AGREEMENT AND PLAN OF MERGER
AMONG
AMAZON.COM, INC.,
AI ACQUISITION, INC.,
ALEXA INTERNET
AND
BREWSTER KAHLE
DATED AS OF APRIL 24, 1999
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CONTENTS
ARTICLE I -- THE MERGER.......................................................... 1
1.1 The Merger.............................................................. 1
1.2 The Closing............................................................. 2
1.3 Effective Date and Time................................................. 2
1.4 Articles of Incorporation of the Surviving Corporation.................. 2
1.5 Bylaws of the Surviving Corporation..................................... 3
1.6 Directors and Officers.................................................. 3
1.7 Conversion of Shares.................................................... 3
1.7.1 Exchange Ratio; Pledged Shares................................... 3
1.7.2 Exchange of Certificates......................................... 7
1.7.3 No Fractional Shares............................................. 8
1.7.4 No Further Transfers............................................. 9
1.8 Shareholder Representative.............................................. 9
1.9 Amendment to Provide for Forward Triangular Merger...................... 9
1.10 Tax Free Reorganization................................................. 9
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDER........................................................ 10
2.1 Organization............................................................. 10
2.2 Enforceability........................................................... 11
2.3 Capitalization........................................................... 11
2.4 Subsidiaries and Affiliates.............................................. 12
2.5 No Approvals; No Conflicts............................................... 13
2.6 Financial Statements..................................................... 13
2.7 Absence of Certain Changes or Events..................................... 14
2.8 Taxes.................................................................... 16
2.9 Property................................................................. 19
2.10 Contracts................................................................ 21
2.11 Claims and Legal Proceedings............................................. 22
2.12 Labor and Employment Matters............................................. 23
2.13 Employee Benefit Plans................................................... 23
2.13.1 Employee Benefit Plan Listing.................................... 23
2.13.2 Documents Provided............................................... 24
2.13.3 Compliance....................................................... 25
2.13.4 Contributions and Premium Payments............................... 26
2.13.5 Related Employers................................................ 26
2.13.6 Multiemployer and Title IV Plans................................. 26
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2.13.7 Post-Termination Welfare Benefits................................ 26
2.13.8 Suits, Claims and Investigations................................. 26
2.13.9 Payments Resulting From Transactions............................. 27
2.14 Intellectual Property.................................................... 27
2.14.1 General...........................................................27
2.14.2 Company Technology............................................... 28
2.14.3 Third Party Technology........................................... 28
2.14.4 Trademarks....................................................... 29
2.14.5 Intellectual Property Rights..................................... 29
2.14.6 Maintenance of Rights............................................ 30
2.14.7 Third Party Claims............................................... 30
2.14.8 Infringement by the Company...................................... 31
2.14.9 Confidentiality.................................................. 31
2.14.10 Warranty Against Defects......................................... 31
2.14.11 Domain Names..................................................... 31
2.14.12 Year 2000........................................................ 32
2.14.13 Indemnification.................................................. 32
2.14.14 Restrictions on Intellectual Property............................ 32
2.15 Corporate Books and Records.............................................. 32
2.16 Licenses, Permits, Authorizations, etc................................... 33
2.17 Compliance With Laws..................................................... 33
2.18 Insurance................................................................ 33
2.19 Brokers or Finders....................................................... 34
2.20 Absence of Questionable Payments......................................... 34
2.21 Bank Accounts............................................................ 34
2.22 Insider Interests........................................................ 35
2.23 Compliance With Environmental Laws....................................... 35
2.24 Information Supplied by the Company...................................... 36
2.25 Full Disclosure.......................................................... 36
2.26 Hart-Scott-Rodino........................................................ 36
2.27 Operating Data........................................................... 36
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF AMAZON.COM AND THE PURCHASER.... 37
3.1 Organization............................................................ 37
3.2 Enforceability.......................................................... 38
3.3 Securities.............................................................. 38
3.4 No Approvals or Notices Required; No Conflicts With Instruments......... 39
3.5 Capitalization.......................................................... 39
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3.6 SEC Documents........................................................... 39
3.7 Absence of Certain Changes.............................................. 40
3.8 Information Supplied by Amazon.com...................................... 40
3.9 Full Disclosure......................................................... 40
3.10 Brokers or Finders...................................................... 40
ARTICLE IV -- CONDITIONS PRECEDENT TO OBLIGATIONS OF AMAZON.COM AND THE
PURCHASER.......................................................... 40
4.1 Accuracy of Representations and Warranties.............................. 41
4.2 Performance of Agreements............................................... 41
4.3 Opinion of Counsel for the Company...................................... 41
4.4 Compliance Certificate.................................................. 41
4.5 Material Adverse Change................................................. 41
4.6 Approvals and Consents.................................................. 41
4.7 Proceedings and Documents; Secretary's Certificate...................... 42
4.8 Nonforeign Affidavit.................................................... 42
4.9 Compliance With Laws.................................................... 42
4.10 Shareholder Approval.................................................... 42
4.11 Legal Proceedings....................................................... 42
4.12 Employment and Noncompetition Arrangements.............................. 43
4.13 Affiliate Letters....................................................... 43
4.14 Termination of Certain Agreements....................................... 43
4.15 Exercise of Stock Purchase Rights....................................... 43
4.16 No Dissenter Rights Exercised Greater Than 5% of Stock.................. 43
4.17 Transmittal Letters..................................................... 44
4.18 Consents to Merger...................................................... 44
4.19 Delivery of Audited Financial Statements................................ 44
ARTICLE V -- CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.................. 45
5.1 Accuracy of Representations and Warranties.............................. 45
5.2 Performance of Agreements............................................... 45
5.3 Opinion of Counsel...................................................... 45
5.4 Compliance Certificate.................................................. 45
5.5 Legal Proceedings....................................................... 45
5.6 Material Adverse Change................................................. 46
5.7 Approvals and Consents.................................................. 46
5.8 Compliance With Laws.................................................... 46
5.9 Tax Opinion............................................................. 46
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ARTICLE VI -- COVENANTS.......................................................... 46
6.1 Conduct of Business by the Company Pending the Merger................... 47
6.2 Access to Information; Confidentiality.................................. 49
6.3 No Alternative Transactions............................................. 49
6.4 Notification of Certain Matters......................................... 50
6.5 Further Action; Commercially Reasonable Efforts......................... 50
6.6 Shareholder Approval.................................................... 50
6.7 Proxy Statement......................................................... 50
6.8 Amazon.com Common Stock................................................. 51
6.9 Securities Act Compliance............................................... 51
6.10 Dissenting Shares....................................................... 52
6.11 Publicity............................................................... 52
6.12 Option Grants........................................................... 52
6.13 Option Shares; Registration............................................. 52
6.14 Indemnification of Officers and Directors............................... 53
6.15 Benefits Rollover....................................................... 53
ARTICLE VII -- TERMINATION, AMENDMENT AND WAIVER................................. 54
7.1 Termination............................................................. 54
7.2 Effect of Termination................................................... 54
7.3 Amendment............................................................... 55
7.4 Waiver.................................................................. 55
ARTICLE VIII -- SURVIVAL AND INDEMNIFICATION..................................... 55
8.1 Survival................................................................ 55
8.2 Indemnification by the Holders of Company Capital Stock................. 55
8.3 Threshold and Limitations............................................... 56
8.4 Procedure for Indemnification........................................... 58
8.5 Remedies; Specific Performance.......................................... 61
ARTICLE IX -- GENERAL............................................................ 62
9.1 Tax Matters............................................................. 62
9.2 Expenses................................................................ 64
9.3 Notices................................................................. 64
9.4 Severability............................................................ 65
9.5 Entire Agreement........................................................ 66
9.6 Assignment.............................................................. 66
9.7 Parties in Interest..................................................... 66
9.8 Governing Law........................................................... 66
9.9 Headings................................................................ 66
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9.10 Counterparts............................................................ 66
9.11 Waiver of Jury Trial.................................................... 67
EXHIBITS
1.6 -- Officers of the Surviving Corporation
1.7.2 -- Letter of Transmittal
2 -- Company Disclosure Memorandum
4.3 -- Opinion of Counsel for the Company
4.8 -- Real Property Tax Affidavit
4.12 -- Form of Confidentiality, Noncompetition and Invention
Assignment Agreement
4.13 -- Form of Affiliate Letter
5.3 -- Opinion of Counsel for Amazon.com and Purchaser
6.12 -- List of Company Employees and Options
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of April 24, 1999, by and among Amazon.com, Inc., a Delaware corporation
("Amazon.com"), AI Acquisition, Inc., a Washington corporation and wholly owned
subsidiary of Amazon.com (the "Purchaser"), Alexa Internet, a California
corporation (the "Company"), and Brewster Kahle (the "Shareholder").
RECITALS
A. The Company, Amazon.com, the Shareholder and the Purchaser
believe it advisable and in their respective best interests to effect a merger
of Purchaser with and into the Company pursuant to this Agreement (the
"Merger").
B. The Board of Directors of the Company has approved this
Agreement and the Merger as required by applicable law.
C. The Boards of Directors of Amazon.com and the Purchaser and the
sole shareholder of the Purchaser have approved this Agreement and the Merger as
required by applicable law.
D. It is intended that the Merger will qualify as a reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
E. It is intended that shareholders holding approximately ninety
percent (90%) of the voting securities of the Company will enter into Voting
Agreements with Amazon.com concurrently herewith.
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as
follows:
ARTICLE I -- THE MERGER
1.1 THE MERGER
Upon the terms and subject to the conditions hereof, (a) at the
Effective Time (as defined in Section 1.3 hereof) the separate existence of the
Purchaser shall cease and the Purchaser shall be merged with and into the
Company (the Company as the surviving corporation after the Merger is sometimes
referred to herein as the "Surviving Corporation"), and (b) from and after the
Effective Time, the Merger shall
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have all the effects of a merger under the laws of the State of Washington, the
State of California and other applicable law.
1.2 THE CLOSING
Subject to the terms and conditions of this Agreement, the closing of
the Merger pursuant to this Agreement (the "Closing") shall take place on the
earliest practicable business day (the "Closing Date") following the
satisfaction or waiver of the conditions set forth in Articles IV and V at 10:00
a.m. local time at the offices of Perkins Coie LLP, 1201 Third Avenue, 48th
Floor, Seattle, Washington, or such other date, time or location as Amazon.com
and the Company shall agree.
1.3 EFFECTIVE DATE AND TIME
On the Closing Date and subject to the terms and conditions hereof, the
parties hereto shall cause the appropriate certificates (the "Articles of
Merger") complying with the applicable provisions of the Washington Business
Corporation Act ("Washington Law") and the California General Corporation Law
("California Law"), to be properly executed and filed with the Secretary of
State of the State of Washington (the "Washington Secretary of State") and the
Secretary of State of the State of California ("California Secretary of State").
The Merger shall become effective on the date (the "Effective Date") and at the
time (the "Effective Time") of filing of the Articles of Merger or at such other
time as may be specified in the Articles of Merger as filed. If the Washington
Secretary of State or the California Secretary of State requires any changes in
the Articles of Merger as a condition to filing or to issuing its certificate to
the effect that the Merger is effective, Amazon.com, the Purchaser and the
Company will execute any necessary revisions incorporating such changes,
provided such changes are not inconsistent with and do not result in any
material change in the terms of this Agreement.
