FindLaw | Find a Lawyer. Find Answers.
Are you a legal Professional?
My current location:
Los Angeles, CA
| Change location
| Featured Legal Services | |
|
(562) 435-1426
|
------------------------------------------------
Agreement and Plan of Merger
By and Among
AmericanGreetings.com, Inc.,
Brewers Acquisition, Inc.
EGCB, Inc.
and
At Home Corporation
September 12, 2001
-------------------------------------
<PAGE>
Article 1 Purchase and Sale..................................... 1
1.1 The Merger ............................................ 1
1.2 Purchase Price ....................................... 3
1.3 Closing ............................................... 3
1.4 Further Assurances ...................................... 4
1.5 Section 338(h)(10) Election .............................. 4
Article 2 Representations and Warranties of Company and Stockholder 5
2.1 Organization and Good Standing .......................... 5
2.2 Subsidiaries ........................................... 5
2.3 Power, Authorization and Validity ...................... 5
2.4 Capitalization of Company .............................. 6
2.5 No Conflict ............................................ 7
2.6 Sufficiency ........................................... 7
2.7 Litigation ............................................ 8
2.8 Taxes ................................................. 8
2.9 Company Financial Statements ......................... 8
2.10 Assets Other than Intellectual Property ............. 9
2.11 Absence of Certain Changes .......................... 9
2.12 Contracts and Commitments/Licenses and Permits ...... 11
2.13 No Default; No Restrictions ......................... 13
2.14 Intellectual Property ............................... 13
2.15 Compliance with Laws ................................ 16
2.16 Related Party Transactions and Agreements ........... 17
2.17 Employees, ERISA and Other Compliance ................ 17
2.18 No Brokers .......................................... 20
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
2.19 Insurance............................................................................ 20
2.20 State Takeover Statutes ............................................................. 20
2.21 Formation of Company ................................................................ 20
2.22 Disclosure .......................................................................... 20
Article 3 Representations and Warranties of Buyer ............................................. 21
3.1 Organization and Good Standing ....................................................... 21
3.2 Power, Authorization and Validity .................................................... 21
3.3 No Conflict .......................................................................... 21
3.4 Buyer Financial Statements; Buyer Financial Projections; Employee Terminations ....... 22
3.5 Absence of Certain Changes ........................................................... 23
3.6 Litigation ........................................................................... 23
3.7 No Brokers ........................................................................... 23
3.8 Stock Ownership ...................................................................... 23
3.9 Disclosure ........................................................................... 23
Article 4 Covenants of Company and Stockholder ................................................ 23
4.1 Advice of Changes .................................................................... 23
4.2 Conduct of Business .................................................................. 24
4.3 Approvals, Consents .................................................................. 26
4.4 Litigation ........................................................................... 26
4.5 No Other Negotiations ................................................................ 26
4.6 Access to Information ................................................................ 26
4.7 Audited Financial Statements ......................................................... 27
4.8 Pre-Closing Health Insurance Claims .................................................. 27
4.9 Certain Agreements ................................................................... 27
Article 5 Buyer Covenants ..................................................................... 27
5.1 Advice of Changes .................................................................... 27
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
5.2 Conduct of Business................................................................... 27
5.3 Approvals, Consents .................................................................. 28
5.4 Company Employees .................................................................... 28
5.5 Redwood City Data Center ............................................................. 29
5.6 Non-Transferable Software ............................................................ 29
5.7 Certain Agreements ................................................................... 29
5.8 Electronic Gift Certificates ......................................................... 29
Article 6 Conditions to Obligations of Company and Stockholder ................................ 29
6.1 Accuracy of Representations and Warranties ........................................... 29
6.2 Covenants ............................................................................ 30
6.3 No Material Adverse Change ........................................................... 30
6.4 Government Consents .................................................................. 30
6.5 No Order; HSR Act .................................................................... 30
6.6 Certain Agreements ................................................................... 30
6.7 Stockholder Approval ................................................................. 30
Article 7 Conditions to Obligations of Buyer .................................................. 30
7.1 Accuracy of Representations and Warranties ........................................... 30
7.2 Covenants ............................................................................ 31
7.3 No Material Adverse Change ........................................................... 31
7.4 Government Consents .................................................................. 31
7.5 No Order; HSR Act .................................................................... 31
7.6 Consents ............................................................................. 31
7.7 Certain Agreements ................................................................... 31
7.8 Receipt of Financing ................................................................. 31
7.9 Stockholder Approval ................................................................. 32
Article 8 Termination of Agreement ............................................................ 32
8.1 Termination by Mutual Consent ........................................................ 32
8.2 Unilateral Termination ............................................................... 32
-iii-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
8.3 Effect of Termination................................................................. 32
Article 9 Survival of Representations, Indemnification and Remedies, Other Covenants .......... 33
9.1 Survival ............................................................................. 33
9.2 Indemnification ...................................................................... 33
9.3 Limitations .......................................................................... 34
9.4 Insurance Proceeds; Set Off .......................................................... 35
9.5 Procedure for Indemnification ........................................................ 35
9.6 Arbitration .......................................................................... 37
Article 10 Miscellaneous ...................................................................... 38
10.1 Governing Law ....................................................................... 38
10.2 Assignment; Binding Upon Successors and Assigns ..................................... 38
10.3 Severability ........................................................................ 39
10.4 Counterparts ........................................................................ 39
10.5 Remedies ............................................................................ 39
10.6 Amendment and Waivers ............................................................... 39
10.7 Expenses ............................................................................ 39
10.8 Attorneys' Fees ..................................................................... 40
10.9 Notices ............................................................................. 40
10.10 Construction of Agreement .......................................................... 41
10.11 No Joint Venture ................................................................... 41
10.12 Further Assurances ................................................................. 41
-iv-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
10.13 Absence of Third Party Beneficiary Rights ....................... 42
10.14 Public Announcement ............................................. 42
10.15 Disclosure Letters .............................................. 42
10.16 Confidentiality ................................................. 42
10.17 Entire Agreement ................................................ 42
-v-
<PAGE>
Agreement and Plan of Merger
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of September 12, 2001 (the "Agreement Date") by and among
AmericanGreetings.com, Inc., a Delaware corporation ("Buyer"), Brewers
Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Buyer
("Merger Sub"), At Home Corporation, a Delaware corporation ("Stockholder"), and
EGCB, Inc., a Delaware corporation and a wholly owned subsidiary of Stockholder
("Company"). Capitalized terms used herein and not otherwise defined shall have
the meanings given them in Appendix A.
Recitals
A. Stockholder owns all of the issued and outstanding capital stock of
Company (the "Company's Stock").
B. Stockholder desires to sell and transfer the Company's Stock to
Buyer, and Buyer desires to purchase the same from Stockholder.
C. Buyer, Stockholder and Company have entered into that certain
Stock Purchase Agreement, dated as of August 10, 2001 (the "Stock Purchase
Agreement"), providing for the purchase by Buyer from Stockholder of all of the
Company's Stock.
D. Buyer, Stockholder and Company desire to terminate the Stock
Purchase Agreement pursuant to Section 8.1 thereof in favor of entering into
this Agreement in order for Buyer to acquire Company by merger, subject to the
terms and conditions set forth in this Agreement.
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, each intending to be bound hereby, agree as follows:
Article 1
Purchase and Sale
1.1 The Merger.
----------
(a) The Merger. At the Effective Time and subject to and upon the terms
----------
and conditions of this Agreement and the Delaware General Corporation Law
("Delaware Law"), Merger Sub shall be merged with and into Company (the
"Merger"), the separate corporate existence of Merger Sub shall cease, and
Company shall continue as the surviving corporation. Company as the surviving
corporation after the Merger hereinafter sometimes is referred to as the
"Surviving Corporation."
(b) Effective Time. On or as promptly as practicable after the Closing
--------------
Date, the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, Delaware Law (the time of such
filing being the "Effective Time").
-1-
<PAGE>
(c) Effect of the Merger. At the Effective Time, the effect of the
--------------------
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
Company and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
(d) Subsequent Actions. If, at any time after the Effective Time, the
------------------
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of Company or Merger Sub acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either Company or Merger Sub, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of such corporations or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
(e) Certificate of Incorporation; By-Laws; Directors and Officers.
-------------------------------------------------------------
(i) At the Effective Time, the Certificate of Incorporation of
Company, as in effect immediately before the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation and shall be amended
to read in its entirety as set forth on Exhibit F to this Agreement (as the same
may be further amended from time to time) until thereafter amended as provided
by law and such Certificate of Incorporation.
(ii) The By-Laws of Merger Sub, as in effect immediately before the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-Laws.
(iii) The directors of Merger Sub immediately before the Effective Time
will be the directors of the Surviving Corporation, and the officers of Merger
Sub immediately before the Effective Time will be the officers of the Surviving
Corporation, in each case until their successors are elected or appointed and
qualified. If, at the Effective Time, a vacancy shall exist on the board of
directors of the Surviving Corporation or in any office of the Surviving
Corporation, such vacancy may thereafter be filled in the manner provided by law
and the Surviving Corporation's Certificate of Incorporation and By-Laws.
(f) Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on the part of Merger Sub, Company or the holder
of any capital stock of Company or Merger Sub:
(i) The Company's Stock shall be converted into the right to receive
the purchase price as determined in accordance with Section 1.2 of this
Agreement, without interest, upon surrender of the certificate(s) which
immediately prior to the Effective Time represented the Company's Stock.
-2-
<PAGE>
The Company's Stock, when so converted as provided herein, shall automatically
be canceled and extinguished and will no longer be outstanding and will
automatically be canceled and retired and will cease to exist, and Stockholder
will cease to have any rights with respect thereto except as otherwise provided
herein and by law and shall only represent the right to receive the purchase
price as determined in accordance with Section 1.2 of this Agreement upon the
surrender of such certificate(s).
(ii) Each share of common stock, par value $.0l per share, of Merger
Sub ("Merger Sub Common Stock") issued and outstanding immediately before the
Effective Time shall thereafter represent one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
(g) Dissenting Shares. Stockholder hereby waives any rights
-----------------
Stockholder may have to demand appraisal of the Company's Stock under Delaware
Law (including but not limited to Section 262 thereof).
1.2 Purchase Price. The purchase price for the Company's Stock shall
--------------
be payable to Stockholder as follows:
(a) Closing Payment. At the Closing, Buyer shall deliver and pay to
---------------
Stockholder cash in the amount of $35,000,000 (such total amount, the "Closing
Payment") less the sum of (i) the $1,000,000 previously paid by Buyer to
Stockholder pursuant to the letter from Buyer to Stockholder dated as of July
13, 2001 and (ii) the $250,000 previously paid by Buyer to Stockholder pursuant
to the letter from Buyer to Stockholder dated as of August 7, 2001, by wire
transfer of immediately available funds to an account of Stockholder designated
before the Closing Date in writing by Stockholder to Buyer.
