-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RyNgGOZz7opkFP7qAxH1NuTYJy8C78yknK2uMZJy06r2ENClulXiRHfmHbFDA/yr bzUJdZ7s7x+B8Is8NiOx/g== 0000912057-01-002827.txt : 20010129 0000912057-01-002827.hdr.sgml : 20010129 ACCESSION NUMBER: 0000912057-01-002827 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20010125 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TICKETMASTER ONLINE CITYSEARCH INC CENTRAL INDEX KEY: 0001006637 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 954546874 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-54304 FILM NUMBER: 1515241 BUSINESS ADDRESS: STREET 1: 790 E COLORADO BLVD STREET 2: STE 200 CITY: PASADENA STATE: CA ZIP: 91101 BUSINESS PHONE: 6264050050 MAIL ADDRESS: STREET 1: 790 E COLORADO BLVD STREET 2: SUITE 200 CITY: PASADENA STATE: CA ZIP: 91101 FORMER COMPANY: FORMER CONFORMED NAME: CITYSEARCH INC DATE OF NAME CHANGE: 19980617 S-3 1 a2036134zs-3.txt S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 25, 2001. REGISTRATION NO. 333- =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------ TICKETMASTER ONLINE-CITYSEARCH, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 95-4546874 (State or Other Jurisdiction of (IRS Employer Identification Number) Incorporation or Organization) 790 E. COLORADO BOULEVARD, SUITE 200 PASADENA, CALIFORNIA 91101 (626) 405-0050 (Address Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) JOHN PLEASANTS CHIEF EXECUTIVE OFFICER 790 E. COLORADO BOULEVARD, SUITE 200 PASADENA, CALIFORNIA 91101 (626) 405-0050 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service) Copies to: Kenneth M. Doran, Esq. S. Brian Farmer, Esq. Gibson, Dunn & Crutcher LLP Hirschler, Fleischer, Weinberg, Cox & Allen 333 South Grand Avenue 701 East Byrd Street Los Angeles, California 90071 P.O. Box 500 (213) 229-7000 Richmond, VA 23218 (804) 771-9504 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. |_| If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. |_| __________________ If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. |_| _____________________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE ========================================================================================================= Proposed Maximum Proposed Maximum Title of Shares Amount To Be Aggregate Price Aggregate Offering Amount of To Be Registered Registered Per Share(1) Price Registration Fee - --------------------------------------------------------------------------------------------------------- Class B Common Stock, 299,954 $10.72 $3,215,507 $804 par value $.01 per share =========================================================================================================
(1) The price of $10.72 was the average of the high and low prices of the Class B Common Stock on the Nasdaq National Market System on January 22, 2001, and is set forth solely for the purpose of computing the registration fee pursuant to Rule 457(c). ----------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. =============================================================================== PROSPECTUS (SUBJECT TO COMPLETION) ISSUED JANUARY __, 2001 299,954 SHARES TICKETMASTER ONLINE-CITYSEARCH, INC. CLASS B COMMON STOCK ---------------- This prospectus relates to the public offering of 299,954 shares of Class B Common Stock, par value $.01 per share, of Ticketmaster Online-Citysearch, Inc. that are held by certain of our current stockholders. For more detailed information, see "Summary -- Recent Developments." This offering will not be underwritten. The prices at which these stockholders may sell the shares will be determined by the prevailing market price for the shares or in negotiated transactions. We will not receive any of the proceeds from the sale of the shares. Our Class B Common Stock is listed on the Nasdaq National Market under the symbol "TMCS." On January 22, 2001, the last reported sale price of our Class B Common Stock was $10.6875 per share. Investing in the Class B Common Stock involves risks. See "Risk Factors" beginning on page 7. ---------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if this prospectus is truthful and complete. Any representation to the contrary is a criminal offense. ---------------- You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The selling stockholders are offering to sell, and seeking offers to buy, shares of our Class B Common Stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Class B Common Stock. In this prospectus, references to "Ticketmaster Online-Citysearch," "we," "us" and "our" refer to Ticketmaster Online-Citysearch, Inc. and its subsidiaries. The date of this prospectus is January __, 2001 The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer and sale is not permitted. TABLE OF CONTENTS
PAGE PROSPECTUS SUMMARY................................................................................................1 THE COMPANY.......................................................................................................1 RECENT DEVELOPMENTS...............................................................................................3 THE OFFERING......................................................................................................5 RISK FACTORS......................................................................................................7 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS................................................................21 USE OF PROCEEDS..................................................................................................21 SELLING STOCKHOLDERS.............................................................................................21 PLAN OF DISTRIBUTION.............................................................................................22 LEGAL MATTERS....................................................................................................23 EXPERTS..........................................................................................................23 WHERE YOU CAN FIND MORE INFORMATION..............................................................................23 INCORPORATION OF DOCUMENTS BY REFERENCE..........................................................................23 CONSENT OF INDEPENDENT AUDITORS
---------------- i - ------------------------------------------------------------------------------- PROSPECTUS SUMMARY YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED INFORMATION CONTAINED IN THIS PROSPECTUS, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES TO THE FINANCIAL STATEMENTS AND OTHER INFORMATION INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. THE COMPANY Ticketmaster Online-Citysearch, Inc. is a leading local portal and electronic commerce company that provides in-depth local content and services to help people get things done online. We offer practical tools for living that make the Internet an important part of people's everyday lives. Our principal operations are online city guides, online ticketing and online personals. Our family of Web sites includes citysearch.com, ticketmaster.com, match.com, museumtix.com, ticketweb.com, cityauction.com and livedaily.com, among others. In September 1998, our company was created by combining CitySearch, Inc. and Ticketmaster Multimedia Holdings, Inc. (Ticketmaster Online), then a wholly-owned online subsidiary of Ticketmaster Corporation, to create Ticketmaster Online-Citysearch, a leading provider of local city guides, local advertising and live event ticketing on the Internet. CitySearch was incorporated in September 1995 and launched its first local city guide in May 1996. Ticketmaster Online was formed in 1993 to administer the online business of Ticketmaster Corporation and began selling live event tickets and related merchandise online in November 1996. Subject to specified limitations, our ticketmaster.com service is the exclusive agent of Ticketmaster Corporation for the online sale of tickets to live events presented by Ticketmaster Corporation's clients. In 1999, we acquired CityAuction, Inc. (cityauction.com), an online auction company, Match.com, Inc. (match.com) and Web Media Ventures, LLC (d/b/a One & Only Network), which are both online personals services. We have combined these companies under the name match.com and are continuing to integrate their services with our citysearch.com city guides. In addition, in 1999, we acquired the arts and entertainment portion of The Microsoft Network (MSN) Sidewalk (sidewalk.com) city guides, significantly expanding the reach of our citysearch.com city guides. We have integrated the Sidewalk city guides with the citysearch.com city guides to create a nationwide network. In January 2000, we acquired 2b Technology, Inc., a Richmond, Virginia based visitor management software developer and offline and online ticketing company targeted at venues such as higher volume museums, cultural institutions and historic sites. In May 2000, we acquired TicketWeb Inc., a ticketing company whose browser-based ticketing software allows venues and event promoters, including symphony concerts, clubs, museum exhibitions, amusement parks and film festivals, to perform box-office operations remotely, over the Internet. We intend to continue to make strategic acquisitions as appropriate opportunities become available. On November 20, 2000, we entered into a contribution agreement with USA Networks, Inc., pursuant to which we propose to combine our business with the businesses conducted by Ticketmaster Corporation and its subsidiaries, which we refer to as the Ticketmaster businesses. Ticketmaster Group is an Illinois corporation and a wholly-owned subsidiary of USA Networks. Ticketmaster Group is a holding company and the sole stockholder of Ticketmaster Corporation, which is also an Illinois corporation and is referred to in this prospectus as Ticketmaster. Ticketmaster, through its wholly-and majority-owned subsidiaries, is the leading provider of automated ticketing services in the United States with over 5,000 domestic and foreign clients, including many of the foremost entertainment facilities, promoters and professional sports franchises. Ticketmaster provides comprehensive ticket inventory control and management, a broad distribution network and dedicated marketing and support services. Ticket orders are received and fulfilled through operator-staffed call centers, independent sales outlets remote to the facility box office and ticketmaster.com's web site. Revenue is generated principally from convenience charges received by Ticketmaster for tickets sold on its clients' behalf. Ticketmaster generally serves as an exclusive agent for its clients and typically has no financial risk for unsold tickets. Please see "Summary-Recent Developments" 1 below. Our portfolio of Web sites includes: citysearch.com, ticketmaster.com, match.com, museumtix.com, ticketweb.com, cityauction.com, livedaily.com and jobs.citysearch.com, which are described in more detail below. - CITYSEARCH.COM is a network of local portal city guide sites that offer primarily original local content for major U.S. and foreign cities as well as practical transactional tools to get things done online. The city guides provide up-to-date, locally produced information about a city's arts and entertainment events, bars and restaurants, recreation, community activities and businesses (shopping and professional services), as well as local news, sports and weather updates. citysearch.com city guides also let people act on what they learn by supporting online business transactions, including ticketing, reservations, auctions, matchmaking, merchandise sales and classifieds. With our recent acquisition of the arts and entertainment portion of the MSN Sidewalk (sidewalk.com) city guides, citysearch.com now reaches more than 70 cities worldwide.TICKETMASTER.COM is the leading online ticketing site and live event portal. Through our exclusive arrangement with Ticketmaster Corporation, ticketmaster.com provides tickets for more than 100 professional sports franchises and more than 3,750 leading arenas, stadiums, performing arts venues and theaters. The site also offers in-context, entertainment-related merchandise, including CDs, apparel and memorabilia through STORE.TICKETMASTER.COM. - TICKETMASTER.COM is the leading online ticketing site and live event portal. Through our exclusive arrangement with Ticketmaster Corporation, ticketmaster.com provides tickets for more than 100 professional sports franchises and more than 3,750 leading arenas, stadiums, performing arts venues and theaters. The site also offers in-context, entertainment-related merchandise, including CDs, apparel and memorabilia through STORE.TICKETMASTER.COM. - MATCH.COM is a leading online matchmaking and dating service which offers single adults a convenient, fun and private environment for meeting other singles. In combination with the One & Only Network, another online personals company we acquired in 1999 and which we are integrating with match.com (the combined operations to be called match.com), match.com has more than 4 million user registrations and approximately 560,000 active users, generating more than 100 million monthly page views. In addition, as part of our recent transaction with Microsoft, match.com has become the premier provider of online personals and matchmaking services on The Microsoft Network (MSN). - MUSEUMTIX.COM is 2b Technology's online ticketing site, providing information and ticketing for cultural institutions and other venues, including museums, zoos, aquariums and planetariums. - TICKETWEB.COM is TicketWeb's online ticketing site, allowing users to purchase tickets for events and venues including museums, amusement parks, festivals, local clubs, symphony concerts and zoos. TicketWeb's browser-based ticketing software allows clients to manage the sale of their tickets remotely from a home or office computer. - CITYAUCTION.COM is a person-to-person online auction service that provides a local resource for online auctions. In addition to national and regional auctions, cityauction.com lets users post and search for items in their own locality, allowing them to trade items that would be considered too valuable or difficult to transport, such as televisions or furniture. Cityauction.com is a member of the FairMarket, Inc. network of auction sites. Buyers and sellers using cityauction.com have access to all of the auctions listed in the FairMarket network of auction sites, including listings from users of many of the largest internet portal Web sites. - LIVEDAILY.COM is our daily online live entertainment news webzine that offers music fans daily concert and music news, tour announcements, reviews, interviews and exclusive national ticketing information. livedaily.com users benefit from direct connections to our ticket distribution network at ticketmaster.com and local music information via citysearch.com's growing network of city guides. 2 - JOBS.CITYSEARCH.COM is our online source of employment classifieds and specialists that can be viewed by city to make job searching efficient and effective. We have two classes of authorized Common Stock outstanding, Class A Common Stock and Class B Common Stock. The rights of the holders of Class A Common Stock and Class B Common Stock are substantially identical, except with respect to voting, conversion and transfer. Except as otherwise required by applicable law, each share of Class A Common Stock entitles its holder to 15 votes and each share of Class B Common Stock entitles its holder to one vote on all matters submitted to a vote or for the consent of stockholders. Except as otherwise required by applicable law, the Class A Common Stock and the Class B Common Stock vote together as a single class on all matters submitted to a vote or for the consent of stockholders. We have also authorized Class C Common Stock which is nonvoting and of which no shares are issued and outstanding. We are currently a direct, majority-owned subsidiary of Ticketmaster Corporation, an Illinois corporation, which is an indirect, wholly-owned subsidiary of USA Networks, Inc., a Delaware corporation, which is referred to in this prospectus as USAi. As of the date of this prospectus, USAi beneficially owns 43,782,544 shares, or approximately 49%, of our total outstanding Common Stock, representing approximately 84% of the total voting power of our outstanding Common Stock. Following our proposed combination with Ticketmaster, we will be a direct subsidiary of USAi and Ticketmaster Corporation will be our indirect, wholly-owned subsidiary. After the closing of the combination, USAi will own 95,782,544 shares, or approximately 68%, of our total outstanding Common Stock, representing approximately 85% of the total voting power of the outstanding Common Stock. We expect to close our combination with the businesses of Ticketmaster Corporation in the first quarter of 2001. Concurrently with the closing of the proposed combination, we will change our name to "Ticketmaster." Our Class B Common Stock will continue to trade on The Nasdaq national Market under the ticker symbol "TMCS." See "Summary - Recent Developments" below for a more detailed description of our pending combination with Ticketmaster Corporation. Our principal executive offices are located at 790 E. Colorado Boulevard, Suite 200, Pasadena, California 91101, and our telephone number at that address is (626) 405-0050. RECENT DEVELOPMENTS ADJUSTMENT OF PURCHASE PRICE PAYABLE TO FORMER SHAREHOLDERS OF 2B TECHNOLOGY, INC. On January 31, 2000, we acquired all of the outstanding shares of capital stock of 2b Technology, Inc., a Virginia corporation. 2b Technology is a fully-integrated visitor management and ticketing firm targeted at venues such as higher volume museums, cultural institutions and historic sites. In connection with the acquisition, we issued 458,005 shares of our Class B Common Stock to the former shareholders of 2b Technology, representing a purchase price of approximately $17.1 million. The remainder of the purchase price was structured as an earn-out ranging from $0 to $11 million, based on the actual revenues of 2b Technology for the 2000 and 2001 fiscal years. On December 8, 2000, we and the former shareholders of 2b Technology entered into a work-out agreement pursuant to which we issued 299,954 shares of Class B Common Stock to the former shareholders of 2b Technology and the parties agreed to commute the earn-out provisions of the purchase agreement thereby ending our obligation to make any additional payments under the purchase agreement.. We are hereby registering the 299,954 shares issued pursuant to the work-out agreement. COMBINATION OF OUR BUSINESSES WITH THE BUSINESSES OF TICKETMASTER CORPORATION On November 20, 2000, we entered into a contribution agreement with USAi, pursuant to which we have agreed to combine our business with the Ticketmaster businesses. We will effect this combination in two steps: 3 - In the first step, Ticketmaster Corporation will contribute to us all of the equity interests of its subsidiaries (except for shares of our Class A and Class B common stock that it holds), and its assets that are freely assignable. The shares of our common stock that are currently held by Ticketmaster Corporation are not being contributed to us or canceled and will continue to be held by Ticketmaster Corporation following the combination. In exchange for the contributions by Ticketmaster Corporation, we will issue to Ticketmaster Corporation a number of shares of our Class B common stock equal to the fair market value of the equity interests and assets contributed to us. - In the second step, USAi, the sole stockholder of Ticketmaster Group, which is in turn the sole stockholder of Ticketmaster Corporation, will contribute to us all of the outstanding capital stock of Ticketmaster Group. In exchange for the capital stock of Ticketmaster Group, we will issue to USAi 52,000,000 new shares of our Class B common stock. In addition, we will issue to USAi a number of shares of our Class A and Class B common stock equal to the number of such shares indirectly held by USAi through Ticketmaster Corporation prior to the combination. Upon completion of the combination, Ticketmaster Group and the former subsidiaries of Ticketmaster Corporation that were contributed to us will be our direct subsidiaries and Ticketmaster Corporation will be our indirect subsidiary. As a result of the combination, USAi will own an additional 52,000,000 shares of our Class B common stock. The other shares to be issued to USAi in connection with the combination will only replace shares that are currently indirectly owned by USAi and that we will indirectly own following the combination. Accordingly, such shares will not increase USAi's percentage ownership of our capital stock. On January 11, 2001, we filed with the SEC and mailed to our stockholders a definitive information statement relating to the combination. We must satisfy a number of conditions before we can complete the combination, but we expect to complete the combination during the first quarter of 2001. PROPOSED ACQUISITION OF RESERVEAMERICA HOLDINGS, INC. On January 9, 2001, we entered into a purchase agreement with ReserveAmerica Holdings, Inc. and certain of its shareholders, pursuant to which we agreed to purchase all of the outstanding capital stock of ReserveAmerica Holdings, Inc., a company that provides campsite reservations across America. The initial target purchase price for the ReserveAmerica shares is approximately $22.2 million in cash and shares of our Class B Common Stock. The remainder of the purchase price may range from $0 to $37.8 million, subject to, among other things, ReserveAmerica's EBITDA for the 2001 and 2002 fiscal years. The closing of the transaction is subject to certain customary conditions. 4 - -------------------------------------------------------------------------------- THE OFFERING THE FOLLOWING SUMMARIZES THE SELLING STOCKHOLDERS' OFFERING OF OUR CLASS B COMMON STOCK.
Class B Common Stock to be offered by the selling stockholders................................................ 299,954 shares Common Stock to be outstanding after the offering: Class A Common Stock.............................................. 47,718,879 shares Class B Common Stock.............................................. 41,291,839 shares Total Common Stock................................................ 89,010,718 shares Use of Proceeds............................................................ We will not receive any proceeds from the sale of the shares. Nasdaq National Market Symbol.............................................. TMCS
The information concerning outstanding Common Stock above is as of December 31, 2000. Each share of Class A Common Stock automatically converts into one share of Class B Common Stock upon transfer to anyone other than another holder of Class A Common Stock. Unless otherwise stated, all information contained in this prospectus excludes: (1) 1,078,635 shares of Class A Common Stock issuable upon the exercise of options outstanding at December 31, 2000 at a weighted average price of $5.56 per share under our 1996 Stock Plan; (2) 2,901,585 shares of Class B Common Stock issuable upon the exercise of options outstanding at December 31, 2000 at a weighted average price of $27.12 per share under our 1998 Stock Plan; (3) 5,446,662 shares of Class B Common Stock issuable upon the exercise of options outstanding at December 31, 2000 at a weighted average price of $28.40 per share under our 1999 Stock Plan; (4) 42,291 shares of Class B Common Stock issuable upon the exercise of options outstanding at December 31, 2000 at a weighted average price of $11.93 per share under TicketWeb's 2000 Stock Plan, which we assumed in connection with our acquisition of TicketWeb; (5) an aggregate of 2,480,450 shares of Class B Common Stock available for future grant or issuance as of December 31, 2000 under our 1998 Stock Plan, our 1999 Stock Plan and our 1998 Employee Stock Purchase Plan; (6) 25,196 shares of Class B Common Stock issuable upon the exercise of warrants that we assumed in connection with our acquisition of TicketWeb outstanding as of December 31, 2000, at a weighted average exercise price of $13.57; (7) 4,500,000 shares of Class B Common Stock issuable upon the exercise of warrants issued to 5 Microsoft Corporation in connection with our acquisition of the assets of Sidewalk.com. The price per share with respect to 1,500,000 of such shares is $60 per share. The price per share with respect to the remaining 3,000,000 of such shares is $30, subject to reduction by $1/16 for each $1/16 by which the fair market value of a share of Class B Common Stock exceeds $30; and (8) the 52,000,000 new shares of Class B Common Stock to be issued in connection with our proposed combination with Ticketmaster Corporation. - -------------------------------------------------------------------------------- 6 RISK FACTORS An investment in our Class B Common Stock offering is very risky. You should carefully consider the following risk factors in addition to the remainder of this prospectus before purchasing the Class B Common Stock. This prospectus contains forward-looking statements that involve risks and uncertainties. Many factors, including those described below, may cause actual results to differ materially from anticipated results. WE MAY NOT REALIZE THE SYNERGIES AND OTHER INTENDED BENEFITS OF THE PROPOSED COMBINATION WITH THE TICKETMASTER BUSINESSES. Among the factors considered by the Special Committee of our Board of Directors and our Board of Directors in connection with its approval of the contribution agreement with USAi relating to our proposed combination with Ticketmaster Corporation were the opportunities for revenue growth that could result from the proposed combination of Ticketmaster Online-Citysearch and the Ticketmaster businesses. However, general economic conditions and other factors beyond our combined company's control may limit the combined company's ability to realize these opportunities. Accordingly, we cannot assure you as to whether or in what time frame any revenue growth will be realized. WE MAY HAVE DIFFICULTY OVERCOMING PROBLEMS ASSOCIATED WITH RAPID EXPANSION AND GROWTH. As our business, or following the combination with the Ticketmaster businesses, the combined company's business, develops and expands following the proposed combination, it will need to implement enhanced operational and financial systems and will likely require additional management, operational and financial resources. We cannot assure you that our combined company will successfully implement and maintain such operational and financial systems or successfully obtain, integrate and use the management, operational and financial resources necessary to manage a developing and expanding business in an evolving and increasingly competitive industry. Failure to implement such systems successfully or use such resources effectively could have a material adverse effect on our, or following the combination, the combined company's business, financial condition or results of operations. OUR TICKETING BUSINESS IS DEPENDENT ON ENTERTAINMENT, SPORTING AND LEISURE EVENTS AND FACTORS AFFECTING SUCH EVENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS. Pursuant to contracts with arenas, stadiums, theaters and other facilities, sports teams, promoters and others, Ticketmaster Corporation, in its capacity as agent, sells tickets relating to entertainment, sporting and leisure events and, accordingly, Ticketmaster Corporation's ticketing business and our ticketmaster.com business are directly affected by the popularity, frequency and location of such events. Factors affecting such events, including general economic conditions, consumer trends and work stoppages (such as the 1994 strike by the Major League Baseball Players Association against Major League Baseball), could have a material adverse effect on the Ticketmaster Corporation and ticketmaster.com business and, following the combination, the businesses of our combined company. QUARTERLY FLUCTUATIONS IN REVENUES COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR CLASS B COMMON STOCK. Ticketmaster Corporation and our ticketmaster.com business have historically experienced quarterly fluctuations in ticket operation revenues, which vary depending upon the dates when tickets for events are released for sale by Ticketmaster Corporation's clients. The scheduling of popular events has generally been more concentrated during the warm weather months. This factor, together with the general practice of commencing ticket sales several months prior to the event date, tends to result in higher revenues in the first six months of operations during each fiscal year. This seasonality could cause our quarterly earnings, and following the combination, 7 quarterly earnings of our combined company, to fall temporarily below market expectations, which could in turn adversely affect the market price of our Class B common stock. OUR PLANS TO EXPAND INTERNATIONALLY WILL REQUIRE US TO ADDRESS RISKS OF OPERATING INTERNATIONALLY. Ticketmaster Corporation presently conducts business directly in the United Kingdom, Canada, Mexico and South America, and through joint ventures in Ireland and Australia. In fiscal 1999, revenues from international operations accounted for 13% of Ticketmaster Corporation's total revenues. Ticketmaster Corporation intends to continue to expand its operations outside of the United States and to enter additional markets, which will require additional resources. Following our combination with the Ticketmaster businesses, if the revenues generated by our international operations are insufficient to offset the expense of establishing and maintaining such operations, our combined company's business, financial condition and results of operations could be materially and adversely affected. We cannot assure you that we or our partners will be able to successfully market or sell our services in these international markets. In addition to the uncertainty as to our ability to expand our international presence, there are certain risks inherent in conducting business on an international level that are not necessarily present in domestic operations, such as: - laws limiting the right and ability of foreign subsidiaries to pay dividends and remit earnings to affiliated companies unless specified conditions are met; - unexpected changes in regulatory requirements, tariffs and other trade barriers; - difficulties in staffing and managing foreign operations; - political instability; - increased exposure to gains and losses on currency rate fluctuations; and - potentially adverse tax consequences. We cannot assure you that one or more of the foregoing factors will not have a material adverse effect on our current and future international operations and, consequently, on our business, financial condition and results of operations. FOLLOWING THE COMBINATION, OUR TICKETING BUSINESS WILL BE DEPENDENT UPON OUR RELATIONSHIP WITH CLIENTS. Following the combination, we anticipate that for the foreseeable future, the majority of our combined company's revenues will be derived from online and offline sales of tickets. We also expect that we will continue to derive a substantial portion of our revenues from per ticket convenience charges and per order handling fees paid by consumers in connection with online and offline purchases of tickets to live events presented or promoted by clients of Ticketmaster Corporation. Accordingly, our future revenues and business success will be dependent on our combined company's ability to maintain and renew relationships with its existing clients and to establish relationships with additional clients. For the year ended December 31, 1999, Ticketmaster Corporation processed ticket sales for over 3,750 clients. Following the combination, our combined company will be dependent upon its ability to enter into and maintain client contracts on favorable terms. We cannot assure you that our combined company will be able to enter into or maintain client contracts on such terms. Our ability to generate ticket and merchandise sales on our ticketmaster.com Web site will also be dependent in part on our combined company's ability to maintain and enhance the Ticketmaster brand name. Any failure on the part of our combined company to maintain our existing base of clients, to establish relationships with new clients upon favorable terms, to obtain or retain the right to sell tickets and merchandise online, to process ticket sales in a timely and accurate manner or at levels necessary to support our 8 business or to maintain and enhance the Ticketmaster brand name, would have a material adverse effect on our business, financial condition and results of operations. WE MAY HAVE FUTURE CAPITAL NEEDS AND MAY NOT BE ABLE TO OBTAIN ADDITIONAL FINANCING ON ACCEPTABLE TERMS. We expect to continue to use significant cash in the expansion of our operations for the foreseeable future. Except for its obligation under the contribution agreement to provide us with a $25 million line of credit if we are unable to secure such a line of credit from a third party, USAi has no obligation or agreement to provide any future capital or other funding to us. We may be required to raise additional funds at some point in the future and we will need the approval of USAi for any capital raising. If additional funds are raised through the issuance of equity securities, our stockholders may experience significant dilution. Furthermore, we cannot assure you that additional financing will be available when needed or that if available, such financing will include terms favorable to our stockholders or us, or that such financing will be approved by USAi. If financing is not available when required, is not available on acceptable terms or is not approved by USAi, we may be unable to develop or enhance our services, take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition and results of operations. WE DEPEND ON KEY PERSONNEL AND NEED TO HIRE ADDITIONAL QUALIFIED PERSONNEL. Following the proposed combination, we expect that the success of our combined company will depend to a significant degree upon the continued contributions of its executive management team. The loss of the services of members of our executive management team could have a material adverse effect on our business, financial condition and results of operations. After completion of the combination, we will need to integrate new members of our management team into our existing management team. The failure to manage this integration smoothly could disrupt our business and harm our results of operations. Our success also depends upon our ability to attract and retain additional highly qualified management, technical and sales and marketing personnel, for which competition is intense. The process of locating and hiring such personnel with the combination of skills and attributes required to carry out our strategy is often lengthy. The loss of the services of key personnel or the inability to attract additional qualified personnel could have a material adverse effect on our business, financial condition and results of operations. WE ARE CONTROLLED BY USAi. We are currently a direct, majority-owned subsidiary of Ticketmaster Corporation, which is an indirect wholly-owned subsidiary of USAi. As of January 1, 2001, USAi beneficially owned approximately 49% of our total outstanding Common Stock, representing approximately 84% of the total voting power of our total outstanding Common Stock. Following the combination, we will be a direct, majority-owned subsidiary of USAi, and USAi will own approximately 68% and 85% of our outstanding Common Stock and voting power, respectively. As a result of its ownership of Class A Common Stock, USAi generally has the ability to control the outcome of any matter submitted for the vote or consent of our stockholders, except where a separate vote of the holders of Class B Common Stock is required by Delaware law. Following the combination, USAi will also own a majority of our Class B Common Stock. Subject to applicable Delaware law, USAi is generally not restricted with regard to its ability to control the election of our directors, to cause the amendment of our Amended and Restated Certificate of Incorporation, or generally to exercise a controlling influence over our business and affairs. This control relationship may have the effect of delaying or preventing a change in control of our company and might adversely affect the market price of the Class B Common Stock. Subject to applicable Delaware law, USAi could elect to sell all or a substantial portion of its equity interest in us to a third party, which would represent a controlling or substantial interest in us, without offering to our other stockholders the opportunity to participate in such a transaction. In the event of a sale of USAi's interest to a third 9 party, that third party may be able to control us in the manner that USAi is able to control us, including the ability to control the election of directors. USAi is currently controlled by Barry Diller, who is also a director of our company. Mr. Diller is the Chairman and Chief Executive Officer of USAi and following the combination, will also be Co-Chairman of Ticketmaster. Under stockholder and governance agreements with Liberty Media Corporation and Universal Studios, Inc., two other significant USAi stockholders, Mr. Diller generally has the right to control the outcome of any matter requiring the approval of USAi stockholders, other than with respect to specified fundamental changes relating to USAi or its subsidiaries. To engage in these fundamental changes, the approval of each of Mr. Diller, Liberty Media and Universal Studios is generally required. Copies of the governance and stockholders agreements among USAi, Universal Studios, Liberty Media and Mr. Diller have been filed with the Securities and Exchange Commission as Appendices B and C, respectively, to USAi's Definitive Proxy Statement, dated January 12, 1998 and are available from the SEC. Mr. Diller does not have an employment agreement with USAi. If Mr. Diller no longer serves in his positions at USAi, generally Universal Studios and Liberty Media will be able to control USAi. Any change in the governance, management, operations or business of USAi could have a material adverse effect on our relationship with USAi, and could materially and adversely affect our business, financial condition and results of operations. CONFLICTS OF INTEREST MAY ARISE BETWEEN TICKETMASTER ONLINE-CITYSEARCH AND USAi. Conflicts of interest may arise between us, including our ticketmaster.com service and, following the combination, Ticketmaster Corporation, on the one hand, and USAi and its affiliates, on the other hand, in areas relating to past, ongoing and future relationships and other matters. These also include: - corporate opportunities; - indemnity arrangements; - tax and intellectual property matters; - potential acquisitions or financing transactions; - sales or other dispositions by USAi of shares of our Class A Common Stock held by it; and - the exercise by USAi of its ability to control our management and affairs. Ownership interests of our directors or officers in USAi common stock, or service as both a director or officer of us and a director, officer or employee of USAi, could create or appear to create potential conflicts of interest when directors and officers are faced with decisions that could have different implications for us and USAi. Several of the members of our board of directors are also directors, officers or employees of USAi. In addition, USAi is engaged in a diverse range of media and entertainment-related businesses, including businesses engaged in electronic and online commerce including Home Shopping Network and its USA Interactive business. These businesses may have interests that conflict or compete in some manner with our business. Subject to applicable Delaware law, USAi is under no obligation, and has not indicated any intention, to share any future business opportunities available to it with us except as expressly provided by our license agreement with USAi and Ticketmaster Corporation. Our Amended and Restated Certificate of Incorporation also includes provisions which provide that: - USAi shall have no duty to refrain from engaging in the same or similar activities or lines of our business, thereby competing with us; 10 - USAi, its officers, directors and employees shall not be liable to us or our stockholders for breach of any fiduciary duty by reason of any activities of USAi in competition with us; and - USAi shall have no duty to communicate or offer corporate opportunities to us and shall not be