1.4 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION
At the Effective Time, the Articles of Incorporation of the Surviving
Corporation shall be amended and restated in their entirety to conform to the
Articles of Incorporation of the Purchaser as in effect immediately prior to the
Effective Time; provided, however, that Article I thereof shall be amended to
read as follows: "The name of this corporation is Alexa Internet." Thereafter,
the Articles of Incorporation of the Surviving Corporation may be amended in
accordance with their terms and as provided by law.
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1.5 BYLAWS OF THE SURVIVING CORPORATION
At the Effective Time, the Bylaws of the Purchaser as in effect
immediately prior to the Effective Time shall become the Bylaws of the Surviving
Corporation. Thereafter, the Bylaws may be amended or repealed in accordance
with their terms and the Articles of Incorporation of the Surviving Corporation
and as provided by law.
1.6 DIRECTORS AND OFFICERS
At the Effective Time, the directors of the Surviving Corporation shall
be Jeff Bezos, David Risher, Rick Dalzell, Randy Tinsley and Brewster Kahle and
the officers of the Surviving Corporation shall be as set forth on Exhibit 1.6
hereto, and such directors and officers shall hold office in accordance with and
subject to the Articles of Incorporation and Bylaws of the Surviving
Corporation.
1.7 CONVERSION OF SHARES
1.7.1 EXCHANGE RATIO; PLEDGED SHARES
As of the Effective Time, by virtue of the Merger and without any action
on the part of the holders thereof:
(a) All shares of any class of capital stock of the Company
held by the Company as treasury shares shall be canceled.
(b) Each issued and outstanding share of Common Stock of the
Company (the "Company Common Stock"), including each share of Company Common
Stock issued upon conversion of each issued and outstanding share of the
Company's Series A Preferred Stock (the "Company Preferred Stock"), other than
shares of Company Common Stock for which dissenters' rights are perfected or as
provided in Section 1.7.1(a), shall be converted into the right to receive from
Amazon.com a number of shares of Amazon.com common stock, par value $0.01 per
share ("Amazon.com Common Stock"), determined by dividing (i) the total number
of shares of Amazon.com Common Stock to be issued in the Merger, which shall be
equal to $250,000,000, less any adjustments pursuant to Section 9.2, divided by
the average of the closing price of Amazon.com Common Stock as reported on the
NASDAQ National Market for each of the five trading days immediately preceding
the trading day immediately preceding the Closing Date (the "Base Price"), by
(ii) the Fully Diluted Common Stock Number, rounded to ten decimal points. The
"Fully Diluted Common Stock Number" shall mean the total number of shares of
Company Common Stock outstanding immediately prior to the Effective Time on a
fully diluted basis, including (x) the exercise of all outstanding rights,
warrants or options, vested or
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unvested, to acquire Company Common Stock, regardless of restrictions on
exercise or conversion and (y) the conversion of all outstanding securities
(including, without limitation, the Company Preferred Stock) and notes
convertible at any time into Company Common Stock (such rights, warrants,
options and convertible securities referenced in clauses (x) and (y) being
referred to herein as "Stock Purchase Rights"). The shares of Amazon.com Common
Stock so issued shall be referred to herein as the "Merger Consideration" and
the quotient as derived being referred to as the "Exchange Ratio." The Company
Common Stock together with the Company Preferred Stock shall be referred to
herein as the "Company Capital Stock." The number of shares of Amazon.com Common
Stock to be issued to each shareholder of the Company under this Section
1.7.1(b) shall be calculated by aggregating all shares of Company Common Stock
held by each such shareholder, so that such number of shares of Amazon.com
Common Stock to be issued shall be equal to the number of shares of Company
Common Stock held by such shareholder multiplied by the Exchange Ratio, with
cash paid in lieu of any fractional share of Amazon.com Common Stock pursuant to
Section 1.7.3 hereof.
(c) Notwithstanding the foregoing:
(i) As collateral security for the indemnification
obligations of the shareholders of the Company pursuant to Article VIII, the
shareholders of the Company, by approving the Merger at a special meeting of
shareholders or by written consent, shall thereby pledge, transfer and assign to
Amazon.com, subject to the effectiveness of the Merger, that number of shares of
Amazon.com Common Stock that equals the quotient of $37,500,000 divided by the
Base Price (the "Pledged Shares"). Each shareholder of the Company, by approving
the Merger at a special meeting of shareholders or by written consent, shall
thereby pledge, transfer and assign to Amazon.com, subject to the effectiveness
of the Merger, a security interest in such shareholder's pro rata share of the
Pledged Shares, and the certificates and instruments, if any, representing or
evidencing such Pledged Shares. Fractional shares of Amazon.com Common Stock
shall not be pledged. In lieu thereof, each shareholder of the Company shall
round up such fractional share to the nearest whole number and pledge a full
share of Amazon.com Common Stock for such fractional share. The pledge pursuant
to this Section 1.7.1(c)(i) includes all securities hereafter delivered to such
shareholder with respect to or in substitution for such shareholder's Pledged
Shares, all certificates and instruments representing or evidencing such
securities, and all cash and noncash dividends and other property at any time
received, receivable or otherwise distributed in respect of or in exchange for
any or all thereof. In the event such shareholder receives any such property,
such shareholder shall hold such property
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in trust for Amazon.com and shall immediately deliver such property to
Amazon.com to be held as Pledged Shares.
(ii) Each certificate, if any, evidencing a
shareholder's Pledged Shares issued in his, her or its name in the Merger shall
be delivered to Amazon.com directly by the transfer agent, such certificate
bearing no restrictive or cautionary legend other than those imprinted by the
transfer agent at Amazon.com's request or as set forth herein. Each shareholder
of the Company shall, at the Closing, deliver to Amazon.com, for each such
certificate, a stock power duly signed in blank by him, her or it.
(iii) The pledgor of any Pledged Share shall be the
holder of record thereof and entitled to exercise any voting powers incident to
such Pledged Share until such time, if any, as such Pledged Share is transferred
to Amazon.com to satisfy any indemnification obligations pursuant to Article
VIII. In addition, upon any release of such Pledged Share from the pledge
pursuant to the terms hereof, such pledgor shall be entitled to any cash or
other proceeds from such Pledged Share.
(iv) The Pledged Shares shall be available solely to
satisfy any indemnification obligations of the shareholders of the Company
pursuant to Article VIII for the Survival Period (as defined in Section 8.1).
Within five (5) business days following the end of the Survival Period,
Amazon.com shall return or cause to be returned to the respective former
shareholders of the Company, the Pledged Shares less (A) any Pledged Shares
previously forfeited to Amazon.com to satisfy any indemnification obligations
pursuant to Article VIII and (B) an additional number of Pledged Shares
sufficient to satisfy any pending Claims for indemnification made by any
Indemnified Parties (as such terms are defined in Article VIII). Any remaining
Pledged Shares shall be released within five (5) business days following final
resolution of, and full payment in connection with, any such pending Claims.
(v) Stop transfer instructions will be given to
Amazon.com's transfer agent with respect to those certificates evidencing the
Pledged Shares and certificates evidencing the Pledged Shares will contain a
legend, stating in substance:
"THESE SHARES HAVE BEEN PLEDGED AS COLLATERAL PURSUANT TO THAT
CERTAIN AGREEMENT AND PLAN OF MERGER DATED AS OF APRIL 24, 1999
BY AND AMONG AMAZON.COM, INC., AI ACQUISITION, INC., ALEXA
INTERNET AND BREWSTER KAHLE. PRIOR TO THE EXPIRATION OF THE
PLEDGE AS SET FORTH IN SUCH AGREEMENT, SUCH SHARES MAY NOT BE
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OFFERED, SOLD, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF."
Amazon.com will terminate such stop transfer instructions and authorize its
transfer agent to remove such restrictive legend with respect to any
certificates representing Pledged Shares that are returned by Amazon.com
pursuant to Section 1.7.1(c)(iv).
(d) Each issued and outstanding share of capital stock of the
Purchaser shall be converted into one share of common stock of the Surviving
Corporation.
(e) Amazon.com shall assume the Company's Amended and Restated 1997
Stock Option Plan (the "Company Option Plan"), and each outstanding option to
purchase shares of Company Common Stock issued pursuant to the Company Option
Plan or any other stock option agreement, whether or not vested or exercisable
(each an "Option"), shall be assumed by Amazon.com and shall constitute an
option to acquire, on the same vesting terms, and on substantially the same
other terms and conditions as were applicable under such assumed Option, that
number of shares of Amazon.com Common Stock equal to the product of the Exchange
Ratio and the number of shares of Company Common Stock subject to such Option,
at a price per share (rounded to the nearest $0.01) equal to the aggregate
exercise price for the shares of Company Common Stock subject to such Option
divided by the number of full shares of Amazon.com Common Stock deemed to be
purchasable pursuant to such Option; provided, however, that (i) subject to the
provisions of clause (ii) below, the number of shares of Amazon.com Common Stock
that may be purchased upon exercise of such Option shall not include any
fractional shares, and, upon the last exercise of such Option, Amazon.com shall
pay to the holder thereof as soon as practicable an amount of cash equal to such
fraction multiplied by the average of the high and low selling price of
Amazon.com Common Stock on the date the Company Option Plan is assumed, and (ii)
in the case of any Option to which Section 421 of the Code applies by reason of
its qualification under Section 422 of the Code, the option price, the number of
shares purchasable pursuant to such Option and the terms and conditions of
exercise of such Option shall be determined in order to comply with Section 424
of the Code. Amazon.com shall assume the obligations of the Company under the
Company Option Plan and shall comply with the terms of such plan as they apply
to the Options assumed as set forth above.
(f) Holders of shares of Company Capital Stock who have complied
with all the requirements for perfecting dissenters' rights, as required under
California Law, shall be entitled to their rights under California Law with
respect to such shares (the "Dissenting Shares"). Notwithstanding the foregoing,
if any holder of Dissenting Shares shall effectively withdraw or lose (through
failure to perfect or otherwise) the
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right to dissent, then, as of the later of the Effective Time and the occurrence
of such event, such holder's shares shall automatically be converted into and
represent only the right to receive the shares of Amazon.com Common Stock to
which such holder is then entitled under this Agreement and California Law,
without interest thereon and upon surrender of the certificate representing such
shares. Notwithstanding any provision of this Agreement to the contrary, any
Dissenting Shares held by a shareholder who has perfected Dissenter's rights for
such shares in accordance with California Law shall not be converted in
Amazon.com Common Stock pursuant to this Section 1.7.1.
(g) If, prior to the Effective Time, Amazon.com recapitalizes
through a split-up of its outstanding shares of capital stock into a greater
number, or a combination of its outstanding shares of capital stock into a
lesser number, reorganizes, reclassifies or otherwise changes its outstanding
shares of capital stock into the same or a different number of shares of other
classes of capital stock, or declares a dividend on its outstanding shares of
capital stock payable in shares or securities convertible into shares, the
number of shares of Amazon.com Common Stock into which the shares of Company
Capital Stock are to be converted, and the number of shares of Amazon.com Common
Stock issuable upon the exercise of each assumed Option, will be adjusted
appropriately so as to maintain the proportionate interests and economic
benefits of the holders of the Company Capital Stock and Options and the holders
of shares of capital stock of Amazon.com.
