprise prior to the Closing Date or under development by\nEnterprise prior to the Closing Date; provided, however, that with respect to\nprint operations, only revenues from transactions or sales with gross margins of\n20% or more (or from transactions which, although having a gross margin of less\nthan 20%, the Chief Executive Officer of NetSelect expressly approves or\ndirects, or otherwise agrees will be included in the definition of \"Enterprise\nNet Sales\") shall count as \"Enterprise Net Sales.\"\n\n 1.5 \"Enterprise Stock\" means the shares of Enterprise, $1.00 par value per\nshare, comprising the authorized capital of Enterprise, as constituted\nimmediately prior to the Closing, as defined in Section 7.1 below.\n\n 1.6 \"Exchange\" means, collectively, the exchange of all of the outstanding\nEnterprise Stock for cash and the Exchange Shares.\n\n 1.7 \"Exchange Shares\" means the one hundred five thousand (105,000) shares\nof NetSelect Common Stock that will be issued under this Agreement.\n\n 1.8 \"Material Adverse Effect\" means any event, change or effect that is\n(or will with the passage of time be) materially adverse to the condition\n(financial or otherwise), properties, assets, liabilities, business, operations,\nresults of operations or prospects of the Enterprise or NetSelect, as applicable\nin context.\n\n 1.9 \"NetSelect Ancillary Agreements\" means, collectively, each agreement,\ncertificate or document (other than this Agreement) which NetSelect is to enter\ninto as a party thereto, or is to otherwise execute and deliver, pursuant to or\nin connection with this Agreement.\n\n 1.10 \"NetSelect Common Stock\" means the Class A Common Stock, $0.001 par\nvalue per share, of NetSelect.\n\n 1.11 \"NetSelect Financial Information\" means the unaudited, consolidated\nincome statement of NetSelect for the twelve months ending December 31, 1997 and\nthe month ended January 31, 1998, and certain consolidated balance sheet\ninformation of NetSelect as of January 31, 1998, to be made available by\nNetSelect to Enterprise and the Enterprise Shareholder as provided in Section\n6.1(a).\n\n 1.12 \"Schmidt Receivable Amount\" means the amount of indebtedness of Robert\nSchmidt to Enterprise, which amount is $23,139.63 as of the Closing Date, and\nthe balance of \n\n 2\n\n \nwhich as of January 31, 1998 is accrued on the balance sheet as of January 31,\n1998 included in the Enterprise Financial Statements.\n\n 1.13 \"Shareholder Ancillary Agreements\" means, collectively, the\nInvestment Representation Letter, the Stock Power, Form W-8 and each other\nagreement, certificate or document (other than this Agreement) to which the\nEnterprise Shareholder is to enter into as a party thereto, or is to otherwise\nexecute and deliver pursuant to or in connection with this Agreement.\n\n Other capitalized terms defined elsewhere in this Agreement and not defined\nin this Section 1 shall have the meanings assigned to such terms in this\nAgreement.\n\n2. THE EXCHANGE\n\n (a) Subject to the terms and conditions of this Agreement, at the\nClosing:\n\n (1) the Enterprise Shareholder shall irrevocably assign and transfer\nto NetSelect all of his shares of Enterprise Stock, the amount of which is set\nforth beside his name on Exhibit A hereto, and in exchange therefor NetSelect\n --------- \nshall issue to the Enterprise Shareholder the Exchange Shares; and\n\n (2) in addition, NetSelect shall pay the Enterprise Shareholder the\naggregate sum of $1,445,000 minus the amount of the Closing Indebtedness, and\nminus the Schmidt Receivable Amount, in cash (or by wire transfer of immediately\navailable funds), and shall execute a note (the \"Note\") attached hereto as\nExhibit 2(a), which Note shall evidence NetSelect's promise to pay the\n------------ \nEnterprise Shareholder (i) $633,333.33 (without a stated interest rate) each\nyear for three additional years beginning on the first anniversary of the\nClosing Date, as defined in Section 7.1 below, and continuing on the second and\nthird anniversaries of the Closing Date, subject to the provisions of Section 11\nbelow, and (ii) $300,000 (without a stated interest rate) on the earlier to\noccur of (i) the closing of NetSelect's initial public offering of its equity\nsecurities or (ii) January 1, 1999 (the \"Additional Deferred Amount\"). The Note\nshall be secured by certain assets of Enterprise pursuant to a Security\nAgreement with the Enterprise Shareholder in the form of Exhibit 2(b).\n ------------ \n\n (b) Subject to the terms and conditions of this Agreement, NetSelect shall\npay to the Enterprise Shareholder the \"Earn-Out,\" as defined below. The parties\nacknowledge that NetSelect and the Enterprise Shareholder intend, at the\nClosing, to enter into an Employment Agreement dated the Closing Date in\nsubstantially the form of Exhibit 9.9A attached hereto (the \"Scommegna\n ------------ \nEmployment Agreement\"). For each calendar year during the period from the\nClosing Date through December 31, 2000 (in other words, calendar years 1998,\n1999 and 2000), if the Enterprise Shareholder has remained employed as an\nemployee of NetSelect for the entire calendar year (with respect to 1998 from\nthe Closing Date through the end of the calendar year), then subject to Section\n11 below, NetSelect shall pay the Enterprise Shareholder, within ninety (90)\ndays after the end of each such calendar year, an amount in cash equal to five\npercent (5%) of the excess of the dollar amount of Enterprise Net Sales for such\nyear (as reflected in NetSelect's financial statements) over Four Million\nDollars ($4,000,000). In no event, however, \n\n 3\n\n \nshall aggregate Earn-Out Payments exceed One Million Dollars ($1,000,000). If\nthe Enterprise Shareholder's employment is terminated by NetSelect during such\nperiod in a Termination Without Cause or if the Enterprise Shareholder\nterminates employment for Good Reason, as defined in Section 6 of the Scommegna\nEmployment Agreement, then the Enterprise Shareholder shall be entitled to\nreceive the Earn-Out payments for each of the three calendar years, at the times\nand in the amounts that he would have been entitled to if he had remained\nemployed by NetSelect during the entire Earn-Out period; and if the Enterprise\nShareholder's employment is terminated during such period in a Termination \"For\nCause\" (as defined in Section 6 of the Scommegna Employment Agreement) by reason\nof the Enterprise Shareholder's death (other than by suicide) or disability (as\ndefined in Section 6 of the Scommegna Employment Agreement), then the Enterprise\nShareholder shall be entitled to receive the Earn-Out payment for the calendar\nyear in which such event occurred (in the case of disability the year in which\nsuch disability commenced), but not for subsequent years.\n\n (c) Exhibit 2(c) attached hereto sets forth certain obligations owed by\n ------------ \nEnterprise to Lillian and\/or Antonio Scommegna (the \"Scommegnas\"), including the\nprincipal and accrued interest owed with respect to each such obligation as of\nthe Closing, a brief description of the material terms of such notes and\/or\nother obligations, and the instruments pursuant to which such obligations were\ncreated (the \"Scommegna Obligations\"). Before the Closing, Enterprise shall\ndeliver to NetSelect copies of all instruments reflecting the Scommegna\nObligations.\n\n (d) At or immediately after the Closing, NetSelect shall infuse such funds\nas are reasonably necessary to cause Enterprise to pay, or NetSelect shall on\nEnterprise's behalf pay the Closing Indebtedness (by wire transfer of\nimmediately available funds to an account specified by the person entitled to\nreceive such funds).\n\n 2.1 Exchange of Shares. At the Closing, all of the shares of Enterprise\n ------------------ \nStock that are issued and outstanding immediately prior to the Closing will be\nexchanged for the Exchange Shares and other consideration payable under this\nAgreement. Subject to surrender and delivery to NetSelect by the Enterprise\nShareholder of the applicable Enterprise Certificates at the Closing and an\naccompanying Stock Power (in a form approved by counsel to NetSelect and\nNetSelect's transfer agent) and Form W-8, the Enterprise Shareholder shall\nreceive a stock certificate for the Exchange Shares at the Closing.\n\n 2.2 Adjustments for Capital Changes. Notwithstanding the provisions of\n ------------------------------- \nSection 2.1 above, if at any time after the Effective Date and prior to the\nClosing, NetSelect recapitalizes, either through a subdivision (or stock split)\nof any of its outstanding shares into a greater number of shares, or a\ncombination (or reverse stock split) of any of its outstanding shares into a\nlesser number of shares, or reorganizes, reclassifies or otherwise changes its\noutstanding shares into the same or a different number of shares of other\nclasses (other than through a subdivision or combination of shares provided for\nin the previous clause), or declares a dividend on its outstanding shares\npayable in shares or securities convertible into shares of NetSelect Common\nStock (each event, a \"Capital Change\"), then the number of shares of NetSelect\nCommon Stock for which shares of Enterprise Stock are to be exchanged in the\nExchange shall be appropriately, equitably and proportionately adjusted so as to\nmaintain the proportionate interests of the Enterprise Shareholder contemplated\nby this Agreement.\n\n 4\n\n \n 2.3 Further Assurances. If, at any time after the Closing, NetSelect or\n ------------------ \nthe Enterprise Shareholder are advised by counsel that any further instruments,\ndeeds, assignments or assurances are reasonably necessary or desirable to\nconsummate the Exchange at or after the Closing, then Enterprise or NetSelect\n(as the case may be) and its officers and directors, and the Enterprise\nShareholder, shall execute and deliver such proper deeds, assignments,\ninstruments and assurances and do all other things that NetSelect or the\nEnterprise Shareholder have been so advised is reasonably necessary or desirable\nto consummate the Exchange.\n\n 2.4 Securities Laws Issues. NetSelect shall issue the Exchange Shares\n ---------------------- \npursuant to an exemption from registration under Section 4(2) and\/or Regulation\nD promulgated under the Securities Act of 1933, as amended (the \"1933 Act\").\nConcurrently with execution of this Agreement, the Enterprise Shareholder will\nexecute and deliver to NetSelect an Investment Representation Letter in the form\nof Exhibit 2.4A hereto (the \"Investment Representation Letter\"), and if\n ------------ \nimmediately after the Closing the Enterprise Shareholder transfers to Cleary (as\ndefined below) 10,000 of the Exchange Shares as described in Section 2.6 below,\nthen Cleary will execute and deliver to NetSelect an investment representation\nletter in substantially the form of Exhibit 2.4B hereto.\n ------------ \n\n 2.5 Put Option Agreement. In addition, NetSelect, the Enterprise\n -------------------- \nShareholder, and Cleary shall enter into an agreement at Closing in the form of\nExhibit 2.5 providing for the right to \"put\" the Exchange Shares and shares of\n----------- \nNetSelect Common Stock that are issued pursuant to the exercise of the stock\noptions to be granted to the Enterprise Shareholder pursuant to the Employment\nAgreement attached hereto as Exhibit 9.9A.\n -------------\n\n 2.6 Consent to Transfer of Certain Shares. NetSelect acknowledges that \n ------------------------------------- \nthe Enterprise Shareholder intends, immediately after the Closing, to transfer\n10,000 of the Exchange Shares to Cleary, Gull, Reiland & McDevitt, Inc. and\/or\ncertain persons affiliated with such firm (collectively, \"Cleary\"). Upon\nreceipt of appropriate instruments of transfer from the Enterprise Shareholder\nand Cleary's agreement in writing to be bound by all of the provisions of this\nAgreement applicable to such shares and making appropriate investment\nrepresentations, in form and substance reasonably satisfactory to NetSelect,\nNetSelect will transfer 10,000 of the Exchange Shares to Cleary.\n\n 2.7 [Reserved]\n\n3. REPRESENTATIONS AND WARRANTIES OF ENTERPRISE AND THE ENTERPRISE SHAREHOLDER\n\n Enterprise and the Enterprise Shareholder hereby jointly and severally\nrepresent and warrant to NetSelect that, except as set forth in the Enterprise\nSchedule of Exceptions attached hereto as Exhibit 3 (the \"Enterprise Schedule of\n --------- \nExceptions\"), each of the following representations and statements in this\nSection 3 is true and correct. For purposes of this Agreement, phrases such as\n\"the knowledge of Enterprise and the Enterprise Shareholder,\" \"to the best\nknowledge of Enterprise and the Enterprise Shareholder,\" or similar phrases\nshall mean, and shall be limited to, the actual knowledge of Roger Scommegna and\nKevin Malloy after \n\n 5\n\n \nhaving made reasonable investigation and inquiry of the directors, officers or\nemployees of Enterprise who could reasonably be expected to have knowledge of\nthe matters to which the statement relates.\n\n 3.1 Organization and Good Standing. Enterprise is a corporation duly\n ------------------------------ \norganized, validly existing and in good standing under the laws of the State of\nWisconsin. Enterprise has the corporate power and authority to own, operate and\nlease its properties and to carry on its business as now conducted and as\nproposed to be conducted, and is duly qualified to transact business as a\nforeign corporation in each jurisdiction in which its failure to be so qualified\nwould have a Material Adverse Effect.\n\n 3.2 Power, Authorization and Validity.\n --------------------------------- \n\n 3.2.1 Enterprise has the right, power, legal capacity and authority\nto enter into, execute, deliver and perform its obligations under this Agreement\nand all Enterprise Ancillary Agreements, and Enterprise has all requisite\ncorporate power and authority to consummate the Exchange. The execution,\ndelivery and performance of this Agreement and each of the Enterprise Ancillary\nAgreements by Enterprise have been duly and validly approved and authorized by\nall necessary corporate action on the part of Enterprise's Board of Directors.\nThe Enterprise Shareholder has the right, power, legal capacity and authority to\nenter into, execute, deliver and perform the Enterprise Shareholder's\nobligations under this Agreement and all Shareholder Ancillary Agreements and\nhas the requisite power and authority to consummate the Exchange.\n\n 3.2.2 No filing, authorization, consent, approval or order,\ngovernmental or otherwise, is necessary or required to be made or obtained by\nEnterprise or the Enterprise Shareholder to enable Enterprise and the Enterprise\nShareholder to lawfully enter into, and to perform their respective obligations\nunder, this Agreement, the Enterprise Ancillary Agreements, and\/or the\nShareholder Ancillary Agreements.\n\n 3.2.3 Except to the extent this Agreement and the Enterprise\nAncillary Agreements create obligations of the Enterprise Shareholder and not\nEnterprise, this Agreement and the Enterprise Ancillary Agreements are, or when\nexecuted by Enterprise will be, valid and binding obligations of Enterprise\nenforceable against Enterprise in accordance with their respective terms.\nExcept to the extent they create obligations of Enterprise and not the\nEnterprise Shareholder, this Agreement and the Shareholder Ancillary Agreements\nare, or when executed by the Enterprise Shareholder will be, valid and binding\nobligations of the Enterprise Shareholder enforceable against the Enterprise\nShareholders in accordance with their respective terms, except that (i) such\nenforcement may be subject to bankruptcy, insolvency, reorganization, moratorium\nor other similar laws now or hereafter in effect relating to creditors' rights\nand (ii) the remedy of specific performance and injunctive relief and other\nforms of equitable relief may be subject to equitable defenses and to the\ndiscretion of the court before which any proceeding therefor may be brought.\n\n 3.2.4 All representations, warranties and other statements made by\nthe Enterprise Shareholder in the Investment Representation Letter executed and\ndelivered to \n\n 6\n\n \nNetSelect by the Enterprise Shareholder pursuant hereto (a) is now, and at the\nClosing shall be, true and correct, and (b) shall be deemed to be\nrepresentations and warranties made pursuant to this Section 3 for all purposes\nof this Agreement (including but not limited to Section 11 hereof).\n\n 3.3 Capitalization of Enterprise.\n ---------------------------- \n\n 3.3.1 Outstanding Stock. The authorized capital stock of Enterprise\n ----------------- \nconsists entirely of 9,000 shares of common stock, $1.00 par value per share, of\nwhich a total of 100 shares are issued and outstanding, all of which are now\nowned and held (and all of which at the Closing will be owned and held) only by\nthe Enterprise Shareholder. No other shares of the capital stock of Enterprise\nare (or will at Closing be) authorized, issued or outstanding. No fractional\nshares of Enterprise Stock are (or will at Closing be) issued or outstanding.\nAll issued and outstanding shares of Enterprise Stock have been duly authorized\nand validly issued, are fully paid and nonassessable, except for assessment\nunder the Wisconsin employee compensation statute (Wis. Stat. (S)\n180.0622(2)(b)), are not subject to any claim, lien, preemptive right, or right\nof rescission, and have been offered, issued, sold and delivered by Enterprise\n(and, if applicable, transferred) in compliance with all registration or\nqualification requirements (or applicable exemptions therefrom) of all\napplicable securities laws, Enterprise's Articles of Incorporation and other\ncharter documents and all agreements to which Enterprise is a party.\n\n 3.3.2 No Options, Warrants or Rights. There are no options,\n ------------------------------ \nwarrants, convertible or other securities, calls, commitments, conversion\nprivileges, preemptive rights or other rights or agreements outstanding to\npurchase or otherwise acquire (whether directly or indirectly) any shares of\nEnterprise's authorized but unissued capital stock or any securities convertible\ninto or exchangeable for any shares of Enterprise's capital stock or obligating\nEnterprise to grant, issue, extend, or enter into, any such option, warrant,\nconvertible or other security, call, commitment, conversion privilege,\npreemptive right or other right or agreement, and Enterprise has no liability\nfor any dividends accrued but unpaid. No person or entity holds or has any\noption, warrant or other right to acquire any issued and outstanding shares of\nthe capital stock of Enterprise from any record or beneficial holder of shares\nof the capital stock of Enterprise. No shares of Enterprise Stock are reserved\nfor issuance under any stock purchase, stock option or other benefit plan.\n\n 3.3.3 No Voting Arrangements or Registration Rights. There are no\n --------------------------------------------- \nvoting agreements, voting trusts, rights of first refusal or other restrictions\n(other than normal restrictions on transfer under applicable securities laws)\napplicable to any of Enterprise's outstanding securities. Enterprise is not\nunder any obligation to register under the 1933 Act or otherwise any of its\ncurrently outstanding securities or any securities that may be subsequently\nissued.\n\n 3.4 No Violation of Existing Agreements. Neither the execution and\n ----------------------------------- \ndelivery of this Agreement or any Enterprise Ancillary Agreement, nor the\nconsummation of the Exchange or any of the other transactions contemplated\nhereby, nor Enterprise's discussion or negotiation with NetSelect of the\nExchange or any other transaction contemplated hereby, will conflict with, or\n(with or without notice or lapse of time, or both) result in a termination,\nbreach, impairment or \n\n 7\n\n \nviolation of: (i) any provision of the charter documents of Enterprise as\ncurrently in effect; (ii) any federal, state, local or foreign judgment, writ,\ndecree, order, statute, rule or regulation applicable to Enterprise or its\nassets or properties; or (iii) any material instrument, agreement, contract,\nletter of intent or commitment to which Enterprise is a party or by which\nEnterprise or its assets or properties are or were bound. The consummation of\nthe Exchange by Enterprise will not require the consent of any third party other\nthan the approval of the Enterprise Shareholder, and no agreement to which\nEnterprise is a party requires that any other party thereto consent to the\nExchange, whether as a condition to the assignment or transfer of such\nagreement, or otherwise.