(b) Post-Closing Adjustment. Within 10 business days after the Closing
-----------------------
Date, Stockholder shall deliver to Buyer the Closing Balance Sheet and (i) if
Net Working Capital is greater than negative $200,000 (i.e., Net Working Capital
is a smaller negative amount or is a positive amount), then Buyer and
Stockholder will mutually agree on an adjustment to the Closing Balance Sheet
(which adjustment will not exceed $100,000) to offset such increase in Net
Working Capital above negative $200,000 and (ii) if Net Working Capital is less
than negative $200,000 (i.e., Net Working Capital is a larger negative amount),
then, within two business days after delivery of the Closing Balance Sheet,
Stockholder shall pay Buyer the amount by which Net Working Capital is less than
negative $200,000 (which adjustment shall not be subject to a maximum payment)
by wire transfer of immediately available funds to an account designated by
Buyer to Stockholder. "Net Working Capital" means total current assets less
total current liabilities shown on the Closing Balance Sheet; provided, however,
-------- -------
that the liabilities set forth in item 3 to Schedule 1.2 of the Contribution
Agreement will be excluded in calculating current liabilities.
1.3 Closing. Subject to the terms and conditions of this Agreement,
-------
the closing of the transactions contemplated herein (the "Closing") will take
place at a time and on a date (the "Closing Date") to be specified by the
parties, which will be no later than the third business day after the date on
which all the conditions set forth in Articles VI and VII have been satisfied or
waived. At the Closing, Buyer, Company and Stockholder shall deliver to each
other the documents, instruments and other items described in Articles 6 and 7.
At the mutual election of Buyer, Company and Stockholder, the Closing may take
place through an exchange of consideration by wire transfer and documents using
overnight delivery or facsimile.
-3-
<PAGE>
1.4 Further Assurances. At any time after the Closing Date, if any
------------------
further action is necessary or desirable to carry out the purposes of this
Agreement or the Ancillary Agreements, including the transfer of any assets,
contracts, rights or properties that are necessary for the conduct of the
Company Business, then each of the parties hereto shall execute and deliver such
documents and other papers and take such further actions as may be reasonably
required to carry out the purposes of this Agreement and the Ancillary
Agreements.
1.5 Section 338(h)(10) Election.
---------------------------
(a) With respect to Buyer's purchase of the Company's Stock
pursuant to the Merger, Stockholder and Buyer (and, to the extent necessary,
their affiliates) shall use commercially reasonable efforts to jointly make
timely and irrevocable elections under Section 338(h)(10) the Code and, if
permissible, similar elections under any applicable state or local tax laws
(collectively, the "Elections"). Stockholder and Buyer (and their affiliates)
shall report the transaction consistently with the Elections and agree not to
take any action that could cause such Elections to be invalid, and shall take no
position contrary thereto unless required to do so pursuant to a determination
(as defined in Section 1313(a) of the Code or any similar state or local tax
provision).
(b) As soon as practicable after the Closing Date, Stockholder and
Buyer (and their affiliates) shall execute any and all forms necessary to
effectuate the Elections (including Internal Revenue Service Form 8023 and any
similar forms under applicable state and local tax laws (collectively, the
"Section 338 Forms")). Buyer (and its affiliates) shall prepare and complete
each such Section 338 Form no later than fifteen (15) days prior to the date
such Section 338 Form is required to be filed. Stockholder and Buyer (and their
affiliates) shall cause each such Section 338 Form to be duly executed by an
authorized person and Buyer, with Stockholder's cooperation, shall duly and
timely file each such Section 338 Form and shall coordinate the participation of
Stockholder in filing each such Section 338 Form in accordance with applicable
tax laws and the terms of this Agreement. Stockholder and Buyer (and their
affiliates) shall also cooperate with each other to take all actions necessary
and appropriate (including filing such additional forms, tax returns, elections,
schedules and other documents as may be required) to effect and preserve the
Elections in accordance with the provisions of Regulation Section 1.338(h)(10)-1
(and comparable provisions of each applicable state and local tax law) or any
successor provisions.
(c) As soon as practicable after the Closing Date, Buyer shall
prepare an initial allocation of the deemed sales price of the assets of the
Company resulting from the Elections (as required pursuant to Section 338(h)(10)
of the Code and the Regulations promulgated thereunder) among such assets (the
"Section 338 Allocation"). Stockholder and Buyer shall then cooperate in good
faith to revise and finalize the Section 338 Allocation. If Stockholder and
Buyer are unable to agree on the Section 338 Allocation within one hundred
eighty (180) days after the Closing Date, they shall request a mutually
agreeable nationally recognized accounting firm to prepare the Section 338
Allocation. The cost of any such firm shall be borne by Buyer. Stockholder and
Buyer (and their affiliates) shall file all tax returns consistently with the
Section 338 Allocation, and shall not voluntarily take any action inconsistent
therewith upon examination of any tax return, in any refund claim, in any
litigation, or otherwise with respect to such tax returns unless required to
pursuant to a determination (as defined in Section 1313(a) of the Code or any
similar state or local tax provision).
-4-
<PAGE>
Article 2
Representations and Warranties of Company and Stockholder
Except as set forth in the Company Disclosure Letter (including an
identification by section reference to the representations and warranties to
which such exceptions and qualifications relate, subject to Section 10.15),
Company and Stockholder hereby represent and warrant to Buyer and Merger Sub the
following (Buyer and Stockholder acknowledge that the transactions contemplated
by the Contribution Agreement will occur immediately prior to the Closing, and
accordingly, the representations and warranties as to the Company's assets,
liabilities and Contracts are made immediately following the consummation of the
transactions contemplated by the Contribution Agreement where it is appropriate
from the context for such representations and warranties to be made at such
time):
2.1 Organization and Good Standing. Company (i) is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware; (ii) has the corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted and as presently
proposed to be conducted; and (iii) is qualified to transact business, and is in
good standing, in each jurisdiction where the character of the material
properties owned, leased or operated by it or the nature of its material
activities make such qualification necessary, except to the extent that any such
failure to be so qualified would not have a Material Adverse Effect on Company.
Company has delivered to Buyer true and correct copies of its currently
effective Certificate of Incorporation and Bylaws, each as amended to date, and
each such instrument is in full force and effect. Company is not in violation of
its Certificate of Incorporation or Bylaws. Stockholder is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted and as proposed to
be conducted.
2.2 Subsidiaries. Company does not have any Subsidiary or any equity or
------------
ownership interest, whether direct or indirect, in any corporation, partnership,
limited liability company, joint venture or other business entity. Company is
not obligated to make and is not bound by any Contract as in effect as of the
Agreement Date or that will be in effect as of the Closing Date under which it
may become obligated to make any future investment in or capital contribution to
any other entity.
2.3 Power, Authorization and Validity.
---------------------------------
(a) Power and Authority. Company has all requisite corporate
-------------------
power and authority to enter into, execute, deliver, and perform its obligations
under, this Agreement and each other agreement which Company is to enter into
pursuant to this Agreement (the Company Disclosure Letter and such agreements
and documents other than this Agreement, collectively, the "Company Ancillary
Agreements") and to consummate the transactions contemplated by this Agreement
and the Company Ancillary Agreements. Stockholder has all requisite power and
authority to enter into, execute, deliver, and perform its obligations under,
this Agreement and each other agreement which Stockholder is to enter into
pursuant to this Agreement (such agreements and documents other than this
Agreement, collectively, the "Stockholder Ancillary Agreements") and to
consummate the transactions contemplated by this Agreement and the Stockholder
Ancillary Agreements. The execution, delivery and performance of this Agreement
and each of the Company Ancillary Agreements and the Stockholder Ancillary
Agreements by Company or Stockholder, as applicable, have been duly and validly
approved and authorized by all necessary
-5-
<PAGE>
corporate action by Company and Stockholder, as applicable, under Applicable
Law. The formation of Company and the sale, transfer, contribution and delivery
directly or indirectly of assets and liabilities from Stockholder to Company
have been duly and validly approved and authorized by all necessary corporate
action, including any required stockholder approvals, by Stockholder under
Applicable Law.
(b) No Consents. No consent, approval, order or authorization
-----------
of, or registration, declaration or filing with, any Governmental Entity is
necessary or required to be made or obtained by Company or Stockholder to enable
Company or Stockholder to lawfully execute and deliver, enter into, and to
perform their respective obligations under, this Agreement and each of the
Company Ancillary Agreements and Stockholder Ancillary Agreements or to
consummate the transactions contemplated by this Agreement, the Company
Ancillary Agreements and the Stockholder Ancillary Agreements, except for such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal, foreign and state
securities (or related) laws and the HSR Act, and the securities or antitrust
laws of any foreign country.
(c) Enforceability. This Agreement is, and each of the Company
--------------
Ancillary Agreements when executed by Company will be, a valid and binding
obligation of Company enforceable against Company in accordance with its
respective terms, subject to the effect of (i) applicable bankruptcy and other
similar laws affecting the rights of creditors generally and (ii) rules of law
and equity governing specific performance, injunctive relief and other equitable
remedies. This Agreement is, and each of the Stockholder Ancillary Agreements
when executed by Stockholder will be, a valid and binding obligation of
Stockholder enforceable against Stockholder in accordance with its respective
terms, subject to the effect of (i) applicable bankruptcy and other similar laws
affecting the rights of creditors generally and (ii) rules of law and equity
governing specific performance, injunctive relief and other equitable remedies.
2.4 Capitalization of Company.
-------------------------
(a) Outstanding Stock and Options. The authorized capital
-----------------------------
stock of Company consists entirely of 1,000 shares of common stock, par value
$0.01 per share ("Company Common Stock"), of which a total of 100 shares are
issued and outstanding as of the Agreement Date and will be issued and
outstanding as of the Closing Date. All of the issued and outstanding shares of
Company Common Stock are, and as of the Closing Date will be, held by
Stockholder. Company holds no treasury shares. All issued and outstanding shares
of Company Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable, and have been offered, issued, sold, granted and
delivered by Company in compliance with (i) all registration or qualification
requirements (or applicable exemptions therefrom) of all applicable securities
laws and, to Company's Knowledge, other Applicable Law and (ii) all requirements
set forth in applicable agreements or instruments. Stockholder has good and
marketable title to the Company's Stock, free and clear of any pledge, lien,
collateral assignment, security interest, mortgage, deed of trust, title
retention, conditional sale, community property interest, restriction or other
security arrangement, or any charge, adverse claim of title, ownership or use,
or any other encumbrance of any kind (collectively, "Liens"). Upon consummation
of the transactions contemplated by this Agreement, Buyer will acquire good and
valid title to the Company's Stock, free and clear of all Liens except for Liens
that are caused by, or result from any action or omission of Buyer or by virtue
of the Company's Stock being owned by Buyer.
-6-
<PAGE>
(b) No Options, Warrants or Rights. There are no equity
------------------------------
securities, partnership interests or similar ownership interests of any class of
Company equity securities, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. There are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which Company is a party or by
which it is bound obligating Company to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of Company or obligating
Company to grant, extend, accelerate the vesting of or enter into any such
subscription, option, warrant, equity security, call, right, commitment or
agreement.