1.7.2 EXCHANGE OF CERTIFICATES
(a) ChaseMellon Shareholder Services, L.L.C. ("ChaseMellon"), as
exchange agent, shall mail prior to the Closing Date to each holder of record as
of the date 20 business days prior to the Closing Date of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Capital Stock (and as soon as practicable to
shareholders that become holders of Company Capital Stock subsequent to such
date), other than shares to be cancelled in accordance with Section 1.7.1(a),
(i) a letter of transmittal (the "Letter of Transmittal") in substantially the
form set forth at Exhibit 1.7.2 and (ii) instructions for effecting the
surrender of the certificates in exchange for certificates representing
Amazon.com Common Stock. Upon surrender of a certificate for cancellation to
ChaseMellon or to such other agent or agents as may be appointed by Amazon.com,
together with such Letter of Transmittal, duly executed, and such other
documents as may reasonably be required by ChaseMellon, the holder of such
certificate shall be entitled to receive in exchange therefor, by the later of
(a) three business days following the Effective Time and (b) three business days
following the surrender of such certificate, a certificate representing that
number of whole shares of Amazon.com Common Stock which such holder has the
right to receive pursuant to the provisions of Section 1.7.1, and the
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certificate so surrendered shall forthwith be cancelled. In the event that any
certificates representing shares of Company Capital Stock shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
shareholder claiming such certificate to be lost, stolen or destroyed,
Amazon.com shall issue in exchange for such lost, stolen or destroyed
certificate the shares of Amazon.com Common Stock that such shareholder is
entitled to receive pursuant to Section 1.7.1 hereof; provided, however, that
Amazon.com may in its discretion and as a condition precedent to the issuance
thereof, require such shareholder to provide Amazon.com with an indemnity
agreement against any claim that may be made against Amazon.com with respect to
the certificate alleged to have been lost, stolen or destroyed. The shares of
Amazon.com Common Stock that each shareholder of the Company shall be entitled
to receive pursuant to the Merger shall be deemed to have been issued at the
Effective Time. No interest shall accrue on the Merger Consideration. If the
Merger Consideration (or any portion thereof) is to be delivered to any person
other than the person in whose name the certificate or certificates representing
shares of Company Capital Stock surrendered in exchange therefor is registered,
it shall be a condition to such exchange that the person requesting such
exchange shall pay to Amazon.com any transfer or other taxes required by reason
of the payment of the Merger Consideration to a person other than the registered
holder of the certificate or certificates so surrendered, or shall establish to
the satisfaction of Amazon.com that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither Amazon.com nor any other party hereto
shall be liable to a holder of shares of Company Capital Stock for any Merger
Consideration delivered to a public official pursuant to applicable abandoned
property, escheat and similar laws.
(b) Amazon.com or the exchange agent will be entitled to deduct and
withhold from the Merger Consideration such amounts as Amazon.com or the
exchange agent are required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld, such amounts will be treated
for all purposes of this Agreement as having been paid to the former holder of
the Company Capital Stock in respect of whom such deduction and withholding were
made by Amazon.com or the exchange agent.
1.7.3 NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Amazon.com
Common Stock shall be issued by virtue of the Merger, and no dividend, stock
split or other distribution with respect to Amazon.com Common Stock shall relate
to any such fractional interest, and any such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security holder. In lieu
thereof, Amazon.com shall pay to
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the holder of shares of Company Capital Stock who would otherwise be entitled to
a fraction of a share of Amazon.com Common Stock, as soon as practicable after
the Effective Date (and in the same timely manner required for delivery of
certificates of Amazon.com Common Stock provided in Section 1.7.2), an amount in
cash equal to such fraction multiplied by the Base Price.
1.7.4 NO FURTHER TRANSFERS
After the Effective Time, there shall be no transfers of any shares of
Company Capital Stock on the stock transfer books of the Surviving Corporation.
If, after the Effective Time, certificates formerly representing shares of
Company Capital Stock are presented to the Surviving Corporation, they shall be
forwarded to Amazon.com and be canceled and exchanged in accordance with this
Section 1.7, subject to applicable law in the case of Dissenting Shares.
1.8 SHAREHOLDER REPRESENTATIVE
By approving the Merger at a special meeting of shareholders or by
written consent of the shareholders, each shareholder of the Company shall have
irrevocably authorized and appointed Bruce Gilliat (the "Shareholder
Representative"), with full power of substitution and resubstitution, as his,
her or its representative and true and lawful attorney-in-fact and agent to act
in his, her or its name, place and stead as contemplated by Article VIII.
1.9 AMENDMENT TO PROVIDE FOR FORWARD TRIANGULAR MERGER
If at any time prior to the Closing Date, Amazon.com elects to have
Purchaser be the Surviving Corporation or elects to have the Company merge
directly into Amazon.com or a different subsidiary of Amazon.com merge with and
into the Company, the parties shall promptly enter into an amendment to this
Agreement to so provide, so long as such action does not result in a breach of a
representation or warranty set forth in Article II hereof, the inability to
satisfy any of the conditions set forth in Articles IV and V hereof, and
Amazon.com makes representations, warrants and covenants consistent with Section
9.1 hereof.
1.10 TAX FREE REORGANIZATION
(a) Except as otherwise required by the Internal Revenue Service
(the "IRS") pursuant to a determination (as defined in Section 1313 of the Code)
or otherwise, or by applicable law, the parties shall not take a position on any
tax returns inconsistent with the treatment of the Merger for tax purposes as a
reorganization within the meaning of Section 368(a) of the Code.
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(b) In addition, Amazon.com represents, now and as of the Closing
Date, that it presently intends to continue the Company's historic business or
use a significant portion of the Company's business assets in business in a
manner that satisfies the continuity of business enterprise requirement set
forth in Treasury Regulation Section 1.368-1(d); provided, however, that nothing
contained herein shall constitute a representation by Amazon.com regarding the
tax consequences of the Merger or the transactions contemplated herein to the
Company or any shareholder of the Company.
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SHAREHOLDER
Except as is otherwise set forth with appropriate Section references in
the Disclosure Memorandum attached as Exhibit 2 (the "Disclosure Memorandum"),
and in order to induce Amazon.com and the Purchaser to enter into and perform
this Agreement and the other agreements and certificates that are required to be
executed pursuant to this Agreement (collectively, the "Operative Documents"),
the Company and the Shareholder severally and not jointly represent and warrant
to Amazon.com and the Purchaser as of the date of this Agreement and as of the
Closing as follows in this Article II.
2.1 ORGANIZATION
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. The Company has all
requisite corporate power and authority to own, operate and lease its properties
and assets, to carry on its business as now conducted and as currently proposed
to be conducted, and to enter into and perform its obligations under this
Agreement and the other Operative Documents to which the Company is a party, and
to consummate the transactions contemplated hereby and thereby. The Company is
duly qualified and licensed as a foreign corporation to do business and is in
good standing in each jurisdiction in which the character of the Company's
properties occupied, owned or held under lease or the nature of the business
conducted by the Company makes such qualification or licensing necessary, except
where the failure to be so qualified or in good standing would not have a
Company Material Adverse Effect. For purposes of this Agreement, the term
"Company Material Adverse Effect" shall mean any change, event or effect that is
or is reasonably likely to be materially adverse to the Company's business,
properties or prospects; provided, however, that a Company Material Adverse
Effect shall not include any change, circumstance, event or effect that relates
to or results from the announcement or other disclosure or consummation of the
transactions contemplated by this Agreement or general economic conditions.
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2.2 ENFORCEABILITY
The Company has all necessary corporate power and authority to execute,
deliver and perform its obligations under this Agreement and each of the other
Operative Documents to which it is a party and each of the certificates,
instruments and documents executed or delivered by it pursuant to the terms of
this Agreement. All corporate action on the part of the Board of Directors of
the Company necessary for the authorization, execution, delivery and performance
of this Agreement, the consummation of the Merger, and the performance of all
the Company's obligations under this Agreement to which the Company is a party
has been taken. All corporate action on the part of the Board of Directors of
the Company necessary for the authorization, execution, delivery and performance
of the Operative Documents to which it is a party and the performance of all of
the Company's obligations under the Operative Documents to which it is a party
has been or will be taken prior to the Effective Time. All corporate action on
the part of the shareholders of the Company necessary for the authorization,
execution, delivery and performance of this Agreement and the other Operative
Documents to which the Company is a party has been taken or will be taken as of
or prior to the Effective Time. This Agreement has been, and each of the other
Operative Documents to which the Company is a party at the Closing will have
been, duly executed and delivered by the Company, and this Agreement is, and
each of the other Operative Documents to which the Company is a party will be at
the Closing, a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as to the effect, if
any, of (a) applicable bankruptcy and other similar laws affecting the rights of
creditors generally, (b) rules of law governing specific performance, injunctive
relief and other equitable remedies, and (c) the enforceability of provisions
requiring indemnification in connection with the offering, issuance or sale of
securities.
2.3 CAPITALIZATION
(a) The authorized capital stock of the Company consists of
50,000,000 shares of Company Common Stock and 10,524,792 shares of preferred
stock, of which 10,524,792 shares are designated as Company Preferred Stock.
(b) As of the date of this Agreement, the issued and outstanding
capital stock of the Company consists solely of 15,410,964 shares of Company
Common Stock and 10,524,792 shares of Company Preferred Stock, which are held of
record and, to the knowledge of the Company and the Shareholder, beneficially by
the shareholders of the Company as set forth on Schedule 2.3(b) to the
Disclosure Memorandum. Such outstanding shares are, and immediately prior to the
Closing will be, duly authorized and validly issued, fully paid and
nonassessable, and issued in compliance with all
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applicable federal and state securities laws. To the knowledge of the Company
and the Shareholder, no Person (as defined in Section 2.5 hereof) other than the
shareholders of the Company holds any interest in any of the outstanding shares.
True and correct copies of the stock records of the Company, showing all
issuances and transfers of shares of capital stock of the Company since
inception, have been provided to Amazon.com or its counsel.
(c) As of the date of this Agreement, other than Options to purchase
up to 1,838,495 shares of Company Common Stock and except as set forth on
Schedule 2.3(c) to the Disclosure Schedule, there are no outstanding rights of
first refusal or offer, preemptive rights, Stock Purchase Rights or other
agreements, either directly or indirectly, for the purchase or acquisition from
the Company, to the knowledge of the Company and the Shareholder, or any
shareholder of any shares of Company Capital Stock or any securities convertible
into or exchangeable for shares of Company Capital Stock. Set forth on Schedule
2.3(c) to the Disclosure Memorandum is a spreadsheet accurately reflecting the
number of such Options and other Stock Purchase Rights outstanding, the grant or
issue dates, vesting schedules and exercise or conversion prices thereof, and,
in each case, the identities of the holders and an indication of their
relationships to the Company (if any exist other than a security holder). The
Company has delivered to Amazon.com or its counsel true and correct copies of
the Company Option Plan, the stock option agreements relating to Options granted
thereunder and all agreements with respect to Stock Purchase Rights. Schedule
2.3(c) to the Disclosure Memorandum also identifies all Options or Stock
Purchase Rights that have been offered in connection with any employee or
consulting agreement but that, as of the date hereof, have not been issued or
granted.