liable for breach of any fiduciary duty as a stockholder of us in connection with these opportunities, provided that the relevant procedures set forth in our Amended and Restated Certificate of Incorporation are followed. There can be no assurance that any conflicts that may arise between us and USAi, any loss of a corporate opportunity to USAi that might otherwise be available to us, or any engagement by USAi in any activity that is similar to our business will not have a material adverse effect on our business, financial condition and results of operations or our other stockholders. USAI MAY SELL A SIGNIFICANT PORTION OF OUR COMMON STOCK THAT IT OWNS WHICH COULD ADVERSELY EFFECT THE PRICE OF OUR STOCK. Subject to applicable federal securities laws, USAi may sell a significant portion of the shares of our Common Stock beneficially owned by it or distribute any or all of its shares of our Common Stock to its stockholders. At January 1, 2001, USAi's holdings represented approximately 49% of our outstanding Common Stock, representing approximately 84% of the voting power of our total outstanding Common Stock. Following the proposed combination of our business with the Ticketmaster businesses, USAi will own approximately 68%, of our total outstanding Common Stock, representing approximately 85% of the total voting power of the outstanding Common Stock. Pursuant to our Amended and Restated Certificate of Incorporation, each share of Class A Common Stock will generally be converted automatically into one share of Class B Common Stock upon any transfer by the initial registered holder. Any sales or distributions by USAi of substantial amounts of Common Stock in the public market or to its stockholders, or the perception that these sales or distributions could occur, could adversely affect the prevailing market prices for our Class B Common Stock. USAi is not subject to any obligation to retain any portion of its controlling interest in us. We have not granted to USAi any registration rights with respect to the shares of our Common Stock owned by it. WE MUST MAINTAIN AND PROMOTE OUR BRANDS TO BE SUCCESSFUL. We believe that maintaining and promoting the ticketmaster.com, citysearch.com and match.com brands and, to a lesser extent, the cityauction.com, ticketweb.com, and museumtix.com brands, are critical to our efforts to attract consumers and business customers to our sites. After completion of the proposed combination, we will also be increasingly dependent on the successful promotion of the Ticketmaster brand name. We also believe that the importance of brand recognition will increase due to the growing number of Internet sites and relatively low barriers to entry to providing Internet content. Promotion of our brands will depend largely on our success, and, to a lesser extent, the success of our media company partners, in providing high quality Internet content. Under the terms of our agreements with media company partners, we have very limited control over the content provided on the Citysearch.com partners' sites. If consumers and business customers do not perceive the content of our or our partners' existing sites to be of high quality, we may be unsuccessful in promoting and maintaining the Citysearch.com brand. Furthermore, not all of our partners promote the Citysearch.com brand on their services with a high level of prominence. In addition, users accessing partner-led market sites that contain different interfaces from our owned and operated sites may be confused by the differences in interface or navigation, and this confusion may inhibit our ability to develop our brand and network. In order to attract and retain consumers and business customers, and to promote our brands in response to competitive pressures, we have found it necessary to increase our budget for content and to increase substantially our financial commitment to creating and maintaining a distinct brand loyalty among consumers and business customers. If either we or our media company partners are unable to provide high quality content or otherwise fail to promote 11 and maintain our brands or if we incur excessive expenses in an attempt to improve our content or promote and maintain our brands, our business, financial condition and results of operations could be materially and adversely affected. THE MARKETS IN WHICH WE AND TICKETMASTER CORPORATION SELL OUR SERVICES ARE INTENSELY COMPETITIVE AND OUR BUSINESS WOULD BE ADVERSELY AFFECTED IF WE FAIL TO GROW OUR MARKET SHARE OR OTHERWISE FAIL TO SUCCESSFULLY COMPETE IN THESE MARKETS. Our ticketing companies, Ticketmaster Corporation, ticketmaster.com, 2b Technology and TicketWeb all compete with event facilities and promoters that handle or may handle their own ticket sales and distribution through online and other distribution channels, live event automated ticketing companies with Web sites that may or may not currently offer online transactional capabilities and certain Web-based live event ticketing companies that conduct business online, including Tickets.com. In certain specific geographic regions, including certain of the local markets in which Citysearch.com provides or intends to provide our local city guide service, one or more of our ticketing companies' competitors may serve as the primary ticketing service in the region. We cannot assure you that one or more of these regional automated ticketing companies will not enter or expand into other regions or nationally, which could have a material adverse effect on our business, financial condition and results of operations. The markets for local interactive content and services, the selling of live event tickets and related merchandise and our other services are highly competitive and diverse. Citysearch.com's primary competitors include Digital City, Inc., a company wholly owned by America Online, Inc., Tribune Company, Cox Interactive and Knight Ridder's Real Cities. Citysearch.com also competes with numerous search engines and other site aggregation companies, media, telecommunications and cable companies, Internet service providers and niche competitors which focus on a specific category or geography and compete with specific content offerings provided by us. Furthermore, additional major media and other companies with financial and other resources greater than ours may introduce new Internet products addressing the local interactive content and service market in the future. The online dating services market is very competitive. match.com's and One & Only Network's primary competitors include FriendFinder, Inc. and Matchmaker.com, Inc., both of whom charge subscribers fees for use of their services. In addition, match.com and One & Only Network face significant competition from online dating services which are free to subscribers and which are offered by most major portal sites, including Yahoo! Inc., Excite Inc. and America Online, Inc., among others. We believe that the principal competitive factors for all our services include: - depth, quality and comprehensiveness of content; - ease of use; - distribution; - search capability; and - brand recognition. Many of our competitors have greater financial and marketing resources than we have and may have significant competitive advantages through other lines of business and existing business relationships. We cannot assure you that we will be able to successfully compete against our current or future competitors or that competition will not have a material adverse effect on our business, financial condition and results of operations. Furthermore, as a strategic response to changes in the competitive environment, we may make certain pricing, servicing or marketing decisions or enter into acquisitions or new ventures that could have a material adverse effect on our business, financial condition and results of operations. 12 OUR BUSINESS RELIES ON THE PERFORMANCE OF OUR SYSTEMS AND THE PERFORMANCE AND AVAILABILITY OF THIRD PARTY SYSTEMS. The satisfactory performance, reliability and availability of our city guides, online ticketing services, auction services, Internet personals services and our network infrastructures are critical to attracting Web users and maintaining relationships with business customers and consumers. System interruptions that result in the unavailability of sites or slower response times for consumers would reduce the number of business Web sites and advertisements purchased and reduce the attractiveness of our citysearch.com local city guides, cityauction.com, match.com and One & Only Network services, and ticketmaster.com's, 2b Technology's and ticketweb.com's online services to business customers and consumers. Our services have experienced system interruptions in the past and we believe that such interruptions will continue to occur from time to time in the future. Any substantial increase in traffic on our services will also require us to expand and adapt our network infrastructure. Our inability to add additional software and hardware to accommodate increased traffic on our services may cause unanticipated system disruptions and result in slower response times. We use a custom-developed system for our ticketmaster.com ticketing operations and certain aspects of transaction processing. ticketmaster.com has experienced temporary system interruptions, which may continue to occur in the future from time to time. Any substantial increase in the volume of traffic on our online sites or the number of tickets purchased by consumers will require us to continue to expand and upgrade further ticketmaster.com technology, transaction- processing systems and network infrastructure. We can not assure you that our ticketmaster.com service's transaction-processing systems and network infrastructure will be able to accommodate increases in traffic in the future, or that we will, in general, be able to accurately project the rate or timing of such increases or upgrade our systems and infrastructure to accommodate future traffic levels on our online sites. In addition, we can not assure you that we will be able to effectively upgrade and expand our ticketmaster.com transaction-processing systems in a timely manner or to successfully integrate any newly developed or purchased components of its existing systems. Any inability to do so could have a material adverse effect on our business, financial condition and results of operations. SECURITY BREACHES OF OUR NETWORK SYSTEMS WOULD SIGNIFICANTLY ADVERSELY AFFECT OUR BUSINESS. A fundamental requirement for online commerce and communications is the secure transmission of confidential information over public networks. We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure transmission of confidential information, such as consumers' credit card numbers. In addition, we maintain an extensive confidential database of consumer profiles and transaction information. We can not assure you that advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments will not result in a compromise or breach of the methods used by us to protect consumer transaction and personal data contained in our database. If any such compromise of our security were to occur, it could have a material adverse effect on our reputation and on our business, operating results and financial condition. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend significant capital and other resources to protect against security breaches or to alleviate problems caused by breaches. Concerns over the security of transactions conducted on the Internet and commercial online services and the privacy of users may also inhibit the growth of the Web and online services as a means of conducting commercial transactions. To the extent that our activities or those of third-party contractors involve the storage and transmission of proprietary information, such as credit card numbers or other personal information, security breaches could expose us to a risk of loss or litigation and possible liability. In addition, we may suffer losses as a result of orders placed with fraudulent credit card data, even though the consumer's payment for such orders has been authorized by 13 the associated financial institution. Under current credit card practices, a merchant is liable for fraudulent credit card transactions where, as is the case with the transactions processed by us, no cardholder signature is obtained. We can not assure you that we will not suffer significant losses as a result of fraudulent use of credit card data in the future, which could have a material adverse effect on our business, financial condition and results of operations. OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO ADAPT TO THE RAPID TECHNOLOGICAL CHANGES THAT CHARACTERIZE THE INTERNET AND THE ONLINE COMMERCE INDUSTRY. The Internet and the online commerce industry are characterized by the following: - rapid technological change; - changes in user and customer requirements and preferences; - frequent new product and service introductions embodying new technologies; and - the emergence of new industry standards and practices that could render our existing online sites and proprietary technology and systems obsolete. The emerging nature of these products and services and their rapid evolution will require that we continually improve the performance, features and reliability of our online services, particularly in response to competitive offerings. Our success will depend, in part, upon our ability: - to enhance our existing services; - to develop new services and technology that address the increasingly sophisticated and varied needs of our prospective customers; and - to respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. The development of online sites and other proprietary technology entails significant technical and business risks and requires substantial expenditures and lead time. There can be no assurance that we will successfully use new technologies effectively or adapt our online sites, proprietary technology and transaction-processing systems to customer requirements or emerging industry standards. If we are unable, for technical, legal, financial or other reasons, to adapt in a timely manner in response to changing market conditions or customer requirements, our business, operating results and financial condition could be materially adversely affected. INFORMATION DISPLAYED ON OR ACCESSED FROM OUR WEB SITES MAY SUBJECT US TO LIABILITY. We may face potential liability for defamation, negligence, copyright, patent or trademark infringement and other claims based on the nature and content of the materials that appear on the citysearch.com, cityauction.com, match.com, One & Only Network, ticketmaster.com, museumtix.com or ticketweb.com sites or on sites operated by our partners. These claims have been brought, and sometimes successfully pressed, against online services. Although we intend to maintain our general liability insurance at current levels, our insurance may not cover claims of these types or may not be adequate to indemnify us for any liability that may be imposed. Any imposition of liability, particularly liability that is not covered by insurance or is in excess of insurance coverage, could have a material adverse effect on our reputation and our business, financial conditions and results of operations. 14 OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS FROM THIRD PARTY CHALLENGES OR IF WE ARE SUBJECT TO LITIGATION. We regard our copyrights, service marks, trademarks, trade dress, trade secrets, proprietary software and similar intellectual property as critical to our success, and rely on trademark and copyright law, trade secret protection and confidentiality and/or license agreements with employees, customers, partners and others to protect our proprietary rights. We do not hold any patents. We pursue the registration of certain of our key trademarks and service marks in the United States and internationally. Effective trademark, service mark, copyright and trade secret protection may not be available or sought by us in every country in which our products and services are made available online. We have licensed in the past, and expect to license in the future, certain proprietary rights, such as trademarks or copyrighted material, to third parties. In addition, we have licensed in the past, and expect that we may license in the future, certain content, including trademarks and copyrighted material, from third parties. While we attempt to ensure that the quality of our brands is maintained by such licensees, we can not assure you that such licensees will not take actions that might materially adversely affect the value of our proprietary rights or reputation, which could have a material adverse effect on our business, financial condition and results of operations. We can not assure you that the steps taken by us to protect our proprietary rights will be adequate or that third parties will not infringe or misappropriate our copyrights, trademarks, trade dress and similar proprietary rights. In addition, we can not assure you that other parties will not assert infringement claims, including patent infringement claims, against us. We license the trademark "Citysearch" from a third party, and we can not assure you that we will be able to continue to license the trademark on terms acceptable to us. The initial term of that license expires in March 2001. We have the right to renew that license annually so long as we are not in breach of the license at the time of renewal. We believe we are in compliance with the terms of the license and have given notice of our intent to renew the license for another term. However, we cannot assure you that the licensor will not challenge our right to renew the license. In the event of such a challenge, we will vigorously defend our rights under the license. We license the trademark "Ticketmaster" and related trademarks from Ticketmaster Corporation pursuant to our license agreement with USAi and Ticketmaster Corporation. Following our proposed combination with the Ticketmaster businesses, our combined company will own such trademark. We may be subject to legal proceedings and claims of alleged infringement of the trademarks and other intellectual property rights of third parties by us and our licensees. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources which could result in a material adverse effect on our business, financial condition and results of operations. IF WE FAIL TO COMPLY WITH THE LAWS AND REGULATIONS THAT GOVERN OUR SERVICES, OUR BUSINESS COULD BE ADVERSELY AFFECTED. We are subject to regulations applicable to businesses generally and laws or regulations directly applicable to access to online commerce and, following the combination with the Ticketmaster businesses, offline ticketing sales. Although there are currently few laws and regulations directly applicable to the Internet and commercial online services, it is possible that a number of laws and regulations may be adopted with respect to the Internet or commercial online services covering issues such as: - user privacy; 15 - pricing; - content; - taxation; - copyrights; - distribution; - antitrust; and - characteristics and quality of products and services. Furthermore, the growth and development of the market for online commerce may prompt calls for more stringent consumer protection laws that could impose additional burdens on those companies conducting business online. The adoption of any additional laws or regulations may decrease the growth of the Internet or commercial online services, which could, in turn, decrease the demand for our products and services and increase our cost of doing business, or otherwise have a material adverse effect on our business, financial condition and results of operations. Moreover, the applicability to the Internet and commercial online services of existing laws in various jurisdictions governing issues such as property ownership, sales and other taxes, libel and personal privacy is uncertain and may take years to resolve. For example, tax authorities in a number of states are currently reviewing the appropriate tax treatment of companies engaged in online commerce, and new state tax regulations may subject us to additional state sales and income taxes. Any such new legislation or regulation, the application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and commercial online services could have a material adverse effect on our business, financial condition and results of operations. We are subject to the Children's Online Privacy Protection Act of 1998 ("COPPA"). Pursuant to COPPA, a Web site operator must provide notice on its Web sites of the information it collects from children under the age of 13, how it uses that information and to whom it discloses that information. With certain exceptions, the operator must obtain verifiable parental consent for any collection, use or disclosure of personal information submitted online by children under the age of 13. We believe we are currently in, and intend to continue to remain in, compliance with COPPA. However, in the event we are found to have violated COPPA, we could be subject to penalties of up to $10,000 per violation. Our ticketmaster.com, 2b Technology, TicketWeb and, following the combination, Ticketmaster Corporation services are regulated by certain state and local regulations, including, but not limited to, a law in Georgia that establishes maximum convenience charges on tickets for certain sporting events. Other legislation that could affect the way our Ticketmaster Corporation, ticketmaster.com, 2b Technology and TicketWeb services do business, including bills that would regulate the amount of convenience charges and handling charges that may be charged, are introduced from time to time in federal, state and local legislative bodies. We cannot predict whether any such bills will be adopted and, if so, whether such legislation would have a material effect on our business, financial condition and results of operations. WE MAY BE SUBJECT TO GOVERNMENTAL INVESTIGATIONS AND LITIGATIONS. From time to time, federal, state and local authorities have conducted investigations or inquiries with respect to Ticketmaster Corporation's compliance with antitrust, unfair business practice and other laws. In addition, we and Ticketmaster Corporation are parties to various legal proceedings involving commercial disputes and intellectual property issues arising in the ordinary course of business. While the outcomes of these proceedings are 16 uncertain, we do not currently expect that they will have a material adverse effect on our business, financial condition or results of operations. CLASS ACTION LITIGATION RELATING TO THE PROPOSED COMBINATION On or about November 21, 2000, four of our shareholders filed separate, virtually identical class action lawsuits against us, USAi and 15 of our current and former directors. The lawsuits, all of which were filed in the Court of Chancery of the State of Delaware, are entitled SACHS V. CONN, ET AL., Case No. 18517 NC; BEER V. TICKETMASTER ONLINE-CITYSEARCH, INC., ET AL., Case No. 18520 NC; HARBOR FINANCE PARTNERS V. TICKETMASTER ONLINE-CITYSEARCH, ET AL., Case No. 18518 NC; and OSHER V. CONN, ET AL., Case No. 18516 NC. In each of the four lawsuits, the plaintiff purports to bring the suit on behalf of our minority shareholders (i.e. all of our shareholders other than the defendants). The plaintiffs allege that, as a result of the proposed combination, USAi, which holds a majority of our shares, will reap the benefits of increasing its holdings of our capital stock to the detriment of our minority public shareholders who will suffer an unwarranted dilution of their shares of our capital stock. The plaintiffs further allege that, by effecting the proposed combination, the individual defendants, who are allegedly controlled by USAi and/or beholden to USAi for their positions and thus have conflicts of interest, have breached their fiduciary duties to our other shareholders. As their prayer for relief in the lawsuits, the plaintiffs seek to have the Court enjoin the defendants from consummating the proposed combination, or in the alternative, to have the Court rescind the proposed combination. In addition, the plaintiffs seek monetary damages, attorneys' fees and other costs of pursuing the lawsuits. None of the defendants has yet filed a response to any of the four class action lawsuits. However, we believe that all four of the lawsuits are without merit, and we expect all defendants to vigorously defend the lawsuits. DERIVATIVE LITIGATION RELATING TO THE PROPOSED COMBINATION On or about December 1, 2000, one of our shareholders filed a derivative lawsuit on our behalf against USAi and the 15 directors of Ticketmaster Online-Citysearch. The lawsuit is entitled WALDMAN V. CONN, ET AL. AND TICKETMASTER ONLINE-CITYSEARCH, Inc., Court of Chancery for the State of Delaware, Case No. 18526. In the derivative lawsuit, the plaintiff alleges that the proposed combination is the product of unfair self-dealing, and that the consideration we will pay to USAi is unfair and excessive. The plaintiff further alleges that, by effecting the proposed combination, the individual defendants, who are controlled by USAi, breached their fiduciary duty to our shareholders by putting the interests of themselves and of USAi in front of the interest of our shareholders. As the prayer for relief in the derivative lawsuit, the plaintiff seeks to have the Court enjoin the defendants from proceeding with the transaction. In addition, the plaintiff seeks monetary damages from us, as well as attorneys' fees and the costs for pursuing the action. None of the defendants has yet filed a response to the derivative suit. However, we believe that the lawsuit is without merit, and we expect all defendants to vigorously defend against the lawsuit. 17 TICKETS.COM LITIGATION On July 23, 1999, we and Ticketmaster Corporation (collectively, "Ticketmaster"), filed a Complaint seeking damages and injunctive relief against Tickets.com, Inc. ("Tickets.com"), entitled TICKETMASTER CORPORATION AND TICKETMASTER ONLINE-CITYSEARCH, INC. V. TICKETS.COM, INC., Case No. 99-07654 HLH, in the United States District Court for the Central District of California. Ticketmaster claims that Tickets.com violates Ticketmaster's legal and contractual rights by, among other things, (i) providing deep-links to Ticketmaster's internal web pages without Ticketmaster's consent, (ii) systematically, deceptively and intentionally accessing Ticketmaster's computers and computer systems and copying verbatim Ticketmaster event pages daily and extracting and reprinting Ticketmaster's Uniform Resource Locators ("URLs") and event data and information in complete form on Tickets.com's web site and (iii) providing false and misleading information about Ticketmaster, the availability of tickets on the Ticketmaster Web Site, and the relationship between Ticketmaster and Tickets.com. On January 7, 2000, Ticketmaster filed a first amended complaint. Tickets.com filed a motion to dismiss Ticketmaster's first amended complaint on or about February 23, 2000, claiming that Tickets.com did not violate the Copyright Act or Lanham Act and that Ticketmaster's state law claims were preempted and/or did not state a valid claim for relief. The Court denied Tickets.com's motion as to Ticketmaster's claims for copyright infringement, violations of the Lanham Act, state law unfair competition and interference with prospective economic advantage. The Court granted Tickets.com's motion, but gave Ticketmaster leave to amend, as to Ticketmaster's claims for breach of contract, trespass, unjust enrichment and misappropriation. Ticketmaster filed a second amended complaint on April 21, 2000. On March 3, 2000, Ticketmaster filed a motion for preliminary injunction, requesting the Court to enjoin Tickets.com from, among other things, deep-linking and "spidering" to Ticketmaster's internal web pages, accessing Ticketmaster's computers and computer systems and copying Ticketmaster's event pages, and providing misleading and false information about Ticketmaster, the availability of tickets on the Ticketmaster Web Site and the relationship between Ticketmaster and Tickets.com. On July 31, 2000, the Court held a hearing. The court took the matter under submission, and on August 11, 2000 issued a ruling denying Ticketmaster's and our motion for preliminary injunction. On September 8, 2000, Ticketmaster filed a notice of appeal of the Court's order denying Ticketmaster's motion for preliminary injunction. On January 11, 2001, the Court of Appeals affirmed the District Court's order. On May 30, 2000, Tickets.com filed its Answer to Ticketmaster's second amended complaint and counterclaims against Ticketmaster Corporation and Ticketmaster Online-Citysearch, Inc. Tickets.com asserted claims for relief against Ticketmaster for violations of the Sherman Act, sections 1 and 2, violations of California's Cartwright Act, violations of California's Business and Professions Code section 17200, violations of common law restraint of trade and unfair competition and business practices, interference with contract and declaratory relief. Tickets.com claimed that Ticketmaster Corporation's exclusive agreements with Ticketmaster Online-Citysearch, Inc., venues, promoters and other third parties injure competition, violate antitrust laws, constitute unfair competition and interfere with Tickets.com's prospective economic advantages. On July 19, 2000, Ticketmaster filed a motion to dismiss any claim based in whole or in part on Ticketmaster's alleged litigation conduct as well as Tickets.com's ninth claim for relief under California's antitrust laws (the Cartwright Act). On September 25, 2000, the court entered an order denying Ticketmaster's motion on the ground that Tickets.com has the right to pursue some discovery on the issues raised in the motion before the issue can properly be resolved. On November 30, 2000, counsel for Ticketmaster and counsel for Tickets.com met pursuant to the required Local Rule 6.2 Early Meeting of Counsel obligation. The parties exchanged information concerning witnesses and documents supporting each side's respective positions, and also exchanged proposals concerning the schedule for the case. Tickets.com has proposed a schedule that would result in a trial date in November 2001. Ticketmaster has proposed a schedule pursuant to which discovery would conclude in November 2001 and after motions and other pretrial matters a trial date would be set in October 2002. The court has not yet issued an order setting a pretrial discovery schedule and a trial date. Ticketmaster intends to vigorously defend this litigation. 18 TICKETMASTER CASH DISCOUNT LITIGATION In the case Adriana Garza et al. v. Southwest Ticketing, Inc., d/b/a Ticketron, Ticketmaster and Rainbow Ticketmaster, Ticketmaster Texas Management, Ticketmaster LLC, Ticketmaster Group, Inc., Ticketmaster Online-Citysearch, Inc. and the May Department Stores Company, the plaintiff filed an amended class action petition in state court on June 20, 2000, which claims that Ticketmaster's practice of offering cash discounts against the amount of its service charges at outlets violated various state laws, and asserting an additional claim that the cash discount program in question violates a provision in a Merchant Services Bankcard Agreement between Ticketmaster and Chase Merchant Services L.L.C. and First Financial Bank. Plaintiff claims all consumers using VISA and MasterCard to purchase tickets from Ticketmaster are third-party beneficiaries of this contract. Plaintiff also filed on July 14, 2000 an amended class certification motion. In addition to the nine-state class sought by Plaintiff's original class certification request, the amended motion seeks the certification of a nationwide class of VISA and MasterCard customers since approximately April 1998 to prosecute the alleged third-party beneficiary claim. Ticketmaster filed a summary judgment motion on May 1, 2000 and Plaintiff filed a second amended motion for partial summary judgment on May 24, 2000. Currently, no hearing is set on any of these motions. On July 20, 2000, Ticketmaster removed the case to federal court in McAllen, Texas on the grounds that the newly added third-party beneficiary claim raises a federal question under the Truth-in-Lending Act. On August 1, 2000, Plaintiff filed a motion to remand the case to state court. Ticketmaster denies the allegations. On January 9, 2001, the plaintiff and defendants reached a tentative settlement of all issues. This settlement will require court approval to be finalized. Once a preliminary approval of the settlement occurs, the terms of the settlement will be announced through notice to the putative class members. As a part of the tentative settlement, the parties agreed to a remand of the matter from federal court to state court on January 17, 2001. CLASS ACTION LITIGATION RELATED TO MAGAZINE SALES On or about December 18, 2000, Ticketmaster Corporation and Time, Inc. were named as defendants in a purported class action lawsuit filed in the Florida Circuit Court of the Thirteenth Judicial Circuit in Hillsborough County. The lawsuit is entitled VICTORIA MCLEAN V. TICKETMASTER CORPORATION AND TIME, INC., Case No. G0009564. Ticketmaster has not yet been served in the lawsuit. The lawsuit alleges that the offering for sale by Ticketmaster Corporation of subscriptions to Entertainment Weekly magazine, a publication of Time, Inc., as an agent of Time, Inc., involves a pattern of criminal activity, conspiracy and unfair and deceptive trade practices by allegedly disclosing credit card account information to third parties without express written consent and unauthorized posting to credit card accounts. As the prayer for relief in the lawsuit, the plaintiff seeks to have the Court enjoin the business practices of which the plaintiff has complained. In addition, the plaintiff seeks treble monetary damages, as well as attorneys' fees and the costs for pursuing the action. Ticketmaster has not yet filed a response to the lawsuit. However, Ticketmaster believes the lawsuit is without merit and expects to vigorously defend against the lawsuit. We cannot assure you that we or Ticketmaster Corporation or, after the proposed combination, our combined company, or any of their respective affiliates, will not become the subject of future governmental investigations or inquiries or be named as a defendant in claims alleging violations of federal or state antitrust laws or any other laws. Any adverse outcome in such litigation, investigation or proceeding against any of us could limit or prevent us from engaging in our respective ticketing businesses or could subject us to potential damage assessments, all of which could have a material adverse effect on our business, financial condition or results of operations. Regardless of its merit, source or outcome, any such litigation, investigation or proceeding would at a minimum be costly and could divert the efforts of our management and other personnel from productive tasks, which could have a material adverse effect on our, and after the combination, our combined company's, business, financial condition or results of operations. 19 ANY ACQUISITIONS THAT WE UNDERTAKE COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS, DILUTE STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS. As part of our business strategy, we intend to make acquisitions of, or significant investments in, complementary companies, products or technologies. For example, we recently completed our acquisitions 2b Technology and TicketWeb and Ticketmaster Corporation recently completed its acquisitions of Admission Network Inc., a Canadian based ticketing company, and EDCS, a fan loyalty technology company. We recently announced that we will acquire Reserve America Holdings, Inc., a camping reservations company. In addition, we made investments in foodline.com, an online restaurant reservation company, FairMarket, Inc., an online auction company, and ActiveUSA.com, an online participatory sports reservation and registration company. These acquisitions and investments and any future acquisitions and investments are and will be accompanied by the risks commonly encountered in acquisitions of companies. These risks include, among other things: . the difficulty of assimilating the operations and personnel of the acquired companies; . the potential disruption of our ongoing business; . the diversion of resources from our existing businesses, sites and technologies; . the inability of management to maximize our financial and strategic position through the successful incorporation of the acquired technology into our products and services; . additional expense associated with amortization of acquired intangible assets; . the maintenance of uniform standards, controls, procedures and policies; and . the impairment of relationships with employees and customers as a result of any integration of new management personnel. We cannot assure you that we would be successful in overcoming these risks or any other problems encountered with such acquisitions. Our inability to overcome such risks could dilute our stockholder value and materially adversely affect our operating results. OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE DO NOT MAINTAIN THE VALUE OF OUR DOMAIN NAMES. We currently hold and license various Web domain names relating to our brand, including the "citysearch.com", "cityauction.com", "match.com", "ticketmaster.com", "sidewalk.com", "museumtix.com" and "ticketweb.com" domain names. The acquisition and maintenance of domain names generally is regulated by governmental agencies and their designees. The regulation of domain names in the United States and in foreign countries is subject to change. Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, there can be no assurance that we will be able to acquire or maintain relevant domain names in all countries in which we conduct business. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. We, therefore, may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights. Any such inability could have a material adverse effect on our business, financial condition and results of operations. WE ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS THAT MAY AFFECT THE PRICE OF OUR STOCK. Our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws and Section 203 of the Delaware General Corporation Law contain provisions that may render more difficult, or have the effect of discouraging, unsolicited takeover bids from third parties or the removal of our incumbent management. These provisions include the right of the holders of our Class A Common Stock to 15 votes per share, versus one vote per 20 share for the holders of our Class B Common Stock and provide that our stockholders may not call special meetings. In addition, our Amended and Restated Certificate of Incorporation authorizes our Board of Directors to issue, without stockholder approval, 2,000,000 shares of preferred stock, par value $.01 per share, with voting, conversion and other rights and preferences that could adversely affect the voting power or other rights of the holders of our Common Stock. Although we have no current plans to issue any shares of preferred stock, the issuance of preferred stock or rights to purchase preferred stock could render more difficult, or have the effect of discouraging, unsolicited takeover bids from third parties or the removal of incumbent management, or otherwise adversely affect the market price for the Class B Common Stock. Although such provisions do not have a substantial practical significance to investors while USAi, through its ownership of a majority of the voting power of our Common Stock, is in a position to effectively control all matters affecting us, such provisions could have the effect of depriving stockholders of an opportunity to sell their shares at a premium over prevailing market prices should USAi no longer be in such control. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intend," "potential," or "continue" or the negative of such terms or other comparable terminology. These statements are only predictions. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including the risks outlined under "Risk Factors" and elsewhere in this prospectus. USE OF PROCEEDS We will not receive any of the proceeds from the sale of the shares of our Class B Common Stock by the selling stockholders pursuant to this prospectus. SELLING STOCKHOLDERS The following table sets forth certain information regarding the holdings of the selling stockholders as of January 10, 2001, including the 299,954 shares of our Class B Common Stock issued to the selling stockholders in connection with the work-out agreement as more fully described in "Recent Developments."
SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY SELLING STOCKHOLDER OWNED PRIOR TO OFFERING SHARES OFFERED OWNED AFTER OFFERING - ------------------------ ----------------------- -------------- -------------------- Bryan T. Bostic (1) 513,152 212,968 300,184 Erik K. Martin (2) 70,490 70,490 0 Kenneth W. Bostic (3) 7,579 2,999 4,580 Live Oak Holdings, L.C. (4) 30,318 11,998 18,320 Clarke Holdings, L.C. (5) 1,499 1,499 0
(1) Mr. Bryan Bostic currently serves as a consultant to 2b Technology pursuant to a consulting agreement with 2b Technology and us. (2) Mr. Martin currently serves as the Vice Chairman and President of 2b Technology pursuant to an employment agreement with 2b Technology and us. 21 (3) Mr. Kenneth Bostic is currently an employee of 2b Technology. (4) Live Oak Holdings, L.C. is a Virginia limited liability company of which Mr. Bryan Bostic is the manager. (5) Clarke Holdings, L.C. is a Virginia limited liability company of which Mr. Martin is the manager. PLAN OF DISTRIBUTION The selling stockholders (and their respective donees, distributees, pledgees and personal representatives) may, from time to time, offer for sale and sell or distribute the shares of our Class B Common Stock offered hereby in transactions executed on The Nasdaq National Market, in negotiated transactions, private sales or through other means. The selling stockholders under some circumstances might be deemed underwriters under the Securities Act of 1933. As a precaution against such a possibility, the selling stockholders intend to deliver prospectuses to purchasers in accordance with Section 5 of the Securities Act of 1933. Sales may be effected at market prices prevailing at the time of sale or at such other prices as may be negotiated by the selling stockholders. The shares may be sold by one or more of the following: (a) a block trade in which the broker-dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; (b) purchased by a broker-dealer as principal and resold by such broker-dealer for its account pursuant to this prospectus; (c) an exchange distribution in accordance with the rules of such exchange; and (d) ordinary brokerage transactions and transactions in which the broker solicits purchasers. In effecting sales, broker-dealers engaged by the selling stockholder may arrange for other broker-dealers to participate in the resales. In connection with distributions of the shares or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers. In connection with such transactions, broker-dealers may engage in short sales of shares of our Class B Common Stock in the course of hedging the positions they assume with the selling stockholders. The selling stockholders may also sell shares of our Class B Common Stock short and deliver the shares offered hereby to close out such short positions. In connection with the foregoing transactions, the selling stockholders may be required to deliver this prospectus. The selling stockholders may also loan or pledge the shares registered hereunder to a broker-dealer and the broker-dealer may sell the shares so loaned, or upon a default the broker-dealer may effect sales of the pledged shares, in each case pursuant to this prospectus. Broker-dealers or agents may receive compensation in the form of commissions, discounts or concessions from the selling stockholders in amounts to be negotiated in connection with the sale. Such broker-dealers or agents and any other participating broker-dealers may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act of 1933 in connection with such sales and any such commission, discount or concession may be deemed to be underwriting discounts or commissions under the Securities Act of 1933. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this prospectus. In order to comply with the securities laws of certain states, if applicable, the shares will be sold in such jurisdictions only through registered or licensed brokers or dealers. The selling stockholders will be responsible for 50% of any fees, disbursements and expenses of any counsel for the selling stockholders. All other expenses incurred in connection with the registration of the shares offered hereby, including SEC registration fees, printer's and accounting fees, 50% of any fees, disbursements and expenses of any counsel for the selling stockholders, and the fees, disbursements and expenses of our counsel will be borne by us. Commissions and discounts, if any, attributable to the sales of the shares offered hereby will be borne by the selling stockholders. The selling stockholders may agree to indemnify any broker-dealer or agent that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act of 1933. We have agreed to indemnify the selling shareholders against certain liabilities in connection with the offering of the shares, including liabilities arising under the Securities Act of 1933. 22 We have undertaken to keep a registration statement of which this prospectus constitutes a part effective until the earliest to occur of (a) all shares offered hereby being sold pursuant to the registration statement or (ii) the twelve month anniversary of the date on which the registration statement of which this prospectus constitutes a part was declared effective by the SEC. After such period, if we choose not to maintain the effectiveness of the registration statement of which this prospectus constitutes a part, the shares offered hereby may not be sold, pledged, transferred or assigned, except in a transaction which is exempt under the provisions of the Securities Act of 1933 or pursuant to an effective registration statement thereunder. LEGAL MATTERS The validity of our Class B Common Stock to be offered in this prospectus will be passed upon for us by Gibson, Dunn & Crutcher LLP, Los Angeles, California. EXPERTS Ernst & Young LLP, independent auditors, have audited our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 1999, as set forth in their report, which is incorporated by reference in this prospectus and elsewhere in the registration statement. Our financial statements are incorporated by reference in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. You may inspect and copy these reports, proxy statements and other information at the public reference facilities of the SEC at: . Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; . 7 World Trade Center, Suite 1300, New York, New York 10048; and . Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661. You may also obtain copies of these materials from the public reference section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You should call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. The SEC also maintains an Internet web site that contains reports, proxy and information statements and other information regarding companies and other persons that file electronically with the SEC. The SEC's Internet web site address is http:\\www.sec.gov. You may inspect reports and other information that we file at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006. We have filed a registration statement and related exhibits with the SEC under the Securities Act of 1933. The registration statement, which includes this prospectus, contains additional information about our company and the shares to be sold by the selling stockholders. You may inspect the registration statement and exhibits without charge at the office of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and you may obtain copies from the SEC at prescribed rates. INCORPORATION OF DOCUMENTS BY REFERENCE The SEC allows us to "incorporate by reference" information that we file with it, which means that we can disclose important information to you by referring to those documents. The information incorporated by reference is an important part of this prospectus, and the information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the following documents that we have filed with the SEC: 23 . Annual Report on Form 10-K for the year ended December 31, 1999; . Quarterly Report on Form 10-Q for the quarter ended March 31, 2000; . Quarterly Report on Form 10-Q for the quarter ended June 30, 2000; . Quarterly Report on Form 10-Q for the quarter ended September 30, 2000; . Current Report on Form 8-K filed January 28, 2000; . Current Report on Form 8-K filed April 20, 2000; . Current Report on Form 8-K filed June 5, 2000; . Current Report on Form 8-K filed August 2, 2000; . Current Report on Form 8-K filed October 26, 2000; . Current Report on Form 8-K filed November 21, 2000; . Definitive Information Statement Pursuant to Section 14(c) of the Securities Exchange Act of 1934 filed January 11, 2001; and . The description of our Class B Common Stock contained in our Registration Statement on Form 8-A (File No. 000-25041) filed on November 6, 1998, pursuant to Section 12(g) of the Exchange Act, including any amendment or report filed for the purpose of updating such description. We are also incorporating by reference additional documents that we may file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of the prospectus and the termination of the offering of the shares offered hereby. You may request a copy of these filings at no cost, by writing or telephoning us at the following address and phone number: Ticketmaster Online-Citysearch, Inc. Attn: Chief Financial Officer 790 E. Colorado Boulevard, Suite 200 Pasadena, California 91101 Telephone: (626) 405-0050 24 You should rely only on the information incorporated by reference or provided in this prospectus and any supplement. We have not authorized anyone else to provide you with different information. 299,954 SHARES TICKETMASTER ONLINE--CITYSEARCH, INC. CLASS B COMMON STOCK ---------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. We will pay all expenses incident to the offering and sale to the public of the shares being registered including any commissions and discounts of underwriters, dealers or agents and any transfer taxes. Such expenses are set forth in the following table except commissions, discounts and transfer taxes. All of the amounts shown are estimates, except for the SEC registration fee:
AMOUNT TO BE ITEM PAID - ------------------------------------------------------------- --------- SEC Registration fee..................................... $1,000 Nasdaq listing fee....................................... 804 Printing fees and expenses............................... 5,000 Accounting fees and expenses............................. 5,000 Legal fees and expenses.................................. 5,000 Blue Sky fees and expenses............................... 1,000 Transfer agent and registrar fees........................ 2,500 Miscellaneous............................................ 5,000 ------- Total........................................................ $25,304 =======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. We are a Delaware corporation. Section 145 of the General Corporation Law of the State of Delaware (the "Delaware Law") empowers a Delaware corporation to indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than action by or in the right of such corporation), by reason of the fact that such person was an officer or director of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such officer or director acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests, and, for criminal proceedings, had no reasonable cause to believe his conduct was illegal. A Delaware corporation may indemnify officers and directors in an action by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation in the performance of his duty. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director actually and reasonably incurred. Our Amended and Restated Certificate of Incorporation provides for the indemnification of directors to the fullest extent permissible under Delaware law. The effect of these provisions is to eliminate our rights and the rights of our stockholders (through stockholders' derivative suits on our behalf) to recover monetary damages against a director for breach of fiduciary duty of care as a director (including breaches resulting from negligent or grossly negligent behavior), except in certain limited situations. These provisions do not limit or eliminate our rights or any of our stockholder's rights to II-1 seek non-monetary relief such as an injunction or rescission in the event of a breach of a director's duty of care. These provisions will not alter the liability of directors under federal securities laws. Our Amended and Restated Bylaws provide for the indemnification of officers, directors and third parties acting on behalf of us if such person acted in good faith and in a manner reasonably believed to be in and not opposed to our best interest, and, with respect to any criminal action or proceeding, the indemnified party had no reason to believe his conduct was unlawful. ITEM 16. EXHIBITS
EXHIBIT NUMBER EXHIBIT TITLE NOTES ------- ------------- ----- 2.1 Agreement and Plan of Reorganization, among CitySearch, Inc., MB Acquisition Corporation, MetroBeat, Inc., Mark Davies and Joshua White, dated May 31, 1996. (A)* 2.2 Amended and Restated Agreement and Plan of Reorganization, among CitySearch, Inc., Tiberius, Inc., USA Networks, Inc., Ticketmaster Group, Inc., Ticketmaster Corporation and Ticketmaster Multimedia Holdings, Inc., dated August 12, 1998. (A) 2.3 Agreement and Plan of Reorganization, dated January 8, 1999, by and among Ticketmaster Online--CitySearch, Inc., Nero Acquisition Corp., Inc., CityAuction, Inc., Andrew Rebele and Monica Lee as amended. (B) 2.4 Exchange Agreement by and among Cendant Corporation, Cendant Intermediate Holdings, Inc. and Ticketmaster Online--CitySearch, Inc. dated as of May 14, 1999. (C) 2.5 Agreement and Plan of Reorganization dated June 10, 1999 among Ticketmaster Online--CitySearch, Web Media Ventures LLC (dba One & Only Network) and William Bunker, David Kennedy and Glenn Wiggins. (C) 2.6 Agreement and Plan of Merger by and among Sidewalk.com, Inc., Microsoft Corporation and the Registrant, dated as of July 19, 1999. (D) 2.7 Agreement and Plan of Merger by and among the Registrant, TMCS Merger Sub, Inc., 2b Technology, Inc., Bryan Bostic, Eric Martin, Live Oak Holdings, L.C., Clarke Holding, L.C., and Kenneth Bostic, dated as of January 30, 2000. (F) 2.8 Agreement and Plan of Merger by and among the Registrant, TMCS Merger Sub, Inc. and TicketWeb Inc., dated as of May 23, 2000. (G) 2.9 Contribution Agreement by and between the Registrant and USA Networks, Inc., dated as of November 20, 2000. (H) 2.10 Work-Out Agreement by and among the Registrant, 2b Technology, Inc., Bryan Bostic, Eric Martin, Live Oak Holdings, L.C., Clarke Holding, L.C., and Kenneth Bostic dated as of December 8, 2000. 2.11 Share Purchase Agreement by and among Ticketmaster Canada, Inc., Ticketmaster Online-Citysearch, Inc, ReserveAmerica Holdings, Inc., and certain Shareholders of ReserveAmerica Holdings, Inc. dated as of January 9, 2001. 4.1 Specimen Class B Common Stock Certificate. (E) 4.2 Form of Class B Common Stock Purchase Warrant of the Registrant to be delivered upon closing of the Sidewalk acquisition (3,000,000 shares). (D) 4.3 Form of Class B Common Stock Purchase Warrant of the Registrant to be delivered upon
II-2
EXHIBIT NUMBER EXHIBIT TITLE NOTES ------- ------------- ----- closing of the Sidewalk acquisition (1,500,000 shares). (D) 5.1 Opinion of Gibson, Dunn & Crutcher LLP as to the legality of the securities being registered. 23.1 Consent of Independent Auditors. 23.2 Consent of Counsel (included in Exhibit 5.1). 24.1 Power of Attorney (included on signature page).
- ------------------------- * Confidential treatment has been granted with respect to portions of this exhibit. (A) Incorporated by reference to exhibits filed in response to Item 16, "Exhibits," of the Company's Registration Statement on Form S-1 (File No. 333-64855) filed with the Commission on September 30, 1998. (B) Incorporated by reference to the Company's Report on Form 10-K filed with the Commission on March 31, 1999. (C) Incorporated by reference to exhibits filed in response to Item 16, "Exhibits," of the Company's Registration Statement on Form S-1 (File No. 333-81761) filed with the Commission on June 29, 1999. (D) Incorporated by reference to exhibits filed in response to Item 6, "Exhibits," of the Report on Form 10-Q filed with the Commission on August 16, 1999. (E) Incorporated by reference to exhibits filed in response to Item 16, "Exhibits," of the Company's Registration Statement on Form S-1 (File No. 333-64855) filed with the Commission on November 6, 1998. (F) Incorporated by reference to exhibits filed in response to Item 16, "Exhibits," of the Company's Registration Statement on Form S-3 (File No. 333-30884) filed with the Commission on February 22, 2000. (G) Incorporated by reference to exhibits filed in response to Item 16, "Exhibits," of the Company's Registration Statement on Form S-3 (File No. 333-39230) filed with the Commission on June 14, 2000. (H) Incorporated by reference to exhibits to the Company's Definitive Information Statement Pursuant to Section 14(c) of the Securities Exchange Act of 1934 filed with the Commission on January 11, 2001. II-3 ITEM 17. UNDERTAKINGS. A. UNDERTAKING PURSUANT TO RULE 415 The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of this offering. B. UNDERTAKING REGARDING FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY REFERENCE The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities and Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. UNDERTAKING IN RESPECT OF INCORPORATED ANNUAL AND QUARTERLY REPORTS The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report, to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. D. UNDERTAKING IN RESPECT OF INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or II-4 paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. E. UNDERTAKING PURSUANT TO RULE 430A The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or Rule 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pasadena, California, on the 23rd day of January, 2001. TICKETMASTER ONLINE-CITYSEARCH, INC. By: /s/ JOHN PLEASANTS ------------------------ John Pleasants Chief Executive Officer POWER OF ATTORNEY Know All Men By These Presents, that each person whose signature appears below constitutes and appoints Brad Serwin and Thomas McInerney, jointly and severally, his attorney-in-fact, each with the power of substitution for him in any and all capacities, to sign any amendments to this registration statement (including post-effective amendments), and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and all post-effective amendments thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JOHN PLEASANTS - ----------------------------- Chief Executive Officer (Principal January 23, 2001 John Pleasants Executive Officer) and Director /s/ THOMAS MCINERNEY - ----------------------------- Chief Financial Officer, Executive Vice January 23, 2001 Thomas McInerney President, Finance and Treasurer (Principal Financial and Accounting Officer) /s/ TERRY BARNES - ----------------------------- Director January 23, 2001 Terry Barnes /s/ CHARLES CONN - ----------------------------- Director January 23, 2001 Charles Conn /s/ BARRY DILLER - ----------------------------- Director January 23, 2001 Barry Diller /s/ JULIUS GENACHOWSKI - ----------------------------- Director January 23, 2001 Julius Genachowski /s/ JOSEPH GLEBERMAN - ----------------------------- Director January 23, 2001 Joseph Gleberman
II-6 /s/ WILLIAM GROSS - ----------------------------- Director January 23, 2001 William Gross /s/ ALLEN GRUBMAN - ----------------------------- Director January 23, 2001 Allen Grubman /s/ VICTOR A. KAUFMAN - ----------------------------- Director January 23, 2001 Victor A. Kaufman /s/ BRYAN LOURD - ----------------------------- Director January 23, 2001 Bryan Lourd /s/ JON MILLER - ----------------------------- Director January 23, 2001 Jon Miller /s/ WILLIAM D. SAVOY - ----------------------------- Director January 23, 2001 William D. Savoy /s/ ALAN SPOON - ----------------------------- Director January 23, 2001 Alan Spoon /s/ THOMAS UNTERMAN - ----------------------------- Director January 23, 2001 Thomas Unterman
II-7 INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBIT TITLE NOTES ------- ------------- ----- 2.1 Agreement and Plan of Reorganization, among CitySearch, Inc., MB Acquisition Corporation, MetroBeat, Inc., Mark Davies and Joshua White, dated May 31, 1996. (A)* 2.2 Amended and Restated Agreement and Plan of Reorganization, among CitySearch, Inc., Tiberius, Inc., USA Networks, Inc., Ticketmaster Group, Inc., Ticketmaster Corporation and Ticketmaster Multimedia Holdings, Inc., dated August 12, 1998. (A) 2.3 Agreement and Plan of Reorganization, dated January 8, 1999, by and among Ticketmaster Online--CitySearch, Inc., Nero Acquisition Corp., Inc., CityAuction, Inc., Andrew Rebele and Monica Lee as amended. (B) 2.4 Exchange Agreement by and among Cendant Corporation, Cendant Intermediate Holdings, Inc. and Ticketmaster Online--CitySearch, Inc. dated as of May 14, 1999. (C) 2.5 Agreement and Plan of Reorganization dated June 10, 1999 among Ticketmaster Online--CitySearch, Web Media Ventures LLC (dba One & Only Network) and William Bunker, David Kennedy and Glenn Wiggins. (C) 2.6 Agreement and Plan of Merger by and among Sidewalk.com, Inc., Microsoft Corporation and the Registrant, dated as of July 19, 1999. (D) 2.7 Agreement and Plan of Merger by and among the Registrant, TMCS Merger Sub, Inc., 2b Technology, Inc., Bryan Bostic, Eric Martin, Live Oak Holdings, L.C., Clarke Holding, L.C., and Kenneth Bostic, dated as of January 30, 2000. (F) 2.8 Agreement and Plan of Merger by and among the Registrant, TMCS Merger Sub, Inc. and TicketWeb Inc., dated as of May 23, 2000. (G) 2.9 Contribution Agreement by and between the Registrant and USA Networks, Inc., dated as of November 20, 2000. (H) 2.10 Work-Out Agreement by and among the Registrant, 2b Technology, Inc., Bryan Bostic, Eric Martin, Live Oak Holdings, L.C., Clarke Holding, L.C., and Kenneth Bostic dated as of December 8, 2000. 2.11 Share Purchase Agreement by and among Ticketmaster Canada, Inc., Ticketmaster Online-Citysearch, Inc, ReserveAmerica Holdings, Inc., and certain Shareholders of ReserveAmerica Holdings, Inc. dated as of January 9, 2001. 4.1 Specimen Class B Common Stock Certificate. (E) 4.2 Form of Class B Common Stock Purchase Warrant of the Registrant to be delivered upon closing of the Sidewalk acquisition (3,000,000 shares). (D) 4.3 Form of Class B Common Stock Purchase Warrant of the Registrant to be delivered upon closing of the Sidewalk acquisition (1,500,000 shares). (D) 5.1 Opinion of Gibson, Dunn & Crutcher LLP as to the legality of the securities being registered. 23.1 Consent of Independent Auditors. 23.2 Consent of Counsel (included in Exhibit 5.1).
EXHIBIT NUMBER EXHIBIT TITLE NOTES ------- ------------- ----- 24.1 Power of Attorney (included on signature page).