(c) No Voting Arrangements or Registration Rights. There are
---------------------------------------------
no voting agreements, voting trusts, proxies, preemptive rights, rights of first
refusal, rights of first offer or antitakeover plan, or other agreements,
understandings or restrictions (other than normal restrictions on transfer under
applicable federal and state securities laws), applicable to any of Company's
outstanding stock or other securities pursuant to any agreement or obligation to
which Company is a party or, to Company's Knowledge, pursuant to any other
agreement or obligation. Company is not under any obligation to register under
the 1933 Act any of its presently outstanding shares of stock or other
securities or any stock or other securities that may be subsequently issued.
2.5 No Conflict. The execution and delivery of this Agreement and the
-----------
Company Ancillary Agreements by Company, the execution and delivery of this
Agreement and the Stockholder Ancillary Agreements by Stockholder, and the
consummation of the transactions contemplated hereby and thereby (including the
formation of Company and the sale, transfer, contribution and delivery directly
or indirectly of liabilities and Company Assets from Stockholder to Company),
will not conflict with, or (with or without notice or lapse of time, or both)
result in a termination, default, breach, impairment or violation of: (i) any
provision of the Certificate of Incorporation or Bylaws of Company or
Stockholder, each as currently in effect; (ii) any law, rule, regulation,
judgment, writ, decree, order or statute (with respect to laws, ordinances,
regulations and rules that relate to or govern the compilation, use and transfer
of User Data, to Company's Knowledge) applicable to Company, Stockholder or any
Company Asset other than those requirements set forth in Section 2.3(b); or
(iii) other than with respect to Company IP Rights Agreements and Company IP
Assets (which are addressed in Section 2.14(b)), any Contract to which Company
or Stockholder is a party or by which Company, Stockholder or any Company Assets
are bound or affected; except in the case of each of clauses (ii) and (iii),
those which, individually or in the aggregate, would not be material to the
business or operations of the Company Business taken as a whole.
2.6 Sufficiency. Company validly possesses all material assets,
-----------
properties, rights, contracts and Intellectual Property that are necessary or
required for the conduct of the Company Business substantially as conducted on
and as of the Agreement Date and as of the Closing Date, including the operation
of each of the Company Websites (other than aspects of the operation of the
Company Websites which are in standard industry practice operated by third
parties), without (i) the need to purchase, license or acquire any other
material asset or property, other than pursuant to the Commercial Agreement, the
Transition Agreement or Section 5.6 of this Agreement or other than in the
ordinary course of Company's business, consistent with its or Stockholder's past
-7-
<PAGE>
practices; (ii) to Company's Knowledge, violating any rights of any third party;
or (iii) to Company's Knowledge, infringing, misappropriating or misusing any
software or Third Party IP Rights. Buyer acknowledges that the operation of the
Company Websites after the Closing Date may require additional Intellectual
Property in that the content and functionality of the Company Websites will
change over time.
2.7 Litigation. There is no action, claim, suit, arbitration,
----------
mediation, proceeding, claim or investigation pending against Company or
Stockholder (or, to the Company's Knowledge, against any officer, director,
employee or agent of Company or Stockholder in their capacity as such or
relating to their employment, services or relationship with Company or
Stockholder) before any court, administrative agency or arbitrator, and to
Company's Knowledge, no such action, claim, suit, arbitration, mediation,
proceeding, claim or investigation has been threatened that, in each case, if
determined adversely to the Company or such person, would be reasonably expected
to have a Material Adverse Effect on Company. There is no judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Company.
2.8 Taxes. All taxes for which Buyer could become liable as a result of
-----
succeeding to the Company Business and the Company Assets or which could result
in an Encumbrance against the Company, the Company Business or the Company
Assets, or in a liability for Buyer, other than those taxes set forth in Section
10.7(b), have been paid by Company or have been paid or will be paid by
Stockholder, as applicable, for all periods (or portions thereof) prior to and
including the Closing Date. The Company has not filed any tax returns and
reports of taxes as of the date hereof. As a result of the consummation of the
transactions contemplated by this Agreement, Buyer shall not become liable for
any parachute payments, as defined in Section 280G(b)(2) of the Code.
2.9 Company Financial Statements. Company has delivered to Buyer as a
----------------------------
schedule to Part 2.9 of the Company Disclosure Letter, Company's unaudited
balance sheet as of May 31, 2001 and Company's unaudited statement of operations
for the twelve month period ended December 31, 2000 and the five month period
ended May 31, 2001 (all such financial statements of Company, excluding a
statement of cash flows and all notes to any of such financial statements, are
hereinafter collectively referred to as the "Company Financial Statements"). The
Company Financial Statements (i) are based on and conform to the books and
records of Stockholder, (ii) have been prepared in accordance with GAAP but do
not include such information as may be required to be disclosed under GAAP in a
statement of cash flows and in the notes to any of such financial statements and
(iii) represent in all material respects (but do not include any notes thereto)
the financial condition of Company at the dates therein indicated and the
results of operations for the periods therein specified. Company has no material
debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, except for (a) those
shown on Company's unaudited balance sheet as of May 31, 2001 included in the
Company Financial Statements (the "Company Balance Sheet") or those shown on
Company's unaudited balance sheet dated as of the Closing Date (the "Closing
Balance Sheet"), (b) those that may have been incurred by the Company after May
31, 2001 (the "Company Balance Sheet Date") in the ordinary course of the
Company Business, and (c) as set forth in Part 2.9 of the Company Disclosure
Letter, the Company Ancillary Agreements or the Stockholder Ancillary Agreements
or as specifically contemplated by the Contribution Agreement and the schedules
and exhibits thereto. All reserves established by Company that are set forth in
or reflected in the Company Balance Sheet are established in accordance with
GAAP. At the Company Balance Sheet Date, there were no material loss
contingencies (as such term is used in
-8-
<PAGE>
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975) which are not adequately provided for
in the Company Balance Sheet as required by such Statement No. 5 (material loss
contingencies, if any, that Statement No. 5 requires to be disclosed in notes to
the Company Balance Sheet, are set forth in Part 2.9 of the Company Disclosure
Letter in the absence of such notes).
2.10 Assets Other than Intellectual Property.
---------------------------------------
(a) Company owns, or has the valid right or lease to use and
possess, all Company Non-IP Assets.
(b) Part 2.10 of the Company Disclosure Letter lists all real
and personal property leases included in the Company Non-IP Assets. All such
leases are in full force and effect and are valid and effective in accordance
with their respective terms, and to Company's Knowledge there is not, under any
such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default) that could give
rise to a material claim against Company. Company does not own any fee interests
in real property. Company has good and marketable title to all of its owned
properties (including those shown on the Company Balance Sheet or acquired
subsequent to the Company Balance Sheet Date), free and clear of all
Encumbrances. All machinery, vehicles, equipment and other tangible personal
property owned or leased by Company and used in the Company Business are in good
condition and repair, normal wear and tear excepted, and all leases of real or
personal property to which Company is a party which are described in the first
sentence of this Section 2.10(b) are fully effective and afford Company peaceful
and undisturbed leasehold possession of the real or personal property that is
the subject of the lease.
2.11 Absence of Certain Changes. Except as set forth in Part 2.11
--------------------------
of the Company Disclosure Letter, since the Company Balance Sheet Date, there
has not been with respect to the Company Business any:
(a) Material Adverse Change with respect to Company;
(b) amendment or change in the Certificate of Incorporation or
Bylaws of Company;
(c) incurrence, creation or assumption by Stockholder or
Company of (i) any Encumbrance on any of the Company Assets; or (ii) any
material obligation, liability or indebtedness for borrowed money;
(d) grant or issuance of any options, warrants or other rights
to acquire from Company, directly or indirectly, any debt or equity securities
of Company, or any offer, issuance or sale by Company of any debt or equity
securities of Company;
(e) acceleration or release of any vesting condition to the
right to exercise any option, warrant or other right to purchase or otherwise
acquire any shares of Company's capital stock, or any acceleration or release of
any right to repurchase shares of Company's capital stock;
(f) purchase, license, sale, assignment or other disposition
or transfer, or any agreement or other arrangement for the purchase, license,
sale, assignment or other disposition or transfer, of any of the assets,
properties or goodwill related to the Company Business other than a
-9-
<PAGE>
license of any Intellectual Property, product or products of Company made in the
ordinary course of business;
(g) damage, destruction or loss of any property or asset used
in the Company Business, individually or in the aggregate, with a book or fair
market value in excess of the Threshold Amount, whether or not covered by
insurance;
(h) declaration, setting aside or payment of any dividend on,
or the making of any other distribution in respect of, the capital stock of
Company, any split, combination or recapitalization of the capital stock of
Company or any direct or indirect redemption, purchase or other acquisition of
any capital stock of Company or any change in any rights, preferences,
privileges or restrictions of any outstanding security of Company except for
distributions made in the ordinary course of business;
(i) change or increase in the compensation payable or to
become payable to any of the officers, directors or employees of Company, or any
bonus or pension, insurance or other benefit payment or arrangement (including
stock awards, stock option grants, stock appreciation rights or stock option
grants) made to or with any of such officers, directors or employees except in
connection with normal employee salary or performance reviews or otherwise in
the ordinary course of business;
(j) material change with respect to the management,
supervisory or other key BMA Employees;
(k) obligation or liability incurred by Company to any of its
officers or directors, except for normal and customary compensation and expense
allowances payable to officers in the ordinary course of business;
(l) loan, payment, advance or capital contribution to, or any
investment in, any officer or director of Company or any firm or business
enterprise in which any such person had a direct or indirect interest at the
time of such loan, payment, advance, capital contribution or investment other
than travel loans or advances of less than $10,000 made in the ordinary course
of business;
(m) amendment of, relinquishment, termination or non-renewal
by Company of any material Contract, transaction, commitment or other right or
obligation related to or in connection with the Company Business or by
Stockholder of any material contract, lease, transaction, commitment or other
right or obligation related exclusively to the Company Business, in each case
other than in the ordinary course of business or any written assertion by the
other party thereto of any problems with Company's services or performance under
such contract, lease, transaction, commitment or other right or obligation or
its desire to so amend, relinquish, terminate or not renew any such contract,
lease, transaction, commitment or other right or obligation;
(n) transaction, contract or agreement related to or in
connection with the Company Business to which Stockholder is a party related
exclusively to the Company Business or to which Company is a party, in each
case, that by its terms requires or contemplates a current or future financial
commitment, expense (inclusive of overhead expense) or obligation on the part of
Company (i) involving amounts in excess of the Threshold Amount, or (ii) that
was not entered into in the ordinary course of business;
-10-
<PAGE>
(o) license, transfer or grant to a third party of a right
under any Company IP Asset other than licenses made in the ordinary course of
business; or
(p) notes or other obligations payable to Company for past or
future issuances of Company options.