(d) The Company is not a party or subject to any agreement or
understanding, and, to the knowledge of the Company and the Shareholder (other
than voting agreements entered into in connection with this Agreement), there is
no agreement or understanding between any Persons that affects or relates to the
voting or giving of written consents with respect to any securities of the
Company or the voting by any director of the Company. The Company is not under
any contractual or other obligation to register any of its presently outstanding
securities or any of its securities that may hereafter be issued.
2.4 SUBSIDIARIES AND AFFILIATES
The Company does not own or control, and has not in the past owned or
controlled, directly or indirectly, any corporation, partnership, limited
liability company or other business entity. The Company does not own, directly
or indirectly,
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any ownership, equity, or voting interest in any corporation,
partnership, joint venture or other entity, and has no agreement or commitment
to purchase any such interest.
2.5 NO APPROVALS; NO CONFLICTS
The execution, delivery and performance by the Company of this Agreement
and the other Operative Documents to which the Company is a party and the
consummation of the transactions contemplated hereby and thereby will not (a)
constitute a material violation (with or without the giving of notice or lapse
of time, or both) of any provision of law or any judgment, decree, order,
regulation or rule of any court or other governmental authority applicable to
the Company, (b) require any consent, approval or authorization of, or
declaration, filing or registration with, any person, corporation, partnership,
joint venture, association, organization, other entity or governmental or
regulatory authority (a "Person"), except (i) compliance with applicable
securities laws, (ii) the filing of all documents necessary to consummate the
Merger with the Washington Secretary of State and California Secretary of State,
(iii) the approval by the shareholders of the Company of the transactions
contemplated hereby, as provided under California Law and the Articles of
Incorporation and Bylaws of the Company and (iv) the notification requirements
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"Hart-Scott-Rodino Act"), (c) result in a material default (with or without the
giving of notice or lapse of time, or both) under, or acceleration or
termination of, or the creation in any party of the right to accelerate,
terminate, modify or cancel, any material agreement, lease, note or other
restriction, encumbrance, obligation or liability to which the Company is a
party or by which it is bound or to which any assets of the Company are subject,
(d) result in the creation of any Encumbrance (as defined in Section 2.9(d))
upon any material assets of the Company or, to the knowledge of the Company and
the Shareholder, upon any outstanding shares or other securities of the Company,
(e) conflict with or result in a breach of or constitute a default under any
provision of the Articles of Incorporation or Bylaws of the Company, or (f)
invalidate or adversely affect any permit, license or authorization currently
material to the conduct of the business of the Company.
2.6 FINANCIAL STATEMENTS
The Company has delivered to Amazon.com (a) audited balance sheets,
statements of income and expense, statements of cash and statements of
shareholders' equity of the Company as of or for the fiscal years ended December
31, 1996 and 1997, (b) an unaudited balance sheet, statement of income and
expense, statement of cash and statement of shareholder's equity of the Company
as of and for the fiscal year ended 1998 and (c) an unaudited balance sheet,
statement of income and expense, statements of cash flow and statements of
shareholders' equity of the Company as of
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and for the three-month period ended March 31, 1999. All the foregoing
financial statements are herein referred to as the "Financial Statements." The
unaudited balance sheet of the Company as of December 31, 1998 is herein
referred to as the "Company Balance Sheet." The Financial Statements have been
prepared in conformity with generally accepted accounting principles in the
United States ("GAAP") on a basis consistent with prior accounting periods,
except as set forth therein, and fairly present in all material respects the
financial position, results of operations and changes in financial position of
the Company as of the dates and for the periods indicated, subject in the case
of interim Financial Statements to normal recurring year-end audit adjustments.
The Company has no liabilities or obligations of any nature (absolute,
contingent or otherwise) that are not fully reflected or reserved against in the
Company Balance Sheet and that would be required under GAAP to be reflected or
reserved, except liabilities or obligations incurred since the date of the
Company Balance Sheet in the ordinary course of business and consistent with
past practice that are not in excess of $40,000 in the aggregate or $30,000
individually. The Company maintains standard systems of accounting that are
adequate for its business. The Company is not a guarantor, indemnitor, surety or
other obligor of any indebtedness of any other Person. The Company's practices
with respect to capitalizing software development costs, as reflected in the
Financial Statements, are reasonable, in accordance with industry standards and
consistent with the advice of the Company's independent accountants.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except for transactions specifically contemplated in this Agreement,
since the date of the Company Balance Sheet through the date of this Agreement,
neither the Company nor any of its officers or directors in their representative
capacities on behalf of the Company have:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment other than in the ordinary course of
business;
(b) forgiven or canceled any indebtedness for money borrowed or
waived any claims or rights of material value (including, without limitation,
any indebtedness owing by any shareholder, officer, director, employee or
affiliate of the Company);
(c) granted, other than in the ordinary course of business and
consistent with past practice, any increase in the compensation of directors,
officers, employees or consultants (including any such increase pursuant to any
employment agreement or bonus, pension, profit-sharing, lease payment or other
plan or
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commitment) or any increase in the compensation payable or to become payable to
any director, officer, employee or consultant;
(d) suffered any change having a Company Material Adverse Effect;
(e) borrowed or agreed to borrow any funds, incurred or become
subject to, whether directly or by way of assumption or guarantee or otherwise,
any obligations or liabilities (absolute, accrued, contingent or otherwise)
individually in excess of $30,000 or in excess of $40,000 in the aggregate,
except liabilities and obligations (i) that are incurred in the ordinary course
of business and consistent with past practice or (ii) that would not be required
to be reflected or reserved against in a balance sheet prepared in accordance
with GAAP, or increased, or experienced any change in any assumptions underlying
or methods of calculating, any bad debt, contingency or other reserves;
(f) paid, discharged or satisfied any material claims, liabilities
or obligations (absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of claims, liabilities and obligations reflected
or reserved against in the Company Balance Sheet or incurred in the ordinary
course of business and consistent with past practice since the date of the
Company Balance Sheet, or prepaid any material obligation having a fixed
maturity of more than 90 days from the date such obligation was issued or
incurred;
(g) knowingly permitted or allowed any of its property or assets
(real, personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or charge,
except in the ordinary course of business and consistent with past practice;
(h) purchased or sold, transferred (except by way of license) or
otherwise disposed of any of its material properties or assets (real, personal
or mixed, tangible or intangible) except in the ordinary course of business and
consistent with past practice;
(i) disposed of or permitted to lapse any rights to the use of any
material trademark, trade name, patent or copyright, or disposed of or disclosed
to any Person without obtaining an appropriate confidentiality agreement from
any such Person any material trade secret, formula, process or know-how not
theretofore a matter of public knowledge;
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(j) made any single capital expenditure or commitment in excess of
$10,000 for additions to property, plant, equipment or intangible capital assets
or made aggregate capital expenditures in excess of $30,000 for additions to
property, plant, equipment or intangible capital assets;
(k) made any change in accounting methods or practices or internal
control procedure other than as required as a result of changes in law or GAAP;
(l) issued any capital stock or other securities, or declared, paid
or set aside for payment any dividend or other distribution in respect of its
capital stock, or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities of the Company, or
otherwise permitted the withdrawal by any of the holders of Company Capital
Stock of any cash or other assets (real, personal or mixed, tangible or
intangible), in compensation, indebtedness or otherwise, other than (i) payments
of compensation in the ordinary course of business and consistent with past
practice, (ii) pursuant to the exercise of Company Options, or (iii) repurchases
of Company Common Stock at cost from holders thereof pursuant to the Company's
repurchase rights;
(m) paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible) to any of the Company's shareholders, officers, directors or
employees or any affiliate of any of the Company's shareholders, officers,
directors or employees, except compensation paid to officers and employees at
rates not exceeding the rates of compensation paid during the fiscal year last
ended and except for advances for travel and other business-related expenses; or
(n) agreed, whether in writing or otherwise, to take any action
described in this Section 2.7.
2.8 TAXES
(a) (i) All Tax Returns (as defined below) required to be filed by
or on behalf of the Company have been filed on a timely basis with the
appropriate governmental authority in all jurisdictions in which such Tax
Returns are required to be filed, and all such Tax Returns were (at the time
they were filed) true, correct and complete in all material respects; (ii) all
Taxes (as defined below) of the Company shown on such Tax Returns have been
fully and timely paid; (iii) no waivers of statutes of limitation have been
given or requested with respect to the Company in connection with any Tax
Returns covering the Company with respect to any Taxes payable by it; (iv) to
the knowledge of the Company and the Shareholder no taxing authority in a
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jurisdiction where the Company does not file Tax Returns has made a claim,
assertion, or threat to the Company that the Company is or may be subject to
taxation by such jurisdiction; (v) the Company has duly and timely withheld from
employee salaries, wages and other compensation and paid over to the appropriate
governmental authority all amounts required to be so withheld and paid over for
all periods under all applicable laws; and no amounts have been or would be
required to be withheld with respect to the lapse of restrictions on Company
Capital Stock; (vi) there are no liens with respect to Taxes on any of the
Company's property or assets other than liens for current Taxes not yet payable;
(vii) there are no Tax rulings, requests for rulings, or closing agreements
relating to the Company which could affect the liability for Taxes or the amount
of taxable income of the Company for any period (or portion of a period) after
the date hereof; and (viii) any adjustment of Taxes of the Company made by the
IRS in any examination which is required to be reported to the appropriate
state, local or foreign taxing authorities has been reported, and any additional
Taxes due with respect thereto have been paid.
(b) Neither the Company nor any other Person on behalf of the Company
(i) has filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the Company;
(ii) has executed or entered into a closing agreement pursuant to Section 7121
of the Code or any predecessor provision thereof or any similar provision of
state, local or foreign law; or (iii) has agreed to or is required to make any
adjustments pursuant to Section 481 (a) of the Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by the Company or has notice that a governmental authority has proposed any such
adjustment or change in accounting method.
(c) There is no dispute or claim concerning any Tax liability of the
Company either (i) claimed or raised by any authority in writing or (ii) as to
which any of the directors and officers (and employees responsible for Tax
matters) of the Company have knowledge based on contact or correspondence with
any agent of such authority. Schedule 2.8 to the Disclosure Memorandum lists all
Tax Returns filed with respect to the Company for taxable periods ended on or
after December 31, 1996 that have been audited, and indicates those Tax Returns
that currently are the subject of audit. The Company has delivered to Amazon.com
or its counsel correct and complete copies of all Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by the
Company since the Company's inception.
(d) The Company has not made any payments, is not obligated to make any
payments and is not a party to any agreement that under certain circumstances
could
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obligate it to make any payments that will not be deductible under Section
280G of the Code (or any similar provision of state, local or foreign law).
(e) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(f) The Company is not a party to any Tax allocation or sharing
agreement. The Company (i) has not been a member of a Tax Group (as defined
below) filing a consolidated income Tax Return under Section 1501 of the Code
(or any similar provision of state, local or foreign law) and (ii) does not have
any liability for Taxes of any Person under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local or foreign law) as a
transferee or successor by contract or otherwise.
(g) The unpaid Taxes of the Company (i) did not, as of December 31,
1998, exceed the reserve for Tax liability set forth on the face (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) of the Company Balance Sheet and (ii) do not exceed that
reserve as adjusted for the passage of time and operations in the ordinary
course of business through the Closing Date.