\n\n 3.5 Litigation. There is no action, suit, arbitration, mediation,\n ---------- \nproceeding, claim or investigation pending against Enterprise (or to the\nknowledge of Enterprise and the Enterprise Shareholder, against any officer or\ndirector of Enterprise or, to the knowledge of Enterprise and the Enterprise\nShareholder, against any employee or agent of Enterprise, in their capacity as\nsuch or relating to their employment, services or relationship with Enterprise)\nbefore any court, administrative agency or arbitrator that, if determined\nadversely to Enterprise (or any such officer, director, employee or agent) may\nreasonably be expected to have a Material Adverse Effect on Enterprise, nor, to\nthe best of Enterprise's knowledge, has any such action, suit, proceeding,\narbitration, mediation, claim or investigation been threatened. To the\nknowledge of Enterprise and the Enterprise Shareholder, there is no basis for\nany person, firm, corporation or other entity, to assert a claim against\nEnterprise or NetSelect based upon: (a) Enterprise's entering into this\nAgreement or consummating the Exchange; (b) any claims of ownership, rights to\nownership, or options, warrants or other rights to acquire ownership, of any\nshares of the capital stock of Enterprise; or (c) any rights as the Enterprise\nShareholder. There is no judgment, decree, injunction, rule or order of any\ngovernmental entity or agency, court or arbitrator outstanding against\nEnterprise.\n\n 3.6 Taxes. Enterprise has filed all national, state, local and foreign\n ----- \ntax returns required to be filed, has paid all taxes required to be paid in\nrespect of all periods for which returns have been filed, has established what\nit believes is an adequate accrual or reserve for the payment of all taxes\npayable in respect of the periods subsequent to the periods covered by the most\nrecent applicable tax returns, has made all necessary estimated tax payments,\nand has no material liability for taxes in excess of the amount so paid or\naccruals or reserves so established. Enterprise is not delinquent in the\npayment of any tax or in the filing of any tax returns, and to the knowledge of\nEnterprise and the Enterprise Shareholder no deficiencies for any tax are\nthreatened, claimed, proposed or assessed. Enterprise has not received any\nnotification that any issues have been raised (and are currently pending) by any\ntaxing authority (including but not limited to any franchise, sales or use tax\nauthority) regarding Enterprise and no tax return of Enterprise has ever been\naudited by any national, state, local or foreign taxing agency or authority.\nThere are no tax liens against any assets of Enterprise. Enterprise is not a\n\"personal holding company\" within the meaning of Section 542 of the Internal\nRevenue Code of 1986, as amended (the \"Code\"). Enterprise is not a \"U.S. Real\nProperty Holding Company\" as defined in the Code.\n\n For the purposes of this Section, the terms \"tax\" and \"taxes\" include all\nnational, state, local and foreign income, alternative or add-on minimum income,\ngains, franchise, excise, \n\n 8\n\n \nproperty, sales, use, employment, license, payroll (including any taxes or\nsimilar payments required to be withheld from payments of salary or other\ncompensatory payments), ad valorem, payroll, stamp, occupation, recording, value\nadded or transfer taxes, governmental charges, fees, customs duties, levies or\nassessments (whether payable directly or by withholding), and, with respect to\nsuch taxes, any estimated tax, interest and penalties or additions to tax and\ninterest on such penalties and additions to tax.\n\n 3.7 Enterprise Financial Statements. Enterprise was incorporated in\n ------------------------------- \nWisconsin. Enterprise's fiscal year ends on December 31. Enterprise has\ndelivered to NetSelect (i) Enterprise's balance sheet as of December 31, 1996,\n(ii) Enterprise's income statements for the years ended December 31, 1996 and\n1997, and (iii) Enterprise's balance sheet (the \"Balance Sheet\") as of December\n31, 1997 (the \"Balance Sheet Date\"), and (iv) Enterprise's balance sheet, and\nincome statement for the month ended January 31, 1998, copies of which are\nattached as Exhibit 3.7 hereto (all such financial statements of Enterprise are\n ----------- \nhereinafter collectively referred to as the \"Enterprise Financial Statements\").\nTo the knowledge of Enterprise and the Enterprise Shareholder, the Enterprise\nFinancial Statements (a) are in accordance with the books and records of\nEnterprise and (b) fairly present the financial condition of Enterprise at the\ndates therein indicated and the results of operations for the periods therein\nspecified. To the knowledge of Enterprise and the Enterprise Shareholder,\nEnterprise has no material debt, liability or obligation of any nature (whether\nintercompany or owed to third parties), whether accrued, absolute, contingent or\notherwise, and whether due or to become due, except for (i) those shown on the\nBalance Sheet, and (ii) those that may have been incurred after the Balance\nSheet Date in the ordinary course of Enterprise's business consistent with past\npractice, and that are not material in amount, either individually or\ncollectively. To the knowledge of Enterprise and the Enterprise Shareholder, (i)\nall reserves established by Enterprise and set forth in the Balance Sheet are\nreasonably adequate, and (ii) at the Balance Sheet Date, there were no material\nloss contingencies (as such term is used in United States Statement of Financial\nAccounting Standards No. 5 issued by the Financial Accounting Standards Board in\nMarch 1975) which are not adequately provided for in the Balance Sheet as\nrequired by said Statement No. 5. Enterprise has no obligation to any employee,\nofficer or director of Enterprise to reimburse such person for expenses incurred\nby such person on behalf of Enterprise, except for such unreimbursed obligations\nas (i) are reflected in the Enterprise balance sheet as of January 31, 1998\nwhich is included in the Enterprise Financial Statements, or (ii) have been\nincurred after January 31, 1998 in the ordinary course of Enterprise's business\nconsistent with Enterprise's past practices and in immaterial amounts.\n\n 3.8 Title to Properties. Enterprise has good and marketable title to all\n ------------------- \nof its assets (including but not limited to those shown on the Balance Sheet),\nfree and clear of all liens, mortgages, security interests, claims, charges,\nrestrictions or encumbrances. All machinery, vehicles, equipment and other\ntangible personal property included in such assets and properties are in good\ncondition and repair, normal wear and tear excepted, and all leases of real or\npersonal property to which Enterprise is a party are fully effective and afford\nEnterprise peaceful and undisturbed possession of the real or personal property\nthat is the subject of the lease. Enterprise does not own any real property. To\nthe knowledge of Enterprise and the Enterprise Shareholder, Enterprise is not in\nviolation of any zoning, building, safety or environmental ordinance, regulation\nor requirement or other law or regulation applicable to the operation of owned\nor \n\n 9\n\n \nleased properties, the violation of which would have a Material Adverse Effect\non Enterprise, nor has Enterprise received any notice of such violation with\nwhich it has not complied.\n\n 3.9 Absence of Certain Changes. Since the Balance Sheet Date, there has\n -------------------------- \nnot been with respect to Enterprise any:\n\n (a) material adverse change in the condition (financial or otherwise),\nproperties, assets, liabilities, businesses, operations, results of operations\nor prospects of Enterprise;\n\n (b) amendments or changes in the charter documents of Enterprise;\n\n (c) (i) incurrence, creation or assumption by Enterprise of any mortgage,\nsecurity interest, pledge, lien or other encumbrance on any of the assets or\nproperties of Enterprise or any material obligation or liability or any\nindebtedness for borrowed money in excess of Ten Thousand Dollars ($10,000); or\n(ii) issuance or sale of, or change with respect to the rights of, any debt or\nequity securities of Enterprise or any options or other rights to acquire from\nEnterprise, directly or indirectly, any debt or equity securities of Enterprise;\n\n (d) payment or discharge of a lien or liability in excess of Ten Thousand\nDollars ($10,000) which lien or liability was not either shown on the Balance\nSheet or incurred in the ordinary course of business after the Balance Sheet\nDate;\n\n (e) purchase, license, sale or other disposition, or any agreement or\nother arrangement for the purchase, license, sale or other disposition, of any\nof the assets, properties or goodwill of Enterprise in excess of Ten Thousand\nDollars ($10,000) other than in the ordinary course of its business consistent\nwith its past practice;\n\n (f) damage, destruction or loss, whether or not covered by insurance,\nhaving a Material Adverse Effect on Enterprise;\n\n (g) declaration, setting aside or payment of any dividend on, or the\nmaking of any other distribution in respect of, the capital stock of Enterprise,\nany split, combination or recapitalization of the capital stock of Enterprise or\nany direct or indirect redemption, purchase or other acquisition of the capital\nstock of Enterprise or any change in any rights, preferences, privileges or\nrestrictions of any outstanding security of Enterprise;\n\n (h) change or increase in the compensation payable or to become payable to\nany of the officers, employees, consultants or agents of Enterprise, or any\nbonus or pension, insurance or other benefit payment or arrangement (including,\nwithout limitation, stock awards, stock appreciation rights or stock option\ngrants) made to or with any of such officers, employees, consultants or agents\nexcept in connection with normal salary or performance reviews, pursuant to\narrangements of which NetSelect has been informed, or otherwise in the ordinary\ncourse of business consistent with Enterprise's past practice, all of which are\nset forth on the Enterprise Schedule of Exceptions;\n\n 10\n\n \n (i) change with respect to the management, supervisory or other key\npersonnel of Enterprise;\n\n (j) obligation or liability incurred by Enterprise to any of its\nofficers, directors or shareholders except normal compensation and expense\nallowances payable to officers in the ordinary course of business consistent\nwith Enterprise's past practice;\n\n (k) making by Enterprise of any loan, advance or capital contribution to,\nor any investment in, any officer, director or record or beneficial shareholder\nof Enterprise;\n\n (l) entering into, amendment of, relinquishment, termination or non-\nrenewal by Enterprise of any contract, lease, transaction, commitment or other\nright or obligation which by its terms calls for annual payments in excess of\nTen Thousand Dollars ($10,000) (a \"Section 3.9 Contract\") other than in the\nordinary course of its business consistent with its past practice or any written\nor oral indication or assertion by the other party thereto of problems with\nEnterprise's services or performance under Section 3.9 Contract or such other\nparty's desire to so amend, relinquish, terminate or not renew any Section 3.9\nContracts;\n\n (m) material change in the manner in which Enterprise extends discounts\nor credits to customers or otherwise deals with its customers;\n\n (n) entering into by Enterprise of any transaction, contract or agreement\nor the conduct of business or operations other than in the ordinary course of\nits business consistent with its past practices;\n\n (o) transfer or grant of a right under any Enterprise IP Rights (as\ndefined in Section 3.12 below), other than those transferred or granted in the\nordinary course of Enterprise's business consistent with Enterprise's past\npractice; or\n\n (p) agreement or arrangement made by Enterprise to take any action which,\nif taken prior to the date of this Agreement, would have made any representation\nor warranty of Enterprise and the Enterprise Shareholder set forth in this\nAgreement untrue or incorrect.\n\n 3.10 Contracts and Commitments. To the best of Enterprise's and\n ------------------------- \nEnterprise Shareholder's knowledge, Exhibit 3.10 sets forth a list of each of\n ------------ \nthe following written or oral contracts, agreements, commitments or other\ninstruments to which Enterprise is a party or to which it or any of its assets\nor properties is bound which calls for or requires payments or the provision of\ngoods or services by any party in excess of Ten Thousand Dollars ($10,000) per\nyear (each a \"Material Contract\") (For purposes of this Section and Section 3.9,\nan agreement which provides for an initial payment or obligation less than\n$10,000, but which provides for possible future payments or obligations, shall\nbe deemed to be in excess of $10,000 if Enterprise or the Enterprise Shareholder\nreasonably expect that the agreement will involve amounts in excess of $10,000\nover the term of the agreement.):\n\n (a) consulting or similar agreement under which Enterprise provides any\nadvice or services to a customer of Enterprise;\n\n 11\n\n \n (b) continuing contract for the future purchase, sale, license, provision\nor manufacture of products, material, supplies, equipment or services which is\nnot terminable on ninety (90) days' or less notice without cost or other\nliability to Enterprise or in which Enterprise has granted or received\nmanufacturing rights, most favored customer pricing provisions or exclusive\nmarketing rights relating to any product or services, group of products or\nservices or territory;\n\n (c) contract providing for the acquisition of software by Enterprise, for\nthe development of software for Enterprise, or the license of software to\nEnterprise, which software is used or incorporated in any products currently\ndistributed by Enterprise or services currently provided by Enterprise or is\ncontemplated to be used or incorporated in any products to be distributed or\nservices to be provided by Enterprise (other than software generally available\nto the public at a per copy license fee of less than One Thousand Dollars\n($1,000));\n\n (d) joint venture or partnership contract or agreement or other agreement\nwhich has involved or is reasonably expected to involve a sharing of profits or\nlosses in excess of Ten Thousand Dollars ($10,000) per annum with any other\nparty;\n\n (e) contract or commitment for the employment of any officer, employee or\nconsultant of Enterprise or any other type of contract or understanding with any\nofficer, employee or consultant of Enterprise which is not immediately\nterminable by Enterprise without cost or other liability;\n\n (f) indenture, mortgage, trust deed, promissory note, loan agreement,\nguarantee or other agreement or commitment for the borrowing of money, for a\nline of credit or for a leasing transaction of a type required to be capitalized\nin accordance with United States Statement of Financial Accounting Standards No.\n13 of the Financial Accounting Standards Board;\n\n (g) lease or other agreement under which Enterprise is lessee of or holds\nor operates any items of tangible personal property or real property owned by\nany third party and under which payments to such third party exceed Ten Thousand\nDollars ($10,000) per annum;\n\n (h) agreement or arrangement for the sale of any assets, properties,\nservices or rights, other than in the ordinary course of business consistent\nwith past practice;\n\n (i) agreement which restricts Enterprise from engaging in any aspect of its\nbusiness or competing in any line of business in any geographic area;\n\n (j) Enterprise IP Rights Agreements (as defined in Section 3.12 below);\n\n (k) agreement relating to the sale, issuance, grant, exercise, award,\npurchase, repurchase or redemption of any shares of capital stock or other\nsecurities of Enterprise or any options, warrants or other rights to purchase or\notherwise acquire any such shares of stock, other securities or options,\nwarrants or other rights therefor;\n\n 12\n\n \n (l) contract with or commitment to any labor union; or\n\n (m) other agreement, contract, commitment or instrument that is material\nto the business of Enterprise or that involves a commitment by Enterprise in\nexcess of Ten Thousand Dollars ($10,000).\n\n A copy of each Material Contract, or if such Material Contract is not in\nwriting a written summary of the material terms thereof, which is required by\nthis Section to be listed on Exhibit 3.10 has been delivered to NetSelect.\n ------------ \n(Where several Material Contracts that are not in writing contain material terms\nthat do not differ in significant respects from each other, Enterprise may\nsummarize once the material terms of such Material Contracts and then simply\nidentify the various parties to such Material Contracts.) No consent or\napproval of any third party is required to ensure that, following the Closing,\nany Material Contract shall continue to be in full force and effect without any\nbreach or violation thereof caused by virtue of the Exchange or by any other\ntransaction called for by this Agreement.\n\n\n 3.11 No Default. To the best knowledge of Enterprise and the Enterprise\n ---------- \nShareholder, Enterprise is not in breach or default of, and has not breached or\nbeen in default of, any Material Contract, and Enterprise is not a party to any\ncontract, agreement or arrangement which has had, or is reasonably expected to\nhave, a Material Adverse Effect on Enterprise. To the best knowledge of\nEnterprise and the Enterprise Shareholder, Enterprise does not have any material\nliability for renegotiation of government contracts or subcontracts, if any.\n\n 3.12 Intellectual Property.\n --------------------- \n\n 3.12.1 Enterprise owns, or has the irrevocable right to use, sell or\nlicense all Intellectual Property Rights (as defined below) necessary or\nrequired for the conduct of its business as presently conducted and as presently\nproposed to be conducted (such Intellectual Property Rights being hereinafter\ncollectively referred to as the \"Enterprise IP Rights\"), and such rights to use,\nsell or license are sufficient for such conduct of its business. Enterprise is\nthe legal and beneficial owner of all rights, including all copyright and\nworldwide distribution rights, to those certain computer software programs set\nforth on Exhibit 3.12, including all object code, source code, configurations,\n ------------ \nroutines and algorithms contained therein with annotations and related\ndocumentation, together with all alterations, modifications and reconfigurations\nthereof in all forms of expression, including but not limited to, the source\ncode, object code, flowcharts, block diagrams, manuals and all other\ndocumentation no matter how stored, transmitted, read or utilized and all\ncopyrights, trade secrets, patents, inventions (whether patentable or not),\nproprietary rights and intellectual property rights associated therewith\n(collectively the \"Software\"). The term \"Enterprise IP Rights\" includes,\nwithout limitation, the Software.