2.12 Contracts and Commitments/Licenses and Permits. Part 2.12 of
----------------------------------------------
the Company Disclosure Letter sets forth a list of each of the following (i)
Contracts (A) to which any Company Asset is bound, (B) to which Company is a
party or (C) related exclusively to the Company Business to which Stockholder is
a party and (ii) licenses and permits held by Stockholder that relate
exclusively to the Company Business or held by Company:
(a) any material website hosting, website linking, content or
data sharing, data feed, information exchange, advertising, fee sharing, lead or
customer referral, commerce, co-branding, framing, service, order or transaction
processing or similar agreement relating to any aspect or element of any of the
Company Websites or any other website;
(b) any material distributor, OEM (Original Equipment
Manufacturer), VAR (Value Added Reseller), sales representative or similar
agreement under which any third party is authorized to sell, sublicense, lease,
distribute, market or take orders for any product, service or technology of
Company;
(c) any continuing Contract for the future purchase, sale,
license, provision or manufacture of products, material, supplies, equipment or
services requiring payment to or from Company or Stockholder in an amount in
excess of the Threshold Amount per annum which is not terminable on 90 or fewer
days' notice without cost or other liability to Company;
(d) any material Contract in which Company or Stockholder has
granted or received most favored customer pricing provisions or exclusive
marketing or on-line distribution rights relating to any product or service,
group of products or services, market or geographic territory;
(e) any material Contract providing for the development of any
software, content (including textual content and visual, aural or graphics
content), technology or Intellectual Property for (or for the benefit or use of)
Company or Stockholder, or providing for the purchase or license of any software
(other than Commercial IP), content (including textual content and visual, aural
or graphics content), technology or Intellectual Property to (or for the benefit
or use of) Company or Stockholder, which software, content, technology or
Intellectual Property is in any manner used or incorporated (or is contemplated
by Company or Stockholder to be used or incorporated) (i) in connection with any
aspect or element of any of the Company Websites; or (ii) in any product or
service currently sold, licensed, provided, leased, distributed or marketed by
Company (other than Commercial IP);
(f) any joint venture or partnership Contract or other
Contract which has involved, or is reasonably expected to involve, a sharing of
profits, expenses or losses with any other party;
(g) any Contract for or relating to the employment of any
officer, employee or consultant of Company or any other type of Contract with
any officer, employee or consultant of Company that is not terminable on 30 or
fewer days' notice without cost or other liability to Company;
-11-
<PAGE>
(h) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or other agreement or commitment for
the borrowing of money, for a line of credit or for a leasing transaction of a
type required to be capitalized in accordance with Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board;
(i) any lease or other agreement under which Company is lessee
of or holds or operates any items of tangible personal property or real property
owned by any third party and under which payments to such third party exceed the
Threshold Amount per annum;
(j) any Contract for the sale, licensing or leasing of any
assets, properties, products, services or rights requiring annual payments in
excess of the Threshold Amount;
(k) any material Company IP Rights Agreement;
(l) any Contract relating to the sale, issuance, grant,
exercise, award, purchase, repurchase or redemption of any shares of capital
stock or other securities of Company or any options, warrants or other rights to
purchase or otherwise acquire any such shares of stock, other securities or
options, warrants or other rights therefor;
(m) any consulting or similar agreement under which Company or
Stockholder provides any advice or services to a third party for an annual
compensation to Company of the Threshold Amount per year or more;
(n) any Contract with or commitment to any labor union;
(o) any Related Party Agreement;
(p) any Contract to which Company or Stockholder is a party
that relates to the acquisition of the Company Business by Stockholder other
than those contracts subject to confidentiality obligations entered into at the
time of such acquisition, which contracts subject to such restrictions are not
material to the Company Business; and
(q) any Governmental Permit related to or in connection with
the Company Business.
A true and complete copy of each agreement or document
required by subsections (a) through (q) of this Section 2.12 to be listed on
Part 2.12 of the Company Disclosure Letter (such agreements and documents being
hereinafter collectively referred to as the "Company Material Agreements") and a
copy of each Governmental Permit required by subsection (r) of this Section 2.12
to be listed on Part 2.12 of the Company Disclosure Letter has been made
available or delivered to Buyer's counsel. With respect to the Company and
Stockholder, each of the Company Material Agreements is in full force and
effect, and is a legal, binding and enforceable obligation of or against the
Company or Stockholder, as applicable, and, with respect to all other parties to
such agreements, to Company's Knowledge, each of the Company Material Agreements
is in full force and effect, and is a legal, binding and enforceable obligation
of or against such other party.
2.13 No Default; No Restrictions. Neither Stockholder nor Company
---------------------------
is in breach or default under any Company Material Agreement, which breaches or
defaults, individually or in the aggregate, would be materially adverse to the
Company Business. Company has no liability for renegotiations of government
contracts or subcontracts, if any. Company is not a party to, and no
-12-
<PAGE>
material asset or property of Company is bound or affected by, any judgment,
injunction, order, decree, contract, covenant or agreement (noncompete or
otherwise) that restricts or prohibits (or purports to restrict or prohibit)
Company from freely engaging in any Company Business now conducted by it or from
competing anywhere in the world (including any contracts, covenants or
agreements restricting the geographic area in which Company may sell, license,
market, distribute or support any products or technology or provide services, or
restricting the markets, customers or industries that Company may address in
operating its business, but excluding any agreement providing for the use by
Company of Intellectual Property where such agreement might be considered to
impose a restriction by virtue of the Company's right to use the specific
Intellectual Property not being unlimited), or includes any grants by Company of
exclusive licenses or exclusive rights with respect to a Company Website. No
event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will, or would reasonably be expected to, (i)
result in a violation or breach by Stockholder or Company, or to Company's
Knowledge, any other party thereto, of any of the provisions of any Company
Material Agreement, (ii) give any third party (a) the right to declare a default
or exercise any remedy under any Company Material Agreement, (b) the right to a
rebate, chargeback, penalty or change in delivery schedule under any Company
Material Agreement, (c) the right to accelerate the maturity or performance of
any obligation of Company under any Company Material Agreement, or (d) the right
to cancel, terminate or modify any Company Material Agreement, except in each
case for such violations, breaches, declarations of default, exercises of
remedies, and rights to rebates, chargebacks, penalties, changes, acceleration,
cancellation, termination or modification that, individually or in the
aggregate, would not be materially adverse to the Company Business. Company has
not received any notice or other communication regarding any actual or possible
violation or breach of, or default under, any Company Material Agreement which,
individually or in the aggregate, would reasonably be expected to be materially
adverse to the Company Business.
2.14 Intellectual Property.
---------------------
(a) (i) Subject to the terms and conditions of the agreements
set forth in Part 2.14(a)(i) of the Company Disclosure Letter, Company owns, or
has a valid right or license to use, possess, license, sublicense, copy, modify,
make derivative works of, sell, distribute, perform, display publicly, market,
advertise or dispose of, all Company IP Assets, other than trademarks and
service marks, that are used in the Company Business.
(ii) Subject to the terms and conditions of the
agreements set forth in Part 2.14(a)(ii) of the Company Disclosure Letter,
Company owns, or has a valid right or license to use, possess, license,
sublicense, copy, sell, distribute, market, display publicly, advertise or
dispose of all trademarks and service marks set forth in Part 2.14(a)(ii) of the
Company Disclosure Letter for current uses in connection with the Company
Business, and, except for any trademarks or service marks which have become
generic other than as a result of actions or failures to act on the part of
Company, all of such trademarks and service marks are valid and enforceable.
(iii) To Company's Knowledge as set forth in Part
2.14(a)(iii) of the Company Disclosure Letter and subject to the terms and
conditions of the agreements set forth therein, Company owns, or has a valid
right to use, possess, license, copy, sell, distribute, market, display
publicly, advertise or dispose of the trademark and service mark "Blue Mountain"
for use in connection with electronic greeting cards in the United States, and,
except if such trademark and service mark has become generic other than as a
result of actions or failures to act on the part of Company, such trademark and
service mark rights are valid and enforceable.
-13-
<PAGE>
(b) Except as set forth in Part 2.14(b) of the Company Disclosure
Letter, the execution, delivery and performance of this Agreement and the
Company Ancillary Agreements by Company, this Agreement and the Stockholder
Ancillary Agreements by Stockholder and the consummation of the transactions
contemplated by this Agreement, the Stockholder Ancillary Agreements and the
Company Ancillary Agreements will not: (i) constitute a material breach of or
default under any instruments, contracts, licenses or other agreements governing
any Company IP Asset to which Company is a party (collectively, the "Company IP
Rights Agreements"), (ii) cause the forfeiture or termination of, or give rise
to a right of forfeiture or termination of, any Company IP Asset, or (iii)
impair the right of Company in any Company IP Asset or portion thereof, in each
case, which breach, default, forfeiture, termination or impairment, individually
or in the aggregate, is materially adverse to the Company Business.
(c) To Company's Knowledge, except as set forth in Part 2.14(c) of
the Company Disclosure Letter, there are no and will be no royalties, honoraria,
fees or other payments (other than salaries payable to employees and amounts
payable to independent contractors not contingent on or related to use of their
work product) pursuant to agreements in effect as of the Closing payable by
Company to any third person by reason of the ownership, use, possession,
license, sublicense, copying, modifying, making derivative works of, sale,
distribute, performance, public display, marketing, advertising or disposition
of any Company IP Assets by Company before or after the Closing Date.
(d) Except as set forth in Part 2.14(d) of the Company Disclosure
Letter, neither the manufacture, modification, copying, disposition, marketing,
license, sublicense, sale, advertising, furnishing, distribution, performance,
public display or intended use of any product or service (including any service
offered to users of any of the Company Websites) currently licensed,
sublicensed, utilized, sold, or otherwise provided or furnished by Company or by
Stockholder exclusively in connection with the Company Business or currently
under development by Company in connection with or related to the Company
Business or by Stockholder to be used exclusively in the Company Business: (i)
violates any license or agreement between Company and any third party, except
for such violations which would not, individually or in the aggregate, be
material to the Company Business; or (ii) to Company's Knowledge, infringes or
misappropriates any Intellectual Property Right of any other party. There is no
pending, and to the Knowledge of Company, there is no threatened, claim, demand,
or litigation contesting the validity, ownership or right of Company to use,
possess, license, sublicense, copy, modify, make derivative works of, sell,
distribute, perform, display publicly, market, advertise or dispose of any
Company IP Asset, nor has Company received any written notice asserting that any
Company IP Asset or the proposed use, possession, license, sublicense, copying,
modifying, making derivative works of, sale, distribution, performance, public
display, marketing, advertising or disposition thereof conflicts or will
conflict with the rights of any other party, nor, to Company's Knowledge, is
there any reasonable basis for any such assertion or, to Company's knowledge,
any such assertion threatened.
(e) Except as set forth in Part 2.14(e) of the Company Disclosure
Letter, to Company's Knowledge, no officer, director or employee of Company: (i)
is in material violation of any material term or covenant of any employment
contract, patent disclosure agreement, invention assignment agreement,
non-disclosure agreement, noncompetition agreement or any other contract or
agreement with any other party by virtue of such officer's, director's or
employee's being employed by, or performing services for, Company or using trade
secrets or proprietary information of others; or (ii) has developed for Company
any technology, software or
-14-
<PAGE>
other copyrightable, patentable, or otherwise proprietary work for Company that
is subject to any agreement under which such officer, director or employee has
assigned or otherwise granted to any third party any rights (including
Intellectual Property Rights) in or to such technology, software or other
copyrightable, patentable or otherwise proprietary work or any Intellectual
Property Right related thereto that is material, individually or in the
aggregate, to the Company Business. To Company's Knowledge, the employment of
any employee of Company or any failure to employ or retain the services of any
employee, in each case in connection with or related to the Company Business,
does not subject Company to any liability to any third party.