(h) All Options that the Company has treated as incentive stock options
under Section 421 of the Code at the time of grant met the requirements of
Section 422 of the Code.
As used in this Agreement, the following terms shall have the following
meanings:
"Taxes" means all foreign, federal, state, county or local taxes,
charges, fees, levies, imposts, duties, and other assessments, including, but
not limited to, any income, alternative minimum or add-on tax, estimated, gross
income, gross receipts, sales, use, transfer, transactions, intangibles, ad
valorem, value-added, franchise, registration, title, license, capital, paid-up
capital, profits, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, real property, recording, personal property, federal
highway use, commercial rent, environmental (including, but not limited to,
taxes under Section 59A of the Code) or windfall profit tax, custom, duty or
other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalties or additions to tax; and "Tax"
means any of the foregoing Taxes.
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"Tax Group" means any federal, state, local or foreign consolidated,
affiliated, combined, unitary or other similar group of which the Company is now
or was formerly a member.
"Tax Returns" means any return, declaration, report, claim or refund,
information return, statement, or other similar document relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
2.9 PROPERTY
(a) The Company owns no real property other than the leasehold
interests described on Schedule 2.9(a) to the Disclosure Memorandum, which
contains a complete and accurate list of all real property owned, leased or
currently being used by the Company (the "Real Property"). The Company has
delivered to Amazon.com or its counsel true and complete copies of all written
leases, subleases, rental agreements, contracts of sale, tenancies or licenses
relating to the Real Property and written summaries of the terms of any oral
leases, subleases, rental agreements, contracts of sale, tenancies or licenses
to which the Real Property is subject.
(b) Schedule 2.9(b) to the Disclosure Memorandum contains a complete
and accurate list of each item of personal property having a value in excess of
$5,000 which is owned, leased, rented or used by the Company as of the date of
this Agreement (the "Personal Property"); provided that such list need not
describe the Technology or the IP Rights (as defined in Sections 2.14.2 and
2.14.5, respectively), listed on Schedule 2.14 to the Disclosure Memorandum. The
Company has delivered to Amazon.com or its counsel true and complete copies of
all leases, subleases, rental agreements, contracts of sale, tenancies or
licenses to which the Personal Property is subject.
(c) The Real Property and the Personal Property include all the
properties and assets (whether real, personal or mixed, tangible or intangible)
(other than, in the case of the Personal Property, property rights with an
individual value of less than $5,000) reflected in the Company Balance Sheet
(except for such properties or assets sold since the date of the Company Balance
Sheet in the ordinary course of business and consistent with past practice) and
all the properties and assets purchased by the Company since the date of the
Company Balance Sheet (other than, in the case of the Personal Property,
property rights with an individual value of less than $5,000 and the Technology
and the IP Rights). The Real Property and the Personal Property include all
material property used in the business of the Company, other than the Technology
and IP Rights. The Company's offices and other structures and its Personal
Property are of a quality consistent with industry standards, are in good
operating condition and
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repair, normal wear and tear excepted, are adequate for the uses to which they
are being put, and comply in all material respects with applicable material
safety and other laws and regulations.
(d) The Company's leasehold interest in each parcel of the Real
Property is free and clear of all liens, mortgages, pledges, deeds of trust,
security interests, charges, encumbrances and other adverse claims or interests
of any kind (each, an "Encumbrance"), except for (i) Encumbrances related to
Taxes not yet due and payable, (ii) Encumbrances for inchoate mechanics' and
materialmen's liens for construction in progress and workmen's, repairmen's,
warehousemen's and carriers' liens arising in the ordinary course, (iii)
Encumbrances for Taxes being contested in good faith, (iv) Encumbrances in favor
of Amazon.com or Purchaser arising out of, under or in connection with this
Agreement, and (v) Encumbrances and imperfections of title that do not secure
payment of indebtedness and the existence of which would not materially affect
the use of the property subject thereto, consistent with past practice
(collectively, "Permitted Encumbrances"). Each lease of any portion of the Real
Property is valid, binding and enforceable in accordance with its terms against
the Company and, to the knowledge of the Company and the Shareholder, any other
Person with an interest in such Real Property (except as to the effect, if any,
of (a) applicable bankruptcy and other similar laws affecting the rights of
creditors generally and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies), the Company has performed in
all material respects all material obligations imposed upon it thereunder, and
neither the Company nor, to the knowledge of the Company and the Shareholder,
any other party thereto is in default thereunder, nor is there any event which
with notice or lapse of time, or both, would constitute a default thereunder by
the Company or, to the knowledge of the Company and the Shareholder, by any
other party. The Company has not granted any lease, sublease, tenancy or license
of, or entered into any rental agreement or contract of sale with respect to,
any portion of the Real Property.
(e) The Personal Property is free and clear of all Encumbrances
other than Permitted Encumbrances and Encumbrances of the owner thereof, and,
other than leased Personal Property which is so noted on the list supplied
pursuant to Section 2.9(b) hereof, the Company owns such Personal Property. Each
lease, license, rental agreement, contract of sale or other agreement to which
the Personal Property is subject is valid, binding and enforceable in accordance
with its terms against the Company (except as to the effect, if any, of (a)
applicable bankruptcy and other similar laws affecting the rights of creditors
generally and (b) rules of law governing specific performance, injunctive relief
and other equitable remedies), the Company has performed in all material
respects all material obligations imposed upon it thereunder,
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and neither the Company nor, to the knowledge of the Company and the
Shareholder, any other party thereto is in default thereunder, nor is there any
event which with notice or lapse of time, or both, would constitute a default by
the Company or, to the knowledge of the Company and the Shareholder, any other
party thereunder. The Company has not granted any lease, sublease, tenancy or
license of any portion of the Personal Property, except in the ordinary course
of business.
2.10 CONTRACTS
Schedule 2.10 to the Disclosure Memorandum contains a complete and
accurate list (other than the IP Rights listed on Schedule 2.14 to the
Disclosure Memorandum) of all contracts, agreements and understandings, oral or
written, to which the Company is a party as of the date of this Agreement or by
which the Company is currently bound as of the date of this Agreement providing
for potential future payments by or to the Company in excess of $20,000 (except
for those contracts, agreements and understandings listed on Schedules 2.9(a)
and 2.9(b)), including, without limitation, security agreements, license
agreements, software development agreements, distribution agreements, joint
venture agreements, reseller agreements, credit agreements and instruments
relating to the borrowing of money. All contracts set forth on Schedule 2.10 are
valid, binding and enforceable in accordance with their terms against the
Company and, to the knowledge of the Company and the Shareholder, each other
party thereto, except as to the effect, if any, of (a) applicable bankruptcy and
other similar laws affecting the rights of creditors generally, (b) rules of law
governing specific performance, injunctive relief and other equitable remedies,
and (c) the enforceability of provisions requiring indemnification in connection
with the offering, issuance or sale of securities, and are in full force and
effect, the Company has performed in all material respects all material
obligations imposed on it thereunder, and neither the Company nor, to the
knowledge of the Company and the Shareholder, any other party thereto is in
default thereunder, nor to the knowledge of the Company and the Shareholder is
there any event which with notice or lapse of time, or both, would constitute a
default by the Company or, to the knowledge of the Company and the Shareholder,
any other party thereunder. True and complete copies of each such written
contract (or written summaries of the terms of any such oral contract) have been
delivered to Amazon.com or its counsel by the Company. Except as set forth on
Schedule 2.10, as of the date of this Agreement the Company has no currently
binding
(a) contracts with directors, officers, stockholders, employees,
agents, consultants, advisors, salespeople, sales representatives, distributors
or dealers that cannot be canceled by the Company within 30 days' notice without
liability, penalty or premium, any agreement or arrangement providing for the
payment of any bonus or
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commission based on sales or earnings, or any compensation agreement or
arrangement affecting or relating to former employees of the Company;
(b) employment agreement, or any other agreement for services that
contains severance or termination pay liabilities or obligations;
(c) noncompetition agreement or other arrangement that would prevent
the Company from carrying on its business anywhere in the world;
(d) notice that any party to a contract listed on Schedule 2.10
intends to cancel, terminate or refuse to renew such contract (if such contract
is renewable);
(e) material dispute with any of its suppliers, customers,
distributors, OEM resellers, licensors or licensees;
(f) product distribution agreement, development agreement, or
license agreement as licensor or licensee (except for standard nonexclusive
software licenses granted to end-user customers in the ordinary course of
business the form of which has been provided to Amazon.com or its counsel or
standard licenses purchased by the Company for off-the-shelf software);
(g) joint venture contract or arrangement or any other agreement
that involves a sharing of profits with other Persons;
(h) instrument evidencing indebtedness of the Company for borrowed
money by way of a direct loan, sale of debt securities, purchase money
obligation, conditional sale or guarantee, or otherwise, except for trade
indebtedness incurred in the ordinary course of business, and except as
disclosed in the Financial Statements; and
(i) agreements or commitments of the Company to provide
indemnification.
2.11 CLAIMS AND LEGAL PROCEEDINGS
Except as set forth on Schedule 2.11 or 2.14 to the Disclosure
Memorandum, as of the date hereof there are no claims, actions, suits,
arbitrations, investigations or proceedings pending or, to the Company's and the
Shareholder's knowledge, threatened against the Company before or by any court
or governmental or nongovernmental department, commission, board, bureau, agency
or instrumentality, or any other Person. Except as set forth on Schedule 2.11 or
2.14, to the knowledge of the Company and the Shareholder, there are no events
or circumstances now in existence
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that could reasonably be expected to give rise to any claim, action, suit,
arbitration, proceeding or investigation before or by any Person. There are no
outstanding or unsatisfied judgments, orders, decrees or stipulations to which
the Company is a party. Schedule 2.11 sets forth a description of any material
disputes that have been settled or resolved by litigation or arbitration since
the Company's inception.
2.12 LABOR AND EMPLOYMENT MATTERS
There are no material labor disputes, employee grievances or
disciplinary actions pending or, to the Company's and the Shareholder's
knowledge, threatened against the Company or any of its present or former
employees in their capacity as such. There is no labor strike, dispute, slowdown
or stoppage pending or, to the knowledge of the Company and the Shareholder,
threatened against or affecting the Company, and the Company has not experienced
any work stoppage or other labor difficulty since its incorporation. No
collective bargaining agreement is binding on the Company. The Company and the
Shareholder has no knowledge of any organizational efforts presently being made
or threatened by or on behalf of any labor union with respect to employees of
the Company. Each employee, officer and consultant of the Company has executed a
nondisclosure agreement substantially in the form provided to Amazon.com or its
counsel. To the knowledge of the Company and the Shareholder, no employee (or
person performing similar functions) of the Company is in violation of any such
agreement or any employment agreement, noncompetition agreement, patent
disclosure agreement, invention assignment agreement, proprietary information
agreement or other contract or agreement relating to the relationship of such
employee with the Company or any other party. Schedule 2.12 to the Disclosure
Memorandum sets forth as of the date hereof a true and complete list of (a) the
names and current compensation amounts of all directors and officers of the
Company; (b) the wage rates for nondirector and nonofficer salaried employees of
the Company by classification, and all labor union contracts (if any); (c) all
group insurance programs in effect for employees of the Company; and (d) the
names and current compensation packages of all independent contractors and
consultants of the Company. The Company is not in default with respect to any of
its obligations referred to in clause (b) above and has no material obligation
or liability for severance or back pay owed through or by virtue of the Merger.