- ------------------------- * Confidential treatment has been granted with respect to portions of this exhibit. (A) Incorporated by reference to exhibits filed in response to Item 16, "Exhibits," of the Company's Registration Statement on Form S-1 (File No. 333-64855) filed with the Commission on September 30, 1998. (B) Incorporated by reference to the Company's Report on Form 10-K filed with the Commission on March 31, 1999. (C) Incorporated by reference to exhibits filed in response to Item 16, "Exhibits," of the Company's Registration Statement on Form S-1 (File No. 333-81761) filed with the Commission on June 29, 1999. (D) Incorporated by reference to exhibits filed in response to Item 6, "Exhibits," of the Report on Form 10-Q filed with the Commission on August 16, 1999. (E) Incorporated by reference to exhibits filed in response to Item 16, "Exhibits," of the Company's Registration Statement on Form S-1 (File No. 333-64855) filed with the Commission on November 6, 1998. (F) Incorporated by reference to exhibits filed in response to Item 16, "Exhibits," of the Company's Registration Statement on Form S-3 (File No. 333-30884) filed with the Commission on February 22, 2000. (G) Incorporated by reference to exhibits filed in response to Item 16, "Exhibits," of the Company's Registration Statement on Form S-3 (File No. 333-39230) filed with the Commission on June 14, 2000. (H) Incorporated by reference to exhibits to the Company's Definitive Information Statement Pursuant to Section 14(c) of the Securities Exchange Act of 1934 filed with the Commission on January 11, 2001. EX-2.10 2 a2036134zex-2_10.txt EXHIBIT 2.10 EXHIBIT 2.10 TICKETMASTER ONLINE-CITYSEARCH, INC./ FORMER SHAREHOLDERS OF 2b TECHNOLOGY, INC. WORK-OUT AGREEMENT DECEMBER 8, 2000 This Work-Out Agreement (this "Agreement") is entered into as of the first date above by and among Ticketmaster Online-CitySearch, Inc. ("TMCS"), 2b Technology, Inc. ("2b") and the former shareholders ("Shareholders") of 2b with respect to the commutation of the earn-out portions of that certain Agreement and Plan of Merger among TMCS, TMCS Merger Sub, Inc., 2b and the Shareholders (the "Original Agreement"). TERMS AND CONDITIONS WHEREAS, The Original Agreement provides that TMCS will pay to the Shareholders additional consideration for the purchase of 2b from the Shareholders based on the achievement of certain business hurdles during calendar years 2000 and 2001, among other things, and certain disputes have arisen among the parties with respect to the rights of the Shareholders to obtain all or portions of such additional consideration; WHEREAS, the parties hereto have agreed to commute the earn-out and EBITDA adjustment provisions of the Agreement, namely Sections 2.11 and 2.12 thereof (collectively the "Work-Out") and enter into certain related agreements among themselves in order to fully satisfy the TMCS and 2b obligations under the Original Agreement with regard to those provisions and to release one another from all liabilities relating to such provisions (except as set forth herein); NOW, THEREFORE, in consideration of the mutual promises herein and other consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. PAYMENT IN LIEU OF CONSIDERATION DUE UNDER SECTION 2.11: At the closing of the Work-Out (the "Closing"), which will occur on the first business day following the execution of this Agreement by all parties hereto, TMCS will deliver to the Shareholders 299,954 shares of fully paid and non-assessable TMCS Class B Common Stock, $.01 par value per share (the "Shares"). Promptly after the Closing, TMCS will use its best efforts, at its sole expense, to cause the Shares to be registered as expeditiously as possible for resale by the Shareholders under the Securities Act of 1933, as amended (the "Act"). In any event, TMCS will cause a registration statement under the Act ("Registration Statement") to be filed with the U.S. Securities and Exchange Commission no later than 45 days after the Closing and the Shares delivered at Closing to be registered no later than 90 days after Closing. TMCS shall cause the Registration Statement to remain effective until the earlier of (a) the date on which all the Shares have been sold by the Shareholders or (b) twelve months following the effective date of the Registration Statement. The Shares will be allocated to the Shareholders in the same proportions as under the Original Agreement, which allocation is as set forth on Exhibit A hereto. At the Closing, TMCS shall issue stock certificates evidencing the Shares, as allocated among the Shareholders, in the names of the record holders as set forth on Exhibit A. TMCS may rely on such Exhibit as the sole expression of the Shareholders with regard to these matters. All the Shares may be sold by the Shareholders pursuant to applicable exemptions from registration under the Act following issuance and may be sold without restriction by the Shareholders immediately following effectiveness of such registration statement. 2. SURVIVAL AND TERMINATION OF TERMS: All terms of the Original Agreement, except those set forth below, will continue in full force and effect after the Closing. All TMCS and/or 2b obligations to pay additional consideration under Section 2.11 of the Original Agreement will terminate upon the Closing. All mutual obligations to cause an audit to be performed under Section 2.11(c) of the Original Agreement also will terminate upon the Closing. All obligations of any party under Section 2.12 of the Original Agreement will terminate upon the Closing. Any other obligations of any party set forth in the Original Agreement which, by their nature, clearly terminate upon the delivery of the additional consideration due to the Shareholders shall also terminate upon the Closing. TMCS' covenants under Section 6.5 of the Original Agreement will be eliminated effective upon the Closing and replaced by covenants that (a) TMCS will maintain an operations facility for 2b's business within a 50-mile radius of its current location in Glen Allen, Virginia and (b) TCMS will continue to be responsible for removing Bryan T. Bostic from all guarantees of obligations of 2b as provided in Section 6.5(d) of the Original Agreement. 3. RELEASE OF CLAIMS: TMCS and 2b on the one hand and each of the Shareholders on the other hand hereby separately and independently release each other, and all of their respective officers, directors, shareholders, employees, representatives, successors, assigns and parent corporations from any and all claims, contracts, duties, demands, setoffs, debts, covenants, promises, agreements, damages, liabilities, obligations, actions, causes of action, commissions, attorneys' fees, costs and expenses, of whatever kind or nature, from the beginning of time to the date hereof, whether known or unknown, at law or in equity, without limitation of any sort whatsoever, relating to the respective obligations of the parties under Sections 2.11, 2.12 and 6.5 of the Original Agreement, except that no party hereby releases the other from any obligations with respect to Section 6.5 as modified herein. Each of the parties hereby waives, to the extent permitted by law, its rights under Section 1542 of the California Civil Code. California Civil Code Section 1542 states: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. 4. ESCROW: At the Closing, Shares with a value of $1 million (valued using a five day trailing average ending on the second trading day prior to the Closing) ("Escrow Shares") will be held by TMCS in trust until such time as TMCS and the Shareholders have mutually agreed upon the identify of an escrow agent ("Escrow Agent") and the terms of an escrow agreement ("Escrow Agreement"). Upon agreement of the parties as to the identity of the Escrow Agent and the terms of the Escrow Agreement (which shall not be unreasonably withheld by either party), TMCS shall immediately transfer the Escrow Shares to escrow accounts administered by the Escrow Agent. Bryan T. Bostic will be the beneficiary of the first escrow account (the "First Escrow") and Eric K. Martin will be the beneficiary of the second escrow account (the "Second Escrow"). The First and Second Escrows are sometimes referred to individually as an Escrow and together as the Escrows. Immediately prior to depositing the Escrow Shares in Escrow, the parties to the Escrows will enter into the Escrow Agreements with the respective Escrow administrators. The Escrow Shares to be deposited into the Escrows will be divided between the First Escrow and Second Escrow as follows: Seventy Six Percent (76%) of the Escrow Shares shall be placed in the First Escrow and Twenty Four Percent (24%) of the Escrow Shares shall be placed in the Second Escrow. Each Escrow will serve as a non-exclusive fund against which post-closing claims by TMCS based on breaches of representations, warranties or covenants in the Original Agreement can be paid (subject to the several liability limitation and other indemnification limitations of the Original Agreement). 2 The Escrow Agreement will provide that the Shareholder who is the beneficiaries of the respective Escrow has exclusive rights to direct the retention or sale of the Shares held subject to the applicable Escrow Agreement and, if such Shares are sold, to reinvest the proceeds, subject to (a) the limitation that any proceeds be invested only in money market funds, United States or United States agency debt with a duration of one year or less, corporate bonds with an "A" or better rating with a duration of one year or less, or Standard & Poors 500 index funds which contain $1 billion or more in invested assets and (b) applicable federal and state securities laws; provided, however, that no more than one half (1/2 ) of the proceeds of the sale of Shares in Escrow may be invested in Standard & Poors Index funds. Each Escrow will terminate on the 18-month anniversary of the closing of the Original Agreement unless TMCS has given a valid Claim Notice (as defined in the Original Agreement) under the indemnification provisions of the Original Agreement prior to such time. Upon termination of the Escrow, Shares or other permitted investments subject to each Escrow will be paid over to the Shareholder(s) who are beneficiaries of such accounts to the extent such assets have not been paid over to TMCS under the terms of the Escrow Agreement. TMCS represents and warrants that, to the actual knowledge of its Chief Financial Officer, General Counsel and President, without any investigation thereof, none of the representations and warranties of the Company and the Shareholders in Section 4 of the Original Agreement are inaccurate or have been breached. The Shareholders represent and warrant that, to their actual knowledge, without any investigation thereof, none of the representations and warranties of TMCS and the Merger Sub in Section 5 of the Original Agreement are inaccurate or have been breached. 5. EXPENSES: TMCS will pay for all reasonable expenses relating to the matters set forth herein incurred by TMCS and the Shareholders in connection with the Work-Out (including attorney's fees of Shareholders' counsel, the expenses relating to the Escrow Agreements and the fees of any escrow administrator), subject to a maximum of $10,000 of Shareholder expenses (the "Maximum Shareholder Expense"), unless the Closing, as provided herein, is prevented due to a failure or refusal of the Shareholders to close which is not in good faith. The Escrows shall be considered as mutual expenses, meaning that TMCS will pay one-half (1/2) of the expenses associated with the Escrow and the Shareholders will pay one-half (1/2) of the expenses associated with the Escrow subject to the TMCS obligation to pay Shareholder expenses up to the Maximum Shareholder Expense. 6. MISCELLANEOUS: A. INDEMNIFICATION: Each party shall indemnify and hold the other parties, and their respective parents, affiliates and subsidiary companies, and its and their successors, and assigns harmless against all losses, costs, damages, claims, liabilities, judgments, settlements and expenses (including reasonable counsel fees) which may be suffered, made, incurred or assumed by such party, growing out of or by reason of any breach or alleged breach of any representations, warranties, undertakings, or agreements made by the other party hereunder. B. SUCCESSORS: This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, devisees, legatees, executors, administrators, successors and personal or legal representatives. C. ENTIRE AGREEMENT: The execution of this Agreement has not been induced by any representations, statements, warranties or agreements other than those expressed herein. This Agreement embodies the entire understandings of the parties with regard to the matters set forth herein, and there are no further agreements or understandings, written or oral, in effect between the parties relating to the subject matter hereof. 3 D. GOVERNING LAW: This Agreement shall be governed by and interpreted in accord with the laws of the State of Delaware applicable to agreements entered into and to be performed wholly in Delaware. E. ARBITRATION: The parties hereby agree that any dispute, controversy or claim arising out of or relating to this Agreement or a breach thereof shall be determined by binding arbitration before a panel of three (3) arbitrators under the Commercial Arbitration Rules of the American Arbitration Association. Such arbitration shall be held in Chicago, Illinois or such other place as the parties may agree upon in writing. The decision of the arbitrators shall set forth in writing the grounds or basis of the arbitrators' decision. Such an award shall be a final and binding determination of the dispute and judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 4 IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of the first date written above: TICKETMASTER ONLINE - CITYSEARCH, INC. 2b TECHNOLOGY, INC. By: By: ---------------------------------- --------------------------------- Name: Name: -------------------------------- ------------------------------- Date: Date: -------------------------------- -------------------------------- - ------------------------------------- ------------------------------------ Bryan T. Bostic Ken Bostic LIVE OAK HOLDINGS, L.C. By - ------------------------------------- ---------------------------------- Eric K. Martin Its: -------------------------------- CLARKE HOLDINGS, L.C. By: ---------------------------------- Its: --------------------------------- 5 EX-2.11 3 a2036134zex-2_11.txt EXHIBIT 2.11 EXHIBIT 2.11 SHARE PURCHASE AGREEMENT BY AND AMONG CITYSEARCH CANADA, INC., TICKETMASTER ONLINE-CITYSEARCH, INC., RESERVEAMERICA HOLDINGS, INC. AND THE SHAREHOLDERS THEREOF DATED AS OF DECEMBER 28, 2000 TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS............................................................................................1 1.1. Defined Terms........................................................................1 1.2. Terms Defined Elsewhere..............................................................6 ARTICLE II AGREEMENT TO PURCHASE AND SELL SHARES.................................................................8 2.1 Agreement to Purchase and Sell Shares................................................8 2.2. Distribution of the Aggregate Consideration..........................................8 2.3. Form of Consideration................................................................9 2.4. Additional Consideration.............................................................9 2.5. Adjustment Events...................................................................11 2.6. Payment of Closing Debt Outstanding at Closing; Release of Guarantee................12 ARTICLE III CLOSING; DELIVERY...................................................................................12 3.1 The Closing.........................................................................12 3.2. Deliveries by the Company and the Shareholders at the Closing.......................12 3.3. Deliveries by Purchaser at the Closing..............................................13 3.4. Non-Resident Deliveries.............................................................13 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS...................................14 4.1 Organization, Good Standing and Qualification.......................................14 4.2 Capitalization......................................................................14 4.3 Subsidiaries........................................................................15 4.4 Due Authorization...................................................................16 4.5 Valid Issuance of Shares............................................................16 4.6 Liabilities.........................................................................16 4.7 Title to Properties and Assets......................................................16 4.8 Intellectual Property; Software.....................................................16 4.9 Material Contracts and Obligations..................................................20 4.10. Litigation..........................................................................21 4.11 Required Consents...................................................................21 4.12 Compliance with Other Instruments...................................................22 4.13. Disclosure..........................................................................22 4.14. Government Contracts................................................................22 4.15. Insurance...........................................................................23 4.16. Financial Statements................................................................23 4.17. Certain Actions.....................................................................24 4.18. Activities Since Balance Sheet Date.................................................24 4.19. Taxes...............................................................................25 4.20. Environmental Matters...............................................................27 4.21 Employee Benefits...................................................................29 4.22. Permits.............................................................................30
i 4.23. Interested Party Transactions.......................................................30 4.24. Compliance with Law.................................................................30 4.25 Certain Business Practices..........................................................30 4.26 Minute Books........................................................................31 4.27. Labor Matters.......................................................................31 4.28. No Brokers..........................................................................31 4.29. Bank Accounts.......................................................................32 4.30. Competition Act.....................................................................32 4.31. Trust Account.......................................................................32 4.32. Private Company.....................................................................32 4.33 Due Authorization of Shareholders...................................................32 4.34 Title to Shares.....................................................................32 4.35. Proceedings Regarding Shareholders..................................................33 4.36. Representations Regarding Parent Shares.............................................33 4.37. Non-Residents.......................................................................34 4.38. Community Property..................................................................34 4.39. Securities Act (Ontario)............................................................34 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER...........................................................34 5.1 Organization........................................................................34 5.2 Due Authorization...................................................................34 5.3 No Conflicts........................................................................35 5.4. Consents and Approvals..............................................................35 5.5. Litigation..........................................................................35 5.6. No Brokers..........................................................................35 5.7. Valid Issuance of Stock.............................................................35 5.8. SEC Filings.........................................................................36 5.9. Conduct of Business.................................................................36 5.10. Financial Statements................................................................36 ARTICLE VI CERTAIN COVENANTS....................................................................................36 6.1 Conduct of the Business.............................................................36 6.2 Further Assurances..................................................................38 6.3 Confidentiality; Public Announcements...............................................38 6.4. Ancillary Agreements................................................................39 6.5 Inspection..........................................................................39 6.6. Notification of Certain Matters.....................................................39 6.7. Non-Executive Employee Matters......................................................39 6.8. Budgeting and Transitional Matters..................................................40 6.9. Registration Statement..............................................................41 6.10. Release.............................................................................44 6.11. Lock-up.............................................................................45 6.12. Financial Statements................................................................46 6.13. Solicitation of Shareholders and Warrant Holders....................................46 6.14. Software Compliance.................................................................46 6.15. Updating Schedules..................................................................47
ii ARTICLE VII CONDITIONS TO CLOSING...............................................................................47 7.1. Conditions to Each Party's Obligations..............................................47 7.2. Conditions to Obligation of the Company and the Shareholders........................47 7.3. Conditions to Obligation of Purchaser...............................................48 ARTICLE VIII. TERMINATION.......................................................................................49 8.1. Termination.........................................................................49 8.2. Effect of Termination...............................................................50 ARTICLE IX. INDEMNIFICATION.....................................................................................51 9.1. Survival of Representations.........................................................51 9.2. Indemnification.....................................................................51 9.3. Notice of Claims....................................................................52 9.4. Third Person Claims.................................................................54 9.5. Limitation on Indemnity.............................................................54 9.6. Right of Offset.....................................................................55 9.7. Remedies............................................................................55 ARTICLE X. MISCELLANEOUS........................................................................................55 10.1. Binding Effect; Assignment..........................................................55 10.2. Notices.............................................................................55 10.3. Choice of Law.......................................................................57 10.4. Entire Agreement; Amendments and Waivers............................................57 10.5. Counterparts........................................................................57 10.6. Severability........................................................................57 10.7. Headings............................................................................57 10.8. Schedules...........................................................................57 10.9. No Third Party Beneficiaries........................................................57 10.10. Specific Performance................................................................58 10.11. No Strict Construction..............................................................58 10.12. Expenses............................................................................58 10.13. Disclosure Schedules................................................................58 10.14. Shareholders' Representatives.......................................................59
iii EXHIBITS Exhibit A Form of Employment Agreement Exhibit B Form of Escrow Agreement Exhibit C Earn-Out Amounts Exhibit D Form of Opinion of Gibson, Dunn & Crutcher LLP Exhibit E Form of Opinion of Torys Exhibit F Form of Opinion of Cassels Brock & Blackwell LLP Exhibit G Form of Opinion of Lemery MacKrell Greisler Exhibit H Form of Spousal Consent
SCHEDULES Schedule I..................................Security Holders Schedule 2.6................................Net Cash and Closing Debt Schedule 4.2................................Options, Warrants, Reserved Shares Schedule 4.3................................Subsidiaries Schedule 4.6................................Liabilities Schedule 4.7 ...............................Title to Properties and Assets Schedule 4.8................................Intellectual Property Schedule 4.9................................Material Contracts Schedule 4.10...............................Litigation Schedule 4.12...............................Compliance with Other Instruments Schedule 4.14...............................Government Contracts Schedule 4.15 ..............................Insurance Schedule 4.16...............................Financial Statements Schedule 4.19...............................Taxes Schedule 4.21...............................Employee Benefits Schedule 4.22...............................Permits Schedule 4.23...............................Interested Party Transactions Schedule 4.27...............................Labor Matters Schedule 4.28...............................Brokers Schedule 4.29...............................Bank Accounts Schedule 4.34...............................Title to Shares Schedule 4.37...............................Non-Residents Schedule 4.38...............................Community Property Schedule 6.1................................Capital Expenditures Schedule 6.14...............................Software Compliance Schedule 7.3................................Liens
iv SHARE PURCHASE AGREEMENT This Share Purchase Agreement (the "AGREEMENT") is entered into as of December 28, 2000 (the "EFFECTIVE DATE") by and among CitySearch Canada, Inc., an Ontario corporation ("PURCHASER"), Ticketmaster Online-CitySearch, Inc., a Delaware corporation and the parent corporation of Purchaser ("PARENT"), ReserveAmerica Holdings, Inc., an Ontario corporation (the "COMPANY") and the Shareholders (as defined below). R E C I T A L S WHEREAS, Parent wishes to acquire the Company; WHEREAS, Parent wishes to effect the acquisition through Purchaser; WHEREAS, Purchaser desires to purchase from the shareholders of the Company included on the signature pages hereto, including those shareholders who have executed this Agreement following the date hereof, but prior to the Closing Date (as defined below) (each a "SHAREHOLDER" and collectively, the "SHAREHOLDERS"), and the Shareholders desire to sell to Purchaser the Company's common shares (the "COMMON SHARES"), Class A Preference shares (the "CLASS A SHARES"), Class B Preference shares (the "CLASS B SHARES,") and Class B Shares (the "WARRANT CLASS B SHARES") and Common Shares (the "WARRANT COMMON SHARES") issuable upon exercise of warrants (the "WARRANTS"), in exchange for cash and stock consideration as provided below; WHEREAS, the Common Shares, Class A Shares, Class B Shares, Warrant Class B Shares and Warrant Common Shares (collectively, the "SHARES") to be sold to Purchaser by the Shareholders are listed on SCHEDULE I attached hereto, as amended immediately prior to the Closing (as defined below); and WHEREAS, the Shares represent at least 98% of each class of the Company's fully diluted equity securities. A G R E E M E N T NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1. DEFINED TERMS. As used herein, the terms below shall have the following meanings. Any of such terms, unless the context otherwise requires, may be used in the singular or plural, depending upon the reference. "ACCREDITED SHAREHOLDERS" means those shareholders of the Company who have represented that they are "accredited investors" as that term is defined in Rule 501 promulgated under the Act (as defined below), as indicated on SCHEDULE I attached hereto, as amended immediately prior to the Closing. "ACT" means the Securities Act of 1933, as amended, of the United States. "AFFILIATE" means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by or is under common control with such Person. "ANCILLARY AGREEMENTS" means the Employment Agreements and the Escrow Agreement substantially in the forms attached hereto as EXHIBITS A and B respectively. "AVERAGE STOCK PRICE" means the average of the closing sales prices of Parent Shares (as defined below) on the NASDAQ National Market for each of the seven trading days immediately preceding and including a specified date (for example, the Closing Date), as reported in the Western Edition of THE WALL STREET JOURNAL. "BUSINESS" means the Company's business of camping reservations and management, hotel reservations, online ticketing and venue ticketing. "BUSINESS DAY" means a day other than a Saturday, Sunday or other day on which commercial banks in Los Angeles, California are authorized or required by law to close. "CANADIAN GAAP" means generally accepted accounting principles as stated in the Handbook of the Canadian Institute of Chartered Accountants. "CAPITAL LEASES" means a lease of which the Company and/or any of its Subsidiaries is the lessee that extends over most of the estimated economic life of the asset(s) leased and which cannot be canceled or, if such lease can be canceled, the lessor is reimbursed for any losses pursuant to the terms of such lease. "CLOSING DEBT" means (a) the outstanding long-term Debt (as defined below) and the outstanding short-term Debt of the Company as set forth on SCHEDULE 2.6, specifically including, among other things, all mortgages and other loans secured by an interest in real property which is not owned by the Company or its Subsidiaries and which is not released at Closing (including, without limitation, any such mortgages or other loans for which the Company or one of its Subsidiaries is contingently liable and which liability is not released at Closing), (b) that certain Mortgage, dated January 1, 1997, in the original amount of $170,000, of which South Street LLC and County of Saratoga Industrial Development Agency are the mortgagors and Key Bank National Association is the mortgagee (the "EQUIPMENT MORTGAGE"), (c) all Capital Leases that will change materially as a result of the consummation of the transactions contemplated hereby [such that they must be paid out in full] and (d) all Capital Leases for improvements to the building and parking lot at 75 South Street, Ballston Spa, New York owned by certain of the Shareholders as set forth on SCHEDULE 2.6. All Capital Leases referred to in clauses (c) and (d) shall be referred to herein as "TERMINATING CAPITAL LEASES." 2 "CODE" meathe Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "COMPANY ACCOUNTANTS" means KPMG LLP. "COMPANY FISCAL YEAR" means a twelve month period commencing on December 1 of each calendar year. "CONSENTS" means any and all consents, approvals, authorizations or waivers of any public, governmental or regulatory body or authority or from parties to Material Contracts (as defined below) that are (a) required for the consummation of the transactions contemplated by this Agreement or (b) necessary in order that the Company can conduct the Business after the Closing Date substantially in the same manner as the Business was conducted by the Company before the Closing Date. "COURT ORDER" means any judgment, decision, consent decree, injunction, ruling or order of any national, federal, state, provincial or local court or governmental agency, department or authority that is binding on any Person or its property under applicable law. "DEBT" means (a) any indebtedness of the Company or any of its Subsidiaries, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or other similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances, (b) any balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or account payable, in each case referred to in this clause (b) incurred in the Ordinary Course of Business (as defined below), (c) all indebtedness of others secured by a lien on any asset of the Company or any of its Subsidiaries (whether or not such indebtedness is assumed by the Company) and (d) to the extent not otherwise included by clauses (a), (b) and (c), any guaranty by the Company or any of its Subsidiaries of any indebtedness of any other Person. "DEFAULT" means (a) any actual breach or default, (b) the occurrence of an event that with the passage of time or the giving of notice or both would constitute a breach or default or (c) the occurrence of an event that with or without the passage of time or the giving of notice or both would give rise to a right of termination, renegotiation or acceleration. "EBITDA" means earnings before interest, taxes, depreciation and amortization, as adjusted in accordance with the express provisions of this Agreement. "EMPLOYMENT AGREEMENTS" means those certain Employment Agreements to be entered into at the Closing by and between the Company and each of the Executives (as defined below) substantially in the form attached hereto as EXHIBIT A. "ENCUMBRANCE" means any claim, lien, pledge, option, charge, easement, security interest, deed of trust, mortgage, conditional sales agreement, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof. 3 "ESCROW AGREEMENT" means that certain escrow agreement to be entered into at the Closing by and between the Escrow Agent (as defined below), the Shareholders' Representative (as defined below), Purchaser and Parent substantially in the form attached hereto as EXHIBIT B, with such changes as reasonably requested by the Escrow Agent. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, of the United States. "EXECUTIVES" means Ken Barber, Andrew Kirkham, Robert Manherz, Young Park and John Weaver. "FISCAL YEAR" means a twelve month period commencing on January 1 of each calendar year. "GOVERNMENT CONTRACT" means any contract currently in effect between the Company or one of its Subsidiaries and the United States government, any state government or a department or agency thereof, or any subcontract thereunder. "INITIAL STOCK PRICE" means the Average Stock Price on the date that is two Business Days prior to the Closing Date; PROVIDED, HOWEVER, that, (a) if the Initial Stock Price is less than ninety percent (90%) of the Signing Stock Price (as defined below), then the Initial Stock Price shall be deemed to be ninety percent (90%) of the Signing Stock Price and (b) if the Initial Stock Price is greater than one hundred ten percent (110%) of the Signing Stock Price, then the Initial Stock Price shall be deemed to be one hundred ten percent (110%) of the Signing Stock Price. "KNOWLEDGE" of the Company means the knowledge of the Executives, after a reasonable investigation of the surrounding circumstances. "LIABILITIES" means any direct or indirect liability, indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person of any type, known or unknown, and whether accrued, absolute, contingent, matured, unmatured or other. "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" will be deemed to occur if any event, violation, inaccuracy, circumstance or other matter (considered together with all other matters that would constitute exceptions to the representations and warranties set forth in this Agreement but for the presence of "Material Adverse Effect" or other materiality qualifications, or any similar qualifications, in such representations and warranties) has, or could reasonably be expected to have or give rise to, a material adverse effect or material adverse change on (a) the condition (financial or otherwise), business, results of operations, assets, prospects, Liabilities, capitalization, operations or financial performance of the party making the representations and warranties or (b) the ability of the Company to consummate the transactions contemplated by this Agreement or to perform any of its obligations under this Agreement; PROVIDED, HOWEVER, that in no event shall any event, violation, inaccuracy, circumstance or other matter that is attributable to or results from changes in general economic conditions or changes affecting the industry generally in which the Company operates, in and of itself, constitute a Material Adverse Effect or Material Adverse Change. 4 "NAMED SHAREHOLDERS" means Robert Manherz, Arlene Manherz, Andrew Kirkham, John Weaver, Manherz Family Trust, MRS Trust Company ITF and Kirkham Family Trust. "NET CASH" means (a) cash on hand, PLUS (b) accounts receivables, net of bad debt accrual recorded by the Company in the ordinary course, PLUS (c) cash due to the Company from the exercise of the Warrants, LESS (d) trade payables. "NON-ACCREDITED SHAREHOLDERS" means those shareholders of the Company who have represented that they are not "accredited investors" as that term is defined in Rule 501 promulgated under the Act, as indicated on SCHEDULE I attached hereto, as amended immediately prior to the Closing. "ORDINARY COURSE OF BUSINESS" or "ORDINARY COURSE" or any similar phrase means the ordinary course of the Business, consistent with the past practice of the Company. "PARENT SEC DOCUMENT" means any report, schedule, form, statement, registration statement, definitive proxy statement or other document filed by Parent with the SEC. "PARENT SHARES" means shares of the Class B Common Stock, par value U.S.$.01 per share, of Parent. "PERMITS" means all licenses, permits, franchises, approvals, authorizations, consents or orders of, or filings with, any governmental authority, whether foreign, national, federal, provincial, state or local, or any other Person, necessary for the past, present or anticipated conduct of, or relating to the operation of the Business. "PERMITTED ENCUMBRANCES" means (a) liens, taxes, assessments and other governmental charges not yet due and payable, (b) statutory, mechanics', laborers' and materialmen liens arising in the Ordinary Course of Business for sums not yet due, (c) statutory and contractual landlord liens under leases pursuant to which the Company is a lessee and not in Default, (d) with regard to real property, any and all matters of record in the jurisdiction where the real property is located including, without limitation, restrictions, reservations, covenants, conditions, oil and gas leases, mineral severances and liens and (e) with regard to real property, any easements, rights-of-way, building or use restrictions, prescriptive rights, encroachments, protrusions, rights and party walls, and liens for taxes, assessments, and other governmental charges not yet due. "PERSON" means any person or entity, whether an individual, trustee, corporation, partnership, limited partnership, limited liability company, trust, unincorporated organization, business association, firm, joint venture, governmental agency or authority. "REGULATIONS" means any laws, statutes, ordinances, regulations, rules, notice requirements, court decisions, agency guidelines, principles of law and orders of any foreign, federal, national, provincial, state or local government and any other governmental department or agency, and including, without limitation, environmental laws, energy, public utility, health 5 codes, occupational safety and health regulations and laws respecting employment practices, employee documentation, terms and conditions of employment and wages and hours. "REPRESENTATIVE" means, with respect to any Person, any officer, director, principal, attorney, agent, employee or other representative of such Person. "SEC" means the United States Securities and Exchange Commission. "SIGNING STOCK PRICE" means the Average Stock Price on the date that is two Business Days prior to the date hereof. "SUBSIDIARY" means (a) any corporation in an unbroken chain of corporations if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain, (b) any partnership in which a Person is a general partner or (c) any limited liability company, partnership or other entity in which a Person possesses a 50% or greater interest in the total capital or total income of such limited liability company, partnership or other entity. "U.S. GAAP" means generally accepted United States accounting principles. 1.2. TERMS DEFINED ELSEWHERE. The following is a list of additional terms used in this Agreement and a reference to the Section hereof in which such term is defined:
DEFINED TERM SECTION PAGE - ------------ ------- ---- AAA...........................................................Section 9.3..............53 Accredited Holder.............................................Section 6.9..............42 Actual Compliance Cost........................................Section 6.14.............47 Additional Consideration......................................Section 2.4..............10 Adjustment Event..............................................Section 2.5..............12 Aggregate Consideration.......................................Section 2.1..............8 Agreement.....................................................Preamble.................1 Arbitrator....................................................Section 9.3..............53 Auditor.......................................................Section 2.4..............12 Balance Sheet Date............................................Section 4.16.............23 Cap...........................................................Section 9.5..............55 Cash Consideration............................................Section 2.1..............8 Claim Notice..................................................Section 9.3..............52 Claim.........................................................Section 6.10.............45 Class A Shares................................................Recitals.................1 Class B Shares................................................Recitals.................1 Closing Date..................................................Section 3.1..............13 Closing.......................................................Section 3.1..............12 Common Shares.................................................Recitals.................1 Company Intellectual Property Assets..........................Section 4.8..............17 Company Marks.................................................Section 4.8..............18 Company Required Consents.....................................Section 4.11.............22 Company.......................................................Preamble.................1 Compliance Estimate...........................................Section 6.14,............47
6 Copyrights....................................................Section 4.8..............17 CPOA..........................................................Section 10.14............59 Damages,......................................................Section 9.2..............52 Designated Software Agreements................................Section 4.8..............20 Disposition...................................................Section 6.8..............46 Dispute Notice................................................Section 9.3..............53 Distribution Date.............................................Section 2.4..............11 Distribution Stock Price......................................Section 2.4..............10 Earn-Out Amount...............................................Section 2.4..............11 Earn-Out Dollar Amount........................................Section 2.4..............10 Effective Date................................................Preamble.................1 Effective Period..............................................Section 6.9..............42 Employee Pension Benefit Plan.................................Section 4.21.............30 Equipment Mortgage............................................Section 1.1..............3 ERISA.........................................................Section 4.21.............30 Escrow Account................................................Section 2.2..............9 Escrow Agent..................................................Section 2.2..............9 Escrowed Amount...............................................Section 2.2..............9 Escrowed Earn-Out Amount......................................Section 2.4..............11 Excess Closing Debt...........................................Section 2.6..............12 Financial Statements..........................................Section 4.16.............23 Holder........................................................Section 6.13.............46 Indemnified Party.............................................Section 9.3..............52 Indemnitor....................................................Section 9.3..............52 Intellectual Property Rights..................................Section 4.8..............17 Intellectual Property.........................................Section 4.8..............17 Licensed Software Agreements..................................Section 4.8..............20 Licensed Software.............................................Section 4.8..............19 Licensed Technology Agreements................................Section 4.8..............20 Limitation on Indemnity.......................................Section 9.5..............54 Lock-Up Period................................................Section 2.2..............9 Marks.........................................................Section 4.8..............17 Material Contracts............................................Section 4.9..............21 Multiemployer Plan............................................Section 4.21.............30 Other Licensed Technology.....................................Section 4.8..............20 Outside Date..................................................Section 8.1..............50 Owned Software................................................Section 4.8..............19 Parent........................................................Preamble.................1 Patents.......................................................Section 4.8..............17 Proceedings...................................................Section 4.10.............21 Purchase Price................................................Section 2.1..............8 Purchaser Indemnified Parties.................................Section 9.2..............52 Purchaser.....................................................Preamble.................1 Real Property.................................................Section 4.7..............17 Registration Indemnified Party................................Section 6.9..............44 Registration Indemnifying Party...............................Section 6.9..............44 Registration Statement........................................Section 6.9..............41 Released Claims...............................................Section 6.10.............45 Releasees.....................................................Section 6.10.............45 Required Amount...............................................Section 3.4..............14 Restricted Parent Shares......................................Section 2.2..............9
7 Share Consideration...........................................Section 2.1..............8 Shareholder Indemnified Parties...............................Section 9.2..............52 Shareholders' Representative..................................Section 10.14............58 Shareholders..................................................Recitals.................1 Shares........................................................Recitals.................1 Software......................................................Section 4.8..............17 Statement.....................................................Section 2.4..............12 Tax Return....................................................Section 4.19.............25 Tax...........................................................Section 4.19.............25 Terminating Capital Leases....................................Section 1.1..............3 Trade Secrets.................................................Section 4.8..............17 Transaction Fees..............................................Section 10.12............58 Violation.....................................................Section 6.9..............43 Warrant Class B Shares........................................Recitals.................1 Warrant Common Shares.........................................Recitals.................1 Warrants......................................................Recitals.................1
ARTICLE II AGREEMENT TO PURCHASE AND SELL SHARES 2.1 AGREEMENT TO PURCHASE AND SELL SHARES. Subject to the terms and conditions hereof, the Shareholders agree to sell to Purchaser, and Purchaser agrees to purchase from the Shareholders, the Shares which represent 100% of the fully-diluted equity of the Company, for an aggregate purchase price (the "PURCHASE PRICE") of U.S.$22,200,000 (in the event less than 100% of the fully-diluted equity of the Company is tendered for sale to the Purchaser, this amount will be reduced PRO RATA), which, assuming 100% of the fully-diluted equity is tendered, shall consist of (a) cash consideration (the "CASH CONSIDERATION") in the amount of U.S.$12,200,000 and (b) that number of Parent Shares determined by DIVIDING (1) the difference between the Purchase Price and the Cash Consideration by (2) the Initial Stock Price (the "SHARE CONSIDERATION" and collectively with the Cash Consideration, the "AGGREGATE CONSIDERATION"). The Aggregate Consideration shall be allocated to the Shareholders as provided on SCHEDULE I attached hereto, as amended immediately prior to the Closing. 2.2 DISTRIBUTION OF THE AGGREGATE CONSIDERATION. (a) On the Closing Date, Purchaser shall pay to each Shareholder holding Class A Shares and/or to such Shareholder's order, by certified check or wire transfer, that portion of the Cash Consideration that such Shareholder has the right to receive with respect to the Class A Shares held by such Shareholder, as reflected on SCHEDULE I attached hereto, as amended immediately prior to the Closing. (b) On the Closing Date, Purchaser shall pay to each Shareholder holding Class B Shares and/or to such Shareholder's order, by certified check or wire transfer, that portion of the Cash Consideration that such Shareholder has the right to receive with respect to the Class B Shares held by such Shareholder, as reflected on SCHEDULE I attached hereto, as amended immediately prior to the Closing. 8 (c) On the Closing Date, Purchaser shall pay to each Non-Accredited Shareholder and/or to such Shareholder's order, by certified check or wire transfer, that portion of the Cash Consideration that such Non-Accredited Shareholder has the right to receive with respect to the Common Shares held by such Non-Accredited Shareholder, as reflected on SCHEDULE I attached hereto, as amended immediately prior to the Closing. (d) On the Closing Date, Purchaser shall (i) pay to each Accredited Shareholder and/or to such Shareholder's order, by certified check or wire transfer, that portion of the Cash Consideration that such Accredited Shareholder has the right to receive with respect to the Common Shares held by such Accredited Shareholder, as reflected on SCHEDULE I attached hereto, as amended immediately prior to the Closing, and (ii) deliver to each Accredited Shareholder certificates representing that portion of the Share Consideration that such Accredited Shareholder has the right to receive with respect to the Common Shares held by such Accredited Shareholder, as reflected as such Accredited Shareholder's "Closing Parent Shares" on SCHEDULE I attached hereto, as amended immediately prior to the Closing. (e) On the Closing Date, certificates representing a portion of the Share Consideration and a portion of the Cash Consideration, representing an aggregate of Five Million United States Dollars (U.S.$5,000,000), otherwise allocable to the Shareholders, as provided on SCHEDULE I attached hereto, as amended immediately prior to the Closing (the "ESCROWED AMOUNT"), shall be delivered to an escrow agent (the "ESCROW AGENT") identified by the Shareholders' Representative at least fifteen (15) days prior to the Closing Date, which Escrow Agent shall be reasonably acceptable to Parent and Purchaser, to be held by such Escrow Agent in an escrow account (the "ESCROW ACCOUNT") for the benefit of the Shareholders pursuant to the terms and conditions of the Escrow Agreement, which include the release of the funds from the Escrow Account upon the renewal of certain Government Contracts of the Company. (f) The Share Consideration to be issued to the Accredited Shareholders shall be subject to a lock-up for the twelve-month period following the Closing Date (the "LOCK-UP PERIOD") and shall otherwise become transferable, subject to applicable securities laws, upon the effectiveness of the Registration Statement (as defined below) (collectively, the "RESTRICTED PARENT SHARES"). (g) Notwithstanding the foregoing, in no event shall the aggregate Cash Consideration and the Additional Consideration (as defined below) paid hereunder with respect to the Class A Shares or Class B Shares exceed the amount of the preference to which such shares are entitled (in respect of dividends or on wind-up of the Company) under the provisions of the Company's articles as in effect immediately prior to the date hereof. 2.3 FORM OF CONSIDERATION. In lieu of delivering the Share Consideration in the form of Parent Shares, Purchaser may, in addition to the Cash Consideration, elect to pay all or any portion of the Share Consideration in cash. In the event that Purchaser elects to pay any portion of the Share Consideration in cash rather than Parent Shares, on the Closing Date, Purchaser will pay to the Accredited Shareholders in immediately available funds that portion of the Share Consideration so converted to cash. 2.4 ADDITIONAL CONSIDERATION. 9 (a) As additional consideration and in exchange for the Shares, with respect to each of the Fiscal Years ending on December 31, 2001 and December 31, 2002, Purchaser shall distribute to the Shareholders on each Distribution Date (as defined below) the number of Parent Shares and cash equal to the Additional Consideration. For the purposes of this SECTION 2.4, "ADDITIONAL CONSIDERATION" shall mean the number of Parent Shares equal to the number determined by DIVIDING (i) the applicable dollar amount set forth opposite the applicable EBITDA amount for such Fiscal Year as reflected on EXHIBIT C hereto (the "EARN-OUT DOLLAR AMOUNT") by (ii) the Average Stock Price on the date that is two trading days prior to the applicable Distribution Date (the "DISTRIBUTION STOCK PRICE"); PROVIDED, HOWEVER, that, (A) if the Distribution Stock Price is less than eighty percent (80%) of the Signing Stock Price, then the Distribution Stock Price shall be deemed to be eighty percent (80%) of the Signing Stock Price and (B) if the Distribution Stock Price is greater than one hundred thirty percent (130%) of the Signing Stock Price, then the Distribution Stock Price shall be deemed to be one hundred thirty percent (130%) of the Signing Stock Price. In lieu of delivering Additional Consideration in the form of Parent Shares, (1) Purchaser shall pay any portion of the Additional Consideration payable to Non-Accredited Shareholders in cash and (2) Purchaser may elect to pay the remaining Additional Consideration, or any portion thereof, in cash; PROVIDED, HOWEVER, that, to the extent Purchaser pays cash in lieu of Parent Shares and the Distribution Stock Price is less than eighty percent (80%) of the Signing Stock Price or greater than one hundred thirty percent (130%) of the Signing Stock Price, then, in lieu of paying the applicable Earn-Out Dollar Amount, Purchaser shall pay an amount in cash equal to the value of the Parent Shares it would have been obligated to deliver pursuant to the previous sentence. Earn-Out Dollar Amounts between levels specified on EXHIBIT C shall be determined as provided thereon. (b) The Company and each of the Shareholders acknowledges that EXHIBIT C has been created with reference to the Company's financial projections which were provided to Purchaser by the Company. The Company and each of the Shareholders further acknowledges that any directive by Purchaser or Parent during Fiscal Years ending December 31, 2001 and December 31, 2002 that the Company not participate in the ticketing, hotel reservation or off season call center markets, except to fulfill their current contracts, if any, shall not be construed as affecting the rights of the Shareholders to earn any portion of either Earn-Out Amount (as defined below) and will not give rise to any claims against Purchaser, Parent or their respective Affiliates with respect thereto. Notwithstanding the foregoing, should the Company directly earn EBITDA from the ticketing, hotel reservation or off season call center businesses in excess of that generated from the existing contracts, such EBITDA shall count toward the calculation of the Earn-Out Amounts. In the event that Purchaser or Parent asks the Company to cede control of the existing Company ticketing, hotel reservation or off season call center contracts, if any, to other Purchaser or Parent operating divisions, then Purchaser will give the Company credit for the EBITDA earned from such ceded contracts for purposes of earning the Earn-Out Amounts discussed herein. Such credit will consist of EBITDA credit equal to a percentage of the revenue recognized under U.S. GAAP by such Purchaser or Parent operating division during the applicable Fiscal Year from such ceded contracts which will be agreed upon in good faith by Parent and the Shareholders' Representative prior to the transfer of such contracts. In addition, any expense (or loss of revenue) incurred by the Company which is actually recovered by the Company, Purchaser or Parent through an indemnification payment made by the Shareholders pursuant to ARTICLE IX hereto shall not be counted as an expense (or loss of revenue) of the Company for the purpose of calculating EBITDA pursuant hereto. 10 (c) Subject to SECTION 2.4(d) below, the amounts to be distributed to Shareholders pursuant to SECTION 2.4(a) with respect to either of the foregoing Fiscal Years (each an "EARN-OUT AMOUNT") shall be distributed to Shareholders pro rata according to their respective percentage ownership of the Company immediately prior to the Closing Date, as reflected on SCHEDULE I attached hereto, as amended immediately prior to the Closing, within ten (10) days after the completion of the Statement (as defined below) with respect to such Fiscal Year (the "DISTRIBUTION DATE") in cash or Parent Shares transferable pursuant to a registration statement which Parent shall cause to be filed and declared effective by the SEC (as defined below) prior to each Distribution Date on the same terms and conditions provided in SECTION 6.9; PROVIDED, that, in addition to those terms and conditions provided in SECTION 6.9, Parent may postpone the effectiveness of any registration statement filed pursuant to this SECTION 2.4(c) for up to 45 days if Parent's board of directors determines that the sale of Parent Shares would reasonably be expected to have an adverse effect on any proposal or plan by Parent or any of its Subsidiaries to engage in any acquisition of assets or capital stock (other than in the Ordinary Course of Business) or any merger, consolidation, tender offer or similar transaction; PROVIDED, HOWEVER, that, in such event the Effective Period (as defined below) for such registration statement shall be extended by the number of days during the postponement period. (d) In the event that no funds in the Escrow Account by reason of SECTION 2.2(e) have been released from the Escrow Account pursuant to the terms of the Escrow Agreement due to clarification of whether or not certain Government Contracts of the Company have been definitively renewed, on each Distribution Date, the applicable Earn-Out Amount, otherwise allocable to the Shareholders as provided in SECTION 2.4(c) (the "ESCROWED EARN-OUT AMOUNT") shall be delivered to the Escrow Agent to be held by such Escrow Agent in the Escrow Account for the benefit of the Shareholders pursuant to the terms and conditions of the Escrow Agreement, which include the release of the funds from the Escrow Account upon the renewal of certain Government Contracts of the Company. (e) As soon as practicable after the Closing and prior to the beginning of the Fiscal Year ending December 31, 2002, the Executives and Purchaser will mutually establish "agreed upon procedures" reasonably consistent with the preparation of the Financial Statements (as defined below) to be used in determining EBITDA for purposes of calculating the Earn-Out Amounts. Not later than ninety (90) days after the end of each of the foregoing Fiscal Years, Ernst & Young LLP (the "AUDITOR") will determine EBITDA for purposes of calculating the Earn-Out Amount for that Fiscal Year in accordance with such agreed upon procedures and will prepare a statement of EBITDA relating thereto (the "STATEMENT"). The fees and disbursements of the Auditor incurred in the preparation of the Statement shall be paid 100% by Purchaser. 2.5 ADJUSTMENT EVENTS. If, between the date of this Agreement and the Closing Date, the outstanding Parent Shares shall have been changed into or exchanged for a different number of shares or kind of shares of Parent or another corporation or entity by reason of any reclassification, split-up, stock dividend or stock combination or merger or any arrangement, amalgamation or similar statutory procedure (an "ADJUSTMENT EVENT"), then the Share Consideration and the Earn-Out Amounts shall be reasonably and equitably adjusted. If the Adjustment Event occurs between the Closing Date and a Distribution Date, the Earn-Out Amounts shall be reasonably and equitably adjusted. If the record date for any such Adjustment Event shall be prior to the Closing Date or a Distribution Date, as applicable, but the payment 11 date therefor shall be subsequent to the Closing Date or a Distribution Date, as applicable, Parent shall take such action as shall be required so that on such payment date the Accredited Shareholders shall be entitled to receive such number or kind of shares as such holder would have received as a result of such event if the record date therefor had been immediately after the Closing Date or a Distribution Date, as applicable. 2.6 PAYMENT OF CLOSING DEBT OUTSTANDING AT CLOSING; RELEASE OF GUARANTEE. (a) The Shareholders shall pay all Closing Debt of the Company and its Subsidiaries immediately after the Closing. The Shareholders may use all Net Cash as of the Closing Date to make all or any portion of such payments. To the extent that there is Closing Debt in excess of the Net Cash (the "EXCESS CLOSING DEBT"), Purchaser shall pay portions of the Cash Consideration to third parties at the Shareholders' direction in order to pay all or any portion of the Excess Closing Debt. The Cash Consideration used for this purpose shall be allocated to the Shareholders pro rata. The use of Net Cash and the amounts to be paid immediately after the Closing are reflected on SCHEDULE 2.6(a). (b) Immediately after the Closing, the Shareholders shall cause the Company and each of its Subsidiaries to be released from all Liabilities that are secured by a lien on any real or personal property that is not owned by the Company or any of its Subsidiaries at the Closing, including, without limitation, the mortgages and capital leases set forth on SCHEDULE 2.6(b). Immediately after the Closing, Purchaser shall cause all Shareholders and their Affiliates to be released from all Liabilities relating to personal property owned by the Company or any of its Subsidiaries as of the Closing Date and will substitute Purchaser or Parent as guarantor in such released persons stead as necessary. ARTICLE III CLOSING; DELIVERY 3.1 THE CLOSING. The closing (the "CLOSING") of the transactions contemplated by this Agreement shall be held at the offices of Gibson, Dunn & Crutcher LLP at 333 South Grand Avenue, Los Angeles, California 90071, on January 31, 2001, or at such other time and place as to which the Company and Purchaser may agree (the "CLOSING DATE"). 3.2 DELIVERIES BY THE COMPANY AND THE SHAREHOLDERS AT THE CLOSING. At the Closing, the Company and the Shareholders, as the case may be, shall deliver, or cause to be delivered: (a) the Ancillary Agreements; (b) certificates representing all of the Shares; (c) a certificate of status issued by the Companies Branch of the Ministry of Consumer and Commercial Relations of the Province of Ontario for the Company, and equivalent certificates of good standing for each of the Subsidiaries of the Company, dated not more than five days prior to the Closing Date ; 12 (d) a certificate, dated as of the Closing Date and signed by the Company's President or a Vice President, as to the fulfillment of the conditions set forth in SECTION 7.3; (e) a certificate executed by the Secretary of the Company, dated as of the Closing Date, certifying resolutions adopted by the Company's board of directors relating to the transactions contemplated by this Agreement and the Ancillary Agreements; (f) copies of all third party and governmental Consents, approvals and filings required in connection with the consummation of the transactions hereunder; (g) the written opinions of counsel described in SECTION 7.3(h) and 7.3(i); and (h) such other documents and items as Purchaser may reasonably request, including, without limitation, all documents required by SECTION 7.3. 3.3 DELIVERIES BY PURCHASER AT THE CLOSING. At the Closing, Purchaser shall deliver, or cause to be delivered: (a) the Ancillary Agreements; (b) certificates representing the Parent Shares comprising the Share Consideration; (c) the Cash Consideration; (d) a certificate, dated as of the Closing Date and signed by Purchaser's authorized representative, as to the fulfillment of the conditions set forth in SECTION 7.2; (e) a certificate executed by the Secretary of the Purchaser, dated as of the Closing Date, certifying resolutions adopted by the Purchaser's board of directors relating to the transactions contemplated by this Agreement and the Ancillary Agreements; (f) the written opinion of counsel described in SECTION 7.2(c) and 7.2(d); and (g) such other documents and items as the Company or the Shareholders may reasonably request, including, without limitation, all documents required SECTION 7.2. 3.4 NON-RESIDENT DELIVERIES. If any Shareholder not listed on SCHEDULE 4.37 fails to deliver to Purchaser, at or prior to the Closing, a certificate issued pursuant to Section 116 of the Income Tax Act (Canada) with respect to the sale of the Shares being sold by such Shareholder, Purchaser shall be entitled to withhold from the Aggregate Consideration payable to such Shareholder an amount equal to 331/3 % of such Aggregate Consideration (the "REQUIRED AMOUNT") with respect to such Shares first from the Cash Consideration payable for such Shares and, if that amount is less than the Required Amount, from the Share Consideration payable for such Shares. Where Share Consideration is withheld, Purchaser may sell or otherwise dispose of that number of Shares such that the net proceeds from such sale or other disposition, when added to the Cash Consideration, will be equal to the Required Amount, and such Shareholder authorizes Purchaser to make such sale or other disposition for this purpose. Purchaser will be 13 entitled to remit the Required Amount to the Receiver General for Canada on account of Taxes payable by such Shareholder under the Income Tax Act(Canada) in respect of the sale of such Shares if such certificate is not received within 30 days following the end of the month in which the Closing takes place. If such certificate is received in the time period referred to above, the amount withheld will be promptly paid to such Shareholder. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS As a material inducement to Purchaser to enter into this Agreement, the Company and each of the Named Shareholders, severally as provided in ARTICLE IX, hereby represent and warrant to Purchaser as provided in SECTION 4.1 through 4.32, which representations and warranties are, as of the date hereof, and will be, as of the Closing Date, true, correct and complete: 4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a corporation duly incorporated and organized, and is validly existing and up-to-date in the filing of all corporate and similar returns under the laws of the Province of Ontario, its jurisdiction of incorporation, and has all requisite corporate power and capacity to own its properties and assets and to carry on its business as now conducted and as presently proposed to be conducted. The Company is duly qualified to do business as an extra-provincial or foreign corporation in each jurisdiction where failure to be so qualified would have a Material Adverse Effect on the Company. 4.2 CAPITALIZATION. Immediately prior to the Closing, the authorized share capital of the Company will consist of the following: (a) A total of (i) an unlimited number of authorized Common Shares, of which 936,896.81 are issued and outstanding, (ii) an unlimited number of authorized Class A Shares, of which 874,037.31 are issued and outstanding, (iii) an unlimited number of authorized Class B Shares, of which 62,859.5 are issued and outstanding and (iv) an unlimited number of authorized Class A Common Shares, none of which are issued and outstanding. (b) Except as set forth on SCHEDULE 4.2(b), there are no options, warrants, conversion privileges or other rights, or agreements, obligations or other commitments, whether written or oral, contingent or otherwise, with respect to the issuance thereof, presently outstanding to purchase any of the shares of the Company. Except as set forth on SCHEDULE 4.2(b), no shares (including the Shares) of the Company, or shares issuable upon exercise or exchange of any outstanding options or other shares issuable by the Company, are subject to any rights of first refusal, preemptive rights or other rights to purchase such shares (whether in favor of the Company or any other Person), pursuant to any agreement, commitment or other obligation of the Company, whether written or oral, contingent or otherwise. (c) SCHEDULE I , as amended immediately prior to the Closing, sets forth a complete list of all outstanding shareholders, option holders and other security holders of the 14 Company as of the date hereof, and identifies those who are in the employment of the Company or an "affiliate" of the Company (for the purposes of this SECTION 4.2(c), as defined in the Securities Act (Ontario)), or were formerly in the employment of the Company or an affiliate of the Company, and who, while in that employment, were, and have continued after that employment to be, security holders of the Company. SCHEDULE I, as amended immediately prior to the Closing, lists, for each Warrant holder of the Company, such Warrant holder's name, the exercise price(s) of all Warrant(s) granted to such Warrant holder, the term(s) of such Warrant(s), the vesting period(s) of such Warrant(s), and any contingencies applicable to such Warrant(s). No claim has been made or threatened to the Company asserting that any Person other than a Person listed on SCHEDULE I, as amended immediately prior to the Closing, is the holder or beneficial owner of, or has the right to acquire beneficial ownership of, any shares of, or any other voting, equity or ownership interest in the Company. (d) The Company has issued all of its securities (including, without limitation, share purchase options and warrants) pursuant to valid exemptions from registration and prospectus requirements under applicable federal, national, provincial and state securities laws. There are no agreements between the Company's shareholders with respect to the voting or transfer of the Company's securities or with respect to any other aspect of the Company's affairs. (e) All shareholders of the Company (other than the Shareholders) are either resident outside Canada or, if not, are in Ontario or the last address of such shareholder as shown on the books of the Company is in Ontario. 4.3 SUBSIDIARIES. (a) Except as set forth on SCHEDULE 4.3, the Company does not presently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, association, or other entity. (b) Each of the Subsidiaries of the Company is a corporation duly incorporated and organized, and is validly existing and up-to-date in the filing of all corporate and similar returns under the laws of its jurisdiction of incorporation, and has all requisite corporate power and capacity to own its properties and assets and to carry on its business as now conducted and as presently proposed to be conducted. Each of the Subsidiaries of the Company is duly qualified to do business as an extra-provincial or foreign corporation in each jurisdiction where failure to be so qualified would have a Material Adverse Effect on the Company. (c) The authorized shares of each of the Subsidiaries of the Company consists of the shares set forth on SCHEDULE 4.3, all of which are owned by the Company or one of its Subsidiaries and are issued and outstanding. All of the outstanding shares of each of the Subsidiaries of the Company have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. (d) None of the Subsidiaries of the Company has granted any outstanding option, warrants, rights or other securities convertible into or exchangeable or exercisable for shares of such Subsidiary or any other commitments or agreements providing for the issuance of additional shares, the sale of treasury shares, or for the repurchase or redemption of shares of 15 such Subsidiary's shares. There are no agreements of any kind which obligate any of the Subsidiaries of the Company to issue, purchase, redeem or otherwise acquire any of its shares. 4.4 DUE AUTHORIZATION. All corporate action on the part of the Company, its officers, directors and shareholders necessary for the authorization, execution and delivery of, and the performance of all obligations of the Company under, this Agreement, has been taken or will be taken prior to the Closing. This Agreement has been duly executed and delivered by the Company and is a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors' rights generally and except insofar as the availability of equitable remedies may be limited by applicable law. 4.5 VALID ISSUANCE OF SHARES. The outstanding shares of the Company are duly and validly issued, fully paid and non-assessable, and such shares and all other outstanding securities of the Company have been issued in full compliance with the requirements of all applicable securities laws, including, without limitation, anti-fraud provisions. 4.6 LIABILITIES. Except as set forth on SCHEDULE 4.6 or on the Financial Statements, the Company has no indebtedness for borrowed money that the Company has, directly or indirectly, created, incurred, assumed or guaranteed, or with respect to which Company has otherwise become directly or indirectly liable. 4.7 TITLE TO PROPERTIES AND ASSETS. (a) Except as set forth on SCHEDULE 4.7(a), (i) each of the Company and its Subsidiaries has, or will have, as of the Closing, a good and valid title to or, in the case of leased properties or properties held under license, a good and valid leasehold or license interest in, all of its properties and assets and (ii) each of the Company and its Subsidiaries holds title to each such property and asset which it purports to own, free and clear of all liens, adverse claims, mortgages, pledges, Encumbrances, security interest or charge of any kind. The representations in this SECTION 4.7 do not apply to the Marks or Intellectual Property Rights as to which only the representations in SECTION 4.8 shall apply. (b) All of the tangible assets of each of the Company and its Subsidiaries, are, or will be as of the Closing, in all material respects, in reasonably serviceable operating condition and repair and are adequate for the conduct of the business of the Company and its Subsidiaries in substantially the same manner as has heretofore been conducted. (c) SCHEDULE 4.7(c) sets forth a true and complete list of all real property owned or leased by each of the Company and its Subsidiaries (collectively, the "REAL PROPERTY"), including the location of, and a brief description of the nature of the activities conducted on, such Real Property. 