\n\n 3.12.2 The execution, delivery and performance of this Agreement and\nthe consummation of the Exchange and the other transactions contemplated hereby\nwill not constitute a material breach of or default under any instrument,\ncontract, license or other agreement governing any Enterprise IP Right (the\n\"Enterprise IP Rights Agreements\") and will not cause the forfeiture or\ntermination, or give rise to a right of forfeiture or termination, of any\n\n 13\n\n \nEnterprise IP Right or materially impair the right of Enterprise to use, sell,\nlicense, provide or otherwise commercially exploit any Enterprise IP Right or\nportion thereof (except where such breach, forfeiture or termination would not\nhave a Material Adverse Effect on Enterprise). There are no royalties,\nhonoraria, fees or other payments payable by Enterprise to any person by reason\nof the ownership, use, license, sale, exploitation or disposition of the\nEnterprise IP Rights.\n\n 3.12.3 Neither the manufacture, marketing, license, sale, furnishing\nor intended use of any product or service currently licensed, utilized, sold,\nprovided or furnished by Enterprise or currently under development by Enterprise\nhas violated or now violates any license or agreement between Enterprise and any\nthird party or infringes or misappropriates any Intellectual Property Right of\nany other party; and there is no pending or, to the best knowledge of Enterprise\nand the Enterprise Shareholder, threatened claim or litigation contesting the\nvalidity, ownership or right to use, sell, license or dispose of any Enterprise\nIP Right nor is there any basis for any such claim, nor has Enterprise received\nany notice asserting that any Enterprise IP Right or the proposed use, sale,\nlicense or disposition thereof conflicts or will conflict with the rights of any\nother party, nor is there any basis for any such assertion. To the knowledge of\nEnterprise and the Enterprise Shareholder, no employee or agent of or consultant\nto Enterprise is in violation of any term of any employment contract, patent\ndisclosure agreement, noncompetition agreement, non-solicitation agreement or\nany other contract or agreement, or any restrictive covenant relating to the\nright of any such employee, agent or consultant to be employed thereby, or to\nuse trade secrets or proprietary information of others, and the employment of\nsuch employees or engagement of such agents and consultants does not subject\nEnterprise to any liability.\n\n 3.12.4 Enterprise has taken reasonable and practicable steps, in\naccordance with prevailing industry standards, designed to protect, preserve and\nmaintain the secrecy and confidentiality of all material Enterprise IP Rights\nand all Enterprise's proprietary rights therein; provided, however, that\nNetSelect acknowledges that Enterprise does not have any registered patents,\ntrademarks or copyrights, and has not filed any patent, trademark or copyright\nregistrations. All officers, employees, agents and consultants of Enterprise\nhaving access to proprietary information have executed and delivered to\nEnterprise an agreement regarding the protection of such proprietary information\nand the assignment of inventions to Enterprise in the form attached hereto as\nExhibit 3.12.4, which was provided to counsel for NetSelect. Copies of all such\n-------------- \nagreements, executed by all such persons, have been delivered to NetSelect's\ncounsel.\n\n 3.12.5 Exhibit 3.12 contains a list of all Enterprise IP Rights and\n ------------ \nall worldwide applications, registrations, filings and other formal actions made\nor taken pursuant to federal, state and foreign laws by Enterprise to secure,\nperfect or protect its interest in Enterprise IP Rights, including, without\nlimitation, all patents, patent applications, copyrights (whether or not\nregistered), copyright applications, trademarks, service marks and trade names\n(whether or not registered) and trademark, service mark and trade name\napplications.\n\n 3.12.6 As used herein, the term \"Intellectual Property Rights\" means,\ncollectively, all worldwide industrial and intellectual property rights,\nincluding, without limitation, patents, patent applications, patent rights,\ntrademarks, trademark applications, trade dress rights, trade names, service\nmarks, service mark applications, copyrights, copyright \n\n 14\n\n \napplications, mask work rights, mask work registrations, franchises, licenses,\ninventions, trade secrets, know-how, customer lists, proprietary processes and\nformulae, software source and object code, algorithms, architecture, structure,\ndisplay screens, layouts, inventions, development tools and all documentation\nand media constituting, describing or relating to the above, including, without\nlimitation, manuals, memoranda and records.\n\n 3.13 Compliance with Laws. To the knowledge of Enterprise and the\n -------------------- \nEnterprise Shareholder, Enterprise is now and at the Closing Date will be in\ncompliance in all material respects with all applicable national, state, local\nor foreign laws, ordinances, regulations, and rules, and all orders, writs,\ninjunctions, awards, judgments, and decrees applicable to Enterprise or to\nEnterprise's assets, properties, and business, where failure to be in such\ncompliance would have a Material Adverse Effect on Enterprise. To the knowledge\nof Enterprise and the Enterprise Shareholder, Enterprise holds all permits,\nlicenses and approvals from, and has made all filings with, third parties,\nincluding government agencies and authorities, that are necessary in connection\nwith Enterprise's present business, except those where failure to do so would\nnot have a Material Adverse Effect on Enterprise.\n\n 3.14 Certain Transactions and Agreements. To the knowledge of Enterprise\n ----------------------------------- \nand the Enterprise Shareholder, (i) none of the officers or directors of\nEnterprise, nor any member of their immediate families, has any direct or\nindirect ownership interest in any firm or corporation that competes with, or\ndoes business with, or has any contractual arrangement with Enterprise (except\nwith respect to any interest in less than five percent (5%) of the stock of any\ncorporation whose stock is publicly traded), (ii) none of said officers,\ndirectors, employees or shareholders or any member of their immediate families,\nis directly or indirectly interested in any contract or informal arrangement\nwith Enterprise, except for normal compensation for services as an officer,\ndirector or employee thereof that have been disclosed to NetSelect, and (iii)\nnone of said officers, directors, employees or shareholders or family members\nhas any interest in any property, real or personal, tangible or intangible\n(including but not limited to any Enterprise IP Rights or any other Intellectual\nProperty Rights) that is used in or that pertains to the business of Enterprise,\nexcept for the normal rights of a shareholder.\n\n 3.15 Employees, ERISA and Other Compliance.\n ------------------------------------- \n\n 3.15.1 Enterprise is in compliance in all material respects with all\napplicable laws, agreements and contracts relating to employment, employment\npractices, wages, hours, and terms and conditions of employment, including, but\nnot limited to, employee compensation matters in each of the jurisdictions in\nwhich it conducts business. A list of all employees, officers and consultants\nof Enterprise, their title, date of hire, employer entity and current\ncompensation is set forth on Exhibit 3.15.1, which has been delivered to\n -------------- \nNetSelect. Enterprise does not have any employment contracts or consulting\nagreements currently in effect that are not terminable at will (other than\nagreements with the sole purpose of providing for the confidentiality of\nproprietary information or assignment of inventions).\n\n 3.15.2 Enterprise (i) has not previously been and is not now subject\nto a union organizing effort, (ii) is not subject to any collective bargaining\nagreement with respect to any of its employees, (iii) is not subject to any\nother contract, written or oral, with any trade or labor \n\n 15\n\n \nunion, employees' association or similar organization, and (iv) does not have\nany current labor disputes. Enterprise has good labor relations, and has no\nknowledge of any facts indicating that the consummation of the transactions\ncontemplated hereby will have a Material Adverse Effect on such labor relations.\nNeither Enterprise nor the Enterprise Shareholder has any knowledge that any key\nemployee of Enterprise intends to leave the employ of Enterprise.\n\n 3.15.3 Enterprise does not have any \"employee benefit plan,\" as\ndefined in Section 3(3) of the Employee Retirement Income Security Act of 1974,\nas amended (\"ERISA\"). Enterprise has no pension plan which constitutes, or has\nsince the enactment of ERISA constituted, a \"multiemployer plan\" as defined in\nSection 3(37) of ERISA. No Enterprise pension plans are subject to Title IV of\nERISA.\n\n 3.15.4 Exhibit 3.15.4 lists each employment, severance or other\n -------------- \nsimilar contract, arrangement or policy, each \"employee benefit plan\" as defined\nin Section 3(3) of ERISA (if any) and each plan or arrangement (written or oral)\nproviding for insurance coverage (including any self-insured arrangements),\nworkers' benefits, vacation benefits, severance benefits, disability benefits,\ndeath benefits, hospitalization benefits, retirement benefits, deferred\ncompensation, profit-sharing, bonuses, stock options, stock purchase, phantom\nstock, stock appreciation or other forms of incentive compensation or post-\nretirement insurance, compensation or benefits for employees, consultants or\ndirectors which is entered into, maintained or contributed to by Enterprise and\ncovers any employee or former employee or consultant or former consultant of\nEnterprise. Such contracts, plans and arrangements are as described in this\nSection 3.15.4 are hereinafter collectively referred to as the \"Enterprise\nBenefit Arrangements.\" Each Enterprise Benefit Arrangement has been maintained\nin compliance in all material respects with its terms and with the requirements\nprescribed by any and all laws, statutes, orders, rules and regulations that are\napplicable to such Enterprise Benefit Arrangement. Enterprise has delivered to\nNetSelect and its counsel, Fenwick & West LLP, a complete and correct copy and\nsummary description of each Enterprise Benefit Arrangement.\n\n 3.15.5 There has been no amendment to, written interpretation or\nannouncement (whether or not written) by Enterprise relating to, or change in\nemployee participation or coverage under, any Enterprise Benefit Arrangement\nthat would increase materially the expense of maintaining such Enterprise\nBenefit Arrangement above the level of the expense incurred in respect thereof\nfor Enterprise's fiscal year ended December 31, 1997.\n\n 3.15.6 The group health plans (as defined in Section 4980B(g) of the\nCode) that benefit employees of Enterprise are in compliance, in all material\nrespects, with the continuation coverage requirements of Section 4980B of the\nCode as such requirements affect Enterprise and its employees. As of the\nClosing Date, there will be no material outstanding, uncorrected violations\nunder the Consolidation Omnibus Budget Reconciliation Act of 1985, as amended\n(\"COBRA\"), with respect to any of the Enterprise Benefit Arrangements, covered\nemployees, or qualified beneficiaries that could result in a Material Adverse\nEffect on Enterprise, or in a material adverse effect on the business,\noperations or financial condition of NetSelect as its successor. Enterprise has\nprovided, or shall have provided prior to the Closing, to individuals entitled\nthereto, all required notices and coverage pursuant to Section 4980B of COBRA,\nwith respect to any \"qualifying event\" (as defined in Section 4980B(f)(3) of the\nCode) occurring prior \n\n 16\n\n \nto and including the Closing Date, and no material amount payable on account of\nSection 4980B of the Code has been incurred with respect to any current or\nformer employees of Enterprise (or their beneficiaries).\n\n 3.15.7 No benefit payable or which may become payable by Enterprise\npursuant to any Enterprise Benefit Arrangement or as a result of or arising\nunder this Agreement shall constitute an \"excess parachute payment\" (as defined\nin Section 280G(b)(1) of the Code) which is subject to the imposition of an\nexcise tax under Section 4999 of the Code or which would not be deductible by\nreason of Section 280G of the Code. Enterprise is not a party to any (a)\nagreement (other than as described in (b) below) with any executive officer or\nother key employee thereof (i) the benefits of which are contingent, or the\nterms of which are materially altered, upon the occurrence of a transaction\ninvolving Enterprise in the nature of any of the transactions contemplated by\nthis Agreement, (ii) providing any term of employment or compensation guarantee,\nor (iii) providing severance benefits or other benefits after the termination of\nemployment of such employee regardless of the reason for such termination of\nemployment, or (b) agreement or plan, including, without limitation, any stock\noption plan, stock appreciation rights plan or stock purchase plan, any of the\nbenefits of which will be materially increased, or the vesting of benefits of\nwhich will be materially accelerated, by the occurrence of the Exchange or any\nof the other transactions contemplated by this Agreement or the value of any of\nthe benefits of which will be calculated on the basis of any of the transactions\ncontemplated by this Agreement.\n\n 3.16 Corporate Documents. Enterprise has delivered to NetSelect for\n ------------------- \nexamination all documents and information listed in the Enterprise Schedule of\nExceptions or other Exhibits called for by this Agreement, including, without\nlimitation, the following: (a) copies of the charter documents as currently in\neffect of Enterprise; (b) the Minute Book containing all records of all\nproceedings, consents, actions, minutes, and meetings of Enterprise, including\n(but not limited to) actions of shareholders, board of directors and any\ncommittees thereof; (c) the stock ledger and journal reflecting all stock\nissuances and transfers of Enterprise; (d) all material permits, orders, and\nconsents issued by any regulatory agency with respect to Enterprise, or any\nsecurities of Enterprise, and all applications for such permits, orders, and\nconsents; and (e) all Material Agreements required to be disclosed pursuant to\nSection 3.10.\n\n 3.17 No Brokers. Neither Enterprise nor the Enterprise Shareholder nor\n ---------- \nany affiliate of Enterprise is obligated for the payment of any fees or expenses\nof any investment banker, broker or finder in connection with the origin,\nnegotiation or execution of this Agreement or in connection with the Exchange or\nany other transaction contemplated hereby.\n\n 3.18 Books and Records. The books, records and accounts of Enterprise (a)\n ----------------- \nare in all material respects true, complete and correct, (b) are stated in\nreasonable detail and in all material respects fairly reflect the transactions\nand dispositions of the assets of Enterprise, and (c) fairly reflect the basis\nfor the Enterprise Financial Statements.\n\n 3.19 Insurance. Exhibit 3.19 hereto lists all insurance maintained by\n --------- ------------ \nEnterprise, including, without limitation, fire and casualty, general liability,\nbusiness interruption, product liability, errors and omissions, and sprinkler\nand water damage insurance.\n\n 17\n\n \n 3.20 Environmental Matters.\n --------------------- \n\n 3.20.1 During the period that Enterprise has leased or owned its\nrespective properties or owned or operated any facilities, to the best knowledge\nof Enterprise and the Enterprise Shareholder, there have been no disposals,\nreleases or threatened releases of Hazardous Materials (as defined below) on,\nfrom or under such properties or facilities that resulted from any act or\nomission of Enterprise or any of its employees, agents or invitees. Enterprise\nhas no knowledge of any presence, disposals, releases or threatened releases of\nHazardous Materials on, from or under any of such properties or facilities,\nwhich may have occurred prior to Enterprise having taken possession of any of\nsuch properties or facilities. For the purposes of this Agreement, the terms\n\"disposal,\" \"release,\" and \"threatened release\" shall have the definitions\nassigned thereto by the Comprehensive Environmental Response, Compensation and\nLiability Act of 1980, 42 U.S.C. (S) 9601 et seq., as amended (\"CERCLA\"). For\nthe purposes of this Agreement \"Hazardous Materials\" shall mean any hazardous or\ntoxic substance, material or waste which is or becomes prior to the Closing\nregulated under, or defined as a \"hazardous substance,\" \"pollutant,\"\n\"contaminant,\" \"toxic chemical,\" \"hazardous materials,\" \"toxic substance\" or\n\"hazardous chemical\" under (a) CERCLA; (b) any similar federal, state or local\nlaw; or (c) regulations promulgated under any of the above laws or statutes.\n\n 3.20.2 To the best knowledge of Enterprise and the Enterprise\nShareholder, none of the properties or facilities of Enterprise is in violation\nof any federal, state or local law, ordinance, regulation or order relating to\nindustrial hygiene or to the environmental conditions on, under or about such\nproperties or facilities, including, but not limited to, soil and ground water\ncondition. During the time that Enterprise has owned or leased its properties\nand facilities, neither Enterprise nor, to the best knowledge of Enterprise and\nthe Enterprise Shareholder, any third party, has used, generated, manufactured\nor stored on, under or about such properties or facilities or transported to or\nfrom such properties or facilities any Hazardous Materials, other than\nEnterprise's lawful use of standard office supplies customarily used in office\nenvironments that contain legally permitted amounts of Hazardous Materials that\nwould have no Material Adverse Effect.\n\n 3.20.3 During the time that Enterprise has owned or leased its\nproperties and facilities, there has been no litigation brought or threatened\nagainst Enterprise, or, to the best knowledge of Enterprise and the Enterprise\nShareholder, against any lessor or owner of real property leased by Enterprise,\nor any settlement reached by Enterprise or the Enterprise Shareholder with any\nparty or parties alleging the presence, disposal, release or threatened release\nof any Hazardous Materials on, from or under any of such properties or\nfacilities.\n\n 3.21 Tax Advice. Enterprise Shareholder has been advised by his own\n ---------- \nadvisers concerning the tax treatment of the Exchange and the other transactions\ncontemplated by this Agreement, and is not relying on NetSelect or any of its\nagents for any advice concerning such tax consequences.\n\n 3.22 Disclosure. To the best knowledge of Enterprise and the Enterprise\n ---------- \nShareholder, neither this Agreement, its exhibits and schedules, nor any of the\ncertificates or documents to be \n\n 18\n\n \ndelivered by Enterprise and\/or the Enterprise Shareholder to NetSelect under\nthis Agreement, taken together, contains any untrue statement of a material fact\nor omits to state any material fact necessary in order to make the statements\ncontained herein and therein, in light of the circumstances under which such\nstatements were made, not misleading.\n\n4. REPRESENTATIONS AND WARRANTIES OF NETSELECT\n\n NetSelect hereby represents and warrants, that, except as set forth in the\nSchedule of Exceptions attached hereto as Exhibit 4 (the \"NetSelect Schedule of\n --------- \nExceptions\"), each of the following representations and statements in this\nSection 4 is true and correct. For purposes of this Agreement, phrases such as\n\"the knowledge of NetSelect,\" \"to the best knowledge of NetSelect\" or similar\nphrases shall mean, and shall be limited to, the actual knowledge of the Chief\nExecutive Officer of NetSelect after having made reasonable investigation and\ninquiry of the directors, officers or employees of NetSelect who could\nreasonably be expected to have knowledge of the matters to which the statement\nrelates.\n\n 4.1 Organization and Good Standing. NetSelect is a corporation duly\n ------------------------------ \norganized, validly existing and in good standing under the laws of the State of\nDelaware, and has the corporate power and authority to own, operate and lease\nits properties and to carry on its business as now conducted and as proposed to\nbe conducted.