(f) Except as set forth in Part 2.14(f) of the Company Disclosure
Letter, to the Company's Knowledge, no current or former officer, director or
employee of Company has any right, license, claim or interest whatsoever in or
with respect to any Company IP Assets.
(g) Part 2.14(g) of the Company Disclosure Letter contains a
complete list of the following types of Company IP Assets anywhere in the world:
(i) all patents (or foreign equivalents thereof), registrations of any patents,
copyrights, mask works, trademarks, service marks, Internet domain names or
Internet or World Wide Web URLs or addresses with any governmental or
quasi-governmental authority owned by Company; (ii) all applications for
registration made or taken pursuant to federal, state and foreign laws by
Company to secure, perfect or protect its interest in Company IP Assets,
including all patent (or foreign equivalents thereof) applications, and
applications for registration of copyrights, trademarks and service marks; and
(iii) to the Company's Knowledge, all material unregistered trademarks and
service marks owned or purported to be owned by Company which are currently used
in connection with the Company Business.
(h) Part 2.14(h) of the Company Disclosure Letter contains a
complete list of (i) all licenses, sublicenses and other agreements as to which
Company is a party (including by assignment or otherwise) and pursuant to which
any person is authorized to use any Company IP Assets, other than any end user
license agreements or terms of use with users of the Company Websites, and (ii)
all material licenses, sublicenses and other agreements as to which Company is a
party and pursuant to which Company is authorized to use any third party
Intellectual Property, including software ("Third Party IP Rights").
(i) Except as set forth in Part 2.14(i) of the Company Disclosure
Letter, neither Company nor any other party acting on behalf of the Company has
disclosed or delivered to any party, or permitted the disclosure or delivery to
any escrow agent or other party, of any Company Source Code. To Company's
Knowledge, no event has occurred, and no circumstance or condition exists, that
(with or without notice or lapse of time) will, or would reasonably be expected
to, result in the disclosure or delivery to any party of any Company Source
Code. Part 2.14(i) of the Company Disclosure Letter identifies each contract,
agreement and instrument (whether written or oral) pursuant to which Company has
deposited, or is or may be required to deposit, with an escrow holder or any
other party, any Company Source Code, and further describes whether the
execution of this Agreement or the consummation of the transactions contemplated
by this Agreement would reasonably be expected to result in the release from, or
a claim for release from, escrow of any Company Source Code.
(j) Except as set forth in Part 2.14(j) of the Company Disclosure
Letter, to Company's Knowledge, there is no unauthorized use, disclosure,
infringement or misappropriation
-15-
<PAGE>
of any Company IP Assets by any third party, including any BMA Employee or
former employee of the Company Business.
(k) All software developed by Company and licensed by Company to
customers and all other products manufactured, sold, licensed, sublicensed,
distributed, leased or delivered by Company to customers and all services
provided by Company to customers on or prior to the Closing Date in connection
with the Company Business conform to applicable contractual commitments and any
express warranties, and Company has no liability for replacement or repair
thereof or other damages in connection therewith in excess of any reserves
therefor reflected on the Company Balance Sheet.
(l) Company's and Stockholder's use, license, sublicense and sale
of any User Data collected from the Company Websites have complied with
Company's and Stockholder's published privacy policy in effect at the time such
User Data was collected, except where the failure to do so would not reasonably
be expected to have a Material Adverse Effect on Company.
2.15 Compliance with Laws.
--------------------
(a) Each of Stockholder (as relates specifically to the Company
Business) and Company has complied, and is now and at the Closing Date will be
in compliance with all applicable (i) federal, state or local laws, ordinances,
regulations and rules, (ii) orders, writs, injunctions, awards, judgments and
decrees, (iii) to Company's Knowledge, foreign laws, ordinances, regulations and
rules applicable to it, Company Assets, or the Company Business and (iv) to
Company's Knowledge, laws, ordinances, regulations and rules that relate to or
govern the compilation, use and transfer of User Data (in each of clauses (i),
(ii), (iii) and (iv), including any regulations promulgated thereunder) ((i),
(ii), (iii) and (iv) collectively, "Applicable Law"), except for such
noncompliance which, individually or in the aggregate, would not be material to
the Company Business.
(b) All materials relating to the Company Business distributed or
marketed by Company, all materials specifically relating to the Company Business
distributed or marketed by Stockholder and, to Company's Knowledge, each of the
Company Websites have at all times made all disclosures to users or customers
required by Applicable Law and none of such disclosures made or contained in any
Company Website or in any such materials have been inaccurate, misleading or
deceptive, except where the failure to make such disclosures or where such
inaccurate, misleading or deceptive disclosures, individually or in the
aggregate, would not be materially adverse to the Company Business.
(c) To Company's Knowledge, each of Stockholder (as relates
specifically to the Company Business) and Company has at all times been in
compliance with Applicable Laws relating to the privacy of users of each of the
Company Websites, except for such noncompliance which, individually or in the
aggregate, would not be materially adverse to the Company Business.
(d) Except as set forth in Part 2.15(d) of the Company Disclosure
Letter, Company holds all permits, licenses and approvals from, and has made all
filings with, government (and quasi-governmental) agencies and authorities, that
are necessary for Company to continue to conduct the Company Business as
presently conducted without any violation of Applicable Law except where such
Applicable Law relates to the compilation, use and transfer of User Data
("Governmental Permits") and all such Governmental Permits are in full force and
-16-
<PAGE>
effect except where the failure to hold such permits or make such filings
individually or in the aggregate would not be materially adverse to the Company
Business. Neither Company nor Stockholder has received any notice or other
communication from any Governmental Entity (or quasi-governmental entity)
regarding (i) any actual or possible material violation of law or any
Governmental Permit or any failure to comply with any material term or
requirement of any Governmental Permit, or (ii) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Permit. Company is not subject to any reporting or filing
requirement with or to any Governmental Entity, or under Applicable Law, or
pursuant to any Governmental Permit other than such requirements that are
applicable to companies similarly situated to Company.
(e) Neither Company nor, to Company's Knowledge, any director or
officer of Company, has, for or on behalf of Company, (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other payment in violation of Applicable
Law, which violation for the purposes of clause (iii) only, is not materially
adverse to the Company Business.
2.16 Related Party Transactions and Agreements. Except as set forth in
-----------------------------------------
Part 2.16 of the Company Disclosure Letter, none of the officers or directors of
Company, nor Stockholder has any direct or indirect ownership, participation,
royalty or other interest in, or is an officer, director, employee of or
consultant or contractor for any firm, partnership, entity or corporation that
competes with, or does business with, or has any contractual arrangement with,
Company related to or in connection with the Company Business (except with
respect to any interest in less than two percent of the stock of any corporation
whose stock is Publicly Traded). Except as disclosed in Part 2.16 of the Company
Disclosure Letter, none of said officers or directors nor Stockholder is a party
to, or otherwise directly or indirectly interested in, any contract, agreement
or formal or informal arrangement or understanding with Company or Stockholder
related to or in connection with the Company Business, except for normal
compensation for services as an officer, director or employee thereof that have
been disclosed in writing to Buyer. Except as disclosed in Part 2.16 of the
Company Disclosure Letter, none of said officers or directors nor Stockholder
has any interest in any property, real or personal, tangible or intangible
(including any Company IP Rights or any other Intellectual Property) that is
used in, or that relates to, the Company Business, except for the rights of
stockholders under Applicable Law. All such transactions, agreements,
arrangements, understandings, and ownership interests described in this Section
2.16 are referred to herein as "Related Party Agreements."
2.17 Employees, ERISA and Other Compliance.
-------------------------------------
(a) Stockholder and Company are in compliance with Applicable Law
and all agreements and contracts relating to employment, employment practices,
immigration, wages, hours, and terms and conditions of employment, including
employee compensation matters, except for such noncompliance which, individually
or in the aggregate, would not be material to the Company Business. Except as
set forth in Part 2.17(a) of the Company Disclosure Letter, neither the Company
nor Stockholder has any employment or consulting agreements with any BMA
Employee or consultant employed or engaged in the Company Business currently in
effect that are not terminable at will (other than agreements with the sole
purpose of providing for the confidentiality of proprietary information or
assignment of inventions).
-17-
<PAGE>
(b) Except as set forth in Part 2.17(b) of the Company Disclosure
Letter, neither the Company nor Stockholder (i) is now, nor has ever been,
subject to a union organizing effort, (ii) is subject to any collective
bargaining agreement, (iii) is subject to any other contract with any trade or
labor union, employees' association or similar organization or (iv) has any
current labor disputes. Company and Stockholder, with respect to the BMA
Employees, have good labor relations, and Company has no Knowledge of any facts
indicating that the consummation of the transactions contemplated by this
Agreement will have an adverse effect on such labor relations. All of the BMA
Employees of Company and Stockholder are legally permitted to be employed by
Company or Stockholder in the United States of America in their current job
capacities.
(c) Neither the Company nor, with respect to any BMA Employee,
Stockholder has any pension plan which constitutes, or has since the enactment
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
constituted, a "multiemployer plan" as defined in Section 3(37) of ERISA. No
pension plan of Company or, with respect to any BMA Employee, Stockholder is
subject to Title IV of ERISA.
(d) (i) Part 2.17(d) of the Company Disclosure Letter lists each
"employee benefit plan" as defined in Section 3(3) of ERISA and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' benefits, vacation benefits, severance
benefits, disability benefits, death benefits, hospitalization benefits,
retirement benefits, deferred compensation, profit-sharing, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
for employees, consultants or directors which is entered into, maintained or
contributed to by Company or Stockholder and covers any BMA Employee. Such
contracts, plans and arrangements as are described in this Section 2.17(d) are
hereinafter collectively referred to as "Company Benefit Arrangements." Company
or Stockholder has delivered or made available to Buyer copies of each document
comprising or forming a part of a Company Benefit Arrangement. Company has no
liability with respect to any Company Benefit Arrangement or any plan, program
or arrangement of the type set forth in Part 2.17(d) of the Company Disclosure
Schedule other than as set forth on the Company Balance Sheet and the Closing
Balance Sheet.
(ii)Each Company Benefit Arrangement has been maintained and
administered in compliance in all material respects with its terms and with
Applicable Law, except for such noncompliance which, individually or in the
aggregate, would not be material to the Company Business. Each Company Benefit
Arrangement that is an "employee pension benefit plan" as defined in Section
3(2) of ERISA which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter that such plan satisfied the
requirements of the Tax Reform Act of 1986 or has remaining a period of time
under applicable Treasury Regulations or Internal Revenue Service pronouncements
in which to apply for such a letter and make any necessary amendments to such
Company Benefit Arrangements.