Except as disclosed on Schedule 2.12, all employees of the Company are employed
on an "at will" basis.
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2.13 EMPLOYEE BENEFIT PLANS
2.13.1 EMPLOYEE BENEFIT PLAN LISTING
Schedule 2.13.1 to the Disclosure Memorandum sets forth a true, accurate
and complete list and description of all retirement, pension, profit sharing,
deferred compensation, savings, bonus, incentive, cafeteria, flexible benefits,
medical, dental, vision, hospitalization, life insurance, group insurance,
medical expense reimbursement, dependent care assistance, tuition reimbursement,
disability, accident, sick pay, holiday, vacation, severance, stock purchase,
stock option, stock appreciation rights, fringe benefit and other employee
benefit plans, funds, policies, programs, contracts, arrangements and payroll
practices (including, but not limited to, all "employee benefit plans," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and all employment, consulting and personal service
contracts and agreements, whether formal or informal, whether written or
unwritten, and whether legally binding or not, (a) sponsored, maintained or
contributed to by the Company, (b) covering or benefiting any current or former
officer, employee, agent, director or independent contractor of the Company (or
any dependent or beneficiary of any such individual) with respect to, or as a
result of, such, individual's relationship with the Company, or (c) with respect
to which the Company has (or could have) any obligation or liability (such
plans, funds, policies, programs, contracts, arrangements and payroll practices
are hereinafter referred to collectively as "Employee Benefit Plans" and each
individually as an "Employee Benefit Plan"). The Company does not have any
agreement, arrangement, commitment or obligation, whether formal or informal,
whether written or unwritten and whether legally binding or not, to create (or
contribute to) any employee benefit plan, fund, policy, program, contract,
arrangement or payroll practice that is not identified in Schedule 2.13.1 as an
Employee Benefit Plan or to modify or amend any existing Employee Benefit Plan
(except as may be required by applicable law and has been disclosed in Schedule
2.13.1). There has been no amendment, written interpretation or announcement
(whether or not written) by the Company relating to, or change in participation
or coverage under, any Employee Benefit Plan that, either alone or together with
other such items or events, could materially increase the expense of maintaining
the Employee Benefit Plans above the level of expense incurred with respect
thereto for the most recent fiscal year included in the Financial Statements.
2.13.2 DOCUMENTS PROVIDED
The Company has delivered to Amazon.com or its counsel true, correct and
complete copies (or, in the case of unwritten Employee Benefit Plans,
descriptions) of all Employee Benefit Plans (and all amendments thereto), along
with, to the extent
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applicable to the particular Employee Benefit Plan, the
following information: (a) copies of the last three annual reports (Form 5500
series) filed with respect to such Employee Benefit Plan; (b) copies of the
summary plan descriptions, and summaries of material modifications filed or
distributed with respect to such Employee Benefit Plan during the last three
years; (c) copies of all contracts (and any amendments thereto) relating to such
Employee Benefit Plan, including, but not limited to, service provider
agreements, administrative service agreements, insurance contracts, annuity
contracts, investment management agreements and record-keeping agreements; and
(d) the most recent determination letter issued by the IRS with respect to such
Employee Benefit Plan.
2.13.3 COMPLIANCE
With respect to each Employee Benefit Plan, (a) such Employee Benefit
Plan is, and at all times since its inception has been, maintained, administered
and operated in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
and all requirements prescribed thereby, including, but not limited to, ERISA
and the Code; (b) all amendments and actions required to bring such Employee
Benefit Plan into conformity with the applicable provisions of ERISA, the Code
and other applicable laws and regulations have been made or taken within the
time prescribed by law, except to the extent that such amendments or actions are
not required by law to be made or taken until after the Closing Date; (c) all
returns, reports and other disclosures relating to such Employee Benefit Plan
required to be filed with any governmental entity or agency or furnished to any
participant or beneficiary have been properly completed or prepared and timely
filed or furnished in accordance with applicable law; (d) neither the Company,
nor to the knowledge of the Company or the Shareholder, any other fiduciary of
such Employee Benefit Plan has engaged in any transaction or acted or failed to
act in a manner that violates the fiduciary requirements of ERISA or any other
applicable law; and (e) none of the Company, any employee of the Company or, to
the knowledge of the Company or the Shareholder, any other Person has engaged in
or is about to engage in a nonexempt prohibited transaction under Section 406 or
407 of ERISA or under Section 4975 of the Code. Each Employee Benefit Plan that
constitutes a "group health plan," as defined in Section 607(1) or 733(a)(1) of
ERISA or Section 4980B(g)(2) of the Code, has been maintained, administered and
operated at all times since its inception in compliance in all material respects
with (and the Company has never violated any of) the requirements of Parts 6 and
7 of Subtitle B of Title I of ERISA, Section 4980B(f) of the Code, any
regulations under such ERISA and Code sections and any other applicable federal,
state, local or foreign law regarding the provision or continuation of health
insurance coverage or other welfare
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benefits (within the meaning of Section 3(1) of ERISA). Each Employee Benefit
Plan that is intended to be qualified under Section 401(a) of the Code is the
subject of an unrevoked favorable determination letter from the IRS with respect
to such qualification; its related trust or annuity contract has been determined
to be exempt from taxation under Section 501(a) of the Code; and nothing has
occurred since the date of such letter, and no circumstances exist or are
reasonably expected by the Company or the Shareholder to occur, that could
adversely affect such qualification or exemption. No event or omission has
occurred, or is reasonably expected by the Company to occur (including, but not
limited to, any of the transactions contemplated in or by this Agreement), with
respect to any Employee Benefit Plan that has or could subject, directly or
indirectly, the Company or, to the knowledge of the Company or the Shareholder,
any other Person to a tax under Chapter 43 of Subtitle D of the Code or a
penalty under Part 5 of Subtitle B of Title I of ERISA.
2.13.4 CONTRIBUTIONS AND PREMIUM PAYMENTS
All contributions, premiums and other payments due or required to be
made to each Employee Benefit Plan under the terms of such Employee Benefit
Plan, ERISA, the Code or other applicable law have been timely paid, or, if not
yet due, have been properly recorded on the books of the Company.
2.13.5 RELATED EMPLOYERS
The Company is not, and has never been, a member of (a) a controlled
group of corporations, within the meaning of Section 414(b) of the Code, (b) a
group of trades or businesses under common control, within the meaning of
Section 414(c) of the Code, (c) an affiliated service group, within the meaning
of Section 414(m) of the Code, or (d) any other group of Persons treated as a
single employer under Section 414(o) of the Code.
2.13.6 MULTIEMPLOYER AND TITLE IV PLANS
The Company does not maintain or contribute to, and has never maintained
or contributed to (or been obligated to contribute to), any multiemployer plan
as defined in Section-3(37) or Section 4001(a)(3) of ERISA or 414(f) of the
Code, any multiple employer plan within the meaning of Section 4063 or 4064 of
ERISA or Section 413(c) of the Code, or any employee benefit plan, fund,
program, contract or arrangement that is subject to Section 412 of the Code,
Section 302 of ERISA or Title IV of ERISA.
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2.13.7 POST-TERMINATION WELFARE BENEFITS
Neither the Company nor any Employee Benefit Plan provides or has any
obligation to provide (or contribute toward the cost of) health, severance or
any other welfare benefits (within the meaning of Section 3(1) of ERISA) with
respect to any current or former officer, employee, agent, director or
independent contractor of the Company or any other entity beyond such
individual's retirement or other termination of service, other than continuation
coverage mandated by Sections 601 through 608 of ERISA or Section 4980B(f) of
the Code.
2.13.8 SUITS, CLAIMS AND INVESTIGATIONS
There are no actions, suits or claims (other than routine claims for
benefits) pending or, to the knowledge of the Company or the Shareholder,
threatened with respect to (or against the assets of) any Employee Benefit Plan,
nor, to the knowledge of the Company or the Shareholder, is there a basis for
any such action, suit or claim. No Employee Benefit Plan is currently under
investigation, audit or review, directly or indirectly, by the IRS, the
Department of Labor (the "DOL") or any other governmental entity or agency, and,
to the knowledge of the Company and the Shareholder, no such action is
contemplated or under consideration by the IRS, the DOL or any other
governmental entity or agency.
2.13.9 PAYMENTS RESULTING FROM TRANSACTIONS
Neither the execution and delivery of this Agreement or any of the other
Operative Documents nor the consummation of the transactions contemplated in (or
by) this Agreement or any of the other Operative Documents will (a) entitle any
current or former officer, employee, agent, director or independent contractor
of the Company to severance pay, unemployment compensation or any other payment
from the Company or any other Person, or otherwise increase the amount of
compensation due to any such individual, or (b) result in any benefit or right
becoming established or increased, or accelerate the time of payment or vesting
of any benefit, under any Employee Benefit Plan, whether or not some other
subsequent action or event would be required to trigger any of the items
specified in (a) or (b) above.
2.14 INTELLECTUAL PROPERTY
2.14.1 GENERAL
The Company owns or is licensed and has all rights in and to the
following as required to conduct its business as now conducted and as proposed
to be conducted: (a) all products, tools, computer programs, specifications,
source code, object code,
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graphics, devices, techniques, algorithms, methods, processes, procedures,
packaging, trade dress, formulae, drawings, designs, improvements, discoveries,
concepts, user interfaces, the "look and feel" of any software or web sites,
software, software development and other tools, content, data inventions
(whether or not patentable or copyrightable and whether or not reduced to
practice), designs, logos, themes, know-how, concepts and other technology that
are now or are currently proposed to be developed, produced, used, marketed or
sold by the Company (collectively, the "Technology-Related Assets"); and (b) all
intellectual property and other proprietary rights in the Technology-Related
Assets, including, without limitation, all: (i) domain names; (ii) trade names,
trademarks, service marks, logos, brand names and other identifiers, with
respect only to the goods and services on which they are currently used by the
Company; (iii) trade secrets,(iv) copyrights and (v) domestic and foreign
letters patent, and the registrations, applications, renewals, extensions and
continuations (in whole or in part) thereof, together with all goodwill
associated with the Company Marks (as defined in Section 2.14.4), and all rights
and causes of action for infringement, misappropriation, misuse, dilution or
unfair trade practices associated with the Company IP Rights (as defined in
Section 2.14.5).
2.14.2 COMPANY TECHNOLOGY
Schedule 2.14.2 to the Disclosure Memorandum sets forth a list of all
products and tools developed, produced, used, marketed or sold by the Company
during the two years prior to the date of this Agreement (collectively, the
"Products"). Except for the Third Party Technologies (as defined in Section
2.14.3), the Company owns all right, title and interest in and to the following
(collectively, the "Technology"), free and clear of all Encumbrances (except for
Permitted Encumbrances and licenses granted by the Company which are disclosed
in the Disclosure Memorandum or, under the terms of this Agreement, are not
required to be so disclosed): (a) the Products, together with any and all codes,
techniques, software tools, formats, designs, user interfaces, content, data and
"look and feel" related thereto; (b) any and all updates, enhancements,
corrections, modifications, improvements and new releases related to the items
set forth in clause (a) above; (c) any and all technology and work in progress
related to the items set forth in clauses (a) and (b) above; and (d) all
inventions, discoveries, processes, designs, trade secrets, know-how and other
confidential or proprietary information related to the items set forth in
clauses (a), (b) and (c) above. The Technology, excluding the Third Party
Technologies, is sometimes referred to herein as the "Company Technology."