4.8 INTELLECTUAL PROPERTY; SOFTWARE. (a) For all purposes of this Agreement, 16 (i) "INTELLECTUAL PROPERTY RIGHTS" means intellectual property rights arising from or in respect of the following, whether protected, created or arising under the laws of the United States or any other jurisdiction: (A) fictional business names, trade names, service names, registered and unregistered trademarks and service marks and logos (including any Internet domain names), and applications therefor (collectively, "MARKS"), (B) patents, patent rights and all applications therefor, including any and all continuation, divisional, continuation-in-part, or reissue patent applications or patents issuing thereon (collectively, "PATENTS"), (C) copyrights and all registrations and applications therefor (collectively, "COPYRIGHTS") and (D) know-how, trade secrets, inventions, discoveries, concepts, ideas, methods, processes, designs, formulae, technical data, drawings, specifications, data bases and other proprietary and confidential information, including customer lists, in each case to the extent not included in the foregoing clauses (B) or (C) (collectively, "TRADE SECRETS" and, together with the Marks, Patents, Copyrights and Trade Secrets, the "INTELLECTUAL PROPERTY"). (ii) "SOFTWARE" means any and all (A) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (B) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (C) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing and (D) all documentation, including user manuals and training materials, relating to any of the foregoing, in each case developed or licensed by the Company and its Subsidiaries, or used in or necessary for the conduct of its business, specifically excluding those items prepared for customers in the operation of the Company's business for which the customer contractually has vested title. (b) SCHEDULE 4.8(b) sets forth a complete and correct list of all Intellectual Property Rights owned, licensed or used by each of the Company and its Subsidiaries in the conduct of its business (other than any Intellectual Property Rights consisting of "shrink-wrap" licensed software), together with a listing of all material licenses, franchises, licensing agreements (whether as licensor or licensee) to which the Company or one of its Subsidiaries is a party, and any other arrangement with respect to such Intellectual Property Rights. All Intellectual Property Rights owned, licensed or used by the Company and its Subsidiaries or used or exercised in or necessary to the conduct of the Company's business, are referred to herein, collectively, as the "COMPANY INTELLECTUAL PROPERTY ASSETS." (c) None of the Company or its Subsidiaries has, during the three years preceding the date of this Agreement, been a party to any Proceeding, nor, to the knowledge of the Company, is any Proceeding threatened that involved or is likely to involve a claim of infringement or misappropriation by any Person (including any governmental authority) of any Intellectual Property Right of such Person. No Company Intellectual Property Asset is subject to any outstanding order, judgment, decree or stipulation to which the Company or its Subsidiaries is subject in any proceeding to which the Company or its Subsidiaries is a party or, to its knowledge, any other proceeding, restricting the use thereof by the Company or its Subsidiaries, or restricting the licensing thereof by the Company or its Subsidiaries or any Person. The current use and exploitation of the Intellectual Property Assets by the Company and its Subsidiaries (including, without limitation, the licensing or other distribution of Software to third parties by the Company or its Subsidiaries) does not conflict with, infringe upon, violate or result in the misappropriation of Intellectual Property Right of any Person. 17 (d) Except as set forth on SCHEDULE 4.8(d): (i) The Company and its Subsidiaries own no right, title or interest in any Patent. The Company and its Subsidiaries own all right, title and interest in each of the Marks listed in SCHEDULE 4.8(b) (collectively, the "COMPANY MARKS"), free and clear of any and all liens and Encumbrances, and neither the Company nor any of its Subsidiaries has received any notice or claim (whether written or oral) challenging the Company's or one of its Subsidiary's exclusive and complete ownership of any Company Marks or suggesting that any other Person has any claim of legal or beneficial ownership or other claim or interest with respect thereto; (ii) The Company Marks are legally valid and enforceable without any material qualification, limitation or restriction on their use and neither the Company nor any of its Subsidiaries has received any notice or claim (whether written or oral) challenging the validity or enforceability of any Company Marks; (iii) Neither the Company nor any of its Subsidiaries has taken any action (or failed to take any action), or used or enforced (or failed to use or enforce) any of the Company Marks, in each case in a manner that would result in the abandonment, cancellation, forfeiture, relinquishment or unenforceability of any of the Owned Marks or any of the Company's or any of its Subsidiary's rights therein; (iv) Each of the Company and its Subsidiaries have taken reasonable steps to protect its rights in and to each of the Company Marks and to prevent the unauthorized use thereof by any other Person, in each case in accordance with standard industry practice, and has adequately policed the Company Marks against third party infringement of which it is aware; (v) Neither the Company nor any of its Subsidiaries has granted to any Person any right, license or permission to use any of the Company Marks; (vi) All Company Marks that have been registered have been effectively registered in accordance with all applicable legal requirements and are currently in compliance with all legal requirements; (vii) All maintenance fees, annuities, and the like due on Company Marks have been timely paid; and (viii) No Mark that constitutes a Company Mark has been or is now involved in any opposition or cancellation proceeding and, to the Company's knowledge, no such action is threatened with the respect to any of the Company Marks. (e) The Company and its Subsidiaries have taken reasonable precautions (as determined by the Company's management) to protect the secrecy of any Trade Secrets that derive commercial value from not being generally known to the public. The Company or one of its Subsidiaries has the absolute and unrestricted right to use all of the Trade Secrets and none of the Trade Secrets owned by the Company or one of its Subsidiaries is subject to any liens or Encumbrances. The Company and its Subsidiaries have not received any notice or claim challenging the Company's or one of its Subsidiary's absolute and unrestricted right to use any of 18 the Trade Secrets or suggesting that any other Person has any claim with respect thereto. None of the Trade Secrets has been, or is alleged to have been, misappropriated from any other Person. Except under appropriate confidentiality obligations, to its best knowledge, there has been no disclosure by the Company or its Subsidiaries of material confidential information or other Trade Secrets that derive commercial value from not being generally known to the public. (f) The Company or one of its Subsidiaries either owns the entire right, title and interest in, to and under, or has acquired a license to use, any and all Company Intellectual Property Assets which are material to the conduct of the Business in the manner that the Business has heretofore been or is presently being conducted or as contemplated to be conducted pursuant to the Company's current business plans, and no other Intellectual Property Rights are necessary for the unimpaired continued operation of such businesses after the Effective Date in the manner that such businesses have heretofore been or are presently being conducted. (g) SCHEDULE 4.8(g) sets forth a complete and accurate list of all of the material Software (excluding Software that is available in consumer retail stores and subject to "shrink-wrap" agreements). SCHEDULE 4.8(g) specifically identifies all material Software that is owned exclusively by the Company or its Subsidiaries (the "OWNED SOFTWARE") and all material Software that is used by the Company or its Subsidiaries in the conduct of the Business that is not exclusively owned by the Company or its Subsidiaries (excluding software that is available in consumer retail stores and subject to "shrink-wrap" agreements) (the "LICENSED SOFTWARE"). The Company or one of its Subsidiaries is the owner of all right, title and interest in and to all Owned Software, including, without limitation, all Copyrights, Trade Secrets and other Intellectual Property Rights relating thereto, free and clear of any and all liens and Encumbrances, and neither the Company nor any of its Subsidiaries has received any notice or claim (whether written, oral or otherwise) challenging the Company's or any of its Subsidiary's complete and exclusive ownership of all Owned Software and all such Intellectual Property Rights relating thereto or claiming that any other Person has any claim of legal or beneficial ownership with respect thereto. Neither the Company nor any of its Subsidiaries has assigned, licensed, transferred or encumbered any of its rights in or to any Owned Software, including, without limitation, any Copyrights, Trade Secrets or other Intellectual Property Rights with respect thereto, to any Person, excluding any non-exclusive licenses granted to distributors or customers in the Ordinary Course of Business. The Company or one of its Subsidiaries has lawfully acquired the right to use the Licensed Software, as it is used in the conduct of its business as presently conducted, and has not exercised any rights in respect of any Licensed Software, including, without limitation, any reproduction, distribution or derivative work rights, outside the scope of any license expressly granted by the Person from which the right to use such Licensed Software was obtained. (h) SCHEDULE 4.8(h) contains a complete and accurate specific list of all agreements and arrangements pertaining to the Licensed Software (collectively, "LICENSED SOFTWARE AGREEMENTS") and a complete and accurate list of all agreements and arrangements pertaining to any other technology used or practiced by the Company or its Subsidiaries as to which a Person other than the Company or one of its Subsidiaries owns the applicable Intellectual Property Rights (collectively, "OTHER LICENSED TECHNOLOGY AGREEMENTS" and, together with Licensed Software Agreements, the "LICENSED TECHNOLOGY AGREEMENTS"). SCHEDULE 4.8(h) sets forth a complete and accurate list of all royalty obligations of the Company 19 and its Subsidiaries under any Licensed Technology Agreements. All Licensed Technology Agreements are in full force and effect, and neither the Company nor any of its Subsidiaries are in material breach thereof, nor is the Company aware of any claim or basis for any claim to the contrary. There are no outstanding, and, to the Company's knowledge, no threatened disputes with respect to any Licensed Technology Agreement. The rights licensed under each Licensed Technology Agreement shall be exercisable by the Company or its Subsidiaries on and after the Closing Date to the same extent as prior to the Closing Date. The Licensed Technology Agreements together expressly confer on the Company or its Subsidiaries valid and enforceable rights under or in respect of all of the Intellectual Property Rights that are not owned exclusively by the Company or its Subsidiaries and that are used or practiced in the Business. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in the impairment of any rights under, any Licensed Technology Agreement. (i) SCHEDULE 4.8(i) contains a complete and accurate list of all agreements and arrangements involving the grant by the Company or its Subsidiaries to any Person of any right to distribute, prepare derivative works based on, support or maintain or otherwise commercially exploit any Software, including, without limitation, any value-added reseller agreements, joint development or marketing agreements or strategic alliance agreements involving any Software (collectively, "DESIGNATED SOFTWARE AGREEMENTS"). All Designated Software Agreements are in full force and effect, and neither the Company nor any of its Subsidiaries are in material breach thereof, nor is the Company aware of any claim or basis for a claim to the contrary. There are no outstanding and, to the Company's knowledge, no threatened disputes or disagreements with respect to any Designated Software Agreement. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in any impairment of rights under any Designated Software Agreement. (j) To the Company's knowledge, each of the Company and its Subsidiaries has taken commercially reasonable actions in accordance with industry practice to protect its Intellectual Property Rights in relation to employees, independent contractors and consultants, including entering into agreements with such Persons that assign to the Company or one of its Subsidiaries all of the employee's, contractor's or consultant's rights, including all Intellectual Property Rights, in any Intellectual Property created or developed thereby that is used in connection with, or that relates to, the Business. To the knowledge of the Company, no employee of the Company or any of its Subsidiaries has entered into any contract or other agreement with any Person (other than the Company or one of its Subsidiaries) that restricts or limits in any way the scope or type of work in which the employee may be engaged for the Company or any of its Subsidiaries or requires the employee to transfer, assign, or disclose information concerning the employee's work with the Company or any of its Subsidiaries to any other Person. 4.9 MATERIAL CONTRACTS AND OBLIGATIONS. (a) All agreements, contracts, leases, licenses, instruments, commitments (oral or written), indebtedness, Liabilities and other obligations to which the Company or one of its Subsidiaries is a party or by which it is bound that (a) are material to the conduct and operations of its business and properties, (b) involve any of the officers, consultants, directors, employees or shareholders of the Company or one of its Subsidiaries or (c) obligate the Company or one of its 20 Subsidiaries to share, license or develop any product or technology (the "MATERIAL CONTRACTS") are listed in SCHEDULE 4.9(a) and have been made available for inspection by Purchaser and its counsel. For purposes of this SECTION 4.9, "material" shall mean any agreement, contract, indebtedness, Liability or other obligation either (i) having an aggregate value, cost or amount in excess of U.S.$50,000 or (ii) not terminable upon thirty days' notice. (b) Each Material Contract is in full force and effect, paid currently and has not been materially impaired by any acts or omissions of the Company or one of its Subsidiaries. Except for those Material Contracts denoted with an asterisk (*) as set forth on SCHEDULE 4.9(a), no Material Contract requires the consent of any other contracting party to the transactions contemplated by this Agreement to prevent a breach of, a Default under, or a termination, change in the terms or conditions or modification of, any Material Contract. All of the Material Contracts are valid, binding and enforceable in accordance with their terms except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors' rights generally and except insofar as the availability of equitable remedies may be limited by applicable law. Each of the Company and its Subsidiaries has fulfilled, or taken all action reasonably necessary to enable them to fulfill when due, all of its material obligations under each of such Material Contracts. To the Company's knowledge, no party is in material Default under such Material Contracts, no event has occurred and no condition or state of facts exists which, with the passage of time or the giving of notice or both, would constitute such a Default and no notice of any claim of Default has been given to the Company or one of its Subsidiaries. The Company is not aware of any intent by any party to any Material Contract to terminate or amend the terms thereof or to refuse to renew any such Material Contract upon expiration of its term. The Company is not currently paying liquidated damages in lieu of performance thereunder. 4.10 LITIGATION. Except as set forth on SCHEDULE 4.10, there is no action, suit, proceeding, claim, arbitration or investigation ("PROCEEDING") pending or, to the Company's knowledge, currently threatened against the Company or one of its Subsidiaries, its activities, properties or assets or, to the Company's knowledge, against any officer, director or employee of the Company or one of its Subsidiaries in connection with such officer's, director's or employee's relationship with, or actions taken on behalf of, the Company or one of its Subsidiaries. To the Company's knowledge, there is no factual or legal basis for any such Proceeding that might result, individually or in the aggregate, in any Material Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries is a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality and there is no Proceeding by the Company or one of its Subsidiaries currently pending or which the Company or one of its Subsidiaries intends to initiate. 4.11 REQUIRED CONSENTS. All Consents, approvals, orders, authorizations or registrations, qualifications, designations, declarations or filings on the part of the Company or the Shareholders with any federal, national, provincial, state or local governmental authority or otherwise required in connection with the consummation of the transactions contemplated herein (the "COMPANY REQUIRED CONSENTS"), shall have been obtained prior to and be effective as of the Closing. 21 4.12 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company nor any of its Subsidiaries is in any violation, breach or Default of (a) any term of its charter, articles or bylaws, (b) in any material respect, any term or provision of any mortgage, indenture, contract, agreement or instrument to which it is a party or by which it may be bound or (c) any provision of any foreign or domestic, provincial, state, national or federal judgment, decree, order, statute, rule or regulation applicable to or binding upon it. Except as set forth on SCHEDULE 4.12, the execution, delivery and performance of and compliance with this Agreement and the consummation of the transactions contemplated hereby will not result in any such violation or Default, or be in conflict with or constitute, with or without the passage of time or the giving of notice or both, either a Default under the charter, articles or bylaws of the Company or any of its Subsidiaries, or any agreement or contract of the Company or any of its Subsidiaries, or, to the best of the Company's knowledge, a violation of any statutes, laws, Regulations or Court Orders, or an event which results in the creation of any lien, charge or Encumbrance upon any of the assets of the Company or any of its Subsidiaries. 4.13 DISCLOSURE. No representation or warranty by the Company in this Agreement or in any statement or certificate signed by any officer of the Company furnished or to be furnished to the Purchaser pursuant to this Agreement contains 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 in which they are made, not misleading. 4.14 GOVERNMENT CONTRACTS. Except as set forth on SCHEDULE 4.14: (a) The Company and its Subsidiaries have not received a final decision of a contracting officer or prime contractor asserting any claim or equitable adjustment against the Company or any of its Subsidiaries with respect to any Government Contract and there are no disputes between the Company or one of its Subsidiaries and the United States Government for any prime contract under the Contract Dispute Act or any other federal statute arising under or relating to any Government Contract that would, individually or in the aggregate have a Material Adverse Effect. (b) The Company and its Subsidiaries have not received any written notice of the intention of any contracting officer or prime contractor to terminate any Government Contract for either convenience or Default. The Company and its Subsidiaries have not received any show cause notices, cure notices, or negative determinations of responsibility with respect to any Government Contract in the last twelve months, and any notice or determination asserted prior thereto has been resolved to the Company's reasonable satisfaction. (c) The Company and its Subsidiaries have not asserted any claim or request for equitable adjustment requesting money, interpretation of contract terms, or other relief under any Government Contract in the last twelve months, and any claim or request asserted prior thereto has been resolved to the Company's reasonable satisfaction. (d) The Company and its Subsidiaries have not received written notice of any failure to comply in all material respects with the Truth in Negotiations Act (10 U.S.C. Section 2306a, 22 41 U.S.C. Section 254(d)) or to submit where required cost or pricing data that were accurate, complete and current. (e) The Company and its Subsidiaries have not received written notice that either the Company or any of its Subsidiaries or any of their directors, officers, employees, agents, or consultants is under administrative, civil, or criminal investigation, indictment or information, audit or internal investigation with respect to any irregularity, misstatement, or omission regarding any Government Contract. (f) The Company and its Subsidiaries have not received written notice that any suspension or debarment action has been commenced against the Company or any of its Subsidiaries with respect to any Government Contract. (g) The Company and its Subsidiaries have fully complied in all material respects with all of its obligations under applicable Government Contracts relating to any government furnished property or similar property or equipment owned by the United States or any state in the United States. (h) The Business has complied in all material respects with all Cost Accounting Standards and has accounted for all Government Contracts in accordance with disclosure statements furnished to and reviewed by the United States government or any state government. (i) The Company and its Subsidiaries possess all necessary security clearances and Permits for the execution of their obligations under any Government Contract. 4.15 INSURANCE. Set forth on SCHEDULE 4.15 is a complete and correct list of all insurance policies of the Company and its Subsidiaries of any kind currently in force and also sets forth for each insurance policy the type of coverage, the name of the insureds, the insurer, the premium, the expiration date, the deductibles and loss retention amounts and the amounts of coverage. 4.16 FINANCIAL STATEMENTS. SCHEDULE 4.16 sets forth the Company's unaudited balance sheet dated November 30, 2000 (the "BALANCE SHEET DATE") and the income statements and statements of changes in cash flows of the Company for the year ended November 30, 2000 (the "FINANCIAL STATEMENTS"), in the case of the year end Financial Statements, as audited by the Company Accountants. Such Financial Statements (a) were prepared in accordance with the books and records of the Company, (b) are true, correct and complete and present fairly the financial condition of the Company as of the dates therein indicated and the results of operations for the periods therein specified and (c) have been prepared in accordance with Canadian GAAP applied on a consistent basis, except for the omission of notes thereto and normal year-end audit adjustments. Specifically, but not by way of limitation, the balance sheet of the Financial Statements discloses all of the Company's material Debts, Capital Leases, Liabilities and obligations of any nature, whether due or to become due, as of the Balance Sheet Date (including, without limitation, absolute liabilities, accrued liabilities and contingent liabilities) to the extent such Debts, Capital Leases, Liabilities and obligations are required to be disclosed in accordance with Canadian GAAP. The Company has good and marketable title to all assets set 23 forth on the balance sheet of the Financial Statements, except for such assets as have been spent, sold or transferred in the Ordinary Course of Business since the Balance Sheet Date. 4.17 CERTAIN ACTIONS. Since the Balance Sheet Date, except as disclosed on SCHEDULE 2.6 or indebtedness that has been incurred with Parent's prior knowledge and consent, neither the Company nor any of its Subsidiaries has: (a) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its shares; (b) incurred any indebtedness for money borrowed or incurred any other Liabilities individually in excess of U.S.$25,000 or in excess of U.S.$100,000 in the aggregate, other than U.S.$200,000 incurred since the Balance Sheet Date for payroll purposes; (c) made any loans or advances to any Person, other than ordinary advances for travel expenses; (d) sold, exchanged or otherwise disposed of any material assets or rights other than the sale of inventory in the Ordinary Course of its Business; or (e) entered into any transactions with any of its officers, directors or employees or any entity controlled by any of such individuals (other than employment, share purchase option, confidentiality, noncompetition and intellectual property rights agreements entered into in the Ordinary Course of Business and disclosed on SCHEDULE 4.9 hereto). 4.18 ACTIVITIES SINCE BALANCE SHEET DATE. Since the Balance Sheet Date, there has not been: (a) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition, operating results, prospects or business of the Company (as presently conducted and as presently proposed to be conducted); (b) any waiver by the Company or its Subsidiaries of a valuable right or of a material Debt owed to the Company or any of its Subsidiaries; (c) any satisfaction or discharge of any lien, claim or Encumbrance or payment of any obligation by the Company or its Subsidiaries, except such a satisfaction, discharge or payment made in the Ordinary Course of Business that is not material to the assets, properties, financial condition, operating results or business of the Company; (d) any material change or amendment to a material contract or arrangement by which the Company, one of its Subsidiaries or any of their assets or properties is bound or subject, except for changes or amendments which are expressly provided for or disclosed in this Agreement; 24 (e) any material change in any compensation arrangement or agreement with any present or prospective employee, contractor or director not approved by the Company's Board of Directors; or (f) to the Company's knowledge, any other event or condition of any character which would materially and adversely affect the assets, properties, financial condition, operating results or business of the Company. 4.19 TAXES. (a) DEFINITIONS. For purposes of this Agreement: (i) the term "TAX" (including with correlative meaning, the terms "TAXES" and "TAXABLE") means (A) all federal, national, provincial, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto, (B) any Liability for payment of amounts described in clause (A) whether as a result of transferee liability, of being a member of an affiliated, consolidated, combined or unitary group for any period, or otherwise through operation of law, and (C) any Liability for the payment of amounts described in clauses (A) or (B) as a result of any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any other Person; and (ii) the term "TAX RETURN" means any return, declaration, report, statement, information statement and other document required to be filed with respect to Taxes. (b) Each of the Company and its Subsidiaries has accurately prepared and timely filed all Tax Returns it is required to have filed. Such Tax Returns are accurate, complete and correct in all material respects and do not contain a disclosure statement under Section 6662 of the Code (or any predecessor provision or comparable provision of state, provincial, local or foreign law). (c) The Company and its Subsidiaries have paid all Taxes each is required to have paid. (d) Except as set forth on SCHEDULE 4.19(d): (i) no claim has been made by any taxing authority in any jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that it is or may be subject to Tax by that jurisdiction; and (ii) no extensions or waivers of statutes or periods of limitations with respect to the Tax Returns have been given by or requested from the Company or its Subsidiaries. (e) SCHEDULE 4.19(e) sets forth: 25 (i) the taxable years of the Company and its Subsidiaries as to which the applicable statutes or periods of limitations on the assessment and collection of Taxes have not expired; (ii) those taxable years for which examinations by taxing authorities are presently being conducted; (iii) those years for which notice of pending or threatened examination or adjustment has been received; and (iv) those years for which required income Tax Returns have not yet been filed. (f) Except to the extent indicated in SCHEDULE 4.19(f), all deficiencies asserted or assessments made against the Company or its Subsidiaries as a result of any examinations by any taxing authority have been fully paid. (g) There are no liens for Taxes (other than for current Taxes not yet due and payable) upon the assets of the Company or its Subsidiaries. (h) Neither the Company nor any of its Subsidiaries is a party to or bound by any tax indemnity, tax sharing or tax allocation agreement. (i) Neither the Company nor any of its Subsidiaries is a party to or bound by any closing agreement or offer in compromise with any taxing authority. (j) Except to the extent indicated in SCHEDULE 4.19(j): (i) neither the Company nor any of its Subsidiaries has ever been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code (or any predecessor provision or comparable provision of state, provincial, local or foreign law), or a member of combined, consolidated or unitary group for state, provincial, local or foreign Tax purposes; (ii) neither the Company nor any of its Subsidiaries has Liability for Taxes of any Person (other than the Company and its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, provincial, local or foreign income Tax law), as transferee or successor, by contract, or otherwise; (iii) neither the Company nor any of its Subsidiaries has filed a consent pursuant to the collapsible corporation provisions of Section 341(f) of the Code (or any corresponding provision of state, provincial, local or foreign income Tax law) or agreed to have Section 341(f)(2) of the Code (or any corresponding provision of state, provincial, local or foreign income Tax law) apply to any disposition of any asset owned by it; and (iv) neither the Company nor any of its Subsidiaries has been a personal holding company under Section 542 of the Code. 26 (k) Neither the Company nor any of its Subsidiaries has agreed to make, nor is it required to make, any adjustment under Sections 481(a) or 263A of the Code or any comparable provision of state, provincial or foreign tax laws by reason of a change in accounting method or otherwise. Neither the Company nor any of its Subsidiaries has taken action that is not in accordance with past practice that could defer a Liability for Taxes of the Company or any of its Subsidiaries from any taxable period ending on or before the Closing Date to any taxable period ending after such date. (l) Neither the Company nor any of its Subsidiaries is a party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in connection with this Agreement or any change of control of the Company, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code, other than an agreement, contract, arrangement or plan for which shareholder approval meeting the requirements of Code Section 280G(b)(5) has been or will be obtained prior to the Closing. (m) SCHEDULE 4.19(m) sets forth all foreign jurisdictions in which the Company or any of its Subsidiaries is subject to tax, is engaged in business or has a permanent establishment. (n) Neither the Company nor any of its Subsidiaries is a party to any joint venture, partnership, or other arrangement or contract which could be treated as a partnership for federal income tax purposes. (o) No material election with respect to Taxes of the Company or any of its Subsidiaries will be made by the Executives or the Company or any of its Subsidiaries after the date of this Agreement without the prior written consent of Purchaser. (p) None of the income recognized, for federal, national, state, provincial, local or foreign income tax purposes, by the Company or any of its Subsidiaries during the period commencing on the date hereof and ending on the Closing Date will be derived other than in the Ordinary Course of Business. (q) The provisions for Taxes currently payable on the Financial Statements are at least equal, as of the date thereof, to all unpaid Taxes of the Company and its Subsidiaries, whether or not disputed. (r) The Company and each of its Subsidiaries have withheld all Taxes required to be withheld from any payments made by each of them and have remitted such withheld Taxes on a timely basis to the appropriate governmental authorities. 4.20 ENVIRONMENTAL MATTERS. (a) For the purposes of this SECTION 4.20: (i) "CERCLA" means the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended. 27 (ii) "DISPOSAL," "RELEASE" and "THREATENED RELEASE" shall have the definitions assigned thereto by CERCLA. (iii) "ENVIRONMENT" means any ambient, workplace or indoor air, surface water, drinking water, groundwater, land surface, subsurface strata, river sediment, plant or animal life, natural resources, workplace, and real property and the physical buildings, structures, improvements and fixtures thereon. (iv) "ENVIRONMENTAL LAWS" means all applicable state, federal, provincial laws relating to Hazardous Substances, toxic torts, occupational health and safety, or the Environment, including without limitation, the Resource Conservation and Recovery Act, CERCLA, the Clean Air Act, the Water Pollution Control Act, the Safe Drinking Water Act, and the Toxic Substances Control Act, and any requirements promulgated pursuant to these applicable laws or any analogous federal, state, provincial or local applicable laws. (v) "ENVIRONMENTAL LIABILITIES" means all Liabilities of a Person (whether such Liabilities are owed by such Person to governmental authorities, third parties or otherwise) whether currently in existence or arising hereafter which arise under or relate to any Environmental Law. (iv) "HAZARDOUS SUBSTANCE" means any substance or material: (i) the presence of which requires investigation or remediation under any applicable law; or (ii) that is defined as a "pollutant or contaminant," "solid waste," "hazardous waste" or "hazardous substance" under any applicable law; or (iii) that is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic or mutagenic or otherwise hazardous and is regulated by any governmental authority having or asserting jurisdiction over the Company; or (iv) the presence of which causes a nuisance, trespass or other tortious condition; (v) the presence of which poses a hazard to the health or safety of Persons; or (vi) without limitation, that contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenols (PCBs) or asbestos. (b) Except as disclosed in SCHEDULE 4.20(b), each of the Company and its Subsidiaries has obtained all approvals, authorizations, certificates, consents, licenses, orders and permits or other similar authorizations of all governmental authorities, or from any other Person, that are required under any Environmental Law, except for such approvals, authorizations, certificates, consents, license, orders and permits or other similar authorizations the failure of which to obtain would not have a Material Adverse Effect on the Company. SCHEDULE 4.20(b) sets forth all material Permits, licenses and other authorizations issued under any Environmental Law relating to the Company, any of its Subsidiaries or the Business. (c) Except as set forth in SCHEDULE 4.20(c), each of the Company and its Subsidiaries is in compliance with all terms and conditions of all Permits of all governmental authorities (and all other Persons) required under all Environmental Laws that are used in the Business or that relate to the Company or any of its Subsidiaries, except where the failure to be in compliance would not have a Material Adverse Effect on the Company. Each of the Company and its Subsidiaries is also in compliance with all other limitations, restrictions, conditions, standards, requirements, schedules and timetables required or imposed under all Environmental 28 Laws, except where the failure to be in compliance would not have a Material Adverse Effect on the Company. (d) Except as set forth in SCHEDULE 4.20(d), there are no past or present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting the Company, any of the Subsidiaries or the Business that violate or may violate any Environmental Law after the Closing Date or that may give rise to any Environmental Liability, or otherwise form the basis of any claim, action, demand, suit, Proceeding, hearing, study or investigation (i) under any Environmental Law, (ii) based on or related to the manufacture, processing, distribution, use, treatment, storage (including without limitation underground storage tanks), disposal, transport or handling, or the emission, discharge, release or threatened release of any Hazardous Substance or (iii) resulting from exposure to workplace hazards, except where such events would not have a Material Adverse Effect on the Company. (e) During the period that the Company or one of its Subsidiaries has owned or leased its properties and facilities, (i) there have been no disposals, releases or threatened releases of Hazardous Substances on, from or under such properties or facilities and (ii) neither the Company nor one of its Subsidiaries, nor, to the Company's knowledge, any third party, has used, generated, manufactured or stored on, under or about such properties or facilities or transported to or from such properties or facilities any Hazardous Substances, except where such activities would not have a Material Adverse Effect on the Company. The Company has no knowledge of any presence, disposals, releases or threatened releases of Hazardous Substances on, from or under any of such properties or facilities, which may have occurred prior to the Company having taken possession of any of such properties or facilities. (f) The Company has delivered to Purchaser all material environmental documents, studies and reports relating to: (i) any facilities or real property ever owned, operated or leased by the Company or any of its Subsidiaries or (ii) any Environmental Liability of the Business, the Company or any of its Subsidiaries. 