(iii) Company or Stockholder, as applicable, has timely filed
and delivered to Buyer and its counsel the most recent annual report (Form 5500)
for each Company Benefit Arrangement that is an "employee benefit plan" as
defined under ERISA.
(iv)Neither Company, Stockholder nor any party to whom the
Company has an indemnification obligation has been a participant in any
"prohibited transaction" or has breached any of the duties imposed on
"fiduciaries" (within the meaning of Section 3(21) of
-18-
<PAGE>
ERISA) by ERISA with respect to the Company Benefit Arrangements which Company
or Stockholder sponsors as employer or in which Company or Stockholder
participates as an employer, which was not otherwise exempt pursuant to Section
408 of ERISA (including any individual exemption granted under Section 408(a) of
ERISA), or which could result in a material excise tax under the Code or other
material liability under ERISA.
(e) Except as set forth in Part 2.17(e) of the Company Disclosure
Letter, there has been no amendment to, written interpretation or announcement
(whether or not written) by Company or Stockholder relating to, or change in
employee participation or coverage under, any Company Benefit Arrangement that
would increase materially the expense of maintaining such Company Benefit
Arrangement above the level of the expense incurred in respect thereof for the
year ended May 31, 2001.
(f) The group health plans (as defined in Section 4980B(g) of the
Code) that benefit BMA Employees are in compliance, in all material respects,
with the continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, Sections 601 through 608 of ERISA, the
Americans with Disabilities Act of 1990, the Health Insurance Portability and
Accountability Act of 1996, as amended, the Women's Health and Cancer Rights Act
of 1998 and the Family Medical and Leave Act of 1993 and the regulations
thereunder, as such requirements affect BMA Employees, the Company and
Stockholder in connection with Stockholder's employment of BMA Employees. To
Company's Knowledge, no BMA Employee has made invalid claims through such health
plans that exceed $10,000 during the twelve-month period preceding the Closing
Date.
(g) No benefit payable or which may become payable by Company or
Stockholder pursuant to any Company Benefit Arrangement or as a result of,
associated with or arising under this Agreement or the transactions contemplated
by this Agreement will constitute an "excess parachute payment" (as defined in
Section 280G(b)(1) of the Code) which is subject to the imposition of an excise
tax under Section 4999 of the Code or which would not be deductible by reason of
Section 280G of the Code. Except as set forth in Part 2.17(g) of the Company
Disclosure Letter, neither Company nor Stockholder is, with respect to any BMA
Employee, a party to any: (i) agreement with any executive officer or other key
employee thereof (A) the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of the transactions contemplated by
this Agreement, (B) providing any term of employment or compensation guarantee,
or (C) providing severance benefits or other benefits after the termination of
employment of such employee regardless of the reason for such termination of
employment; or (ii) agreement or plan, including any stock option plan, stock
appreciation rights plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of the transactions contemplated by this Agreement or any event
associated with the transactions contemplated by this Agreement, including any
of the other transactions contemplated by this Agreement, or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(h) Set forth in Part 2.17(h)(i) of the Company Disclosure
Schedule is a true and complete list showing the names and annual current salary
rates of all of the personnel employed by Stockholder or Company who work
primarily in connection with the Company Business as of the date hereof (the
"BMA Employees") and in Part 2.17(h)(ii) of the Company Disclosure Schedule is a
true and complete list of the BMA Employees who will become employees of Company
or Buyer on or before the Closing Date (the "Transferred Employees"), which list
-19-
<PAGE>
includes for such employees the amounts paid or payable as a base salary and
lists any other compensation arrangements for such BMA Employees, including
bonuses or other compensation arrangements. The BMA Employees constitute all
personnel employed in the Company Business, whether full-time or part-time and
whether or not actively at work (including employees on short or long-term
disability and leaves of absence).
2.18 No Brokers. Neither Company, Stockholder nor any of their
----------
ffiliates is obligated for the payment of any fees or expenses of any
investment banker, broker, finder or similar party in connection with the
origin, negotiation or execution of this Agreement or the transactions
contemplated by this Agreement, and neither Company, Stockholder nor any of
their affiliates will incur any liability, either directly or indirectly, to any
such investment banker, broker, finder or similar party as a result of this
Agreement, the transactions contemplated by this Agreement or any act or
omission of Company or any of the BMA Employees or any of Company's officers,
directors, stockholders, agents or affiliates.
2.19 Insurance. All policies of insurance now held by Company or
---------
Stockholder that insure the Company Assets or the Company Business are set forth
in Part 2.19 of the Company Disclosure Letter, together with the name of the
insurer under each policy, the type of policy, the policy coverage amount and
any applicable deductible. There is no claim that relates primarily to the
Company Business pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such policies and
bonds have been timely paid, and Company or Stockholder, as applicable, is
otherwise in compliance with the terms of such policies and bonds. Company has
no Knowledge of any threatened termination of, or premium increase with respect
to, any of such policies.
2.20 State Takeover Statutes. The Board of Directors of Company has
-----------------------
taken all actions necessary so that no "fair price," "moratorium," "control
share acquisition" or other antitakeover statute or regulation is applicable to
the consummation of the transactions contemplated by this Agreement.
2.21 Formation of Company. The sale, transfer, contribution and
--------------------
delivery of liabilities and assets from Stockholder to Company was completed in
accordance with the Contribution Agreement, a copy of which was provided by
Stockholder to Buyer. As of the Closing, Company will own no assets and have no
liabilities other than those (i) shown on the Closing Balance Sheet and (ii) set
forth in Part 2.9 of the Company Disclosure Letter, the Company Ancillary
Agreements and the Stockholder Ancillary Agreements or (iii) as specifically
contemplated by the Contribution Agreement and the schedules and exhibits
thereto.
2.22 Disclosure. No representation or warranty made by Company or
----------
Stockholder contained in this Agreement, the Company Ancillary Agreements or the
Stockholder Ancillary Agreements contains an untrue statement of a material fact
or omits to state a material fact necessary to make the statements and facts
contained herein or therein, in light of the circumstances in which they were or
are made, not false or misleading.
Article 3
Representations and Warranties of Buyer
-20-
<PAGE>
Buyer and Merger Sub hereby represent and warrant to Company and
Stockholder the following:
3.1 Organization and Good Standing. Each of Buyer and Merger Sub is a
------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has the corporate power and authority to own,
operate and lease its properties and to carry on its business as now conducted
and as proposed to be conducted.
3.2 Power, Authorization and Validity.
---------------------------------
(a) Power and Authority. Each of Buyer and Merger Sub has all
-------------------
requisite corporate power and authority to enter into, execute, deliver, and
perform its respective obligations under, this Agreement and each other
agreement which Buyer or Merger Sub is to enter into pursuant to this Agreement
(such agreements and documents other than this Agreement, collectively, the
"Buyer Ancillary Agreements") and to consummate the transactions contemplated by
this Agreement and the Buyer Ancillary Agreements. The execution, delivery and
performance of this Agreement and each of the Buyer Ancillary Agreements by
Buyer or Merger Sub, as applicable, have been duly and validly approved and
authorized by all necessary corporate action on the part of Buyer or Merger Sub,
as applicable, under Applicable Law.
(b) No Consents. No consent, approval, order or authorization
-----------
of, or registration, declaration or filing with, any Governmental Entity is
necessary or required to be made or obtained by Buyer or Merger Sub to enable
Buyer or Merger Sub to lawfully execute and deliver, enter into, and to perform
its respective obligations under, this Agreement and each of the Buyer Ancillary
Agreements, or to consummate the transactions contemplated by this Agreement and
the Buyer Ancillary Agreements, except for such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws and the HSR
Act, and the antitrust laws of any foreign country.
(c) Enforceability. This Agreement is, and each of the Buyer
--------------
Ancillary Agreements when executed by Buyer or Merger Sub will be, a valid and
binding obligation of Buyer or Merger Sub, as applicable, enforceable against
Buyer or Merger Sub, as applicable, in accordance with its respective terms,
subject to the effect of (i) applicable bankruptcy and other similar laws
affecting the rights of creditors generally and (ii) rules of law and equity
governing specific performance, injunctive relief and other equitable remedies.
3.3 No Conflict. The execution and delivery of this Agreement and the
-----------
Buyer Ancillary Agreements by Buyer or Merger Sub, as applicable, and the
consummation of the transactions contemplated hereby and thereby, will not
conflict with, or (with or without notice or lapse of time, or both) result in a
termination, default, breach, impairment or violation of: (i) any provision of
the Certificate of Incorporation or Bylaws of Buyer or Merger Sub, each as
currently in effect; (ii) any law, rule, regulation, judgment, writ, decree,
order or statute applicable to Buyer or Merger Sub or any of their respective
assets other than those requirements set forth in Section 3.2(b); or (iii) any
Contract to which Buyer or Merger Sub is a party or by which Buyer or Merger Sub
or any of their respective material assets or properties are bound or affected;
except in the case of each of clauses (ii) and (iii), those which, individually
or in the aggregate, would not be material to the business or operations of
Buyer taken as a whole.
-21-
<PAGE>
3.4 Buyer Financial Statements; Buyer Financial Projections; Employee
-----------------------------------------------------------------
Terminations.
------------
(a) Buyer has delivered to Company and Stockholder Buyer's
draft audited consolidated balance sheet as of December 31, 2000 and Buyer's
draft audited consolidated statement of operations, statement of cash flows and
statement of changes in stockholders' equity for the year ended December 31,
2000 and Buyer's unaudited consolidated balance sheet as of May 31, 2001 and
Buyer's unaudited consolidated statements of operations and cash flows for the
five-month period ended May 31, 2001 (all such financial statements of Buyer and
any notes thereto are hereinafter collectively referred to as the "Buyer
Financial Statements"). The Buyer Financial Statements (i) are derived from and
in accordance with the books and records of Buyer, (ii) fairly present the
financial condition of Buyer at the dates therein indicated and the results of
operations for the periods therein specified, and (iii) have been prepared in
accordance with GAAP applied on a basis consistent with prior periods except for
any absence of notes thereto. Except as set forth in the Buyer Financial
Statements, Buyer has no material debt, liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, except for (A) those shown on Buyer's audited balance sheet as of December
31, 2000 (the "Buyer Balance Sheet") included in the Buyer Financial Statements,
(B) those that may have been incurred after December 31, 2000 (the "Buyer
Balance Sheet Date") in the ordinary course of Buyer's business, consistent with
its past practices, and (C) those that are not required to be set forth in the
Buyer Balance Sheet under GAAP. All reserves established by Buyer that are set
forth in or reflected in the Buyer Balance Sheet are established in accordance
with GAAP. At the Buyer Balance Sheet Date, there were no material loss
contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting Standards Board in March
1975) which are not adequately provided for in the Buyer Balance Sheet as
required by such Statement No. 5.