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2.14.3 THIRD PARTY TECHNOLOGY
Schedule 2.14.3 to the Disclosure Memorandum sets forth a list of all
Technology used in the Company's business for which the Company does not own all
right, title and interest (collectively, the "Third Party Technologies"), and
all license agreements or other contracts pursuant to which the Company has the
right to use (in the manner used by the Company, or intended or necessary for
use with the Company Technology) the Third Party Technologies (the "Third Party
Licenses"), indicating, with respect to each of the Third Party Technologies
listed therein, and the Third Party License applicable thereto. The Company has
the lawful right to use (to the full extent permitted under the terms of the
applicable Third Party License) (a) all Third Party Technology that is
incorporated in or used in the development or production of the Company
Technology as currently being developed, licensed, marketed or used by the
Company, and (b) all other Third Party Technology necessary for the conduct of
the Company's business as now conducted and as proposed to be conducted. All
Third Party Licenses are valid, binding and in full force and effect, the
Company and, to the knowledge of the Company and the Shareholder, each other
party thereto have performed in all material respects their obligations
thereunder, and neither the Company nor, to the knowledge of the Company and the
Shareholder, any other party thereto is in default thereunder, nor to the
knowledge of the Company and the Shareholder has there occurred any event or
circumstance which with notice or lapse of time or both would constitute a
default or event of default on the part of the Company or, to the knowledge of
the Company and the Shareholder, any other party thereto or, to the knowledge of
the Company and the Shareholder, give to any other party thereto the right to
terminate or modify any Third Party License. The Company has not received
written notice or, to the best of the knowledge of the Company and the
Shareholder, oral or other notice that any party to any Third Party License
intends to cancel, terminate or refuse to renew (if renewable) such Third Party
License or to exercise or decline to exercise any option or right thereunder.
2.14.4 TRADEMARKS
Schedule 2.14.4 to the Disclosure Memorandum sets forth as of the date
hereof a list of (a) all trademarks, trade names, brand names, service marks,
logos or other identifiers for the Products owned or claimed to be owned by the
Company in its business together with a description of the goods and/or services
on or with respect to which such identifiers are used (the "Company Marks") and,
if applicable, the application or registration numbers for such Company Marks,
and (b) all trademarks, trade names, brand names, service marks, logos or other
identifiers for the Products which are used but not owned by the Company in its
business (the "Licensed Marks"). The Company has full legal and beneficial
ownership, free and clear of any
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Encumbrances (except for Permitted Encumbrances and licenses granted by the
Company which are disclosed in the Disclosure Memorandum or, under the terms of
this Agreement, are not required to be so disclosed), of all rights conferred by
use of the Company Marks on or with respect to the goods and/or services
identified in Schedule 2.14.4 and, as to those Company Marks that have been
registered in the United States Patent and Trademark Office, by federal
registration of the Company Marks on the goods and/or services set forth in such
federal registrations. The Company is licensed or otherwise has sufficient
rights in and to the Licensed Marks as required to conduct its business as now
conducted and as proposed to be conducted.
2.14.5 INTELLECTUAL PROPERTY RIGHTS
Schedule 2.14.5 to the Disclosure Memorandum sets forth as of the date
hereof all patents, patent applications, copyright registrations (and
applications therefor) and trademark registrations (and applications therefor)
filed or obtained by the Company and claiming or covering the Company Technology
(or any portion thereof) and the Company Marks (collectively, the "IP
Registrations"). The Company owns all right, title and interest, free and clear
of any Encumbrances (except for Permitted Encumbrances and licenses granted by
the Company which are disclosed in the Disclosure Memorandum or, under the terms
of this Agreement, are not required to be so disclosed), in and to the IP
Registrations, together with any other rights in or to any copyrights
(registered or unregistered), rights in the Company Marks (registered or
unregistered), trade secret rights and other intellectual property rights
(including, without limitation, rights of enforcement) contained or embodied in
the Company Technology and the Company Marks (collectively, the "Company IP
Rights").
2.14.6 MAINTENANCE OF RIGHTS
Except as set forth on Schedule 2.14.6 to the Disclosure Memorandum, the
Company has not conducted its business, and has not used or enforced (or, to the
knowledge of the Company or the Shareholder, failed to use or enforce) the
Company IP Rights as currently being used by the Company, in a manner that would
result in the abandonment, cancellation or unenforceability of any item of the
Company IP Rights, and the Company has not taken (or, to the knowledge of the
Company or the Shareholder, failed to take) any action that would result in the
forfeiture or relinquishment of any Company IP Rights, in each case where such
abandonment, cancellation, unenforceability, forfeiture or relinquishment would
have a Company Material Adverse Effect. Except as set forth in Schedule 2.14.6,
the Company has not granted to any third party any rights or permissions to use
any of the Technology or the IP Rights. To the best of the Company's and the
Shareholder's knowledge, except pursuant to reasonably prudent safeguards,
(a) no third party has been given by the
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Company any confidential information relating to the Technology or the Company
IP Rights, and (b) the Company is not under any contractual or other obligation
to disclose to any third party any confidential information relating to the
Company Technology.
2.14.7 THIRD PARTY CLAIMS
Except as set forth on Schedule 2.14.7 to the Disclosure Memorandum, (a)
the Company has not received any notice or claim (whether written, oral or
otherwise) challenging the Company's ownership or rights in the Company
Technology or the Company IP Rights or claiming that any other person or entity
has any legal or beneficial ownership with respect thereto; (b) the Company has
not received any notice or claim (whether written, oral or otherwise)
challenging the validity or enforceability of any of the Company IP Rights; and
(c) to the knowledge of the Company and the Shareholder, no other person or
entity is infringing or misappropriating any part of the Company IP Rights or
otherwise making any unauthorized use of the Company Technology.
2.14.8 INFRINGEMENT BY THE COMPANY
Except as set forth on Schedule 2.14.8 to the Disclosure Memorandum, the
use of any of the Company Technology, Company Marks or Company IP Rights in the
Company's business as currently used or proposed to be used does not infringe,
violate or constitute an appropriation of any right, title or interest
(including, without limitation, any patent, copyright or trade secret right)
held by any other person or entity, and there have been no claims made with
respect thereto.
2.14.9 CONFIDENTIALITY
Except as set forth on Schedule 2.14.9 to the Disclosure Memorandum, (a)
the Company has not disclosed any source code regarding the Technology to any
person or entity other than an employee of the Company and under a written
nondisclosure agreement; (b) the Company has at all times maintained and
diligently enforced commercially reasonable procedures to protect all
confidential information relating to the Technology; (c) neither the Company
nor, to the knowledge of the Company and the Shareholder, any escrow agent is
under any contractual or other obligation to disclose the source code or any
other proprietary information included in or relating to the Technology; and (d)
the Company has not deposited any source code relating to the Technology into
any source code escrows or similar arrangements. If, as disclosed on Schedule
2.14.9, the Company has deposited any source code to the Technology into source
code escrows or similar arrangements, the Company has not taken any action
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and has not failed to take any action which action or omission has or could
reasonably form the basis for a release of such source code from such escrows or
arrangements.
2.14.10 WARRANTY AGAINST DEFECTS
Except as set forth in Schedule 2.14.10 to the Disclosure Memorandum,
the Technology is free from known material defects and substantially conforms to
the applicable specifications and documentation of such Technology.
2.14.11 DOMAIN NAMES
Schedule 2.14.11 sets forth a list of all Internet domain names used by
the Company in its business (collectively, the "Domain Names"). The Company has,
and after the Closing the Surviving Corporation will have, a valid registration
and all material rights (free of any material restriction) in and to the Domain
Names, including, without limitation, all rights necessary to continue to
conduct the Company's business as it is currently conducted, subject only to a
successful challenge to the Company's registration of a Domain Name by the third
party owner of the registered United States trademark that corresponds to the
Domain Name.
2.14.12 YEAR 2000
Each hardware, software and firmware product developed by or for the
Company in its business (collectively, the "Software") will accurately process
date data (including, but not limited to, calculating, comparing and sequencing)
from, into and between the twentieth and twenty-first centuries, including,
without limitation, leap year calculations, without a decrease in the
functionality of the Software. The Software is designed to be used prior to,
during and after the calendar year 2000 A.D. and will operate during each such
time period without breach of this Section 2.14.12. Without limiting the
generality of the foregoing, the Software (a) will not abnormally end or provide
invalid or incorrect results as a result of correctly entered date data,
specifically including date data which represents or references different
centuries or more than one century; (b) has been designed to ensure date data
century recognition, calculations which accommodate same century and
multi-century formulas and date values, and date data interface values that
reflect the century; and (c) provides that all date-related user interface
functionalities and data fields include the indication of century.
2.14.13 INDEMNIFICATION
Except as set forth in Schedule 2.14.13, the Company has not entered
into any agreement or offered to indemnify any Person against any charge of
infringement by
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the Technology or Company IP Rights, or any other intellectual property or
right. The Company has not entered into any agreement granting any Person the
right to bring any infringement action with respect to, or otherwise to enforce,
any of the Technology or Company IP Rights.
2.14.14 RESTRICTIONS ON INTELLECTUAL PROPERTY
To the knowledge of the Company and the Shareholder, none of the
Company's officers, employees, consultants, distributors, agents or
representatives have on their own behalf entered into any agreement regarding
know-how, trade secrets, assignment of rights in inventions, or prohibition or
restriction of competition or solicitation of customers, or any other similar
restrictive agreement or covenant, whether written or oral, with any Person
other than the Company during the period in which such officer, employee,
consultant, agent or representative was employed with or engaged by the Company.
2.15 CORPORATE BOOKS AND RECORDS
The Company has furnished to Amazon.com or its representatives for their
examination true and complete copies of (a) the Articles of Incorporation and
Bylaws of the Company as currently in effect, including all amendments thereto,
(b) the minute books of the Company through the date hereof, and (c) the stock
transfer books of the Company through the date hereof. Such minutes reflect all
meetings of the Company's shareholders, Board of Directors and any committees
thereof since the Company's inception, and such minutes accurately reflect in
all material respects the events of and actions taken at such meetings. Such
stock transfer books accurately reflect all issuances and transfers of shares of
capital stock of the Company since its inception.
2.16 LICENSES, PERMITS, AUTHORIZATIONS, ETC.
Except as identified on Schedule 2.1 or 2.5 to the Disclosure
Memorandum, the Company has received all currently required governmental
approvals, authorizations, consents, licenses, orders, registrations and permits
of all agencies relating to the operation of its business, whether federal,
state, local or foreign, the failure to obtain of which would have a Company
Material Adverse Effect. The Company has not received any notifications of any
asserted present failure by it to have obtained any such governmental approval,
authorization, consent, license, order, registration or permit, or past and
unremedied failure to obtain such items.