4.21 EMPLOYEE BENEFITS. (a) For all purposes of this Agreement, (i) "EMPLOYEE PENSION BENEFIT PLAN" means any employee pension benefit plan, as defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA, or any other registered or unregistered employee pension, retirement, retirement savings, supplemental pension or other retirement plan, program, agreement or arrangement. (ii) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (iii) "MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section 3(37) and 4001(a)(3) of ERISA. (b) Except as set forth on SCHEDULE 4.21, the Company and its Subsidiaries do not currently sponsor, maintain or contribute to and has not ever sponsored, maintained, contributed to, or incurred an obligation to contribute to, any Employee Pension Benefit Plan on 29 behalf of or with respect to any employee of the Company or its Subsidiaries. The Company and its Subsidiaries do not currently sponsor, maintain or contribute to any Multiemployer Plan covering its employees. 4.22 PERMITS. SCHEDULE 4.22 sets forth a complete list of all Permits material to the operation of the Business or otherwise held by the Company or one of its Subsidiaries in connection with the Business, all of which are as of the date hereof, and all of which will be as of the Closing Date, in full force and effect. The Company and its Subsidiaries have, and at all times have had, all Permits required under any Regulation in the operation of the Business and owns or possesses such Permits free and clear of all Encumbrances except Permitted Encumbrances, and except such Permits the failure of which to obtain would not have a Material Adverse Effect on the Company. The Company and its Subsidiaries are not in material Default and has not received any notice of any claim of Default, with respect to any such Permit. Except as otherwise governed by law, all such Permits are renewable by their terms or in the Ordinary Course of Business without the need to comply with any special qualification procedures or to pay any amounts other than routine filing fees and will not be adversely affected by the completion of the transactions contemplated by this Agreement. Except as set forth on SCHEDULE 4.22, no present or former shareholder, director, officer or employee of the Company or any Affiliate thereof, or any other Person, owns or has any proprietary, financial or other interest (direct or indirect) in any Permit which the Company or any of its Subsidiaries owns, possesses or uses. 4.23 INTERESTED PARTY TRANSACTIONS. Except as set forth SCHEDULE 4.23, no officer or director of any of the Company or any "affiliate" or "associate" (as those terms are defined in Rule 405 promulgated under the Act) of any such Person has had, either directly or indirectly, a material interest in: (a) any Person or entity which purchases from or sells, licenses or furnishes to the Company or any of its Subsidiaries any goods, property, technology, intellectual or other property rights or (b) any contract or agreement to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries may be bound or affected. 4.24 COMPLIANCE WITH LAW. The Company and its Subsidiaries and the conduct of its business have not violated and are in compliance with all Regulations and Court Orders relating to the business or operations of the Company, except where such violation or failure to be in compliance would not have a Material Adverse Effect on the Company. The Company has not received any notice to the effect that, or otherwise been advised that, it is not in compliance in any material respect with any such Regulations or Court Orders, and the Company does not know of any existing circumstances that are likely to result in violations of any of the foregoing. 4.25 CERTAIN BUSINESS PRACTICES. None of the directors, officers, agents or employees of the Company or any of its Affiliates has, in each case in connection with the business, (a) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses, including without limitation, expenses related to political activity, (b) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns, made any bribes or kickback payments or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (c) made any other unlawful payment. 30 4.26 MINUTE BOOKS. The minute books of the Company and its Subsidiaries provided to Purchaser contain a complete summary of all meetings of directors and shareholders and all other corporate proceedings since the time of incorporation and reflect all transactions referred to in such books accurately in all material respects. 4.27 LABOR MATTERS. (a) Neither the Company nor any of its Subsidiaries is bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the knowledge of the Company, has sought to represent any of the employees, representatives or agents of Company or any of its Subsidiaries. There is no strike or other labor dispute involving the Company or any of its Subsidiaries pending, or to the knowledge of the Company, threatened, which could have a Material Adverse Effect on the Company, nor is the Company aware of any labor organization or employee bargaining agent involving its employees or the employees of any of its Subsidiaries. (b) SCHEDULE 4.27(b) sets forth the names of each of the key, exempt employees (I.E., those employees whose annual cash compensation exceeds U.S.$50,000 and who are considered "exempt" from the payment of overtime) of the Company and its Subsidiaries, and also sets forth the base payment made to such key employee each pay period as of the date hereof and projections for the current Company Fiscal Year of other incentive compensation (including bonuses) for each Person named therein. SCHEDULE 4.27(b) also lists as of the date hereof the names of all other employees of the Company and its Subsidiaries, the hourly pay rates of compensation and the job titles for all such employees, length of employment and whether on approved or statutory leave of absence. The Company is not aware that any officer or key employee, or that any group of key employees, intends to terminate his or her employment with the Company of any of its Subsidiaries, nor does the Company have a present intention to terminate the employment of any of the foregoing. SCHEDULE 4.27(b) also sets forth all employment, compensation, severance or termination agreements between the Company or any of its Subsidiaries and any employee of the Company or any of its Subsidiaries. To the Company's knowledge, no employee or director of the Company or any of its Subsidiaries is a party to, or is otherwise bound by, any nondisclosure, confidentiality, noncompetition, proprietary rights, employment, consulting or similar agreement, between such employee or director and any other Person that materially adversely affects or will affect the performance of his or her duties as an employee or director of the Company or any of its Subsidiaries. (c) No complaint, grievance, claim, work order or investigation has been filed, made or commenced against the Company or any Subsidiary pursuant to the Ontario Human Rights Code, the Occupational Health & Safety Act, the Workplace Safety and Insurance Act (Ontario), the Employment Standards Act or the Pay Equity Act, in each case of the Province of Ontario, or any similar legislation of Canada, the Province of Ontario or any other jurisdiction, except for such complaints, grievances, claims, work orders or investigations that have been resolved such that the Company will have no further liability to any third party. 4.28 NO BROKERS. Except as set forth on SCHEDULE 4.28, none of the Company or any of the Company's Subsidiaries, officers, directors, employees or shareholders has entered into nor 31 will enter into any contract, agreement, arrangement or understanding with any broker, finder or similar agent or any Person which will result in the obligation of Purchaser, Parent, the Company or any of their respective Affiliates to pay any finder's fee, brokerage fees or commission or similar payment in connection with the transactions contemplated hereby. 4.29 BANK ACCOUNTS. SCHEDULE 4.29 contains a true, correct and complete list of all bank accounts maintained by the Company and its Subsidiaries, including each account number and the name and address of each bank and the name of each Person who has signature power with respect to each such account. 4.30 COMPETITION ACT. The Company, together with its "affiliates" (as defined in the Competition ACT (Canada)), does not have assets in Canada, or gross revenues from sales in, from or into Canada, that exceed C$35,000,000 in aggregate value as determined in accordance with the Notifiable Transaction Regulations promulgated under the Competition Act (Canada). 4.31 TRUST ACCOUNT. As of the Closing Date, the cash and other marketable securities in the Company's trust account maintained for the benefit of the clients of the Company on whose behalf the Company collects funds will equal or exceed the amount of the Liabilities of the Company to such clients. All funds collected by the Company on behalf of its clients are deposited in the trust account of the Company and are not commingled with other funds of the Company. 4.32 PRIVATE COMPANY. The Company is not a reporting issuer (as defined in the Securities Act (Ontario)), there is not a published market for the Shares, and the number of holders of securities of the Shares is not more than fifty, exclusive of holders who are in the employment of the Company or an Affiliate of the Company, and exclusive of holders who were formerly in the employment of the Company or an Affiliate of the Company and who while in that employment were, and have continued after that employment to be, security holders of the Company. As a material inducement to Purchaser to enter into this Agreement, each of the Shareholders, severally as provided in ARTICLE IX, hereby represent and warrant to Purchaser as provided in SECTION 4.33 through 4.39, which representations and warranties are, as of the date hereof, and will be, as of the Closing Date, true, correct and complete: 4.33 DUE AUTHORIZATION OF SHAREHOLDERS. Each of the Shareholders has all requisite power and authority, and has taken all action necessary, to execute, deliver and perform this Agreement, to consummate the transactions contemplated hereby, and to perform his, her or its obligations hereunder. This Agreement has been duly executed and delivered by each of the Shareholders and is a legal, valid and binding obligation of each of the Shareholders, enforceable against him or her in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors' rights generally and except insofar as the availability of equitable remedies may be limited by applicable law. 4.34 TITLE TO SHARES. Except as set forth on SCHEDULE 4.34, as of the date hereof, each Shareholder is the registered and sole beneficial owner of the Shares held by such Shareholder, 32 with good and marketable title thereto, free and clear of any and all liens, security interests, pledges, mortgages, charges, limitation, claims, restrictions, rights of first refusal, rights of first offer, rights of first negotiation or other Encumbrance of any kind or nature whatsoever. Effective upon the Closing, each Shareholder will be the registered and sole beneficial owner of the Shares held by such Shareholder, with good and marketable title thereto, free and clear of any and all liens, security interests, pledges, mortgages, charges, limitation, claims, restrictions, rights of first refusal, rights of first offer, rights of first negotiation or other Encumbrance of any kind or nature whatsoever. Upon consummation of the purchase of the Shares from each Shareholder, Purchaser will acquire from such Shareholder good and marketable title to the Shares held by such Shareholder, free and clear of any and all liens, security interests, pledges, mortgages, charges, limitation, claims, restrictions, rights of first refusal, rights of first offer, rights of first negotiation or other Encumbrance of any kind or nature whatsoever. 4.35 PROCEEDINGS REGARDING SHAREHOLDERS. There is no Proceeding pending against, or to each Shareholder's knowledge, currently threatened against or affecting, any Shareholder before any court or arbitrator or any governmental body, agency or official that challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement. 4.36 REPRESENTATIONS REGARDING PARENT SHARES. Each of the Accredited Shareholders, severally, but not jointly, hereby represent and warrant to Parent as follows: (a) INVESTIGATION; ECONOMIC RISK. Each of the Accredited Shareholders acknowledges that he has had an opportunity to discuss the business, affairs and current prospects of Parent with its officers. Each of the Accredited Shareholders further acknowledges having had access to information about Parent that it has requested. Each of the Accredited Shareholders acknowledges that he is able to fend for himself in the transactions contemplated by this Agreement and has the ability to bear the economic risks of holding Parent Shares pursuant to this Agreement. (b) PURCHASE FOR OWN ACCOUNT. The Parent Shares to be acquired by each of the Accredited Shareholders hereunder will be acquired for such Accredited Shareholder's own account, not as a nominee or agent, and not with a view to or in connection with the sale or distribution of any part thereof, except for such transfers made under an effective registration statement or such other transfer as may be in compliance with applicable securities laws as provided in an opinion, acceptable in form to Parent, delivered to Parent by counsel for the Accredited Shareholders prior to any such transfer. (c) RESTRICTIVE LEGENDS. It is understood by each of the Accredited Shareholders that each certificate representing the Restricted Parent Shares and any other securities issued in respect of the Restricted Parent Shares upon any stock split, stock dividend, recapitalization, merger or similar event shall be stamped or otherwise imprinted with a legend substantially in the following form: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF 33 ANY STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THAT CERTAIN STOCK PURCHASE AGREEMENT, DATED AS OF DECEMBER 28, 2000, BY AND BETWEEN CITYSEARCH CANADA, INC., TICKETMASTER ONLINE-CITYSEARCH, INC., RESERVEAMERICA HOLDINGS, INC. AND THE SHAREHOLDERS THEREOF, THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. (d) REMOVAL OF RESTRICTIVE LEGEND. The legends set forth above shall be removed by Parent upon request to do so from the holder thereof within five Business Days from any certificate evidencing Restricted Parent Shares, (i) with respect to the legend regarding the Act, upon the transfer of such Restricted Parent Shares in accordance with the Registration Statement or pursuant to an opinion of counsel, as reasonably requested by Parent, that such Restricted Parent Shares may be transferred in reliance upon an exemption from the Act and applicable Ontario securities laws and (ii) with respect to the lock-up, upon the transfer of such Restricted Parent Shares subsequent to the expiration of the Lock-Up Period. 4.37. NON-RESIDENTS. SCHEDULE 4.37 lists each of the Shareholders that are not "non-residents" of Canada for the purposes of the Income Tax Act (Canada). 4.38. COMMUNITY PROPERTY. Except for those Shareholders listed on SCHEDULE 4.38, each Shareholder does not reside in and is not subject to the laws of a community property jurisdiction. 4.39. SECURITIES ACT (ONTARIO). Each Shareholder is either resident outside Canada or, if not, is in Ontario or the last address of such Shareholder as shown on the books of the Company is in Ontario. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER Parent and Purchaser hereby jointly and severally represent and warrant to the Company and each of the Shareholders as follows: 5.1 ORGANIZATION. Purchaser is a corporation duly incorporated and organized, and is validly existing and up-to-date in the filing of all corporate and similar returns under the laws of the Province of Ontario, its jurisdiction of incorporation, and has all requisite corporate power and capacity to own its properties and assets and to carry on its business as now conducted and as presently proposed to be conducted. 5.2 DUE AUTHORIZATION. All corporate action on the part of each of Purchaser and Parent, its officers, directors and shareholders necessary for the authorization, execution and delivery of, and the performance of all obligations of each of Purchaser and Parent under this Agreement has been taken or will be taken prior to the Closing. This Agreement, when executed 34 and delivered by each of Purchaser and Parent, will constitute a valid and legally binding obligation of each of Purchaser and Parent, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors' rights generally and to general equitable principles. 5.3 NO CONFLICTS. Each of Purchaser and Parent is not in any violation, breach or Default of any term of its charter or bylaws or in any material respect of any term or provision of any mortgage, indenture, contract, agreement or instrument to which the either Purchaser or Parent is a party or by which it may be bound, or of any provision of any foreign or domestic state or federal judgment, decree, Court Order, statute, rule or Regulation applicable to or binding upon Purchaser or Parent. The execution, delivery and performance of and compliance with this Agreement and the consummation of the transactions contemplated hereby will not result in any such violation or Default, or be in conflict with or constitute, with or without the passage of time or the giving of notice or both, either a Default under the Purchaser's or Parent's charter or bylaws, or any agreement or contract of Purchaser or Parent, or, to the best of Purchaser's or Parent's knowledge, as the case may be, a violation of any statutes, laws, Regulations or Court Orders, or an event which results in the creation of any lien, charge or Encumbrance upon any of Purchaser's or Parent's assets. 5.4. CONSENTS AND APPROVALS. Except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements, of state or provincial securities laws and the Investment Canada Act (Canada), no consent, approval or authorization of, declaration to, or filing or registration with, any governmental or regulatory authority, or any other Person, is required to be made or obtained by Purchaser or Parent in connection with the execution, delivery and performance by Purchaser or Parent of this Agreement and the consummation of the transactions contemplated hereby. 5.5. LITIGATION. Except as disclosed in the Parent SEC Documents, there is no Proceeding pending, or to the knowledge of Purchaser or Parent, threatened or anticipated against or affecting Purchaser or Parent which has or might be reasonably expected to have a Material Adverse Effect on Purchaser or Parent or on the ability of Purchaser or Parent to perform any of its obligations hereunder or on the consummation of the transactions contemplated by this Agreement. 5.6. NO BROKERS. Neither Purchaser nor Parent nor any of their respective partners, Representatives or Affiliates has entered into nor will enter into any contract, agreement, arrangement or understanding with any broker, finder or similar agent or any Person which will result in the obligation of the Company or the Shareholders to pay any finder's fee, brokerage fees or commission or similar payment in connection with the transactions contemplated hereby. 5.7. VALID ISSUANCE OF STOCK. The Parent Shares to be issued hereunder, when issued and delivered in accordance with the terms of this Agreement, will be duly and validly issued, fully paid and non assessable, free and clear of all liens, claims, Encumbrances and adverse interests of any kind, except for such Encumbrances as may have been created by the Shareholders. All Parent Shares upon issuance will have the rights, privileges and preferences set forth in Parent's Certificate of Incorporation and Bylaws for such class of shares. The Parent 35 Shares will be issued in compliance with or pursuant to exemptions from applicable federal and state securities laws and applicable Canadian securities laws. 5.8 SEC FILINGS. Parent has filed each Parent SEC Document which Parent was required to file with the SEC since December 31, 1998. As of their respective dates or, in the case of registration statements, their effective dates (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), none of the Parent SEC Documents (including all schedules thereto and documents incorporated by reference therein) contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Parent SEC Documents complied when filed in all material respects with the then applicable requirements of the Act or the Exchange Act, as the case may be, and the rules and regulations promulgated by the SEC thereunder. 5.9 CONDUCT OF BUSINESS. Except as disclosed in the Parent SEC Documents filed during the calendar year 2000, Parent has conducted its business only in the Ordinary Course and there has not been, since the last such filing, any event, change or effect that has had or could reasonably be expected to have a Material Adverse Effect on Parent. 5.10 FINANCIAL STATEMENTS. The financial statements of Parent included in any Parent SEC Document filed in 1999 and 2000 complied as to form in all material respects with the then applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were prepared in accordance with U.S. GAAP applied on a consistent basis during the periods involved (except as may have been indicated in the notes thereto or, the case of the unaudited statements, as permitted by Form 10-Q promulgated by the SEC) and fairly present (subject, in the case of the unaudited statements, to normal, year-end audit adjustments) the consolidated financial position of Parent and its consolidated Subsidiaries as at the respective dates thereof and the consolidated results of their operations and cash flows for the respective periods then ended. Except as disclosed in any Parent SEC Document, neither Parent nor any of its Subsidiaries has any liabilities, accrued, contingent or otherwise, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on Parent. ARTICLE VI CERTAIN COVENANTS 6.1 CONDUCT OF THE BUSINESS. From the date hereof until the Closing Date, the Company will conduct its business in the Ordinary Course and use its commercially reasonable efforts, without paying or increasing the compensation, payments, remuneration or fees payable to any Person other than in the Ordinary Course of Business, to preserve intact its business organizations and relationships and goodwill with third parties. Without limiting the generality of the foregoing, from the date hereof until the Closing Date: (a) Without the Purchaser's prior consent (which consent shall not be unreasonably withheld or delayed), neither the Company nor any of its Subsidiaries will and will not agree to: 36 (i) purchase or otherwise acquire assets from any other Person, or sell or transfer any assets of its business, other than in the Ordinary Course of Business; (ii) incur any Liability, except Liabilities (A) incurred in the Ordinary Course of Business where the aggregate dollar amount of all such Liabilities incurred does not exceed U.S.$25,000, (B) incurred pursuant to existing obligations of the Company that are disclosed in the Schedules hereto, (C) incurred for payroll purposes where the aggregate dollar amount of all such Liabilities incurred does not exceed U.S.$300,000 or (D) expressly contemplated by the terms of this Agreement; (iii) amend or modify in any material respect or terminate any Material Contract or any other contract entered into by the Company after the date hereof which, if in existence on the date hereof, would be considered a Material Contract; (iv) make or commit to make any capital expenditure, or group of related capital expenditures, in excess of U.S.$25,000, other than (A) capital expenditures set forth on SCHEDULE 6.1 and (B) capital expenditures expressly required under any Material Contract; (v) hire or make an offer to hire any full-time employee; PROVIDED, HOWEVER, that this restriction will not apply to any part-time call center personnel; or (vi) fail to inform Purchaser of any material issues being investigated by the Company and its independent auditors in connection with the preparation and finalization of the Company's audited financial statements as provided in SECTION 6.12. (b) Each of the Company and its Subsidiaries will: (i) (A) maintain its assets in the Ordinary Course of Business in reasonably serviceable operating order and condition, reasonable wear and tear, damage by fire and other casualty excepted, (B) promptly repair, restore or replace any material assets in the Ordinary Course of Business and (C) upon any damage, destruction or loss to any of such assets, apply any and all insurance proceeds received with respect thereto to the prompt repair, replacement and restoration thereof to the condition of such assets before such event to the extent reasonably practicable; (ii) comply with all material applicable laws; (iii) not allow any liens for taxes to be placed on any of its assets, except for liens arising from taxes which are due but not yet payable; (iv) use its commercially reasonable efforts to obtain, prior to the Closing Date, all Company Required Consents; (v) promptly notify Purchaser in writing if it has knowledge of any action, event, condition or circumstance, or group of actions, events, conditions or circumstances that materially affect the Business of the Company, other than changes in general economic conditions; 37 (vi) promptly notify Purchaser in writing of the commencement of any Proceeding by or against the Company, or of becoming aware of any material claim, action, suit, inquiry, proceeding, notice of violation, subpoena, government audit or disallowance that could reasonably be expected to result in a Proceeding; and (vii) pay accounts payable and pursue collection of its accounts receivable in the Ordinary Course of Business. 6.2 FURTHER ASSURANCES. The parties hereto shall execute and deliver such other documents, certificates, agreements and other writings and shall take such other actions as may be reasonably necessary or desirable (including, without limitation, obtaining the Company Required Consents and any consent or approvals required to be obtained by Purchaser or Parent and making necessary filings with all governmental authorities) in order to consummate or implement expeditiously the transactions contemplated by this Agreement. Notwithstanding the foregoing, no party hereto shall have any obligation to expend any funds or to incur any other obligation in connection with the consummation of the transactions contemplated hereby (including, by way of illustration only, any payment in connection with obtaining the Company Required Consents) other than normal out-of-pocket expenses (such as fees and expenses of counsel and accountants) reasonably necessary to consummate such transactions. 6.3 CONFIDENTIALITY; PUBLIC ANNOUNCEMENTS. The parties hereto shall use their best efforts to keep this Agreement and the execution and terms hereof confidential, and shall consult with each other before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby. The parties may, however, disclose such matters to its directors, officers, executive employees and professional advisors and those of prospective financing sources to such extent as may be reasonable for the negotiation, execution and consummation of this Agreement. Each party shall keep confidential all information concerning the other obtained pursuant to this Agreement and shall not use such information except in connection with the transactions set forth herein. If for any reason such transactions shall not be consummated, each party will return all such information (including all copies thereof) regarding the other, to the other party. The foregoing obligations of confidentiality in this SECTION 6.3 do not pertain to the disclosure of information which is available publicly, is required to be disclosed by any court or any party discloses, upon advice of counsel, in order to comply with applicable law. The parties hereto recognize and agree that in the event of a breach by a party of this section, money damages would not be an adequate remedy to the injured party for such breach and, even if money damages were adequate, it would be impossible to ascertain or measure with any degree of accuracy the damages sustained by such injured party therefrom. Accordingly, if there should be a breach or threatened breach by a party of the provisions of this section, the injured party shall be entitled to an injunction restraining the breaching party from any breach without showing or proving actual damage sustained by the injured party. Nothing in the preceding sentence shall limit or otherwise affect any remedies that a party may otherwise have under applicable law. Notwithstanding the foregoing, Purchaser and Parent agree that the Company may inform its customers and clients of the transactions contemplated hereby after the close of trading on the NASDAQ National Market one day prior to the issuance of any press release announcing the transactions contemplated hereby. 38 6.4. ANCILLARY AGREEMENTS. In connection with the transactions contemplated hereby, Purchaser and the Company will enter into the Employment Agreements with each of the Executives. 6.5 INSPECTION. Subject to confidentiality obligations and similar restrictions that may be applicable to information furnished to the Company by third parties that may be in the Company's possession from time to time (including restrictions on the disclosure of government-classified information), prior to the Closing, the Company shall allow Purchaser and its accountants, counsel and other representatives reasonable access, during normal business hours, by advance arrangement with the Company's management and in the presence of representatives of the Company and in such manner so as not to interfere unduly with the Company's operations, to all of the properties, books, contracts, commitments, tax returns and records of its business and appropriate officers and employees, and shall furnish such representatives, at Purchaser's expense for copying only, with all financial and operating data and other information concerning its affairs as Purchaser may reasonably request. 6.6. NOTIFICATION OF CERTAIN MATTERS. (a) The Company and the Named Shareholders shall give prompt notice to Purchaser of (i) the occurrence, or failure to occur, of any event which occurrence or failure would be likely to cause any representation or warranty of the Company or Named Shareholders contained in this Agreement or in any Ancillary Agreement, exhibit or schedule to be untrue or inaccurate in any material respect and (ii) any material failure of the Company or any of its Affiliates or the Named Shareholders to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement or any Ancillary Agreement, exhibit or schedule; PROVIDED, HOWEVER, that such disclosure shall not be deemed to cure any breach of a representation, warranty, covenant or agreement or to satisfy any condition. The Company and the Named Shareholders shall promptly notify Purchaser of the threat or commencement of any Proceeding, or any development that occurs before the Closing that could in any way result in a Material Adverse Effect on the Company. (b) Each of Purchaser and Parent shall give prompt notice to the Company of (i) the occurrence, or failure to occur, of any event which occurrence or failure would be likely to cause any representation or warranty of Purchaser or Parent contained in this Agreement or in any Ancillary Agreement, exhibit or schedule to be untrue or inaccurate in any material respect and (ii) any material failure of Purchaser Parent or any of their respective Affiliates or Representatives, as applicable, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement or any Ancillary Agreement, exhibit or schedule; PROVIDED, HOWEVER, that such disclosure shall not be deemed to cure any breach of a representation, warranty, covenant or agreement or to satisfy any condition. Each of Purchaser and Parent shall promptly notify the Company of the threat or commencement of any Proceeding, or any development that occurs before the Closing that, to Purchaser's or Parent's knowledge, could in any way result in a Material Adverse Effect on Purchaser or Parent. 6.7. NON-EXECUTIVE EMPLOYEE MATTERS. Purchaser or Parent intends to continue the employment with the Company of all non-Executive employees of the Company on an at-will basis at the Closing at the same compensation levels such employees received in the Company 39 Fiscal Year prior to the Closing. The Company and the Shareholders shall each use their best efforts to assist Purchaser in continuing the employment of such employees of the Company. In addition, promptly after the Closing, at Purchaser's sole discretion, those non-Executive employees of the Company identified by Purchaser in its reasonable discretion will be granted options to purchase Parent Shares in amounts commensurate with those options provided to similarly situated employees of Parent, such amount to be determined by Purchaser in its reasonable discretion. In addition, in accordance with Parent's normal compensation and review process, those non-Executive employees of the Company identified by Purchaser in its reasonable discretion will receive annual salary adjustments and Parent Share option awards commensurate with other employees of Parent in the same general positions and geographic locations. 6.8. BUDGETING AND TRANSITIONAL MATTERS. (a) Purchaser and the Company acknowledge and agree that, promptly following the Closing (with respect to the 2001 Fiscal Year) and prior to the beginning of the 2002 Fiscal Year (with respect to the 2002 Fiscal Year), the parties will jointly prepare an operating plan for the Company that will include minimum and maximum working capital and capital expenditure resources and an annual budget for any applicable Fiscal Years; PROVIDED, HOWEVER, that Purchaser shall have the right to approve the final operating plan in its discretion. The parties agree that Purchaser shall have the right to (a) in its sole discretion, prevent the Company from entering into agreements with any Persons with respect to ticketing, hotel reservations and off season call markets, (b) increase employee compensation by up to an aggregate of U.S.$1,000,000 in each of the 2001 and 2002 Fiscal Years and (c) transfer the rights and obligations of the Company's existing ticketing, hotel reservation and off season call center service contracts (or the relevant portions of contracts which include campground reservation rights and the transferred rights) to other Purchaser Affiliates. None of the foregoing actions by Purchaser shall give rise to any claim by the Company or the Shareholders that such actions have affected or impaired the ability of the Shareholders to earn all or any portion of the maximum Earn-Out Amounts for each of the 2001 and 2002 Fiscal Years. (b) The parties agree that, promptly after the Closing Date, Purchaser will change the fiscal year of the Company from a November 30 year-end to a December 31 year-end. In connection therewith, each of the parties acknowledges that any EBITDA generated by the Company or its Subsidiaries in December 2000 will not be taken into account in calculating the Earn-Out Amount for the Fiscal Year ending December 31, 2001. (c) Purchaser, Parent and the Company acknowledge and agree that, promptly following execution of this Agreement, through Closing and continuing after the Closing, the parties will jointly prepare a technology staffing and implementation plan for the Company that will set forth changes to the Company's technology personnel and technology development efforts post-Closing. The plan will be jointly prepared by the parties; PROVIDED, HOWEVER, that Purchaser and Parent shall have the right to approve the final technology plan in their sole discretion. In addition, Parent reserves the right, in its sole discretion, to appoint new senior personnel for the Company post-Closing and to remove Company personnel post-Closing. Further, the Company reserves the right, in its sole discretion, to appoint a Chief Operating Officer and such other appropriate senior management for the Company. The Chief Operating 40 Officer will report to the Chief Executive Officer of the Company and will have such direct reports as are mutually agreed upon by the Chief Executive Officer and Parent. The Company and the Shareholders acknowledge and agree that none of the foregoing actions by Purchaser and Parent shall give rise to any claim by the Company or the Shareholders that such actions have affected or impaired the ability of the Shareholders to earn all or any portion of the maximum Earn-Out Amounts for each of the 2001 and 2002 Fiscal Years; PROVIDED that Purchaser and Parent use commercially reasonable efforts to make any and all decisions to take any and all of the foregoing actions with the intent of maintaining or improving the EBITDA generating capacity of the Company. 