\n\n 4.2 Power, Authorization and Validity.\n --------------------------------- \n\n 4.2.1 NetSelect has the right, power and authority to enter into,\nexecute and perform its obligations under this Agreement and the NetSelect\nAncillary Agreements. The execution, delivery and performance of this Agreement\nand the NetSelect Ancillary Agreements by NetSelect have been duly and validly\napproved and authorized by NetSelect's Board of Directors.\n\n 4.2.2 No filing, authorization, consent, approval or order,\ngovernmental or otherwise, is necessary or required to enable NetSelect to enter\ninto, and to perform its obligations under, this Agreement and the NetSelect\nAncillary Agreements except for such filings as may be required to comply with\napplicable securities laws in connection with the Exchange itself.\n\n 4.2.3 This Agreement and the NetSelect Ancillary Agreements are, or\nwhen executed by NetSelect will be, valid and binding obligations of NetSelect,\nenforceable in accordance with their respective terms, except that (i) such\nenforcement may be subject to bankruptcy, insolvency, reorganization, moratorium\nor other similar laws now or hereafter in effect relating to creditors' rights\nand (ii) the remedy of specific performance and injunctive relief and other\nforms of equitable relief may be subject to equitable defenses and to the\ndiscretion of the court before which any proceeding therefor may be brought.\n\n 4.3 Capital Structure.\n ----------------- \n\n 19\n\n \n 4.3.1 Stock. The authorized capital stock of NetSelect consists of\n ----- \n35,000,000 shares of Class A Common Stock, $0.001 par value per share,\n10,000,000 shares of Class B Common Stock, par value $0.001 per share, and\n5,000,000 shares of Preferred Stock, par value $0.001 per share, of which\n1,647,059 shares have been designated as Series A Convertible Preferred Stock,\n352,941 shares have been designated as Series B Convertible Preferred Stock,\n700,000 shares have been designated as Series C Convertible Preferred Stock, and\n681,201 shares have been designated as Series D Convertible Preferred Stock\n(such Preferred Stock referred to as the \"NetSelect Preferred Stock\"). On the\nEffective Date, 265,852 shares of Class A Common Stock were issued and\noutstanding, 116,470 shares of Class B Common Stock were issued and outstanding,\nand 3,295,575 shares of NetSelect Preferred Stock were issued and outstanding.\nAll outstanding shares of NetSelect Common Stock are validly issued, fully paid\nand nonassessable and not subject to preemptive rights. NetSelect has provided\nto the Enterprise Shareholder, and his counsel, copies of (i) NetSelect's\nArticles of Incorporation, (ii) By-Laws, and (iii) a true and correct list of\nthe shareholders of NetSelect and the number of shares of Common Stock and\nPreferred Stock held by each such person.\n\n 4.3.2 Options. Options to purchase a total of 741,588 shares are\n ------- \noutstanding, including options granted pursuant to the NetSelect 1996 Stock\nOption Plan, (the \"NetSelect Option Plan\").\n\n 4.3.3 No Other Commitments. Except for (i) the NetSelect stock\n -------------------- \noptions (whether granted or ungranted) described in Section 4.3.2 above, (ii)\nthe conversion privileges of the NetSelect Preferred Stock, and (iii) the right\nof first offer provided for in the NetSelect, Inc. Stockholder's Agreement,\ndated as of November 26, 1996, as amended, as of the Effective Date, there are\nno options, warrants, convertible or other securities, calls, commitments,\nconversion privileges or preemptive or other rights or agreements of any\ncharacter to which NetSelect is a party or by which NetSelect is bound\nobligating NetSelect to issue, deliver or sell, or cause to be issued, delivered\nor sold, any shares of capital stock of NetSelect or securities convertible into\nor exchangeable for shares of capital stock of NetSelect, or obligating\nNetSelect to grant, extend or enter into any such option, warrant, call, right,\ncommitment, conversion right or agreement.\n\n 4.3.4 Other Entities. NetSelect and Infotouch, Inc. are the only\n -------------- \nmembers of NetSelect LLC. NetSelect LLC and the National Association of\nRealtors are the only beneficial owners of equity securities of RealSelect, Inc.\n\n 4.4 No Violation of Existing Agreements. Neither the execution and\n ------------------------------------ \ndelivery of this Agreement or any NetSelect Ancillary Agreement, nor the\nconsummation of the Exchange or any of the other transactions contemplated\nhereby, nor NetSelect's discussion or negotiation with Enterprise of the\nExchange or any other transaction contemplated hereby, will conflict with, or\n(with or without notice or lapse of time, or both) result in a termination,\nbreach, impairment or violation of: (i) any provision of the charter documents\nof NetSelect as currently in effect; (ii) any federal, state, local or foreign\njudgment, writ, decree, order, statute, rule or regulation applicable to\nNetSelect or its assets or properties; or (iii) any material instrument,\nagreement, contract, letter of intent or commitment to which NetSelect is a\nparty or by which NetSelect or its assets or properties are or were bound. The\nconsummation of the Exchange by NetSelect will \n\n 20\n\n \nnot require the consent of any third party pursuant to the terms of any\nagreement to which NetSelect is a party or by which NetSelect or its assets or\nproperties are bound.\n\n 4.5 Validity of Shares. The shares of NetSelect Common Stock to be issued\n ------------------ \npursuant to the Exchange shall, when issued: (a) be duly authorized, validly\nissued, fully paid and nonassessable and free of liens and encumbrances created\nby NetSelect, and (b) be free and clear of any transfer restrictions, liens and\nencumbrances except for restrictions on transfer under applicable federal\nsecurities laws, including Rule 144 promulgated under the 1933 Act and except\nfor restrictions contemplated by this Agreement.\n\n 4.6 Litigation. There is no action, suit, arbitration, mediation,\n ---------- \nproceeding, claim or investigation pending against NetSelect (or to the\nknowledge of NetSelect, against any officer, director or employee or agent of\nNetSelect, in their capacity as such or relating to their employment, services\nor relationship with NetSelect) before any court, administrative agency or\narbitrator that, if determined adversely to NetSelect (or any such officer,\ndirector, employee or agent) may reasonably be expected to have a Material\nAdverse Effect on NetSelect, nor, to NetSelect's knowledge, has any such action,\nsuit, proceeding, arbitration, mediation, claim or investigation been\nthreatened. To NetSelect's knowledge, there is no basis for any person, firm,\ncorporation or other entity, to assert a claim against NetSelect based upon:\n(a) NetSelect's entering into this Agreement or consummating the Exchange; or\n(b) any claims of ownership, rights to ownership, or options, warrants or other\nrights to acquire ownership, of any material amount of shares of the stock of\nNetSelect (except pursuant to agreements between such persons and NetSelect or\npursuant to the rights of outstanding Preferred Stock of NetSelect). There is\nno judgment, decree, injunction, rule or order of any governmental entity or\nagency, court or arbitrator outstanding against NetSelect.\n\n 4.7 No Default. To the knowledge of NetSelect, NetSelect is not in breach\n ---------- \nor default of any agreement to which NetSelect is a party which breach or\ndefault is reasonably likely to have a Material Adverse Effect on NetSelect.\n\n 4.8 Absence of Certain Changes. Since December 31, 1997, there has not\n -------------------------- \nbeen with respect to NetSelect any:\n\n (a) material adverse change in the condition (financial or otherwise),\nproperties, assets, liabilities, businesses, operations, results of operations\nor prospects of NetSelect;\n\n (b) damage, destruction, or loss, whether or not covered by insurance,\nhaving a Material Adverse Effect on NetSelect;\n\n (c) transfer of a material intellectual property right of NetSelect, other\nthan those (if any) transferred in the ordinary course of NetSelect's business\nconsistent with NetSelect's past practice;\n\n (d) amendments or changes in the certificate of incorporation of\nNetSelect, as amended (including any certificates of designation), except\npursuant to the issuance of shares of Series D Preferred Stock of NetSelect in\nJanuary 1998; or\n\n 21\n\n \n (e) agreement or arrangement made by NetSelect to take any action which,\nif taken prior to the date of this Agreement, would have made any representation\nor warranty of NetSelect set forth in this Agreement untrue or incorrect in any\nmaterial respect.\n\n 4.9 Compliance with Laws. To the knowledge of NetSelect, NetSelect is \n -------------------- \nnow and at the Closing Date will be in compliance in all material respects with\nall applicable national, state, local or foreign laws, ordinances, regulations,\nand rules, and all orders, writs, injunctions, awards, judgments, and decrees\napplicable to NetSelect or to NetSelect's assets, properties, and business,\nwhere failure to be in such compliance would have a Material Adverse Effect on\nNetSelect. To the knowledge of NetSelect, NetSelect holds all permits, licenses\nand approvals from and has made all filings for third parties, including\ngovernment agencies and authorities, that are necessary in connection with\nNetSelect's present business, except where a failure to have such permits,\nlicenses or approvals or failure to make such filings would not have a Material\nAdverse Effect on NetSelect.\n\n 4.10 Disclosure. To the knowledge of NetSelect, neither this Agreement,\n ---------- \nits exhibits and schedules, nor any of the certificates or documents to be\ndelivered by NetSelect to Enterprise or the Enterprise Shareholder under this\nAgreement, taken together, contains any untrue statement of material fact or\nomits to state any material fact necessary in order to make the statements\ncontained herein and therein in light of the circumstances under which such\nstatements were made, not misleading.\n\n 4.11 NetSelect Financial Information. The NetSelect Financial Information\n ------------------------------- \nis unaudited and has not otherwise been reviewed by any independent accountant.\nThe NetSelect Financial Information has been prepared in good faith. However,\nNetSelect does not represent or warrant that the NetSelect Financial Information\nhas been prepared in accordance with generally accepted accounting principles or\nthat the NetSelect Financial Information is accurate in all material respects;\nand application of generally accepted accounting principles, or further review\nof such NetSelect Financial Information and NetSelect's financial records by\nNetSelect or an independent accountant, may result in differences (some of which\ncould be material) in the information presented in the NetSelect Financial\nInformation. The line item entitled \"Cash and Cash Equivalents\" in the balance\nsheet information as of January 31, 1998, accurately sets forth in all material\nrespects NetSelect's cash and cash equivalents as of that date.\n\n 4.12 Shareholder Agreements. Other than compensatory plans, arrangements\n ---------------------- \nor agreements, those agreements referenced in connection with the organization\nand formation of NetSelect, RealSelect, Inc. and NetSelect LLC, those agreements\nreferenced in the closing documents relating to NetSelect's Preferred Stock\nfinancings, and those agreements made available by NetSelect for review by the\nEnterprise Shareholder before the Closing Date, there are no agreements between\nNetSelect and holders of NetSelect Common Stock (\"Holders\") that grant such\nHolders materially superior rights or preferences by virtue of their ownership\nof shares of NetSelect Common Stock, than the rights and preferences of holders\nof NetSelect Common Stock generally or that provide materially superior economic\nrights or relationships among NetSelect and such Holders.\n\n 22\n\n \n5. COVENANTS OF ENTERPRISE AND THE ENTERPRISE SHAREHOLDER\n\n During the period from the Effective Date until the earlier to occur of (i)\nthe Closing, or (ii) the termination of this Agreement in accordance with\nSection 10, Enterprise and the Enterprise Shareholder hereby jointly and\nseverally covenant and agree with NetSelect as follows:\n\n 5.1 Advice of Changes. Enterprise or the Enterprise Shareholder, as the\n ----------------- \ncase may be, will use all reasonable efforts to promptly advise NetSelect in\nwriting (a) of any event occurring subsequent to the date of this Agreement that\nwould render any representation or warranty of Enterprise and the Enterprise\nShareholder contained in Section 3 of this Agreement, if made on or as of the\ndate of such event or the Closing Date, untrue or inaccurate in any material\nrespect and (b) of any material adverse change in Enterprise's assets, business,\nresults of operations, financial condition or prospects. Enterprise shall\ndeliver to NetSelect within thirty (30) days after the end of each calendar\nmonth ending after the Effective Date and before the Closing Date, an unaudited\nbalance sheet and statement of operations, which financial statements shall be\nprepared in the ordinary course of business consistent with Enterprise's past\npractice (and in accordance with United States generally accepted accounting\nprinciples, except for the absence of footnotes and subject to normal year-end\nadjustments, none of which are expected to be material in amount), in accordance\nwith Enterprise's books and records and shall fairly present the financial\nposition of Enterprise as of their respective dates and the results of\nEnterprise's operations for the periods then ended.\n\n 5.2 Maintenance of Business. Enterprise will uses its best efforts to\n ----------------------- \ncarry on and preserve its business and its relationships with customers,\nsuppliers, employees, consultants and others in substantially the same manner as\nit has prior to the date hereof. If Enterprise becomes aware of a material\ndeterioration in the relationship with any customer, supplier, key employee,\nconsultant or business partner (including, without limitation, the Enterprise\nShareholder or Kevin Malloy), it will promptly bring such information to the\nattention of NetSelect in writing and, if requested by NetSelect, will exert its\nbest efforts to restore the relationship.\n\n 5.3 Conduct of Business. Enterprise will continue to conduct its business\n ------------------- \nand maintain its business relationships in the ordinary and usual course and\nwill not, without the prior written consent of NetSelect (which consent shall\nnot be unreasonably withheld):\n\n (a) borrow or lend any money in excess of Ten Thousand Dollars ($10,000),\nother than advances to employees for travel and expenses that are incurred in\nthe ordinary course of Enterprise's business consistent with Enterprise's past\npractice;\n\n (b) accelerate the payment of account receivables or delay the payment of\naccount payables other than in the ordinary course of business with persons or\nentities, and in amounts, consistent with prior practice;\n\n 23\n\n \n (c) purchase or sell shares or other equity interests in any corporation or\nother business or enter into any transaction or agreement not in the ordinary\ncourse of Enterprise's business consistent with Enterprise's past practice;\n\n (d) encumber, or permit to be encumbered, its assets with debt in excess of\nTen Thousand Dollars ($10,000);\n\n (e) sell, transfer or dispose of any of its assets except in immaterial\namounts and in the ordinary course of Enterprise's business consistent with\nEnterprise's past practice;\n\n (f) enter into any material lease or contract for the purchase or sale of\nany property, whether real or personal, tangible or intangible for an amount in\nexcess of Ten Thousand Dollars ($10,000);\n\n (g) pay any bonus, increased salary or special remuneration to any officer,\nemployee or consultant (except for normal salary increases consistent with past\npractices not to exceed five percent (5%) of such officer's, employee's or\nconsultant's base annual compensation, except pursuant to existing arrangements\npreviously disclosed to and approved in writing by NetSelect) or enter into any\nnew employment or consulting agreement with any such person;\n\n (h) change any of its accounting methods;\n\n (i) declare, set aside or pay any cash or stock dividend or other\ndistribution in respect of any of its capital stock, redeem, repurchase or\notherwise acquire any of its capital stock or other securities, pay or\ndistribute any cash or property to the Enterprise Shareholder or make any other\ncash payment to the Enterprise Shareholder that is unusual, extraordinary, or\nnot made in the ordinary course of Enterprise's business consistent with\nEnterprise's past practice;\n\n (j) amend or terminate any contract, agreement or license to which it is a\nparty except those amended or terminated in the ordinary course of Enterprise's\nbusiness, consistent with Enterprise's past practice, and which are not material\nin amount or effect;\n\n (k) guarantee or act as a surety for any obligation of any third party;\n\n (l) waive or release any material right or claim except in the ordinary\ncourse of business, consistent with past practice, or agree to any audit\nassessment by any tax authority or file any federal or state income or franchise\ntax return unless copies of such returns have been delivered to NetSelect for\nits review prior to filing;\n\n (m) issue, sell, create or authorize any shares of its capital stock of any\nclass or series or any other of its securities, or issue, grant or create any\nwarrants, obligations, subscriptions, options, convertible securities, or other\ncommitments to issue shares of its capital stock or securities ultimately\nexchangeable for, or convertible into, shares of its capital stock;\n\n 24\n\n \n (n) subdivide or split or combine or reverse split the outstanding shares\nof its capital stock of any class or enter into any recapitalization affecting\nthe number of outstanding shares of its capital stock of any class or affecting\nany other of its securities;\n\n (o) merge, consolidate or reorganize with, or acquire, any entity or enter\ninto any negotiations, discussions or agreement for such purpose;\n\n (p) amend its charter documents;\n\n (q) license any of its technology or Intellectual Property Rights except\nin the ordinary course of business consistent with past practice;\n\n (r) change any insurance coverage or issue any certificates of insurance;\n\n (s) purchase or otherwise acquire, or sell or otherwise dispose of (i) any\nshares of NetSelect Common Stock or other NetSelect securities or (ii) any\nsecurities whose value is derived from or determined with reference to, in whole\nor in part, the value of NetSelect stock or other NetSelect securities;\n\n (t) agree to do any of the things described in the preceding clauses\n5.3(a) through 5.3(s).\n\n 5.4 Regulatory Approvals. Enterprise and the Enterprise Shareholder will\n -------------------- \npromptly execute and file, or join in the execution and filing, of any\napplication or other document that may be necessary in order to obtain the\nauthorization, approval or consent of any governmental body, federal, state,\nlocal or foreign, which may be reasonably required, or which NetSelect may\nreasonably request, in connection with the consummation by Enterprise and the\nEnterprise Shareholder of the transactions contemplated by this Agreement.\nEnterprise, its officers, directors and employees and the Enterprise Shareholder\nwill use their respective best efforts to promptly obtain, and to cooperate with\nNetSelect to promptly obtain, all such authorizations, approvals and consents.\n\n 5.5 Necessary Consents. Enterprise, its officers, directors and employees\n ------------------ \nand the Enterprise Shareholder will use their respective best efforts to\npromptly obtain such written consents and take such other actions as may be\nreasonably necessary or appropriate in addition to those set forth in Section\n5.4 to allow the consummation of the transactions contemplated hereby and to\nallow NetSelect to carry on Enterprise's business after the Closing.