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2.17 COMPLIANCE WITH LAWS
Except as described on Schedule 2.17 to the Disclosure Memorandum, the
Company is in compliance with all federal, state, local and foreign laws, rules,
regulations, ordinances, decrees and orders applicable to it, to its employees
or to the Real Property and the Personal Property, including, without
limitation, all such laws, rules, regulations, ordinances, decrees and orders
relating to intellectual property protection, antitrust matters, consumer
protection, environmental protection, equal employment opportunity, health and
occupational safety, pension and employee benefit matters, securities and
investor protection matters, labor and employment matters and practices, except
where the failure of the Company to so comply would not have a Company Material
Adverse Effect. The Company has not received any notification of any asserted
present or past unremedied failure by the Company to comply with any of such
laws, rules, ordinances, decrees or orders.
2.18 INSURANCE
The Disclosure Memorandum sets forth a true and correct list of all
insurance policies maintained by the Company. The Company maintains commercially
reasonable levels of (a) insurance on its property (including leased premises)
that insures against loss or damage by fire or other casualty and (b) insurance
against liabilities, claims and risks of a nature and in such amounts as are
normal and customary in the Company's industry for companies of similar size and
financial condition. As of the date hereof, all insurance policies of the
Company are in full force and effect, all premiums with respect thereto covering
all periods up to and including the date this representation is made have been
paid, and no notice of cancellation or termination has been received with
respect to any such policy or binder. Such policies or binders are sufficient
for compliance with all requirements of law currently applicable to the Company
and of all agreements to which the Company is a party, will remain in full force
and effect through the respective expiration dates of such policies or binders
without the payment of additional premiums, and will not in any way be affected
by, or terminate or lapse by reason of, the transactions contemplated by this
Agreement. The Company has not been refused any insurance with respect to its
assets or operations, nor has its coverage been limited, by any insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance.
2.19 BROKERS OR FINDERS
The Company has not incurred, and will not incur, directly or
indirectly, as a result of any action taken by or on behalf of the Company, any
liability for brokerage
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or finders' fees or agents' commissions or any similar charges in connection
with the Merger, this Agreement or any transaction contemplated hereby.
2.20 ABSENCE OF QUESTIONABLE PAYMENTS
Neither the Company nor any director, officer, agent, employee or other
Person acting on behalf of the Company has used any Company funds for improper
or unlawful contributions, payments, gifts or entertainment, or made any
improper or unlawful expenditures relating to political activity to domestic or
foreign government officials or others. The Company has reasonable financial
controls to prevent such improper or unlawful contributions, payments, gifts,
entertainment or expenditures. Neither the Company nor any current director,
officer, agent, employee or other Person acting on behalf of the Company, in
their capacity as such, has accepted or received any improper or unlawful
contributions, payments, gifts or expenditures. The Company has at all times
complied, and is in compliance, in all respects with the Foreign Corrupt
Practices Act and all foreign laws and regulations relating to prevention of
corrupt practices and similar matters.
2.21 BANK ACCOUNTS
Schedule 2.21 to the Disclosure Memorandum sets forth as of the date
hereof the names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which the Company maintains
safe deposit boxes or accounts of any nature and the names of all Persons
authorized to draw thereon, make withdrawals therefrom or have access thereto.
2.22 INSIDER INTERESTS
Except as set forth on Schedule 2.22 to the Disclosure Memorandum, no
shareholder or officer or director of the Company has any interest (other than
as a shareholder of the Company) (a) in any Real Property, Personal Property,
Technology or IP Rights used in or directly pertaining to the business of the
Company, including, without limitation, inventions, patents, trademarks or trade
names, or (b) in any agreement, contract, arrangement or obligation relating to
the Company, its present or prospective business or its operations. Except as
set forth on Schedule 2.22, there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors,
shareholders, affiliates or any affiliate thereof. As of the date hereof, the
Company and its officers and directors have no interest, either directly or
indirectly, in any entity, including, without limitation, any corporation,
partnership, joint venture, proprietorship, firm, licensee, business or
association (whether as an employee, officer, director, shareholder, agent,
independent contractor, security holder,
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creditor, consultant or otherwise) that presently (i) provides any services,
produces and/or sells any products or product lines, or engages in any activity
that is the same, similar to or competitive with any activity or business in
which the Company is now engaged or proposes to engage; (ii) is a supplier,
customer or creditor; or (iii) has any direct or indirect interest in any asset
or property, real or personal, tangible or intangible, of the Company or any
property, real or personal, tangible or intangible, that is necessary or
desirable for the present or currently anticipated future conduct of the
Company's business.
2.23 COMPLIANCE WITH ENVIRONMENTAL LAWS
Neither the Company nor, to the knowledge of the Company and the
Shareholder, any other Person (including, without limitation, any previous
owner, lessee or sublessee) has treated, stored or disposed of any material
amounts of petroleum products, hazardous waste, hazardous substances, pollutants
or contaminants on the Real Property, or any real property previously owned,
leased, subleased or used by the Company in the operation of its business, in
violation of any applicable material, federal, state or local statutes,
regulations or ordinances, or common law, in each case as in existence at or
prior to the Closing. To the knowledge of the Company and the Shareholder, there
have been no releases of any material amounts of petroleum, petroleum products,
hazardous waste, hazardous substances, pollutants or contaminants on, at or from
any assets or properties, including, without limitation, the Real Property,
owned, leased, subleased or used by the Company in the operation of its business
during the time such assets or properties were owned, leased, subleased or used
by the Company (or, to the knowledge of the Company and the Shareholder, prior
to such time), including, without limitation, any releases of any material
amounts of petroleum, petroleum products, hazardous waste, hazardous substances,
pollutants or contaminants in violation of any law.
2.24 INFORMATION SUPPLIED BY THE COMPANY
None of the information supplied or to be supplied by the Company for
inclusion in the proxy statement to be delivered to its shareholders in
connection with any written consent by or meeting of such shareholders
(collectively, "Shareholder Materials"), at the date on which such information
was supplied prior to the time the Company's shareholders were requested to
approve the Merger, contained or will contain any untrue statement of a material
fact or omits or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not materially misleading; provided,
however, that the Company makes no representations or
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warranties regarding information furnished by or related to Amazon.com or the
Purchaser.
2.25 FULL DISCLOSURE
No information furnished by the Company to Amazon.com or its
representatives in connection with this Agreement (including, but not limited
to, the Financial Statements and all information in the Disclosure Memorandum
and the other Exhibits hereto) or the other Operative Documents contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements so made or information so delivered not
misleading in light of all the circumstances in which they were made or
delivered.
2.26 HART-SCOTT-RODINO
The Company is its own ultimate parent entity as defined under the rules
and regulations promulgated under the Hart-Scott-Rodino Act. The Company is not
a $10 million person as defined thereunder.
2.27 OPERATING DATA
On or prior to the date hereof, the Company has delivered to Amazon.com
certain of its operating data and certain performance data for its Web Site
including, without limitation, information with respect to downloads, users,
page views and click-through rates, all as set forth in Schedule 2.27 of the
Disclosure Memorandum (the "Operations and Web Site Data"). The Operations and
Web Site Data accurately and fairly present the operations of and other data
related to the Company and the performance of its Web Site, for the period
therein indicated.
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF
AMAZON.COM AND THE PURCHASER
In order to induce the Company to enter into and perform this Agreement
and the other Operative Documents, Amazon.com and the Purchaser jointly and
severally represent and warrant to the Company as follows in this Article III:
3.1 ORGANIZATION
Amazon.com is a corporation duly organized validity existing and in good
standing under the laws of the state of Delaware. The Purchaser is a corporation
validly existing and in good standing under the laws of the State of Washington.
Each of Amazon.com and the Purchaser has all requisite corporate power and
authority to
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own, operate and lease its respective properties and assets, to
carry on its respective business as now conducted, and as proposed to be
conducted and to enter into and perform its respective obligations under this
Agreement and the other applicable Operative Documents to which Amazon.com or
the Purchaser is a party, and to consummate the transactions contemplated hereby
and thereby. Each of Amazon.com and the Purchaser is duly qualified and licensed
as a foreign corporation to do business and is in good standing in each
jurisdiction in which the character of properties occupied, owned or held under
lease by Amazon.com or the Purchaser, as applicable, or the nature of the
business conducted by Amazon.com or the Purchaser, as applicable, makes such
qualification or licensing necessary, except where the failure to be so
qualified or in good standing would not have a material adverse effect on the
business, properties, or prospects of Amazon.com taken as a whole (an
"Amazon.com Material Adverse Effect"); provided, however, that Amazon.com
Material Adverse Effect shall not include any change, circumstance, event or
effect that relates to or results from the announcement or other disclosure or
consummation of the transactions contemplated by this Agreement or general
economic conditions. Each of Amazon.com and the Purchaser has full corporate
power and authority to execute, deliver and perform this Agreement and the other
Operative Documents to which it is a party, and to carry out the transactions
contemplated hereby and thereby. All the issued and outstanding shares of
capital stock of the Purchaser are held of record and beneficially by
Amazon.com. Since the date of its incorporation, the Purchaser has not engaged
in any activities other than in connection with or as contemplated by this
Agreement or the Operative Documents or the transactions contemplated hereby or
thereby.
3.2 ENFORCEABILITY
Amazon.com and the Purchaser each have full corporate power and
authority to execute, deliver and perform their obligations under this Agreement
and each of the other Operative Documents to which they are a party and each of
the certificates, instruments and documents executed or delivered by them
pursuant to the terms of this Agreement. All corporate action on the part of
Amazon.com and the Purchaser and their respective officers, directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Agreement and the other applicable Operative Documents to
which Amazon.com or the Purchaser is a party, the consummation of the Merger and
the performance of all of their respective obligations under this Agreement and
the other applicable Operative Documents to which Amazon.com or the Purchaser is
a party has been taken or will be taken prior to the Effective Time. This
Agreement has been, and each of the other Operative Documents to which
Amazon.com is a party will have been at the Closing, duly executed and
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delivered by Amazon.com, and this Agreement is, and each of the other Operative
Documents to which Amazon.com is a party will be at the Closing, a legal, valid
and binding obligation of Amazon.com, enforceable against Amazon.com in
accordance with its terms, except as to the effect, if any, of (a) applicable
bankruptcy and other similar laws affecting the rights of creditors generally,
(b) rules of law governing specific performance, injunctive relief and other
equitable remedies, and (c) the enforceability of provisions requiring
indemnification in connection with the offering, sale or issuance of securities.
This Agreement has been, and each of the other Operative Documents to which the
Purchaser is a party will have been at the Closing, duly executed and delivered
by the Purchaser, and this Agreement is, and each of the other Operative
Documents to which the Purchaser is a party will be at the Closing, a legal,
valid and binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with its terms, except as to the effect, if any, of (i) applicable
bankruptcy and other similar laws affecting the rights of creditors generally,
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies, and (iii) the enforceability of provisions requiring
indemnification in connection with the offering, sale or issuance of securities.
3.3 SECURITIES
The Amazon.com Common Stock to be issued pursuant to this Agreement has
been, or will be prior to the Effective Time, duly authorized for issuance, and
such Amazon.com Common Stock, when issued and delivered to the Company's
shareholders pursuant to this Agreement, shall be validly issued, fully paid and
nonassessable.
3.4 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
The execution, delivery and performance of this Agreement and the other
Operative Documents