(b) Buyer has delivered to Stockholder cash flow forecasts
prepared in accordance with Buyer's past practice and statements of operations
financial projections for each quarter in the period from January 1, 2001
through June 30, 2002 (the "Financial Projections"). The Financial Projections
have been prepared in good faith by Buyer based upon reasonable assumptions and
represent Buyer's best good faith estimates as to its future results of
operations. Buyer will, at all relevant times, have, or have access to, funds
sufficient to pay its obligations to Stockholder under this Agreement and the
Commercial Agreement.
(c) None of the funds that Buyer will use to pay the Closing
Payment will be derived from the cash, cash equivalents or short-term
investments shown on Buyer's balance sheet as of May 31, 2001.
(d) As of the Agreement Date and the Closing Date, Buyer has
no plan or intention to terminate the employment of any of the Transferred
Employees during the sixty day period commencing with the Closing Date.
3.5 Absence of Certain Changes. Since the Buyer Balance Sheet Date,
--------------------------
there has not been with respect to Buyer any:
(a) Material Adverse Change in Buyer; or
(b) amendment or change in the Certificate of Incorporation or
Bylaws of Buyer.
-22-
<PAGE>
3.6 Litigation. There is no action, claim, suit arbitration, mediation,
----------
proceeding, claim or investigation pending or, to Buyer's Knowledge, threatened,
against Buyer or any of its Subsidiaries before any court, administrative agency
or arbitrator that would, if determined adversely to Buyer, have a Material
Adverse Effect on Buyer or a material adverse effect on Buyer's ability to
consummate the transactions contemplated by this Agreement.
3.7 No Brokers. Neither Buyer nor any of its affiliates is obligated
----------
for the payment of any fees or expenses of any investment banker, broker, finder
or similar party in connection with the origin, negotiation or execution of this
Agreement or the transactions contemplated by this Agreement, and neither Buyer
nor any of its affiliates will incur any liability, either directly or
indirectly, to any such investment banker, broker, finder or similar party as a
result of this Agreement, the transactions contemplated by this Agreement or any
act or omission of Buyer, any affiliate of Buyer, Company any BMA Employee, or
any of their officers, directors, stockholders, agents or affiliates.
3.8 Stock Ownership. Buyer has determined, pursuant to 16 C.F.R.
---------------
(S)(S)801.10(a)(2)(a)(ii) and 801.10(c)(3), that the value of the Company voting
securities that Buyer will acquire in connection with the transactions
contemplated by the Agreement does not exceed $50,000,000. Buyer's ultimate
parent entity will not, as a result of the transactions contemplated by the
Agreement, hold voting securities of AT&T Corp. or any corporations controlled
by AT&T Corp. that have an aggregate value, as determined in accordance with 16
C.F.R. (S)(S)801.10 and 801.13, of more than $50,000,000.
3.9 Disclosure. No representation or warranty made by Buyer contained
----------
in this Agreement or in the Buyer Ancillary Agreements contains an untrue
statement of a material fact or omits to state a material fact necessary to make
the statements and facts contained herein or therein, in light of the
circumstances in which they were or are made, not false or misleading.
Article 4
Covenants of Company and Stockholder
During the period from the Agreement Date until the earlier to occur of
(i) the Closing (except with respect to the covenants in Sections 4.7, 4.8 and
4.9, which covenants shall continue after Closing in accordance with their
terms) or (ii) the termination of this Agreement in accordance with the
provisions of Article 8, Company and Stockholder covenant and agree with Buyer
as follows:
4.1 Advice of Changes. Stockholder will promptly advise Buyer in
-----------------
writing (i) of any event occurring subsequent to the Agreement Date of which it
becomes aware that would render any representation or warranty of Company or
Stockholder, as applicable, contained in Article 2, if made on or as of the date
of such event or the Closing Date, materially untrue or inaccurate and (ii) of
any Material Adverse Change in Company occurring subsequent to the Agreement
Date of which it has Knowledge.
4.2 Conduct of Business. Except in connection with or related to the
-------------------
transactions specifically contemplated by this Agreement or the Contribution
Agreement, Company will, and Stockholder will cause Company to, (i) conduct its
operations only in, and not take any actions except in, the ordinary course of
business; and (ii) use commercially reasonable efforts to preserve
-23-
<PAGE>
intact its business organizations and goodwill, keep available the services of
the BMA Employees and maintain relationships with those persons having business
relationships with Company. Notwithstanding the foregoing, Company will, and
Stockholder will cause Company to, preserve intact and continue operating the
Company Websites without modification and in a manner intended to result in
availability, reliability and speed of access on the Company Websites to be
materially consistent with past practice (subject to the effects of
circumstances outside of the control of Company and Stockholder). In addition,
Stockholder and Company shall use their commercially reasonable efforts to
cooperate with Buyer to pursue mutually-agreed upon projects related to the
conduct of the Company Business following the Closing; provided, that in the
--------
event that the Closing does not occur, Buyer shall promptly reimburse all of
Stockholder's and Company's reasonable costs and expenses incurred in pursuing
any such projects.
Other than as set forth in Part 4.2 of the Company Disclosure Letter,
Company will not and Stockholder will cause Company not to, without the prior
written consent and approval of Buyer:
(a) borrow or lend any money, other than reasonable and normal
advances to employees for bona fide travel expenses that are incurred in the
ordinary course of the Company Business;
(b) grant any Encumbrance on any Company Asset;
(c) sell, transfer or dispose of any Company Asset, except in
the ordinary course of the Company Business;
(d) enter into any lease or contract for the purchase or sale
of any real property, or enter into any lease or contract for the purchase or
sale of any other property whether personal, tangible or intangible, except in
the ordinary course of the Company Business;
(e) pay any bonus, increased salary or special remuneration to
any BMA Employee or Company officer, director, or consultant to the Company
Business (except for normal salary increases consistent with Stockholder's past
practices and not to exceed 5% of such officer's, BMA Employee's or consultant's
base annual compensation, and except pursuant to existing arrangements
previously disclosed to and approved in writing by Buyer) or enter into any new
employment or consulting agreement with any such person;
(f) change any of its accounting methods;
(g) declare, set aside or pay any cash or stock dividend or
other distribution in respect of its capital stock, redeem, repurchase or
otherwise acquire any of its capital stock or other securities (except for the
repurchase of stock from employees, directors, consultants or contractors of
Company in connection with the termination of their services with Company at the
original purchase price of such stock), pay or distribute any cash or property
to any stockholder or security holder of Company or make any other cash payment
to any stockholder or security holder of Company that is unusual, extraordinary,
or not made in the ordinary course of the Company Business;
(h) amend or terminate any contract, agreement or license to
which Company is a party except those amended or terminated in the ordinary
course of the Company Business;
(i) guarantee or act as a surety for any obligation of any
third party;
-24-
<PAGE>
(j) waive or release any right or claim or initiate,
compromise or settle any litigation material to the Company Business, except in
the ordinary course of the Company Business;
(k) issue, sell, create or authorize any shares of its capital
stock of any class or series or any other of its securities, or issue, grant or
create any warrants, obligations, subscriptions, options, convertible
securities, or other commitments to issue shares of its capital stock or any
securities that are potentially exchangeable for, or convertible into, shares of
its capital stock;
(l) subdivide or split or combine or reverse split the
outstanding shares of its capital stock of any class or series or enter into any
recapitalization affecting the number of outstanding shares of its capital stock
of any class or series or affecting any other of its securities;
(m) merge, consolidate or reorganize with, or acquire, or
enter into any other business combination with, any corporation, partnership,
limited liability company or any other entity (other than Buyer) or enter into
any negotiations, discussions or agreement for such purpose;
(n) amend its Certificate of Incorporation or Bylaws;
(o) agree to any audit assessment by any tax authority or file
any federal or state income or franchise tax return unless copies of such
returns have first been delivered to Buyer for its review at a reasonable time
prior to filing;
(p) modify or change the exercise or conversion rights or
exercise or purchase prices of any capital stock of Company, any Company stock
options, warrants or other Company securities, or accelerate or otherwise modify
(i) the right to exercise any option, warrant or other right to purchase any
capital stock or other securities of Company or (ii) the vesting or release of
any shares of capital stock or other securities of Company from any repurchase
options or rights of refusal held by Company or any other party or any other
restrictions;
(q) take any action inconsistent with the representations and
warranties contained in Sections 2.11(b) through (f), and (h) through (p);
provided, that Stockholder or Company shall be permitted to terminate the
--------
employment of BMA Employees if they shall have good reason to do so and give
Buyer prior notice of such termination, and, in the case of the five Company
employees named in the definition of "Knowledge" herein, if they shall have
obtained Buyer's prior written consent, which consent shall not be unreasonably
withheld or delayed; or
(r) agree to do any of the things described in the preceding
clauses 4.2(a) through 4.2(q).
4.3 Approvals, Consents. Each of Company and Stockholder will use its
-------------------
diligent efforts to (i) obtain the authorization, approval or consent of any
Governmental Entity or third party which may be reasonably required in
connection with the consummation of the transactions contemplated by this
Agreement and will promptly execute and file, or join in the execution and
filing of, any application, notification, petition, statement, registration,
permit, submission of information, or any other document and take such other
actions that may be necessary in order to obtain such authorizations, approvals
and consents except for the those the failure of which to obtain would not be
materially adverse to the Company Business; (ii) satisfy or cause to be
satisfied all of the conditions precedent which are set forth in Article 7;
(iii) take or cause to be taken all actions, and
-25-
<PAGE>
do or cause to be done all things, necessary, proper or advisable under this
Agreement and applicable laws to cause the transactions contemplated by this
Agreement to be consummated in accordance with the terms of this Agreement.
Stockholder, as the sole stockholder of Company, will vote the Company's Stock
in favor of adoption of this Agreement.
4.4 Litigation. Company will notify Buyer in writing promptly after
----------
learning of any claim, suit, arbitration, mediation, proceeding, claim or
investigation by or before any court, administrative agency or arbitrator,
initiated by or against it, or to the Company's Knowledge threatened against
Company or any of its officers, directors or stockholders or the BMA Employees
in their capacity as such which action would reasonably be expected to be
materially adverse to the Company Business.
4.5 No Other Negotiations. During the time period commencing on the
---------------------
Agreement Date and ending on the earlier to occur of (a) the Closing or (b) the
termination of this Agreement in accordance with the provisions of Article 8,
neither Stockholder nor Company will, and neither Stockholder nor Company will
authorize, encourage or permit any officer, director, employee, stockholder,
affiliate or agent of Company or Stockholder or any attorney, investment banker
or any other person on Company's or Stockholder's behalf to, directly or
indirectly: (i) solicit, initiate or induce the making, submission or
announcement of, any offer or proposal from any party concerning any Alternative
Transaction or take any other action that could reasonably be expected to lead
to an Alternative Transaction or a proposal therefor; (ii) furnish any
information regarding Company or the Company Business to any person in
connection with or in response to any inquiry, offer or proposal for or
regarding any Alternative Transaction; (iii) participate in any discussions or
negotiations with any person with respect to any Alternative Transaction; (iv)
otherwise cooperate with or facilitate any effort or attempt by any person
(other than Buyer) to effect any Alternative Transaction; or (v) execute, enter
into or become bound by any letter of intent, agreement, commitment or
understanding between Company or Stockholder and any third party that is related
to, provides for or concerns any Alternative Transaction. During the foregoing
time period identified in the preceding sentence, Stockholder will promptly
notify Buyer orally and in writing of any inquiries or proposals received by
Company or Stockholder or any of its officers, directors, employees,
stockholders, attorneys, investment bankers or agents regarding any Alternative
Transaction and will identify the party making the inquiry or proposal and the
nature and terms of any inquiry or proposal.