\n\n 5.6 Litigation. Enterprise will notify NetSelect in writing promptly\n ---------- \nafter learning of any action, suit, arbitration, mediation, proceeding or\ninvestigation by or before any court, arbitrator or arbitration panel, board or\ngovernmental agency, initiated by or against it, or known by it to be threatened\nagainst it or any of its directors, officers, employees or consultant in their\ncapacity as such.\n\n 5.7 No Other Negotiations. From the Effective Date until the earlier of\n --------------------- \nthe termination of this Agreement in accordance with Section 10 or the\nconsummation of the \n\n 25\n\n \nExchange, Enterprise, its officers, directors and employees and the Enterprise\nShareholder will not, and will not authorize, encourage or permit, any officer,\ndirector, employee or affiliate of Enterprise, or any other person, on its or\ntheir behalf to, directly or indirectly, solicit or encourage any offer from any\nparty or consider any inquiries or proposals received from any other party,\nparticipate in any negotiations regarding, or furnish to any person any\ninformation with respect to, or otherwise cooperate with, facilitate or\nencourage any effort or attempt by any person (other than NetSelect), concerning\nany agreement or transaction regarding the possible disposition of all or any\nsubstantial portion of the business, assets or capital stock of Enterprise by\nmerger, consolidation, reorganization, sale of assets, sale of stock, exchange,\ntender offer or any other form of business combination (\"Alternative\nTransaction\"). Enterprise will promptly notify NetSelect orally and in writing\nof any such inquiries or proposals. In addition, neither Enterprise, nor the\nEnterprise Shareholder, shall execute, enter into or become bound by (a) any\nletter of intent or agreement or commitment between Enterprise and\/or the\nEnterprise Shareholder, on the one hand, and any third party, on the other hand,\nthat is related to an Alternative Transaction or (b) any agreement or commitment\nbetween Enterprise and\/or the Enterprise Shareholder, on the one hand, and a\nthird party, on the other hand, providing for an Alternative Transaction.\n\n 5.8 Access to Information. Until the Closing, Enterprise will allow\n --------------------- \nNetSelect and its agents reasonable access to the files, books, records and\noffices of Enterprise, including, without limitation, any and all information\nrelating to Enterprise's taxes, commitments, contracts, leases, licenses, and\nreal, personal and intangible property and financial condition, subject to the\nterms of the Mutual Nondisclosure Agreement between Enterprise and RealSelect,\nInc. dated as of August 20, 1997 (the \"Confidentiality Agreement\"). Enterprise\nwill cause its accountants to reasonably cooperate with NetSelect and its agents\nin making available all financial and tax information reasonably requested,\nincluding, without limitation, the right to examine all working papers\npertaining to all financial statements and tax returns, prepared or audited by\nsuch accountants.\n\n 5.9 Satisfaction of Conditions Precedent. Enterprise, and its directors\n ------------------------------------ \nand officers and the Enterprise Shareholder will use their respective best\nefforts to satisfy or cause to be satisfied all the conditions precedent which\nare set forth in Section 9, and Enterprise, its directors and officers, and the\nEnterprise Shareholder will use their respective best efforts to cause the\ntransactions contemplated by this Agreement to be consummated; and, without\nlimiting the generality of the foregoing, to obtain all consents and\nauthorizations of third parties and to make all filings with, and give all\nnotices to, third parties that may be necessary or reasonably required on\nEnterprise's part in order to effect the transactions contemplated hereby.\n\n 5.10 Securities Laws. Enterprise and the Enterprise Shareholder shall\n --------------- \neach use all reasonable efforts to assist NetSelect to the extent necessary to\ncomply with the securities and Blue Sky laws of all jurisdictions which are\napplicable in connection with the Exchange.\n\n 5.11 Termination of Registration and Voting Rights. All registration\n --------------------------------------------- \nrights agreements and voting agreements applicable to or affecting any\noutstanding shares or other securities of Enterprise (if any) shall be duly\nterminated and canceled by no later than the Closing.\n\n 26\n\n \n 5.12 Invention Assignment and Confidentiality Agreements. Enterprise\n --------------------------------------------------- \nshall obtain, before the Closing or within ten (10) days thereafter, from each\nemployee, and consultant providing significant services to Enterprise who has\nhad access to any proprietary software, technology or copyrightable, patentable\nor other proprietary works or intellectual property owned or developed by\nEnterprise or other Intellectual Property Rights, or to any other confidential\nor proprietary information of Enterprise or its clients, an invention assignment\nand confidentiality agreement in substantially the form of the agreement\nattached hereto as Exhibit 5.12, duly executed by such employee or consultant\n ------------ \n(unless, with respect to consultants, the written agreement between Enterprise\nand the consultant provides for retention by the consultant of intellectual\nproperty rights relating to inventions developed by consultant) and delivered to\nEnterprise (with Enterprise as a beneficiary of such agreement).\n\n 5.13 Non-Competition and Non-Solicitation and Employment Agreements. The\n -------------------------------------------------------------- \nEnterprise Shareholder shall execute and deliver to NetSelect at the Closing the\nNon-Competition and Non-Solicitation Agreement in the form attached hereto as\nExhibit 9.8 (the \"Non-Competition and Non-Solicitation Agreement\") and an\n----------- \nEmployment Agreement in the form attached hereto as Exhibit 9.9A (the \"Scommegna\n ------------ \nEmployment Agreement\"). The Scommegna Employment Agreement shall provide, among\nother things, that the Enterprise Shareholder will initially have a title of\nPresident of Realtor.com. Enterprise shall use its best efforts to cause Kevin\nMalloy to execute and deliver to NetSelect at the Closing an Employment\nAgreement (the \"Malloy Employment Agreement\") in the form attached hereto as\nExhibit 9.9B.\n------------ \n\n 5.14 Closing of Exchange. Enterprise and the Enterprise Shareholder shall\n ------------------- \nnot refuse to effect the Exchange if, on or before the Closing Date, all of the\nconditions precedent to their obligations to effect the Exchange under Section 8\nhereof have been satisfied, or in their sole discretion, waived by them.\n\n 5.15 Consultants to Become Employees. Enterprise and its officers shall\n ------------------------------- \nuse all reasonable efforts to cause those persons designated on Exhibit 5.15 to\n ------------ \nbecome employees of Enterprise at or prior to the Closing on terms and\nconditions satisfactory to NetSelect.\n\n 5.16 Insurance.\n --------- \n\n (a) Enterprise shall, if requested by NetSelect, cause the cancellation\nof any outstanding life insurance policies on the life of the Enterprise\nShareholder; provided, however, that Enterprise may, before or after the\nClosing, with the consent of NetSelect transfer to the Enterprise Shareholder\none or more life insurance policies with the Enterprise Shareholder as the\nbeneficiary. After the Closing, the Enterprise Shareholder shall cooperate with\nNetSelect and Enterprise if NetSelect desires, at its expense, to acquire\nadditional or other insurance on the life of the Enterprise Shareholder.\n\n 5.17 Certain Indebtedness. On the date which is the earlier to occur of\n -------------------- \n(i) the day before the closing of the initial public offering of equity\nsecurities by NetSelect or (ii) December 31, 1998, Enterprise will forgive the\nindebtedness owed by Roger Scommegna to Enterprise, evidenced by the written\nmaterials (such as book entries, checks, etc.) delivered by Enterprise and\/or\nthe Enterprise Shareholder to NetSelect before the Closing, which is reflected\nin the \n\n 27\n\n \nEnterprise Financial Statements, with principal and accrued interest as of the\nClosing Date equal to $300,000. At the time such indebtedness is forgiven, the\namount (reasonably determined by NetSelect) required to be withheld by\nEnterprise (or other applicable entity) under applicable federal, state and\nlocal tax laws and other required withholdings (e.g., social security, Medicare,\nMedicaid, etc.) with respect to such forgiveness of indebtedness shall be paid\nby Enterprise Shareholder by means of a reduction in the Additional Deferred\nAmount. In addition, NetSelect agrees that after the Closing it shall forgive\nthe principal and accrued interest of indebtedness owed by a certain employee of\nEnterprise, which is identified in the Schedule of Exceptions (Exhibit 3), in\n --------- \nthe approximate amount of $11,000 (with the precise amount of outstanding\nprincipal and accrued interest to be specified in the document delivered by\nEnterprise to NetSelect), less any required taxes and other withholdings as\ndescribed in the preceding sentence.\n\n 5.18. Tax Returns. As soon after the Closing as is practicable, NetSelect\n ----------- \nshall cause Enterprise to make a closing of the books election under Section\n1362(e)(3) of the Code as of the Closing Date. NetSelect and the Enterprise\nShareholder shall cooperate in good faith with respect to preparation of\nEnterprise's federal and state tax returns (which returns shall be reasonably\nsatisfactory to the Enterprise Shareholder) for the short tax year ending on the\nClosing Date (and any other tax returns filed by Enterprise with respect to\nperiods before the Closing Date), and the costs of preparing such returns\n(including reasonable fees of NetSelect's auditors) shall be paid by the\nEnterprise Shareholder, up to a maximum of $7,000. The tax returns filed for\nperiods prior to the Closing Date must be reasonably satisfactory to the\nEnterprise Shareholder. For purposes of this Section 5.18, the term \"tax\nreturn\" shall include any and all returns and amended returns for \"taxes\" (as\ndefined in Section 3.6).\n\n6. NETSELECT COVENANTS\n\n 6.1 Terminating Covenants. During the period from the Effective Date\n --------------------- \nuntil the earlier to occur of (i) the Closing or (ii) the termination of this\nAgreement in accordance with Section 10, NetSelect covenants and agrees as\nfollows:\n\n (a) NetSelect Financial Information. No later than one business day\n ------------------------------- \nbefore the Closing, NetSelect will make available for inspection by Enterprise\nand the Enterprise Shareholder true and complete copies of the NetSelect\nFinancial Information.\n\n (b) Advice of Changes. NetSelect will use all reasonable efforts to\n ----------------- \npromptly advise Enterprise in writing (i) of any event occurring subsequent to\nthe date of this Agreement that would render any representation or warranty of\nNetSelect contained in this Agreement, if made on or as of the date of such\nevent or the Closing Date, untrue or inaccurate in any material respect and (ii)\nof any material adverse change in NetSelect's business, results of operations or\nfinancial condition.\n\n (c) Regulatory Approvals. NetSelect will execute and file, or join in \n -------------------- \nthe execution and filing, of any application or other document that may be\nnecessary in order to obtain the authorization, approval or consent of any\ngovernmental body, federal, state or local, which may be reasonably required, in\nconnection with the consummation by NetSelect of the transactions \n\n 28\n\n \ncontemplated by this Agreement in accordance with the terms of this Agreement.\nNetSelect will use its best efforts to obtain all such authorizations, approvals\nand consents.\n\n (d) Satisfaction of Conditions Precedent. NetSelect will use its best\n ------------------------------------ \nefforts to satisfy or cause to be satisfied all the conditions precedent which\nare set forth in Section 8, and NetSelect will use its best efforts to cause the\ntransactions contemplated by this Agreement to be consummated in accordance with\nthe terms of this Agreement, and, without limiting the generality of the\nforegoing, to obtain all consents and authorizations of third parties and to\nmake all filings with, and give all notices to, third parties that may be\nnecessary or reasonably required on its part in order to effect the transactions\ncontemplated hereby.\n\n (e) Securities Laws. NetSelect shall take such steps as may be necessary\n --------------- \nto comply with the securities and Blue Sky laws of all jurisdictions which are\napplicable in connection with the Exchange, with the cooperation and assistance\nof Enterprise and the Enterprise Shareholder.\n\n 6.2 Continuing Covenants.\n -------------------- \n\n (a) Financial Data. During the period that the Enterprise Shareholder is\n -------------- \nemployed pursuant to the Scommegna Employment Agreement, NetSelect covenants and\nagrees to provide the Enterprise Shareholder with the same financial data of\nNetSelect that is provided to executive officers of NetSelect, with the\nexception of data provided to the Chief Executive Officer that is not provided\nto other executive officers.\n\n (b) Continued Operations in Milwaukee. As long as the Enterprise\n --------------------------------- \nShareholder is employed by Enterprise, NetSelect or RealSelect, Inc. pursuant to\nthe Scommegna Employment Agreement, NetSelect will cause Enterprise (and\/or\nsuccessors to the business operations of Enterprise) to continue to maintain its\nprincipal business office in Milwaukee, Wisconsin for at least four (4) years\nfrom the Closing Date.\n\n (c) Office Space and Resources for the Enterprise Shareholder. As long as\n --------------------------------------------------------- \nthe Enterprise Shareholder is an employee of Enterprise, NetSelect or\nRealSelect, Inc. pursuant to the Scommegna Employment Agreement, NetSelect will\ncause Enterprise (and\/or successors to the business operations of Enterprise) to\nprovide the Enterprise Shareholder appropriate office space and resources to\nperform his duties.\n\n (d) Employee Benefits. As soon as practicable after the Effective Date,\n ----------------- \nNetSelect and Enterprise shall confer and work in good faith to agree upon a\nplan under which Enterprise employees will be covered either by (a) NetSelect's\nemployee benefits plans or (b) Enterprise's employee benefit plans, with such\ndecision to be made no later than six (6) months following the Closing, in a\nmanner that results in minimal disruption to the continuing operations of\nEnterprise, and minimal cost to NetSelect.\n\n 6.3 Advice of Changes. NetSelect shall use all reasonable efforts to\n ----------------- \npromptly advise Enterprise and the Enterprise Shareholder in writing (a) of any\nevent occurring after the Effective Date and before the Closing or termination\nof this Agreement that would render any representation or warranty of NetSelect\ncontained in this Agreement, if made on or as of the date \n\n 29\n\n \nof such event or the Closing Date, untrue or inaccurate in any material respect\nand (b) of any event that NetSelect believes will have a Material Adverse Effect\non NetSelect.\n\n 6.4 Satisfaction of Conditions Precedent. NetSelect, and its officers, and\n ------------------------------------ \ndirectors will use their respective best efforts to satisfy or cause to be\nsatisfied all the conditions precedent to NetSelect's obligation to consummate\nthe transactions contemplated hereby which are set forth in Section 8, and\nNetSelect, its officers and directors, will use their respective reasonable best\nefforts to cause the transactions contemplated by this agreement to be\nconsummated.\n\n7. CLOSING MATTERS\n\n 7.1 The Closing. Subject to termination of this Agreement as provided in\n ----------- \nSection 10 below, the closing of the transactions for consummation of the\nExchange (the \"Closing\") will take place at the offices of Fenwick & West LLP,\nTwo Palo Alto Square, Palo Alto, California 94306 on March 31, 1998 (with such\nclosing to be effective as of the close of business on such day) or on such\nother date on or before the Termination Date (as defined in Section 10.1.2) as\nNetSelect and Enterprise may mutually agree upon in writing after which the\nsatisfaction or waiver of the conditions to Closing set forth in Sections 8 and\n9 hereof have been satisfied and\/or waived in accordance with this Agreement\n(the \"Closing Date\").\n\n 7.2 Exchanges at the Closing.\n ------------------------ \n\n 7.2.1 At the Closing, (a) the Enterprise Certificates shall be\nexchanged for the Exchange Shares as provided in Section 2 hereof and (b) the\nEnterprise Shareholder shall be paid the amounts described in Section 2 hereof.\n\n 7.2.2 The Enterprise Shareholder understands and agrees that stop\ntransfer instructions will be given to NetSelect's transfer agent with respect\nto certificates evidencing the Exchange Shares to assure compliance with the\nprovisions of the Investment Representation Letter and that there will be placed\non the certificates evidencing such Exchange Shares legends as specified in the\nInvestment Representation Letter.\n\n 7.2.3 After the Closing there will be no further registration of\ntransfers on the stock transfer books of Enterprise or its transfer agent of the\nEnterprise Stock that was outstanding immediately prior to the Closing. If,\nafter the Closing, Enterprise Certificates are presented for any reason, they\nwill be canceled.\n\n 30\n\n \n8. CONDITIONS TO OBLIGATIONS OF ENTERPRISE AND THE ENTERPRISE SHAREHOLDER\n\n The obligations of Enterprise and the Enterprise Shareholder to consummate\nthe Exchange are subject to the fulfillment or satisfaction, on and as of the\nClosing, of each of the following conditions (any one or more of which may be\nwaived by Enterprise and the Enterprise Shareholder in their sole discretion,\nbut only in a writing signed by Enterprise and the Enterprise Shareholder):\n\n 8.1 Accuracy of Representations and Warranties. The representations and\n ------------------------------------------ \nwarranties of NetSelect set forth in Section 4 (as qualified by the NetSelect\nSchedule of Exceptions, if any) shall be true and accurate in every material\nrespect on and as of the Closing with the same force and effect as if they had\nbeen made at the Closing, and Enterprise shall have received a certificate to\nsuch effect executed by NetSelect's Chief Executive Officer or President.\n\n 8.2 Covenants. NetSelect shall have performed and complied in all\n --------- \nmaterial respects with all of its covenants contained in Section 6 on or before\nthe Closing, and Enterprise shall have received a certificate to such effect\nsigned by NetSelect's Chief Executive Officer or President.\n\n 8.3 Compliance with Law; No Legal Restraints. There shall not be\n ---------------------------------------- \noutstanding or threatened, or enacted or adopted, any order, decree, temporary,\npreliminary or permanent injunction, legislative enactment, statute, regulation,\naction, proceeding or any judgment or ruling by any court, arbitrator,\ngovernmental agency, authority or entity, or any other fact or circumstance\n(other than any such matter initiated by Enterprise, its officers or directors\nor the Enterprise Shareholder), that, directly or indirectly, challenges,\nthreatens, prohibits, enjoins, restrains, suspends, delays, conditions or\nrenders illegal or imposes limitations on (or is likely to result in a\nchallenge, threat to, or a prohibition, injunction, restraint, suspension, delay\nor illegality of, or to impose limitations on): (i) the Exchange or any other\ntransaction contemplated by this Agreement; or (ii) NetSelect's payment for, or\nacquisition or purchase of, some or all of the shares of Enterprise Stock or any\nmaterial part of the assets of Enterprise.\n\n 8.4 Government Consents. There shall have been obtained at or prior to\n ------------------- \nthe Closing Date such permits and\/or authorizations, and there shall have been\ntaken such other action by any regulatory authority having jurisdiction over the\nparties and the actions herein proposed to be taken, as may be required to\nlawfully consummate the Exchange, including but not limited to requirements\nunder applicable U.S. securities and corporations laws.\n\n 8.5 Opinion of NetSelect's Counsel. Enterprise shall have received from\n ------------------------------ \ncounsel to NetSelect, an opinion substantially in the form of Exhibit 8.5.\n ----------- \n\n 8.6 Documents. NetSelect shall have executed and delivered to Enterprise\n --------- \nand\/or the Enterprise Shareholder, as applicable, the NetSelect Ancillary\nAgreements. Enterprise shall have received all written consents, assignments,\nwaivers, authorizations or other certificates reasonably deemed necessary by\nEnterprise's legal counsel for Enterprise to lawfully consummate the\ntransactions contemplated hereby.\n\n 31\n\n \n 8.7 No Litigation. No litigation or proceeding (other than any litigation\n ------------- \nor proceeding initiated by Enterprise, any member of its Board of Directors, any\nemployee of Enterprise or the Enterprise Shareholder) shall be threatened or\npending for the purpose or with the probable effect of enjoining or preventing\nthe consummation of the Exchange or any of the other transactions contemplated\nby this Agreement, or which could be reasonably expected to have a Material\nAdverse Effect on NetSelect.\n\n 8.8 No Material Adverse Change. There shall not have been any Material\n -------------------------- \nAdverse Effect in the financial condition, properties, assets, liabilities,\nbusiness, results of operations, operations or prospects of NetSelect, taken as\na whole.\n\n 8.9 Instructions to Transfer Agent; Deliveries. NetSelect shall have made\n ------------------------------------------ \nthe deliveries contemplated by Section 2 hereof.\n\n 8.10 Satisfactory Form of Legal Matters. The form, scope and substance of\n ---------------------------------- \nall legal and accounting matters contemplated hereby and all closing documents\nand other papers delivered hereunder shall be reasonably acceptable to\nEnterprise's counsel.\n\n 8.11 Ancillary Agreements. NetSelect shall have delivered to Enterprise,\n -------------------- \nthe Enterprise Shareholder and Kevin Malloy, as applicable, fully executed\ncopies of each NetSelect Ancillary Agreement (including, without limitation, the\nEmployment Agreements described in Exhibits 9.9A and 9.9B).\n ------------- ---- \n \n9. CONDITIONS TO OBLIGATIONS OF NETSELECT\n\n The obligations of NetSelect hereunder are subject to the fulfillment or\nsatisfaction, on and as of the Closing, of each of the following conditions (any\none or more of which may be waived by NetSelect in its sole discretion, but only\nin a writing signed by NetSelect):\n\n 9.1 Accuracy of Representations and Warranties. The representations and\n ------------------------------------------ \nwarranties of Enterprise and the Enterprise Shareholder set forth in Section 3\n(as qualified by the Enterprise Schedule of Exceptions) and in the Investment\nRepresentation Letter shall each be true and accurate in every material respect\non and as of the Closing with the same force and effect as if they had been made\nat the Closing, and NetSelect shall have received certificates to such effect\nexecuted by Enterprise's President and by the Enterprise Shareholder.\n\n 9.2 Covenants. Enterprise and the Enterprise Shareholder shall have\n --------- \nperformed and complied in all material respects with all of their respective\ncovenants contained in Section 5 on or before the Closing, and NetSelect shall\nhave received certificates to such effect signed by Enterprise's President and\nby the Enterprise Shareholder.\n\n 9.3 Compliance with Law; No Legal Restraints. There shall not be\n ---------------------------------------- \noutstanding or threatened, or enacted or adopted, any order, decree, temporary,\npreliminary or permanent injunction, legislative enactment, statute, regulation,\naction, proceeding or any judgment or ruling by any court, arbitrator,\ngovernmental agency, authority or entity, or any other fact or \n\n 32\n\n \ncircumstance (other than any such matter initiated by NetSelect or its officers\nor directors), that, directly or indirectly, challenges, threatens, prohibits,\nenjoins, restrains, suspends, delays, conditions, or renders illegal or imposes\nlimitations on (or is likely to result in a challenge, threat to, or a\nprohibition, injunction, restraint, suspension, delay or illegality of, or to\nimpose limitations on): (i) the Exchange or any other transaction contemplated\nby this Agreement; (ii) NetSelect's payment for, or acquisition or purchase of,\nsome or all of the shares of Enterprise Stock or any material part of the assets\nof Enterprise; (iii) the ownership or operation by NetSelect or Enterprise of\nall or any material portion of the business or assets of Enterprise, including\n(but not limited to) Enterprise's Intellectual Property Rights; or (iv)\nNetSelect's ability to exercise full rights of ownership with respect to\nEnterprise, and its respective assets and shares, including but not limited to\nrestrictions on NetSelect's ability to vote all the shares of Enterprise.\n\n 9.4 Government Consents. There shall have been obtained at or prior to\n ------------------- \nthe Closing Date such permits or authorizations from, and there shall have been\ntaken such other action, as may be required to lawfully consummate the Exchange\nby, any governmental or regulatory authority having jurisdiction over any of the\nparties and\/or the actions herein proposed to be taken, including but not\nlimited to requirements under applicable U.S. and foreign securities and\ncorporate laws.\n\n 9.5 Opinion of Enterprise's Counsel. NetSelect shall have received from\n ------------------------------- \ncounsels to Enterprise, opinions in substantially the form of Exhibit 9.5.\n ----------- \n\n 9.6 Documents and Consents. Enterprise and the Enterprise Shareholder\n ---------------------- \nshall have executed and delivered to NetSelect all the Enterprise Ancillary\nAgreements and all the Shareholder Ancillary Agreements, as applicable. The\nEnterprise Shareholder shall have delivered to NetSelect Enterprise Certificates\nrepresenting one hundred percent (100%) of the outstanding shares of Enterprise\ntogether with the other deliverables specified in Section 2.1 hereof. NetSelect\nshall have received (or waived receipt of) duly executed copies of all third-\nparty consents, approvals, assignments, waivers, authorizations or other\ncertificates contemplated by this Agreement or the Enterprise Schedule of\nExceptions or reasonably deemed necessary by NetSelect's legal counsel to\nprovide for the continuation in full force and effect of any and all material\ncontracts, agreements and leases of Enterprise and the preservation of\nEnterprise's IP Rights and other assets and properties and for NetSelect to\nconsummate the transactions contemplated hereby, in form and substance\nreasonably satisfactory to NetSelect, except for such thereof (if any) as\nNetSelect and Enterprise shall have agreed in writing need not be obtained.\n\n 9.7 No Litigation. No litigation or proceeding shall be threatened or\n ------------- \npending for the purpose or with the probable effect of enjoining or preventing\nthe consummation of the Exchange or any of the other transactions contemplated\nby this Agreement, or which could be reasonably expected to have a Material\nAdverse Effect on the present or future operations or financial condition of\nEnterprise or NetSelect or which asserts that Enterprise's or NetSelect's or the\nEnterprise Shareholder's negotiations regarding this Agreement, NetSelect's or\nEnterprise's or the Enterprise Shareholder's entering into this Agreement or\nEnterprise's or NetSelect's or the Enterprise Shareholder's consummation of the\nExchange or other transactions contemplated hereby, breaches or violates any\nlaw, rule, order or judgment, or any agreement or commitment \n\n 33\n\n \nof Enterprise or the Enterprise Shareholder or constitutes tortious conduct on\nthe part of NetSelect, Enterprise or the Enterprise Shareholder.\n\n 9.8 Non-Competition and Non-Solicitation Agreement. NetSelect shall have\n ---------------------------------------------- \nreceived from the Enterprise Shareholder a fully executed copy of a Non-\nCompetition and Non-Solicitation Agreement in the form of Exhibit 9.8.\n ----------- \n\n 9.9 Employment Agreement. NetSelect shall have received from the\n -------------------- \nEnterprise Shareholder and Kevin Malloy, a fully executed copy of an Employment\nAgreement in the forms of Exhibits 9.9A and 9.9B, respectively.\n ---------------------- \n\n 9.10 Appointment of New Directors and Officers. The directors and\n ----------------------------------------- \nofficers of Enterprise in office immediately prior to the Closing of the\nExchange shall have resigned effective as of the Closing, unless otherwise\ndirected by NetSelect.\n\n 9.11 No Material Adverse Effect. There shall not have been any Material\n -------------------------- \nAdverse Effect as to Enterprise.\n\n 9.12 Satisfactory Form of Legal and Accounting Matters. The form, scope\n ------------------------------------------------- \nand substance of all legal and accounting matters contemplated hereby and all\nclosing documents and other papers delivered hereunder shall be reasonably\nacceptable to NetSelect's counsel and independent public accountants.\n\n 9.13 Closing Indebtedness. Each person entitled to receive payments of\n -------------------- \nClosing Indebtedness shall have executed and delivered to NetSelect and\nEnterprise instruments in form and substance reasonably satisfactory to counsel\nfor Enterprise and NetSelect, evidencing receipt of full payment for the Closing\nIndebtedness owed to such person.\n\n\n10. TERMINATION OF AGREEMENT\n\n 10.1 Prior to or at the Closing.\n -------------------------- \n\n 10.1.1 This Agreement may be terminated at any time prior to or at\nthe Closing by the mutual written consent of NetSelect and Enterprise, approved\nby their respective Boards of Directors.\n\n 10.1.2 This Agreement may be terminated after the Termination Date,\nas defined below, by NetSelect if the conditions precedent set forth in Section\n9 shall have not been complied with, waived or performed and such noncompliance\nor nonperformance shall not have been cured or eliminated (or by its nature\ncannot be cured or eliminated) by Enterprise and\/or the Enterprise Shareholder\non or before 11:59 p.m., Pacific Time on April 15, 1998 (the \"Termination\nDate\").\n\n 10.1.3 This Agreement may be terminated after the Termination Date\nby Enterprise and the Enterprise Shareholder if the conditions precedent set\nforth in Section 8 shall \n\n 34\n\n \nhave not been complied with, waived or performed and such noncompliance or\nnonperformance shall not have been cured or eliminated (or by its nature cannot\nbe cured or eliminated) by NetSelect on or before the Termination Date.\n\n 10.1.4 NetSelect may terminate this Agreement at any time prior to\nor at the Closing if any of the representations and warranties of Enterprise\nand\/or the Enterprise Shareholder in Section 3 of this Agreement were incorrect,\nuntrue or false in any material respect as of the Effective Date or are\nincorrect, untrue or false in any material respect as of the proposed Closing\nDate or Enterprise and\/or the Enterprise Shareholder have materially breached\nany of their respective covenants under Section 5 of this Agreement, and\nEnterprise and\/or the Enterprise Shareholder have not cured such breach prior to\nthe earlier of (i) the Closing, (ii) thirty (30) days after NetSelect has given\nEnterprise written notice of its intention to terminate this Agreement pursuant\nto this subsection or (iii) the Termination Date.\n\n 10.1.5 Enterprise and the Enterprise Shareholder may terminate this\nAgreement at any time prior to or at the Closing if any of the representations\nand warranties of NetSelect in Section 4 of this Agreement were incorrect,\nuntrue or false in any material respect as of the Effective Date or are\nincorrect, untrue or false in any material respect as of the proposed Closing\nDate or NetSelect has materially breached any of its covenants under Section 6\nof this Agreement, and NetSelect has not cured such breach prior to the earlier\nof (i) the Closing, (ii) thirty (30) days after Enterprise and the Enterprise\nShareholder have given NetSelect written notice of their intention to terminate\nthis Agreement pursuant to this subsection or (iii) the Termination Date.\n\n Any termination of this Agreement under this Section 10 will be effective\nby the delivery of notice of the terminating party to the other party hereto.\n\n 10.2 No Liability for Proper Termination. Any termination of this\n ----------------------------------- \nAgreement in accordance with this Section 10 will be without further obligation\nor liability upon any party in favor of the other party hereto or to its\nstockholders, directors or officers, other than the obligations provided in the\nConfidentiality Agreement; provided, however, that nothing herein will limit the\n -------- ------- \nobligation of Enterprise, the Enterprise Shareholder and NetSelect for any\nwillful breach hereof or failure to use their best efforts to cause the Exchange\nto be consummated, as set forth in Sections 5.9 and 6.1(c) hereof, respectively.\nIn the event of the termination of this Agreement pursuant to this Section 10,\nthis Agreement shall thereafter become void and have no effect and each party\nshall be responsible for its own expenses incurred in connection herewith.\n\n11. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES, CONTINUING\n COVENANTS\n\n 11.1 Survival of Representations. All representations, warranties and\n --------------------------- \ncovenants of (i) Enterprise and the Enterprise Shareholder and (ii) NetSelect,\ncontained in this Agreement will remain operative and in full force and effect,\nregardless of any investigation made by or on behalf of NetSelect, until that\ndate which is the earlier of (iii) the termination of this Agreement or (iv)\nthree (3) years after the Closing Date, except that the representations and\nwarranties of \n\n 35\n\n \nEnterprise and the Enterprise Shareholder in Section 3.6 of this Agreement shall\nsurvive until the expiration of the applicable statute of limitations (including\nextensions) (\"Release Date\").\n\n 11.2 Agreement to Indemnify. (a) Subject to the limitations set forth in\n ---------------------- \nSection 11.3 below, the Enterprise Shareholder agrees to indemnify and hold\nharmless NetSelect and its officers, directors, agents, stockholders and\nemployees, and each person, if any, who controls or may control NetSelect within\nthe meaning of the 1933 Act (such persons, together with persons entitled to\nindemnity under paragraph (b) below, as applicable in context, referred to\nindividually as an \"Indemnified Person\" and collectively as \"Indemnified\nPersons\") from and against any and all claims, demands, suits, actions, causes\nof actions, losses, costs, damages, liabilities and expenses including, without\nlimitation, reasonable attorneys' fees, other professionals' and experts'\nreasonable fees and court or arbitration costs (hereinafter collectively\nreferred to as \"Damages\") incurred and arising out of any inaccuracy,\nmisrepresentation, breach of, or default in, any of the representations,\nwarranties or covenants given or made by Enterprise and\/or the Enterprise\nShareholder in this Agreement or in the Enterprise Schedule of Exceptions or in\nany certificate delivered by or on behalf of Enterprise pursuant hereto (if such\ninaccuracy, misrepresentation, breach or default existed at the Closing Date).\nAny Damages asserted by an Indemnified Person shall be adjusted to reflect the\nTax Benefit to such Indemnified Person resulting from the payment of such\namount, and the amount of Damages for purposes of indemnification payments\nhereunder shall be so adjusted. For these purposes, \"Tax Benefit\" shall mean\nthe actual reduction in federal and state taxes (as defined in Section 3.6) paid\n(determined, if the Indemnified Person is a member of a group with NetSelect\nthat reports its taxes on a consolidated basis, on a consolidated basis) which\ndoes or will result from the appropriate tax treatment (as reasonably determined\nby the Indemnified Person) of such payment of the item of Damage as a deduction\n(whether immediate or through depreciation\/amortization or otherwise) or credit\nand, in the case of any determinable actual future Tax Benefit (i.e., a Tax\nBenefit which will not be realized for the tax year such indemnification payment\nis made), such amount shall be discounted to its present value using a discount\nrate equal to the Prime Rate as published in The Wall Street Journal as of the\ndate of satisfaction of the claim. Any claim of indemnity made by an\nIndemnified Person under this Section 11.2 must be asserted no later than the\nRelease Date. An Indemnified Person may not make a claim for indemnification\npursuant to Section 11 unless, at the time such assertion of a claim is made,\nthe Indemnified Person has a good faith basis for assertion of the claim.\n\n (b) NetSelect agrees to indemnify and hold harmless the Enterprise\nShareholder from and against any and all Damages incurred and arising out of any\ninaccuracy, misrepresentation, breach of, or default in, any of the\nrepresentations, warranties or covenants given or made by NetSelect in this\nAgreement or in the NetSelect Schedule of Exceptions or in any certificate\ndelivered by or on behalf of NetSelect pursuant hereto (if such inaccuracy,\nmisrepresentation, breach or default existed at the Closing Date). Any Damages\nasserted by the Enterprise Shareholder shall be adjusted (as set forth above) to\nreflect the Tax Benefit (as set forth above) to the Enterprise Shareholder\nresulting from the payment of such amount, and the amount of Damages for\npurposes of indemnification payments hereunder shall be so adjusted.