4.6 Access to Information. Company and Stockholder will afford Buyer
---------------------
and its accountants, counsel and other representatives reasonable access during
normal business hours to the properties, books, records, personnel, accountants
and other representatives of Company and Stockholder (to the extent primarily
related to the Company Business) during the period prior to the Closing to
obtain all information concerning the business, including the status of product
development efforts, properties, results of operations and personnel of Company
and the 2000 Audit, as Buyer may reasonably request. No information or knowledge
obtained by Buyer in any investigation pursuant to this Section 4.6 will affect
or be deemed to modify any representation or warranty contained herein or the
conditions to the obligations or the obligations of the parties to consummate
the transactions contemplated by and described in this Agreement.
4.7 Audited Financial Statements. As promptly as practicable after the
----------------------------
date of this Agreement, Stockholder shall use commercially reasonable efforts to
cause the Company's auditors to provide Buyer with audited financial statements
of the Company Business (including accompanying notes) for the year ended
December 31, 2000, and a "review" of the unaudited
-26-
<PAGE>
financial statements for the six months ended June 30, 2001 (the "2000 Audit")
to be prepared in accordance with Regulation S-X under the federal securities
laws and in accordance with GAAP. Buyer agrees to promptly (but in no event more
than 30 calendar days) following invoicing reimburse half of Stockholder's
out-of-pocket costs and expenses incurred in and for the 2000 Audit, subject to
a cap on such reimbursement of $75,000. In the event that Stockholder's
out-of-pocket costs and expenses of the 2000 Audit exceed $150,000, Stockholder
shall promptly notify Buyer, and Buyer agrees to promptly (but in no event more
than 30 calendar days) following invoicing reimburse all of Stockholder's out-of
pocket costs and expenses incurred in and for the 2000 Audit to the extent such
costs and expenses exceed $150,000 in the aggregate.
4.8 Pre-Closing Health Insurance Claims. In consideration of an account
-----------------------------------
payable to Stockholder in the amount of $95,000 on the Closing Balance Sheet,
Stockholder agrees to retain liability for claims covered by Stockholder's
health insurance benefit plan made by Transferred Employees in respect of
periods prior to the Closing Date.
4.9 Certain Agreements. Following the Closing, Stockholder agrees to
------------------
perform the obligations set forth on Part 5.7 of the Company Disclosure Letter
with respect to the agreements described thereon.
Article 5
Buyer Covenants
During the period from the Agreement Date until the earlier to occur of
(i) the Closing (except with respect to the covenants in Sections 5.4, 5.6 and
5.7 which shall continue after the Closing in accordance with their terms) or
(ii) the termination of this Agreement in accordance with the provisions of
Article 8, Buyer covenants and agrees with Company and Stockholder as follows:
5.1 Advice of Changes. Buyer will promptly advise Company and
-----------------
Stockholder in writing (i) of any event occurring subsequent to the Agreement
Date of which it becomes aware that would render any representation or warranty
of Buyer contained in Article 3, if made on or as of the date of such event or
the Closing Date, materially untrue or inaccurate and (ii) of any Material
Adverse Change in Buyer occurring subsequent to the Agreement Date of which it
has Knowledge.
5.2 Conduct of Business. Buyer will continue to conduct its business
-------------------
and maintain its business relationships in the ordinary and usual course. If
Buyer becomes aware of a material deterioration in its business, it will
promptly bring such information to the attention of Company and Stockholder in
writing and, if requested by Company or Stockholder, will exert reasonable
commercial efforts to promptly restore its business. In addition, Buyer shall
use its commercially reasonable efforts to cooperate with Stockholder and
Company to pursue mutually-agreed upon projects related to the conduct of the
Company Business following the Closing; provided, that in the event that the
--------
Closing does not occur, Buyer shall promptly reimburse all of Stockholder's and
Company's costs and expenses incurred in pursuing any such projects.
5.3 Approvals, Consents. Each of Buyer and its affiliates will use its
-------------------
diligent efforts to (i) obtain the authorization, approval or consent of any
Governmental Entity or third party which may be reasonably required in
connection with the consummation of the transactions contemplated by this
Agreement and will promptly execute and file, or join in the execution and
filing of, any application, notification, petition, statement, registration,
permit, submission of information, or
-27-
<PAGE>
any other document and take such other actions that may be necessary in order to
obtain such authorizations, approvals and consents except for the those the
failure of which to obtain would not be materially adverse to Buyer and its
Subsidiaries, taken as a whole; (ii) satisfy or cause to be satisfied all of the
conditions precedent which are set forth in Article 6; (iii) take or cause to be
taken all actions, and do or cause to be done all things, necessary, proper or
advisable under this Agreement and applicable laws to cause the transactions
contemplated by this Agreement to be consummated in accordance with the terms of
this Agreement. Buyer, as the sole stockholder of Merger Sub, will vote all
shares of Merger Sub Common Stock owned by it in favor of adoption of this
Agreement.
5.4 Company Employees.
-----------------
(a) To the extent that service is relevant for eligibility, vesting,
benefit accrual, benefit contributions, benefit calculations or allowances
(including entitlements to severance, vacation and sick days) under any employee
benefit plan, program or arrangement established, assumed, continued or
maintained after the Closing by Company or Buyer for the benefit of the
Transferred Employees, Buyer shall cause such plan, program or arrangement to
credit such Transferred Employees for service on or prior to the Closing Date
with the Company or Stockholder; provided, however, that Buyer shall not be
-------- -------
obligated to give credit for such service to the extent it (i) would result in
duplication of any benefits to which a Transferred Employee is entitled to under
any comparable plans, programs or arrangements maintained by Company or
Stockholder prior to the Closing Date or by Buyer after the Closing Date or (ii)
was not service which was recognized for purposes of such comparable plans,
programs or arrangements. In addition, Buyer shall, to the extent practicable,
waive any pre-existing conditions and recognize pre-Closing Date claims for
purposes of annual deductible and out-of-pocket limits under its medical and
dental plans.
(b) As soon as practicable after the Closing Date, Stockholder shall
prepare and deliver to Buyer a schedule listing the Transferred Employees who
were participants in the At Home 401(k) Savings Plan ("401(k) Plan") as of the
Closing Date. The Transferred Employees shall be permitted to receive an
immediate distribution of their account balances in accordance with the terms of
the 401(k) Plan and pursuant to Section 401(k)(10)(A)(iii) of the Code, or
directly roll over their respective account balances in the 401(k) Plan to the
defined contribution plan designated by Buyer (the "Buyer's DC Plan") or to an
individual retirement account, in any case pursuant to Section 401(k)(10)(A) of
the Code; provided, however, that any direct rollover to the Buyer's DC Plan
-------- -------
will be subject to the policies and procedures of Buyer with respect to direct
rollovers generally except that to the extent that a Transferred Employee
transfers a loan obligation to Buyer's DC Plan, Buyer's DC Plan shall continue
to accept repayments of such loan amounts and shall otherwise administer such
loans in accordance with their terms and ERISA until such loan amounts are
repaid or are foreclosed upon.
(c) Nothing in this Section 5.4 or elsewhere in this Agreement shall be
deemed to make any of the BMA Employees or former employees of the Company
Business third party beneficiaries of this Agreement.
5.5 Redwood City Data Center. Buyer shall reimburse Stockholder within
------------------------
30 days after receiving invoice for all reasonable costs incurred by Stockholder
in connection with moving the data center operations of the Company Business
that are currently maintained in Redwood City,
-28-
<PAGE>
California to San Diego, California, including termination fees or expenses,
connection or installation fees, expenses or charges, costs and expenses for new
or replacement equipment.
5.6 Non-Transferable Software. Buyer agrees that it will use its
-------------------------
commercially reasonable efforts to obtain, prior to the Closing, all necessary
and appropriate consents and licenses to use, following the Closing, the
non-transferable commercially available software described on Part 5.6 of the
Company Disclosure Letter (the "Non-Transferable Software"). In the event that
Buyer expends more than $74,000 to obtain such licenses or support such software
in respect of its use of such software during the first six months following the
Closing, Stockholder will reimburse Buyer's documented expenses in excess of
such $74,000. Buyer agrees that Stockholder may, in lieu of any such payments,
arrange and pay for any required consents or licenses to be obtained. Buyer
agrees that, following the Closing, Buyer will not use, modify, copy or transfer
the Non-Transferable Software transferred as part of, or loaded on, the Company
Assets, and will immediately following the Closing delete all such
Non-Transferable Software, in each case, other than any such software for which
all required consents and licenses have been obtained by Buyer prior to the
Closing.
5.7 Certain Agreements. Following the Closing, Buyer shall, and shall
------------------
cause the Company to, perform the obligations set forth on Part 5.7 of the
Company Disclosure Letter with respect to the agreements described thereon.
5.8 Electronic Gift Certificates. Buyer shall use commercially
----------------------------
reasonable efforts to ensure that eCash or its successor in interest with
respect to the eCash gift certificates, honors or can honor its redemption
obligations with respect to gift certificates issued in connection with the
Company Business, including by taking commercially reasonable efforts to cause
that gift certificate funds are transferred as necessary so that users can
redeem their gift certificates and by ensuring that any applicable cards are
still "open" or available for users to access in order to use their electronic
gift certificates.
Article 6
Conditions to Obligations of Company and Stockholder
The obligations of Company and Stockholder hereunder are subject to the
fulfillment or satisfaction, on and as of the Closing, of each of the following
conditions, any one or more of which may be waived in writing by Company and
Stockholder:
6.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Buyer set forth in Article 3 that are qualified as to materiality
shall be true and correct, and that are not qualified as to materiality shall be
true and correct in all material respects, in each case, on and as of the
Agreement Date and on and as of the Closing Date with the same force and effect
as if they had been made on the Closing Date (except for any such
representations or warranties that, by their terms, speak only as of a specific
date or dates, in which case such representations and warranties that are
qualified as to materiality shall be true and correct, and such representations
and warranties that are not qualified as to materiality shall be true and
correct in all material respects on and as of such specified date or dates).
6.2 Covenants. Buyer will have performed and complied in all material
---------
respects with all of its covenants contained in Article 5 on or before the
Closing (to the extent that such covenants require performance by Buyer on or
before the Closing).
-29-
<PAGE>
6.3 No Material Adverse Change. Since the Agreement Date, there shall
--------------------------
not have been any Material Adverse Change in Buyer, whether or not resulting
from a breach in any representation, warranty or covenant in this Agreement.
6.4 Government Consents. There will have been obtained at or prior to