\n\n 11.3 Limitation. (a) Except as provided herein, the Enterprise\n ---------- \nShareholder's indemnification liability under Section 11.2 shall be satisfied\nby, and shall be limited to, \n\n 36\n\n \nwithholding and offsetting that portion of the purchase price for the Enterprise\nStock as is represented by the cash payments that are payable (but not payments\nalready made) by NetSelect pursuant to this Agreement after the Closing Date\nevidenced by the Note and the payments pursuant to the Earn-Out pursuant to this\nAgreement (such payments referred to as the \"Payments\"), and such amounts shall\nbe the exclusive remedies of NetSelect and the other Indemnified Persons under\nthis Agreement or in any cause of action based thereon (subject to the\nexceptions in the last sentence of this Section) against the Enterprise\nShareholder for any inaccuracy, misrepresentation, breach of, or default in, any\nof the representations, warranties or covenants given or made by Enterprise or\nthe Enterprise Shareholder in this Agreement or in any certificate, document or\ninstrument delivered by or on behalf of Enterprise pursuant hereto or in any\ncause of action based thereon (subject to the exceptions in the last sentence of\nthis Section). In no event, however, shall any portion of the Additional\nDeferred Amount be subject to the provisions of this Section 11 or otherwise\navailable to satisfy the Enterprise Shareholder's indemnification obligations\nhereunder. If NetSelect has made a payment pursuant to the Note or the Earn-Out,\nthen once such payment is made the amount of such payment shall no longer be\nconsidered to be included in the Payments and shall not be available to satisfy\nthe Enterprise Shareholder's indemnity obligations hereunder (subject to the\nexceptions in the last sentence of this Section). Amounts that are unpaid under\nthe Note because of nonpayment constituting a material breach by NetSelect of\nprovisions of the Note shall not be considered to be amounts available to\nsatisfy the Enterprise Shareholder's indemnification obligations hereunder\n(subject to the exceptions in the last sentence of this Section). If an\nIndemnified Person becomes entitled to indemnity under this Section 11 for\namounts in excess of the amounts then-represented by amounts remaining to be\npaid pursuant to the Note, but no amounts are then-owed pursuant to the Earn-\nOut, then the person obligated to provide indemnity under this Section 11 (an\n\"Indemnitor\") shall be obligated to make additional indemnity payments only at\nsuch time, if any, as amounts become due and payable pursuant to the Earn-Out,\nand in such event only to the extent of such Payments (subject to the exceptions\nin the last sentence of this Section). In addition, the other provisions of\nSection 11 notwithstanding, if the aggregate Damages for which one or more\nIndemnified Persons seeks or has sought indemnification against the Enterprise\nShareholder hereunder exceeds a cumulative aggregate of Fifty Thousand Dollars\n($50,000) (the \"Basket\"), then (i) the Enterprise Shareholder shall be liable to\nindemnify the Indemnified Persons for only Damages in excess of the Basket and\n(ii) NetSelect shall be entitled to withhold, forgo and offset against such\namount any of the Payments that would otherwise be owed by NetSelect to the\nEnterprise Shareholder. The limitations on the indemnification obligations set\nforth in this Section shall not be applicable to (aa) Misconduct Damages (as\n ---\ndefined below), (bb) Damages resulting from breach of the representations and\nwarranties set forth in Section 3.6 of this Agreement and (cc) Damages incurred\nand arising out of any inaccuracy, misrepresentation, breach of, or default in,\nthe representations and warranties set forth in Sections 3.1, 3.2, 3.3 and 3.8.\nAs used herein, \"Misconduct Damages\" means Damages resulting from fraudulent\nconduct of Enterprise or the Enterprise Shareholder.\n\n (b) Except as provided herein, NetSelect shall not have any liability to\nthe Enterprise Shareholder under Section 11.2 of this Agreement in excess of the\nPayments, and such amounts shall be the exclusive remedies of the Enterprise\nShareholder under this Agreement or in any cause of action based thereon (except\nfor Damages resulting from fraudulent conduct of NetSelect) against NetSelect\nfor any inaccuracy, misrepresentation, breach \n\n 37\n\n \nof, or default in, any of the representations, warranties or covenants given or\nmade by NetSelect in this Agreement or in any certificate, document or\ninstrument delivered by or on behalf of NetSelect pursuant hereto or in any\ncause of action based thereon (except for Damages resulting from fraudulent\nconduct of NetSelect). In addition, the other provisions of Section 11\nnotwithstanding, if the aggregate Damages for which the Enterprise Shareholder\nseeks or has sought indemnification against NetSelect hereunder exceeds the\nBasket, then NetSelect shall be liable to indemnify the Enterprise Shareholder\nfor only Damages in excess of the Basket.\n\n 11.4 Notice. Promptly after an Indemnified Person becomes aware of the\n ------ \nexistence of any claim by an Indemnified Person for indemnity from an Indemnitor\nbased on any action, suit or proceeding commenced by a third party, the\nIndemnified Person will notify the Indemnitor of such potential claim (in the\ncase of third party claims, such notice shall in any event be given within\ntwenty (20) days of filing or assertion of any claim against the person claiming\nindemnification, stating the nature and basis of such claim) and will, to the\nextent that it can reasonably do so without materially impairing its ability to\nadequately defend and respond to any such claim, permit the Indemnitor the\noption to assume the defense of such claim. The Indemnified Person will\ncooperate with the Indemnitor in obtaining copies of any records or other\ninformation which is relevant to the defense of such claim. Delay in giving\nsuch notice shall not affect any rights or remedies of an Indemnified Person or\nthe Indemnitor hereunder with respect to indemnification for Damages unless such\ndelay renders the Indemnified Person or the Indemnitor unable to defend the\nclaim. If the Indemnitor shall assume the defense of a claim, it shall promptly\nnotify the other parties that it has elected to assume such defense, and shall\nhave the right and obligation (i) to conduct any proceedings or negotiations in\nconnection therewith and necessary or appropriate to defend the indemnified\nperson, (ii) to take all other required steps or proceedings to settle or defend\nany such claims and (iii) to employ counsel reasonably satisfactory to the\nIndemnified Person to contest any such claim or liability in the name of the\nIndemnified Person or otherwise. If and only if the Indemnitor shall not assume\nthe defense of any such claim, the Indemnified Person may defend against any\nsuch claim or litigation in such manner as it may deem appropriate and the\nIndemnified Person may settle such claim or litigation on such terms as it may\ndeem appropriate. In addition to the foregoing, the Indemnified Person shall\nhave the right to participate (at its own expense and with counsel of its\nchoice) in the defense, compromise or settlement of the action, suit,\nproceeding, claim or demand. The Indemnitor will not compromise or settle any\nsuch action, suit, proceeding, claim or demand without the prior written consent\nof the Indemnified Person, which consent will not be unreasonably withheld or\ndelayed. So long as the Indemnitor is defending in good faith any such action,\nsuit, proceeding, claim or demand asserted by a third party against the\nIndemnified Person, the Indemnified Person shall not settle or compromise such\naction, suit, proceeding, claim or demand without the prior written consent of\nthe Indemnitor, which consent will not be unreasonably withheld or delayed. If\nthe Indemnitor shall fail to promptly and adequately defend any such action,\nsuit, proceeding, claim or demand, or if the Indemnified Person has been advised\nby counsel that there may be additional or different defenses available to the\nIndemnified Person or that a conflict of interest may exist between Indemnitor\nand the Indemnified Person, then the Indemnified Person may defend, through\ncounsel of its own choosing, such action, suit, proceeding, claim or demand and\n(so long as the Indemnified Person gives Indemnitor at least ten (10) days\nnotice of the terms of the proposed settlement thereof and permits the\nIndemnitor to then undertake the defense thereof if the Indemnitor objects to\nthe proposed settlement) to settle \n\n 38\n\n \nsuch action, suit, proceeding, claim or demand and to recover from the\nIndemnitor the amount of any resulting Damages, with the attorney's fees and\nexpenses of counsel to the Indemnified Person to be paid by the Indemnitor.\n\n 11.5 Further Procedures. (a) If an Indemnified Person intends to assert\n ------------------ \na claim for indemnification, it must first notify the Indemnitor in writing. If\nthe Indemnitor disputes the claim, it shall deliver a notice of dispute within\n30 days of the date on which the Indemified Person's notice was delivered, and\nthe dispute (\"Dispute\") shall be resolved by binding arbitration in Los Angeles,\nCalifornia, under the commercial arbitration rules of the American Arbitration\nAssociation (\"AAA\") (subject to the provisions set forth below) (and, if AAA is\nunable or unwilling to resolve the Dispute as provided below, then under the\nauspices of Judicial Arbitration and Mediation Services, Inc.). Any judgment\nupon the award rendered by the arbitrators may be entered in any court having\njurisdiction over the subject matter thereof. The arbitrators shall have the\nauthority to grant any equitable and legal remedies that could be available in\nany judicial proceeding instituted to resolve a Dispute. The parties shall use\ntheir best efforts to select an arbitrator within 30 days and to resolve the\nDispute within 60 days.\n\n (b) Each party shall select one arbitrator, and the two arbitrators\nso selected shall appoint the third arbitrator. The parties shall each pay one-\nhalf of the costs of the arbitrators. The arbitrators shall be compensated at a\nrate to be determined by the parties or by AAA, but based upon reasonable hourly\nor daily consulting rates for the arbitrators in the event the parties are not\nable to agree upon rates of compensation.\n\n (c) Enterprise Shareholder and NetSelect will each pay 50% of the\ninitial compensation to be paid to the arbitrators in any such arbitration and\n50% of the costs of transcripts and other normal and regular expenses of the\narbitration proceedings. The parties shall pay their own attorneys' fees and\ncosts.\n\n (d) For any Dispute submitted to arbitration, the burden of proof\nwill be as it could be if the claim were litigated in a judicial proceeding.\n\n (e) Upon the conclusion of any arbitration proceedings hereunder,\nthe arbitrators will render findings of fact and conclusions of law and a\nwritten opinion setting forth the basis and reasons for any decision reached and\nwill deliver such documents to each party to this Agreement along with a signed\ncopy of the award.\n\n (f) The arbitrators chosen in accordance with these provisions will\nnot have the power to alter, amend or otherwise affect the terms of these\narbitration provisions or the provisions of this Agreement.\n\n\n12. INCIDENTAL REGISTRATION RIGHTS\n\n 12.1 Definitions. For the purposes of this Section 12, the following\n ----------- \nwords shall have the meanings set forth below:\n\n (a) An \"Affiliate\" of any Person is any other Person which controls,\n --------- \nis controlled by or is under common control with such Person.\n\n 39\n\n \n (b) \"Corporation\" shall mean NetSelect.\n ----------- \n\n (c) \"Person\" includes an individual, partnership, trust, corporation,\n ------ \nlimited liability company, joint venture, association, government, government\nbureau or agency or other entity of whatsoever kind or nature.\n\n (d) The terms \"register,\" \"registered\" and \"registration\" refer to a\n -------- ---------- ------------ \nregistration effected by preparing and filing a registration statement in\ncompliance with the Securities Act.\n\n (e) \"Registrable Stock\" means (x) the shares of NetSelect Class A\n ----------------- \nCommon Stock issued pursuant to this Agreement or upon exercise of the stock\noptions referenced in the Employment Agreements and held by the Enterprise\nShareholder, Kevin Malloy or Cleary; and (y) any shares issued or issuable with\nrespect to the securities identified in clause (x) above by reason of a stock\ndividend or stock split or in connection with a combination of shares of Class A\nCommon Stock, merger, consolidation or other reorganization. Each share of\nRegistrable Stock shall cease to be Registrable Stock when transferred to any\nperson who is not Affiliated with a holder or transferred pursuant to a\nregistered public offering or pursuant to Rule 144 promulgated by the Securities\nand Exchange Commission (the \"Commission\") under the 1933 Act.\n\n (f) \"Short-Form Registration Statement\" means a registration \n --------------------------------- \nstatement on Form S-3 or any similar form of registration statement adopted by\nthe Commission from and after the date hereof.\n\n 12.2 Incidental Registration.\n ----------------------- \n\n (a) If the Corporation at any time proposes to register on a firmly\nunderwritten public offering basis any of its shares of Class A Common Stock to\nbe offered for cash for its own account pursuant thereto (other than a\nregistration requested pursuant to registration rights held by other\nshareholders), it shall give written notice (the \"Corporation's Notice\"), at its\nexpense, to all holders of Registrable Stock of its intention to do so at least\n15 days prior to the filing of a registration statement with respect to such\nregistration with the Commission. If any holder of Registrable Stock desires to\ndispose of all or part of such stock, it may request registration thereof in\nconnection with the Corporation's registration by delivering to the Corporation,\nwithin ten days after receipt of the Corporation's Notice, written notice of\nsuch request (the \"Holder's Notice\") stating the number of shares of Registrable\nStock to be disposed. The Corporation shall use its best efforts to cause all\nshares of Class A Common Stock specified in the Holder's Notice to be registered\nunder the 1933 Act so as to permit the sale or other disposition by such holder\nor holders of the shares so registered, subject however, to the limitations set\nforth in Section 12.3 hereof.\n\n (b) Notwithstanding anything to the contrary contained in this\nSection 12.2, no person (as defined, for these purposes, in Rule 144(a)(2) of\nthe Commission under the 1933 Act) who then beneficially owns one percent (1%)\nor less of the outstanding shares of the Class A Common Stock (including the\nRegistrable Stock) may request that any of its shares of Registrable Stock be\nincluded in any registration statement filed by the Corporation pursuant to this\nSection 12.2 unless, in the opinion of counsel for such person, such person's\nintended \n\n 40\n\n \ndisposition of Registrable Stock could not be effected within 90 days of the\ndate of said opinion without registration of such shares under the Securities\nAct (assuming, for this purpose, that if \"current public information\" (as\ndefined in Rule 144 (c) of the Commission under the 1933 Act) is available with\nrespect to the Corporation as of the date of such opinion, it will remain so\navailable for such 90-day period).\n\n Section 12.3 Limitations on Incidental Registration.\n -------------------------------------- \n\n (a) The Corporation shall have the right to limit the aggregate size\nof the offering or the number of shares of Registrable Stock to be included\ntherein by stockholders of the Corporation if requested to do so in writing and\ngood faith by the managing underwriter or agent of the offering. Only\nsecurities which are to be included in the underwriting may be included in the\nregistration. NetSelect shall deliver a copy of such written request to the\nEnterprise Shareholder.\n\n (b) Whenever the number of shares of Registrable Stock which may be\nregistered pursuant to Section 12.2 is limited by the provisions of Section\n12.3(a) hereof, the Corporation will include in such registration, (i) first,\nthe securities the Corporation proposes to sell, (ii) second, the shares of\nRegistrable Stock requested to be sold by the holders of Registrable Stock and\nother shares of NetSelect Common Stock requested to be included in the\nregistration by stockholders of the Corporation who have the contractual right\nto include all or a portion of their shares in the registration, on a pro rata\nbasis, and (iii) third, any other securities of the Corporation requested to be\nincluded in such registration on a pro rata basis; provided, that, if, at level\n -------- \n(ii) above, any such holder would thus be entitled to include more shares than\nsuch holder requested to be registered, the excess will be allocated among the\nother requesting holders pro rata based upon the number of shares owned by such\n --- ---- \nholders of Registrable Stock and other stockholders.\n\n (c) Notwithstanding anything to the contrary contained in this\nSection, the Corporation may decide, in its sole and absolute discretion, not to\nproceed with or to discontinue any registration commenced or proposed to be\ncommenced under Section 12.2 hereof.\n\n 12.4 Registration Procedures.\n ----------------------- \n\n (a) If and when the Corporation is required by the provisions of this\nAgreement to use its best efforts to effect the registration of shares of\nRegistrable Stock, the Corporation shall:\n\n (1) furnish to each holder of shares of Registrable Stock selling\nshares in the registration (a \"Prospective Seller\") such number of copies of\neach prospectus, including preliminary prospectuses, in conformity with the\nrequirements of the 1933 Act, and such other documents, as the Prospective\nSeller may reasonably request in order to facilitate the public sale or other\ndisposition of the shares of Registrable Stock owned by it;\n\n (2) if requested by a Prospective Seller, use its best efforts to\nregister or qualify the shares of Registrable Stock covered by such registration\nstatement under the applicable securities or blue sky laws of such jurisdictions\nas the Prospective Seller reasonably \n\n 41\n\n \nrequests and take such other similar actions that the Prospective Seller\nreasonably requests to qualify the disposition of such Registerable Stock under\nthe laws of such jurisdiction;\n\n (3) if the registration is underwritten, furnish to each\nProspective Seller a copy of a \"comfort\" letter addressed to the Corporation and\nthe underwriter, if any, of the Prospective Sellers, signed by the independent\npublic accountants who have certified the Corporation's financial statements\nincluded in the registration statement; covering substantially the same matters\nwith respect to the registration statement (and the prospectus included therein)\nand (in the case of the accountants' letter) with respect to the events\nsubsequent to the date of the financial statements, as are customarily covered\n(at the time of such registration) in accountants' letters delivered to the\nunderwriters in connection with underwritten public offerings of securities; and\n\n (4) use its best efforts to cause all such Registrable Stock to\nbe listed on each securities exchange on which similar securities issued by the\nCorporation are then listed.\n\n (b) Each Prospective Seller of Registrable Stock shall furnish to the\nCorporation in writing such information as the Corporation may reasonably\nrequire from the Prospective Seller for inclusion in the registration statement\n(and the prospectus included therein).\n\n (c) The Prospective Sellers shall not (until further notice) effect\nsales of the shares of Registrable Stock covered by the registration statement\nafter receipt of telegraphic or written notice from the Corporation to suspend\nsales to permit the Corporation to correct or update a registration statement or\nprospectus.\n\n 12.5 Expenses of Registration. All expenses incurred in effecting any\n ------------------------ \nregistration requested pursuant to Section 12.2 hereof, including, without\nlimitation, all registration and filing fees, printing expenses, expenses of\ncompliance with blue sky laws, fees and disbursements of counsel for the\nCorporation, and expenses of any audits incidental to or required by any each\nregistration (\"Registration Expenses\") shall be borne by the Corporation;\nprovided that each Prospective Seller shall bear its own legal expenses (if it\n-------- \nretains separate counsel) and all underwriting discounts or brokerage fees or\ncommissions relating to the sale of its Registrable Stock.\n\n 12.6 Indemnification and Contribution. (a) The Corporation shall\n -------------------------------- \nindemnify each Stockholder who sells Registrable Stock in a registration\n(\"Selling Stockholder\") (and each person, if any, who controls such Selling\nStockholder) against all claims, losses, damages, expenses and liabilities\narising out of or based on any untrue statement (or alleged untrue statement) of\na material fact contained in any prospectus, offering circular or other document\nincident to the offering, or any omission (or alleged omission) to state a\nmaterial fact required to be stated or necessary to make the statements\ncontained in any such document not misleading, or any violation by the\nCorporation of any rule or regulation promulgated under the 1933 Act applicable\nto the Corporation, and shall reimburse such Selling Stockholder (and each\nperson, if any, who controls such selling Stockholder) for any legal and any\nother expenses reasonably incurred in connection with investigating or defending\nany such claim, loss, damage, liability or action; provided, however, that the\n -------- ------- \nCorporation shall not be liable to the extent that any claim, \n\n 42\n\n \nloss, damage, expense or liability arises out of or is based on any untrue\nstatement or omission based upon written information furnished to the\nCorporation by such Selling Stockholder specifically for use in such document.\n\n (b) Each Selling Stockholder shall indemnify the Corporation and its\nofficers and directors against all claims, losses, damages, expenses and\nliabilities arising out of or based on any untrue statement (or alleged untrue\nstatement) of a material fact contained in any prospectus, offering circular or\nother document incident to the offering or any omission (or alleged omission) to\nstate a material fact required to be stated or necessary to make the statements\ncontained in any such document not misleading, and shall reimburse the\nCorporation and its officers and directors for any legal and any other expenses\nreasonably incurred in connection with investigating or defending any such\nclaim, loss, damage, expense, liability or action; provided, however, that such\n -------- ------- \nstatement or omission was made in reliance upon and in conformity with\ninformation furnished to the Corporation in writing by such Selling Stockholder\nspecifically for use in such document. In no event shall the liability of a\nSelling Stockholder exceed the net amount received by such Selling Stockholder\nupon the sale of Registrable Stock pursuant to such registration.\n\n (c) Promptly after receipt by an indemnified party of notice of the\ncommencement of any action or proceeding involving a claim referred to in the\npreceding subdivisions of this Section 12, such indemnified party will, if a\nclaim in respect thereof is to be made against an indemnifying party, give\nwritten notice to the latter of the commencement of such action; provided,\n -------- \nhowever, that the failure of any indemnified party to give notice as provided\n------- \nherein shall not relieve the indemnifying party of its obligations under the\npreceding subdivisions of this Section 12, except to the extent that the\nindemnifying party is actually prejudiced by such failure to give notice. In\ncase any such action is brought against an indemnified party, unless in such\nindemnified party's reasonable judgment a conflict of interest between such\nindemnified and indemnifying parties is reasonably likely to exist in respect of\nsuch claim, the indemnifying party shall be entitled to participate in and, to\nassume the defense thereof, jointly with any other indemnifying party similarly\nnotified to the extent that it may wish, with counsel reasonably satisfactory to\nsuch indemnified party, and after notice from the indemnifying party to such\nindemnified party of its election so to assume the defense thereof, the\nindemnifying party shall not be liable to such indemnified party for any legal\nor other expenses subsequently incurred by the latter in connection with the\ndefense thereof other than reasonable costs of investigation unless in such\nindemnified party's reasonable judgment a conflict of interest between such\nindemnified and indemnifying parties arises in respect of such claim after the\nassumption of the defense thereof and the indemnified party notifies the\nindemnifying party of such indemnified party's judgment and the basis therefor.\nNo indemnifying party shall be liable for any settlement of any action or\nproceeding effected without its written consent, which consent shall not be\nunreasonably withheld. No indemnifying party shall, without the consent of the\nindemnified party, consent to entry of any judgment or enter into any settlement\nwhich does not include as an unconditional term thereof the giving by the\nclaimant or plaintiff to such indemnified party of a release from all liability\nin respect of such claim or litigation.\n\n (d) If the indemnification provided for in this Section 12.6 is held\nto be unavailable by a court of competent jurisdiction to an indemnified party\nin respect of any claims, losses, damages, expenses or liabilities referred to\nherein, then each applicable indemnifying \n\n 43\n\n \nparty, in lieu of indemnifying such indemnified party, shall contribute to the\namount paid or payable by such indemnified party as a result of such claims,\nlosses, damages, expenses or liabilities in such proportion as is appropriate to\nreflect the relative fault of the Corporation, on the one hand, and the Selling\nStockholder, on the other hand, in connection with the statements or omissions\nwhich resulted in such claims, losses, damages, expenses or liabilities, as well\nas any other relative equitable considerations. The relative fault of the\nCorporation, on the one hand, and of such Selling Stockholder, on the other\nhand, shall be determined by reference to, among other things, whether the\nuntrue or alleged untrue statement of a material fact or the omission or alleged\nomission to state a material fact relates to information supplied by the\nCorporation, on the one hand, or by such Selling Stockholder, on the other hand,\nand the party's relative intent, knowledge, access to information and\nopportunity to correct or prevent such statement or omission. The amount paid or\npayable by a party as a result of the claims, losses, damages, expenses and\nliabilities referred to above shall be deemed to include any legal or other fees\nor expenses reasonably incurred by such party in connection with investigating\nor defending any such action or claim. The Corporation and Stockholders agree\nthat it would not be just and equitable if contribution pursuant to this Section\n12.6(c) were determined by pro rata allocation or by any other method of\n --- ----\nallocation that does not take account of the equitable considerations referred\nto above. Notwithstanding the provisions of this Section 12.6(c), no Selling\nStockholder shall be required to contribute any amount in excess of the amount\nby which the net price at which the shares of Registrable Stock sold by such\nSelling Stockholder and distributed to the public or offered to the public\nexceeds the amount of any damages which such Selling Stockholder has otherwise\nbeen required to pay by reason of such untrue or alleged untrue statement or\nomission or alleged omission. No person guilty of fraudulent misrepresentation\n(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to\ncontribution from any person who is not guilty of such fraudulent\nmisrepresentation.\n\n13. MISCELLANEOUS\n\n 13.1 Governing Law; Consent to Jurisdiction. The laws of the State of\n -------------------------------------- \nCalifornia (irrespective of its choice of law principles) will govern the\nvalidity of this Agreement, the construction of its terms, and the\ninterpretation and enforcement of the rights and duties of the parties hereto.\nEach party to this Agreement hereby consents to exclusive personal jurisdiction\nand venue of the federal and state courts for Los Angeles, California, and\nagrees that service of process in any such action may be made in the manner\nprovided in this Agreement for the delivery of notices.\n\n 13.2 Assignment; Binding Upon Successors and Assigns. Neither party\n ----------------------------------------------- \nhereto may assign any of its rights or obligations hereunder without the prior\nwritten consent of the other party hereto, except that NetSelect may assign its\nrespective rights and\/or obligations to any wholly-owned subsidiary of\nNetSelect; and except that after the Closing, NetSelect may assign its rights\nand obligations hereunder without the prior written consent of Enterprise or the\nEnterprise Shareholder in connection with a merger, consolidation or sale of all\nor substantially all of NetSelect's assets, provided that the acquiring or\nsurviving corporation agrees to assume all of NetSelect's obligations under this\nAgreement. This Agreement will be binding upon and inure to the benefit of the\nparties hereto and their respective successors and permitted assigns.\n\n 44\n\n \n 13.3 Severability. If any provision of this Agreement, or the application\n ------------ \nthereof, will for any reason and to any extent be invalid or unenforceable, the\nremainder of this Agreement and application of such provision to other persons\nor circumstances will be interpreted so as reasonably to effect the intent of\nthe parties hereto. The parties further agree to replace such void or\nunenforceable provision of this Agreement with a valid and enforceable provision\nthat will achieve, to the extent possible, the economic, business and other\npurposes of the void or unenforceable provision.\n\n 13.4 Counterparts. This Agreement may be executed in any number of\n ------------ \ncounterparts, each of which will be an original as regards any party whose\nsignature appears thereon and all of which together will constitute one and the\nsame instrument. This Agreement will become binding when one or more\ncounterparts hereof, individually or taken together, will bear the signatures of\nboth parties reflected hereon as signatories.\n\n 13.5 Other Remedies. Except as otherwise provided herein, any and all\n -------------- \nremedies herein expressly conferred upon a party will be deemed cumulative with\nand not exclusive of any other remedy conferred hereby or by law on such party,\nand the exercise of any one remedy will not preclude the exercise of any other.\n\n 13.6 Amendment and Waivers. Any term or provision of this Agreement may\n --------------------- \nbe amended prior to the Closing by the written consent of NetSelect, Enterprise\nand the Enterprise Shareholder, and, after the Closing by NetSelect and the\nEnterprise Shareholder (or their successors in interest). The observance of any\nterm, condition or provision of this Agreement may be waived (either generally\nor in a particular instance and either retroactively or prospectively) only by a\nwriting signed by the party to be bound thereby or for whose benefit such\ncondition was provided. The waiver by a party of any breach hereof or default\nin the performance hereof will not be deemed to constitute a waiver of any other\ndefault or any succeeding breach or default. In addition, at any time prior to\nthe Closing, the Enterprise Shareholder and each of Enterprise and NetSelect (by\naction taken by its respective Board of Directors) may, to the extent legally\nallowed: (i) extend the time for the performance of any of the obligations or\nother acts of the other; (ii) waive any inaccuracies in the representations and\nwarranties made to it contained herein or in any document delivered pursuant\nhereto; and (iii) waive compliance with any of the agreements or conditions for\nits benefit contained herein. No such waiver or extension shall be effective\nunless signed in writing by the party against whom such waiver or extension is\nasserted. The failure of any party to enforce any of the provisions hereof will\nnot be construed to be a waiver of the right of such party thereafter to enforce\nsuch provisions or any other provisions.\n\n 13.7 Expenses. Each party will bear its respective expenses and legal\n -------- \nfees incurred with respect to this Agreement, and the transactions contemplated\nhereby; provided, however, that the Enterprise Shareholder shall pay all of the\n -------- ------- \nexpenses and legal, accounting and other fees incurred by Enterprise with\nrespect to this Agreement and transactions contemplated hereby.\n\n 13.8 Attorneys' Fees. Should suit be brought to enforce or interpret any\n --------------- \npart of this Agreement, the prevailing party will be entitled to recover, as an\nelement of the costs of suit and not as damages, reasonable attorneys' fees to\nbe fixed by the court (including, without limitation, \n\n 45\n\n \ncosts, expenses and fees on any appeal). The prevailing party will be entitled\nto recover its costs of suit, regardless of whether such suit proceeds to final\njudgment.\n\n 13.9 Notices. All notices and other communications required or permitted\n ------- \nunder this Agreement will be in writing and will be either hand delivered in\nperson, sent by telecopier, sent by certified or registered first class mail,\npostage pre-paid, or sent by nationally recognized express courier service.\nSuch notices and other communications will be effective upon receipt if hand\ndelivered or sent by telecopier, five (5) days after mailing if sent by mail,\nand one (l) day after dispatch if sent by express courier, to the following\naddresses, or to such other addresses or fax number as any party may notify the\nother parties in accordance with this Section:\n\n\n (i) If to NetSelect:\n\n NetSelect, Inc.\n 5655 Lindero Canyon Road, Suite 120\n Westlake Village, CA 91362\n Attention: Stuart Wolff, Chairman and Chief Executive Officer\n\n with a copy to:\n\n Mark Stevens, Esq.\n Fenwick & West LLP\n Two Palo Alto Square, Suite 800\n Palo Alto, CA 94306\n Fax Number: (415) 494-1417\n\n (ii) If to Enterprise:\n\n The Enterprise of America, Ltd.\n 823 South 60\/th\/ Street\n Milwaukee, WI 53214\n Attention: Roger Scommegna, President\n\n with a copy to:\n\n John C. Vitek, Esq.\n Beck, Chaet, Molony & Bamberger, S.C.\n Two Plaza East, Suite 1085\n 330 East Kilbourn Avenue\n Milwaukee, WI 53202\n Fax Number: (414) 273-7786\n\n with a copy to:\n\n Craig H. Zetley, Esq.\n\n 46\n\n \n Zetley & Cohn, S.C.\n 324 East Wisconsin Avenue\n Suite 1400\n Milwaukee, WI 53202\n Fax Number: (414) 272-1435\n\n\n (iii) If to Enterprise Shareholder:\n\n Roger Scommegna\n 20740 Lincolnshire Court\n Brookfield, WI 53005\n\n with a copy to:\n\n John C. Vitek, Esq.\n Beck, Chaet, Molony & Bamberger, S.C.\n Two Plaza East, Suite 1085\n 330 East Kilbourn Avenue\n Milwaukee, WI 53202\n Fax Number: (414) 273-7786\n\n with a copy to:\n\n Craig H. Zetley, Esq.\n Zetley & Cohn, S.C.\n 324 East Wisconsin Avenue\n Suite 1400\n Milwaukee, WI 53202\n Fax Number: (414) 272-1435\n\n 13.10 Construction of Agreement. This Agreement has been negotiated by\n ------------------------- \nthe respective parties hereto and their attorneys and the language hereof will\nnot be construed for or against either party. A reference to a Section or an\nexhibit will mean a Section in, or exhibit to, this Agreement unless otherwise\nexplicitly set forth. The titles and headings herein are for reference purposes\nonly and will not in any manner limit the construction of this Agreement which\nwill be considered as a whole.\n\n 13.11 No Joint Venture. Nothing contained in this Agreement will be\n ---------------- \ndeemed or construed as creating a joint venture or partnership between any of\nthe parties hereto. No party is by virtue of this Agreement authorized as an\nagent, employee or legal representative of any other party. No party will have\nthe power to control the activities and operations of any other party and their\nstatus is, and at all times will continue to be, that of independent contractors\nwith respect to each other. No party will have any power or authority to bind\nor commit any other. No party will hold itself out as having any authority or\nrelationship in contravention of this Section.\n\n 47\n\n \n 13.12 Further Assurances. Each party agrees to cooperate fully with the\n ------------------ \nother parties and to execute such further instruments, documents and agreements\nand to give such further written assurances as may be reasonably requested by\nany other party to evidence and reflect the transactions described herein and\ncontemplated hereby and to carry into effect the intents and purposes of this\nAgreement.\n\n 13.13 Absence of Third Party Beneficiary Rights. No provisions of this\n ----------------------------------------- \nAgreement are intended, nor will be interpreted, to provide or create any third\nparty beneficiary rights or any other rights of any kind in any client,\ncustomer, affiliate, shareholder, partner, employee, agent, consultant or any\nparty hereto or any other person or entity unless specifically provided\notherwise herein, and, except as so provided, all provisions hereof will be\npersonal solely between the parties to this Agreement.\n\n 13.14 Confidentiality. Enterprise, the Enterprise Shareholder, and\n --------------- \nNetSelect each confirm that they have entered into the Confidentiality Agreement\nand that they are each bound by, and will abide by, the provisions of such\nConfidentiality Agreement (except that NetSelect will cease to be bound by the\nConfidentiality Agreement after the Exchange becomes effective). If this\nAgreement is terminated, all copies of documents containing confidential\ninformation of a disclosing party shall be returned by the receiving party to\nthe disclosing party or be destroyed, as provided in the Confidentiality\nAgreement.\n\n 13.15 Entire Agreement. This Agreement and the exhibits hereto constitute\n ---------------- \nthe entire understanding and agreement of the parties hereto with respect to the\nsubject matter hereof and supersede all prior and contemporaneous agreements or\nunderstandings, inducements or conditions, express or implied, written or oral,\nbetween the parties with respect hereto other than the Confidentiality\nAgreement. The express terms hereof control and supersede any course of\nperformance or usage of the trade inconsistent with any of the terms hereof.\n\n 13.16 Withholding. All amounts payable to the Enterprise Shareholder\n ----------- \nhereunder shall be reduced by all federal, state, local and other withholding,\nemployment and similar taxes and payments on such amounts (e.g., if required,\nsocial security, Medicare, Medicaid, etc.) that NetSelect determines in good\nfaith are required by applicable law. In connection herewith, the parties\nacknowledge that payments and deliveries to the Enterprise Shareholder pursuant\nto Section 2 of this Agreement are intended as consideration in exchange for the\ntransfer of the Enterprise Stock. The parties agree to report the transactions\ncontemplated under this Agreement consistent with that understanding and will\nnot take an inconsistent position in connection therewith in connection with any\ntax filing or reporting.\n\n\n\n [Remainder of Page Intentionally Left Blank]\n\n 48\n\n \n IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of\nthe date first above written.\n\nNETSELECT, INC. THE ENTERPRISE OF AMERICA, LTD.\na Delaware corporation a Wisconsin corporation\n \n \nBy: \/s\/ Stuart Wolff By: \/s\/ Roger Scommegna\n --------------------------------- ----------------------------------\nStuart Wolff Roger Scommegna, President\nChairman and Chief Executive Officer\n\n ENTERPRISE SHAREHOLDER\n ROGER SCOMMEGNA\n \n \/s\/ Roger Scommegna\n -------------------------------------\n Roger Scommegna, individually\n\n\n\n [SIGNATURE PAGE TO EXCHANGE AGREEMENT]\n\n 49\n\n \n LIST OF EXHIBITS\n<\/pre>\n
\n
\nExhibit 1.4 Enterprise Print Business<\/p>\nExhibit A Enterprise Shareholder<\/p>\n
Exhibit 2(a) Note<\/p>\n
Exhibit 2(b) Security Agreement<\/p>\n
Exhibit 2(c) Enterprise’s Obligations to the Scommegnas<\/p>\n
Exhibit 2.4A Investment Representation Letter (Enterprise Shareholder)<\/p>\n
Exhibit 2.4B Investment Representation Letter (Cleary)<\/p>\n
Exhibit 2.5 Put Option Agreement<\/p>\n
Exhibit 3 Enterprise Schedule of Exceptions<\/p>\n
Exhibit 3.7 Enterprise Financial Statements<\/p>\n
Exhibit 3.10 Contracts and Commitments of Enterprise<\/p>\n
Exhibit 3.12 Enterprise IP Rights<\/p>\n
Exhibit 3.12.4 Enterprise Employee Invention and Proprietary Information
\n Agreements<\/p>\n
Exhibit 3.15.1 List of Enterprise Employees, Officers and Consultants<\/p>\n
Exhibit 3.15.4 Enterprise Benefit Arrangements<\/p>\n
Exhibit 3.19 Insurance Policies<\/p>\n
Exhibit 4 NetSelect Schedule of Exceptions<\/p>\n
Exhibit 5.12 Invention Assignment and Confidentiality Agreement<\/p>\n
Exhibit 5.15 Consultants to Become Employees<\/p>\n
Exhibit 8.5 Form of Opinion of Fenwick & West LLP<\/p>\n
Exhibit 9.5 Form of Opinion of Beck, Chaet, Molony & Bamberger, S.C.<\/p>\n
Exhibit 9.8 Non-Competition and Non-Solicitation Agreement<\/p>\n
Exhibit 9.9A Employment Agreement (Enterprise Shareholder)<\/p>\n
Exhibit 9.9B Employment Agreement (Kevin Malloy)
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