6.9. REGISTRATION STATEMENT. (a) Parent shall promptly prepare at its sole expense, with the cooperation of the Accredited Shareholders with respect to information relating to the Accredited Shareholders or their sale of Parent Shares, and Parent at its sole expense shall file with the SEC prior to the expiration of the Lock-Up Period, a Registration Statement on Form S-3 or other appropriate short-form registration statement (the "US REGISTRATION STATEMENT") under the Act, with respect to the Restricted Parent Shares. (b) Parent, with the cooperation of the Accredited Shareholders with respect to information relating to the Accredited Shareholders or their sale of such Parent Shares, shall cause the US Registration Statement to comply as to form in all material respects with the applicable provisions of the Act and the rules and regulations thereunder. Parent shall use all reasonable efforts, and the Accredited Shareholders will cooperate with Parent, to have the US Registration Statement declared effective by the SEC prior to the expiration of the Lock-Up Period. Parent shall use its commercially reasonable efforts to obtain, prior to the effective date of the US Registration Statement, all necessary state securities law or "Blue Sky" permits or approvals required to carry out the sale of such Parent Shares by the Accredited Shareholders and will pay all expenses incident thereto. (c) Parent agrees that the US Registration Statement and each amendment or supplement thereto at the time it is filed or becomes effective, will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and indemnifies and holds harmless the Accredited Shareholders with respect to any breach of the foregoing; PROVIDED, HOWEVER, that the foregoing shall not apply to the extent that any such untrue statement of a material fact or omission to state a material fact was made by Parent in reliance upon and in conformity with written information concerning the Accredited Shareholders furnished to Parent by the Accredited Shareholders specifically for use in the US Registration Statement or any amendment thereto, and the Accredited Shareholders and their counsel have been given reasonable opportunity to review the US Registration Statement or any amendment thereto prior to filing. (d) Parent shall advise the Accredited Shareholders, promptly after it receives notice thereof, of the time when the US Registration Statement has become effective. Parent shall cause the US Registration Statement to remain effective until the earlier of (1) the date at which all of the Restricted Parent Shares have been sold by the Accredited Shareholders or (2) 41 twelve months following the Registration Date (the "EFFECTIVE PERIOD"). Parent at its expense shall provide the shareholders with such number of copies of the US Registration Statement and any amendments thereto as any Accredited Shareholder may reasonably request from time to time. (e) The Accredited Shareholders agree that (A) the written information provided by each of them for inclusion in the US Registration Statement and each amendment or supplement thereto at the time it is filed or becomes effective, will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (B) such Accredited Shareholders, upon notification from Parent, shall not use the US Registration Statement to effect sales of Parent Shares for any reasonable time period during which Parent is amending the US Registration Statement to reflect material developments, as specified in the notice from Parent. (f) With a view to making available the benefits of certain rules and regulations of the SEC which may at any time permit the sale of the Parent Shares to the public without registration, or pursuant to a registration on Form S-3, for a period of three (3) years following the Closing Date, Parent agrees to use its reasonable best efforts to: (i) Make and keep public information available, as those terms are understood and defined in Rule 144 promulgated under the Act, at all times after the share purchase; (ii) File with the SEC in a timely manner all reports and other documents required of Parent under the Act and the Exchange Act; and (iii) So long as an Accredited Shareholder or its assignee or transferee who is identified to Parent in writing ("ACCREDITED HOLDER") owns any Parent Shares, and Parent has been notified of the name, address and holdings of such Accredited Holder, to furnish to that Accredited Holder forthwith upon request a written statement by Parent as to its compliance with the reporting requirements of said Rule 144, and of the Act and the Exchange Act, a copy of the most recent annual or quarterly report of Parent, and such other reports and documents of Parent as such Accredited Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing such Accredited Holder to sell any such Parent Shares without registration. (g) (i) To the extent permitted by law, Parent will indemnify and hold harmless each Shareholder, any underwriter (as defined in the Act) for such Shareholder, its officers, directors, shareholders or partners and each person, if any, who controls such Shareholder or underwriter within the meaning of the Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations with respect to the Registration Statement (collectively, a "VIOLATION"): (A) any untrue statement or alleged untrue statement of a material fact, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (B) the omission or alleged omission to state therein a material fact required 42 to be stated therein, or necessary to make the statements therein not misleading or (C) any violation or alleged violation by Parent of the Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Act, the Exchange Act or any state securities law; and Parent will pay to each such Shareholder (and its officers, directors, stockholders or partners), underwriter or controlling person, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that the indemnity agreement contained in this SECTION 6.9(g)(i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of Parent; nor shall Parent be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon (1) a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in the Registration Statement by any such Shareholder or (2) a Violation that would not have occurred if such Shareholder had delivered to the purchaser the version of the prospectus most recently made available by Parent to the Shareholder as of the date of such sale. (ii) To the extent permitted by law, each selling Shareholder, severally and not jointly, will indemnify and hold harmless Parent, each of its directors, each of its officers who has signed the Registration Statement, each person, if any, who controls Parent within the meaning of the Act, any underwriter, any other Shareholder selling securities pursuant to the Registration Statement and any controlling person of any such underwriter or other Shareholder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation (which includes without limitation the failure of the Shareholder to comply with the prospectus delivery requirements under the Act, and the failure of the Shareholder to deliver the most current prospectus made available by Parent prior to such sale), in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Shareholder expressly for use in the Registration Statement or such Violation is caused by the Shareholder's failure to deliver to the purchaser of the Shareholder's Parent Share the most current version of the prospectus (or amendment or supplement thereto) that had been made available to the Shareholder by Parent; and each such Shareholder will pay any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this SECTION 6.9(g)(ii) in connection with investigating or defending any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that the indemnity agreement contained in this SECTION 6.9(g)(ii) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Shareholder. The aggregate indemnification and contribution liability of each shareholder under this SECTION 6.9(g)(ii) shall not exceed the net proceeds received by such Shareholder in connection with sale of shares pursuant to the Registration Statement. (iii) Each Person entitled to indemnification under this SECTION 6.9(g) (for purposes of this SECTION 6.9(g), the "REGISTRATION INDEMNIFIED PARTY") shall give notice to the party required to provide indemnification (the "REGISTRATION INDEMNIFYING PARTY") promptly after such Registration Indemnified Party has actual knowledge of any claim as to which indemnity may be sought and shall permit the Registration Indemnifying Party to assume the defense of any such claim and any litigation resulting therefrom; PROVIDED, that counsel for 43 the Registration Indemnifying Party who conducts the defense of such claim or any litigation resulting therefrom shall be approved by the Registration Indemnified Party (whose approval shall not unreasonably be withheld), and the Registration Indemnified Party may participate in such defense at such party's expense; PROVIDED FURTHER, that the failure of any Registration Indemnified Party to give notice as provided herein shall not relieve the Registration Indemnifying Party of its obligations under this SECTION 6.9(g) unless the Registration Indemnifying Party is materially prejudiced thereby. No Registration Indemnifying Party, in the defense of any such claim or litigation, shall (except with the consent of each Registration Indemnified Party) consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Registration Indemnified Party of a release from all liability in respect to such claim or litigation. Each Registration Indemnified Party shall furnish such information regarding itself or the claim in question as a Registration Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. (iv) To the extent that the indemnification provided for in this SECTION 6.9(g) is held by a court of competent jurisdiction to be unavailable to a Registration Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Registration Indemnifying Party, in lieu of indemnifying such Registration Indemnified Party hereunder, shall contribute to the amount paid or payable by such Registration Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Registration Indemnifying Party on the one hand and of the Registration Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the Registration Indemnifying Party and of the Registration Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Registration Indemnifying Party or by the Registration Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 6.10. RELEASE. (a) From and after the Closing Date, each Shareholder finally and forever releases Purchaser, Parent and the Company, and their respective successors, assigns, officers, directors, agents, servants, employees and all Affiliates and Subsidiaries, past and present, of Purchaser, Parent and the Company (the "RELEASEES") from each and every agreement, commitment, indebtedness, obligation and claim of every nature and kind whatsoever, known or unknown, suspected or unsuspected (each, a "CLAIM" and collectively, the "CLAIMS") that (A) such Shareholder may have had in the past, may have as of the date hereof or, to the extent arising from or in connection with any act, omission or state of facts taken or existing on or prior to the date hereof, may have after the date hereof against any of the Releasees and (B) has arisen or arises directly out of, or relates directly to, such Shareholder's interest as a shareholder, director, officer and/or employee of the Company, except (1) such Claims as are contemplated by this Agreement (including, without limitation, such Shareholder's rights pursuant to SECTION 6.9) and (2) Claims for indemnification that such Shareholder may have under the Company's 44 charter or bylaws (such Claims being the "RELEASED CLAIMS"). Each Shareholder acknowledges his, her or its understanding that the facts in respect of which this release is given may hereafter be determined to be other than or different from the facts now known or believed by such Shareholder, and such Shareholder hereby accepts and assumes the risks of the facts being different and agrees that this release shall be and remain, in all respects, effective and not subject to termination or rescission by reason of any such difference in facts. Specifically, each Shareholder hereby expressly waives any and all rights under Section 1542 of the California Civil Code with respect to the Released Claims, which reads in full as follows: SECTION 1542. GENERAL RELEASE. A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Each Shareholder acknowledges that he, she or it has separately bargained for the foregoing waiver of Section 1542. The parties hereto intend that the provisions regarding the Released Claims be construed as broadly as possible, and incorporate herein similar federal, national, state, provincial or other laws, all of which, with respect to the Released Claims, are similarly waived by each Shareholder. (b) From and after the Closing Date, except with respect to any Liabilities to be paid to any Shareholder by Parent pursuant to this Agreement, each Shareholder covenants and agrees to waive and release the right to receive any and all amounts due to such Shareholder pursuant to Liabilities of the Company by reason of any agreement between the Company and such Shareholder on or before the Closing Date or otherwise. Each Shareholder shall have caused all indebtedness owed to the Company by such Shareholder or any Affiliate of such Shareholder to be paid in full prior to the Closing. In addition, each Shareholder covenants and agrees to take any and all actions as may be necessary to effect the release of indebtedness contemplated hereby, in form reasonably satisfactory to Purchaser. (c) Except with respect to each Shareholder's right, as of the Closing Date, to receive a portion of the Aggregate Consideration in exchange for his, her or its shares of the Company as provided herein, each Shareholder hereby acknowledges that, as of the Closing Date, such Shareholder will have no ongoing interest in the Company, financial or otherwise, by reason of ownership of the shares of the Company or otherwise. 6.11. LOCK-UP. Except for transfers between the Accredited Shareholders in accordance with U.S. and Canadian securities laws and pursuant to an opinion of counsel reasonably satisfactory to Parent if requested, each Accredited Shareholder agrees that he, she or it will not offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or grant any rights with respect to (collectively, a "DISPOSITION") any Restricted Parent Shares during the Lock-Up Period; PROVIDED, HOWEVER, that nothing in this SECTION 6.11 shall prohibit such Accredited Shareholders from exchanging his, her or its Restricted Parent Shares for interests in a diversified exchange fund; PROVIDED that any such exchange is done in accordance with applicable securities laws. Each Accredited Stockholder also consents to the entry of stop transfer instructions by Parent's transfer agent and registrar prohibiting the transfer of any 45 Restricted Parent Shares held by such Accredited Shareholder except in compliance with the foregoing restrictions. 6.12. FINANCIAL STATEMENTS. The Company shall, and the Shareholders shall cause the Company to, no later than one (1) day prior to the Closing Date, deliver to Purchaser audited financial statements of the Company and its Subsidiaries as of and for the fiscal year ended November 30, 2000. 6.13. SOLICITATION OF SHAREHOLDERS AND WARRANT HOLDERS. (a) As promptly as practicable following the date hereof, the Company shall send to all shareholders of the Company information soliciting such holders to sell all of their outstanding shares of the Company to Purchaser pursuant to the terms of this Agreement, as evidenced by execution of this Agreement by such shareholder at least five (5) days prior to the Closing Date. Purchaser agrees to cooperate with the Company, as requested by the Company, in the solicitation of the security holders of the Company as provided in this SECTION 6.13(a). (b) As promptly as practicable following the date hereof, the Company shall send to all holders of Warrants of the Company (each a "HOLDER" and collectively, the "HOLDERS") information soliciting such Holder to (i) exercise such Warrants prior to the Closing Date and (ii) sell all of their Warrant Class B Shares and Warrant Common Shares issued upon such exercise to Purchaser pursuant to the terms of this Agreement, and for the full consideration for Class B Shares and Common Shares provided herein, as evidenced by execution of this Agreement by such Holder as a "Shareholder" at least five (5) days prior to the Closing Date. In connection therewith, the Company agrees to offer to each such Holder the right to finance the exercise of such Warrants by accepting a loan of the funds necessary for such exercise and executing a Note in favor of the Company for the full exercise price of such Warrants, such Note to be repaid in full, pursuant to its terms, from the portion of the Cash Consideration payable to such Holder pursuant hereto. Purchaser agrees to cooperate with the Company, as requested by the Company, in the solicitation of the Holder as provided in this SECTION 6.13(b). 6.14. SOFTWARE COMPLIANCE. The parties agree that, within thirty (30) days of the Closing Date, Purchaser shall cause the Company to be brought into compliance with respect to the license agreements pursuant to which the Company has licensed the software listed on SCHEDULE 6.14. The Shareholders shall be responsible for all costs related to bringing the Company into compliance pursuant to this SECTION 6.14. The parties estimate that such compliance will cost approximately $200,000 (the "COMPLIANCE ESTIMATE"), which amount shall be deducted from the Cash Consideration paid at the Closing pursuant to ARTICLE II pro rata based on each Shareholder's percentage ownership of the Company immediately prior to the Closing Date, as reflected on SCHEDULE I attached hereto, as amended immediately prior to the Closing. To the extent that the actual cost of bringing the Company into compliance (the "ACTUAL COMPLIANCE COST") is more than $5,000 greater than the Compliance Estimate, the Shareholders' Representative and Purchaser shall jointly notify the Escrow Agent to release funds from the Escrow Account to Purchaser in the amount of such excess, to be borne by the Shareholders pro rata. To the extent that the Actual Compliance Cost is more than $5,000 less than the Compliance Estimate, Purchaser shall pay such difference to the Escrow Account for the benefit of the Shareholders PRO RATA, subject to the terms of the Escrow Agreement. 46 6.15. UPDATING SCHEDULES. The Company shall deliver to Purchaser, no later than three (3) days prior to the Closing Date, a written update or supplement to the Schedules reflecting events occurring and contracts and agreements executed or to be executed from the date hereof through the Closing Date and any corrections required to be made to the Schedules. To the extent that the Schedules are updated, corrected or supplemented, the Schedules shall be deemed to be amended as of the Closing Date to include the information set forth on such updated, corrected or supplemental Schedules; PROVIDED, HOWEVER, that (a) if there are any matters or events reflected on such updated, corrected or supplemental Schedules that could reasonably be expected to have a Material Adverse Effect on the Company, then Purchaser shall not be obligated to close the transactions contemplated hereby pursuant to SECTION 7.3(p) and (b) for all purposes of ARTICLE IX, the representations and warranties shall only be qualified by the Schedules as of the date hereof and shall not be qualified by any updated, corrected or supplemental Schedules. ARTICLE VII CONDITIONS TO CLOSING 7.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of each party hereto to consummate the transactions provided for hereby are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions: (a) No Proceeding by any governmental authority or other Person shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby and which could reasonably be expected to damage the assets of the Company or the Business materially if the transactions contemplated hereby are consummated. There shall not be any Regulation or Court Order that makes the transactions contemplated hereby and by the Ancillary Agreements illegal or otherwise prohibited. (b) Any governmental or regulatory notices or approvals required under any Regulations to carry out the transactions contemplated by this Agreement shall have been obtained and the parties shall have complied with all Regulations applicable to the transactions contemplated by this Agreement. 7.2. CONDITIONS TO OBLIGATION OF THE COMPANY AND THE SHAREHOLDERS. The obligations of the Company and the Shareholders to consummate the transactions provided for hereby are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by the Company: (a) All representations and warranties of each of Purchaser and Parent contained in this Agreement shall be true and correct in all material respects at and as of the date of this Agreement and at and as of the Closing Date, except as and to the extent that the facts and conditions upon which such representations and warranties are based are expressly required or permitted to be changed by the terms hereof, and each of Purchaser and Parent shall have performed and satisfied in all material respects all agreements and covenants required hereby to be performed by it prior to or on the Closing Date. 47 (b) Purchaser shall have tendered for delivery the documents and other items to be delivered by such parties pursuant to ARTICLE III of this Agreement. (c) Purchaser shall have delivered to the Company and the Shareholders a written opinion of Gibson, Dunn & Crutcher LLP, dated as of the Closing Date, substantially in the form attached hereto as EXHIBIT D. (d) Purchaser shall have delivered to the Company and the Shareholders a written opinion of Torys, dated as of the Closing Date, substantially in the form attached hereto as EXHIBIT E. 7.3. CONDITIONS TO THE OBLIGATION OF PURCHASER. The obligation of Purchaser to consummate the transactions provided for hereby are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by Purchaser: (a) The Shares to be sold hereunder, as held by the security holders of the Company listed on the executed signature pages hereto, shall represent not less than 98% of the issued and outstanding shares of each class of shares of the Company on a fully-diluted basis. (b) All representations and warranties of the Company and the Shareholders contained in this Agreement shall be true and correct in all material respects at and as of the date of this Agreement and at and as of the Closing Date, except as and to the extent that the facts and conditions upon which such representations and warranties are based are expressly required or permitted to be changed by the terms hereof, and the Company and each of the Shareholders shall have performed and satisfied in all material respects all agreements and covenants required hereby to be performed by each of them prior to or on the Closing Date. (c) The Company shall have tendered for delivery the documents and other items to be delivered by such parties pursuant to ARTICLE III of this Agreement. (d) All Permits and Company Required Consents by governmental agencies that are required for the consummation of the transactions contemplated hereby, or by third parties that are required in order to prevent a breach of, a Default under, or a termination, change in the terms or conditions or modification of, any instrument, contract, lease, license or other agreement to which the Company is a party and which is denoted with an asterisk (*) on SCHEDULE 4.9 shall have been obtained on terms and conditions satisfactory to Purchaser. In the event the Company cannot obtain certain Consents prior to the Closing and Purchaser elects to waive this condition to Closing, the Company and the Shareholders shall have the continuing obligation after the Closing to use its commercially reasonable efforts to endeavor to obtain all necessary Consents. (e) The Executives and the Company shall have executed and delivered the Ancillary Agreements. (f) All liens against the Company or any of its assets or properties shall have been released, including, without limitation, those liens listed on SCHEDULE 7.3(f) hereto, except as otherwise provided for herein. 48 (g) All liens or other Encumbrances against the Shares shall have been release, including, without limitation, those Encumbrances listed on SCHEDULE 4.5 hereto, except as otherwise provided for herein. (h) The Company shall have delivered to Purchaser a written opinion of Cassels Brock & Blackwell LLP, dated as of the Closing Date, substantially in the form attached hereto as EXHIBIT F. (i) The Company shall have delivered to Purchaser a written opinion of Lemery MacKrell Greisler, dated as of the Closing Date, substantially in the form attached hereto as EXHIBIT G. (j) Purchaser shall have received from the spouse, if any, of each Shareholder listed on SCHEDULE 4.38 a spousal consent in the form attached hereto as EXHIBIT H. (k) The Company shall have delivered the audited financial statements as required by SECTION 6.12. (l) The offer and sale of the Shares to Purchaser pursuant to this Agreement shall be exempt from the registration, prospectus and qualification requirements of all applicable securities laws. (m) Since the date of this Agreement, there shall have been no Material Adverse Change in the business, operations, prospects, condition (financial or otherwise) or results of operations of the Company. (n) Purchaser shall have received from the Company all documents and other materials requested by Purchaser for the purpose of examining and determining the Company's rights in and to any technology, products and proprietary assets now used, proposed to be used in, or necessary to, the Company's business as now conducted and proposed to be conducted, and the status of the Company's ownership rights in and to all such technology, products and proprietary assets shall be reasonably satisfactory to Purchaser. (o) Purchaser shall have received the letters of resignation of each of the directors of the Company, effective as of the Closing Date. (p) Any updated, corrected or supplemented Schedules provided to Purchaser pursuant to SECTION 6.15 shall not contain any matters or events that could reasonably be expected to have a Material Adverse Effect on the Company. ARTICLE VIII. TERMINATION 8.1. TERMINATION. This Agreement may be terminated at any time prior to the Closing Date: 49 (a) by mutual written consent of Purchaser, the Company and the Shareholders; (b) by Purchaser or the Company and the Shareholders if (i) any governmental authority shall have issued a final order, decree or ruling or taken any other final action restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, decree, ruling or other action is or shall have become nonappealable or (ii) subject to the following, the transactions contemplated hereby have not been consummated by March 31, 2001 (the "OUTSIDE DATE"); PROVIDED, HOWEVER, that no party may terminate this Agreement pursuant to this clause (ii) if such party's failure to fulfill any of its obligations under this Agreement shall have been the reason that the Closing Date shall not have occurred on or before said date; (c) by the Company and the Shareholders if (i) there shall have been a breach of any representation or warranty on the part of Purchaser or Parent set forth in this Agreement or if any representation or warranty of Purchaser or Parent shall have become untrue, in either case such that the conditions set forth in SECTION 7.2(a) would be incapable of being satisfied by the Outside Date or (ii) there shall have been a breach by Purchaser or Parent of any of their respective covenants or agreements hereunder having a Material Adverse Effect on Purchaser or Parent or materially adversely affecting (or materially delaying) the consummation of the transactions contemplated hereby, and Purchaser or Parent has not cured such breach or event within twenty (20) Business Days after notice by the Company thereof; PROVIDED that the Company has not breached any of its obligations hereunder; or (d) by Purchaser if (i) there shall have been a breach of any representation or warranty on the part of the Company or the Shareholders set forth in this Agreement or if any representation or warranty of the Company or the Shareholders shall have become untrue in either case such that the conditions set forth in SECTION 7.3(a) would be incapable of being satisfied by the Outside Date or (ii) there shall have been a breach by the Company or the Shareholders of any of their respective covenants or agreements hereunder having a Material Adverse Effect on the Company or materially adversely affecting (or materially delaying) the consummation of the transactions contemplated hereby, and the Company or the Shareholders, as the case may be, have not cured such breach or event within twenty (20) Business Days after notice by Purchaser thereof; PROVIDED that Purchaser or Parent has not breached any of its respective obligations hereunder. 8.2. EFFECT OF TERMINATION. In the event of the termination and abandonment of this Agreement pursuant to SECTION 8.1, this Agreement shall forthwith become void and have no effect without any liability on the part of any party hereto or its Affiliates, directors, officers or stockholders other than the provisions of SECTION 6.3, this SECTION 8.2, the arbitration provisions of SECTION 9.3(b) and SECTION 10.12 hereof. Nothing contained in this SECTION 8.2 shall relieve any party from liability for any breach of this Agreement. 50 ARTICLE IX. INDEMNIFICATION 9.1. SURVIVAL OF REPRESENTATIONS. All statements contained in any schedule or in any certificate or other document delivered by or on behalf of the parties pursuant to this Agreement or in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the parties hereunder. The representations and warranties of the Company, the Shareholders and Purchaser contained herein shall survive the Closing Date until the later to occur of (a) forty five days after the delivery of the audited financial statements for the Fiscal Year ending December 31, 2002 and (b) June 30, 2003; PROVIDED, HOWEVER, that: (i) the representations and warranties set forth in SECTIONS 4.4, 4.33 and 5.2 ("Due Authorization"), 4.2 ("Capitalization"), 4.20 ("Environmental Matters"), SECTION 4.21 ("Employee Benefit Plans"), 4.25 ("Compliance with Law"), 4.29 and 5.6 ("No Brokers") and SECTION 5.7 ("Valid Issuance of Stock") shall survive until the third anniversary of the Closing Date and (ii) the representations and warranties in SECTION 4.19 ("Taxes") and SECTION 4.34 ("Title to Shares") shall survive the Closing Date until sixty days following the expiration of any applicable statute of limitations (including any extensions thereof). In the case of actual fraud, intentional misrepresentation or active concealment, the representations and warranties of such breaching party shall survive until the expiration of the applicable statute of limitations. Any claims under this Agreement with respect to a breach of a representation and warranty must be asserted by written notice within the applicable survival period contemplated by this SECTION 9.1, and if such a notice is given, the survival period for such representation and warranty shall continue until the claim is fully resolved. The right to indemnification or other remedy based on the representations, warranties, covenants and agreements herein will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or agreement. All representations and warranties of each party set forth in this Agreement shall be deemed to have been made again by such party at and as of the Closing Date. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or agreement, will not affect the right to indemnification or other remedy based on such representations, warranties, covenants and agreements, unless such right is also expressly waived. 9.2. INDEMNIFICATION. (a) Subsequent to the Closing, subject to the limitations described below in SECTION 9.5, the Named Shareholders shall, as provided in SECTION 9.5(b), indemnify Purchaser and its respective Affiliates (including, after the Closing, the Company), and each of its respective officers, directors, employees, shareholders, partners and agents ("PURCHASER INDEMNIFIED PARTIES") against, and hold each of the Purchaser Indemnified Parties harmless from, any damage, claim, loss, cost, Liability or expense, including without limitation, interest, penalties, reasonable attorneys' fees and expenses of investigation (other than those expressly allocated pursuant to SECTION 9.3(b)(3)), consequential damages, response action, removal action or remedial action (collectively "DAMAGES") incurred by such Purchaser Indemnified Party that arise out of or relate to, whether directly or indirectly: (i) any misrepresentation or breach of any 51 warranty on the part of the Company or the Named Shareholders contained in this Agreement or in any agreement, certificate or other instrument delivered by the Company or the Shareholders pursuant to this Agreement or (ii) any breach or non-performance by the Company or the Shareholders of any of their respective covenants or agreements contained in this Agreement or in any agreement, certificate or other instrument delivered by the Company or the Shareholders pursuant to this Agreement. (b) Subsequent to the Closing, subject to the limitations described below in SECTION 9.5, the Shareholders shall severally, but not jointly, indemnify the Purchaser Indemnified Parties against, and hold each of the Purchaser Indemnified Parties harmless from, any Damages incurred by such Purchaser Indemnified Party that arise out of or relate to, whether directly or indirectly: (i) any misrepresentation or breach of any warranty on the part of such Shareholder contained in this Agreement or in any agreement, certificate or other instrument delivered by such Shareholder pursuant to this Agreement or (ii) any breach or non-performance by such Shareholder of any of his, her or its covenants or agreements contained in this Agreement or in any agreement, certificate or other instrument delivered by such Shareholder pursuant to this Agreement. (c) Each of Purchaser and Parent shall jointly and severally indemnify each of the Shareholders ("SHAREHOLDER INDEMNIFIED PARTIES"), against, and hold each of the Shareholder Indemnified Parties harmless from, any Damages incurred by such Shareholder Indemnified Party that arise out of or relate to, whether directly or indirectly: (i) any breach of any representation or warranty of Purchaser or Parent contained in this Agreement or in any agreement, certificate or other instrument delivered by Purchaser or Parent pursuant to this Agreement or (ii) any breach or non-performance by Purchaser or Parent of its covenants or agreements contained in this Agreement or in any agreement, certificate or other instrument delivered by Purchaser or Parent pursuant to this Agreement. (d) The term "DAMAGES" as used in this SECTION 9.2 is not limited to matters asserted by third parties against Shareholder Indemnified Parties or Purchaser Indemnified Parties, but includes Damages incurred or sustained by such persons in the absence of third-party claims, and payments by the indemnitee shall not be a condition precedent to recovery. 9.3. NOTICE OF CLAIMS. (a) Any Purchaser Indemnified Party or Shareholder Indemnified Party (the "INDEMNIFIED PARTY") seeking indemnification hereunder shall, within the relevant limitation period provided for in Section 9.1 above, give to the party obligated to provide indemnification to such Indemnified Party (the "INDEMNITOR") a notice (a "CLAIM NOTICE") describing in reasonable detail the facts giving rise to any claims for indemnification hereunder and shall include in such Claim Notice (if then known) the amount or the method of computation of the amount of such claim, and a reference to the provision of this Agreement or any agreement, certificate or instrument executed pursuant hereto or in connection herewith upon which such claim is based; PROVIDED, that a Claim Notice in respect of any action at law or suit in equity by or against a third Person as to which indemnification will be sought shall be given promptly after the action or suit is commenced; and PROVIDED FURTHER, that failure to give such notice shall not 52 relieve the Indemnitor of its obligations hereunder except to the extent it shall have been prejudiced by such failure. (b) Indemnitor shall have thirty days after the giving of any Claim Notice pursuant hereto to (i) agree to the amount or method of determination set forth in the Claim Notice and to pay such amount to such Indemnified Party in immediately available funds or (ii) to provide such Indemnified Party with notice that it disagrees with the amount or method of determination set forth in the Claim Notice (the "DISPUTE NOTICE"). Within fifteen days after the giving of the Dispute Notice, a representative of Indemnitor and such Indemnified Party shall negotiate in a BONA FIDE attempt to resolve the matter. In the event that the controversy is not resolved within thirty days of the giving of the Dispute Notice, the parties shall proceed to binding arbitration pursuant to the following procedures: (i) Any party may send another party written notice identifying the matter in dispute and invoking the procedures of this SECTION 9.3. Within 14 days, each party involved in the dispute shall meet at a mutually agreed location in New York, New York, or such other location as mutually agreed by the parties, for the purpose of determining whether they can resolve the dispute themselves by written agreement, and, if not, whether they can agree upon a third-party arbitrator to whom to submit the matter in dispute for final and binding arbitration. (ii) If such parties fail to resolve the dispute by written agreement or agree on the arbitrator within said 14-day period, any such party may make written application to the American Arbitration Association ("AAA") for the appointment of a panel of three arbitrators (collectively, the "ARBITRATOR") to resolve the dispute by arbitration. At the request of AAA the parties involved in the dispute shall meet with AAA at its offices within ten calendar days of such request to discuss the dispute and the qualifications and experience which each party respectively believes the Arbitrator should have; PROVIDED, HOWEVER, that the selection of the Arbitrator shall be the exclusive decision of AAA and shall be made within 30 days of the written application to AAA. (iii) Within 120 days of the selection of the Arbitrator, the parties involved in the dispute shall meet in New York, New York, or such other location as mutually agreed by the parties, with such Arbitrator at a place and time designated by such Arbitrator after consultation with such parties and present their respective positions on the dispute. The arbitration proceeding shall be held in accordance with the rules for commercial arbitration of the AAA in effect on the date of the initial request by for appointment of the Arbitrator, that gave rise to the dispute to be arbitrated (as such rules are modified by the terms of this Agreement or may be further modified by mutual agreement of the parties) Each party shall have no longer than five days to present its position, the entire proceedings before the Arbitrator shall be no more than ten consecutive days, and the decision of the Arbitrator shall be made in writing no more than 30 days following the end of the proceeding and shall set forth in writing the grounds or basis of the Arbitrator's decision. Such an award shall be a final and binding determination of the dispute and shall be fully enforceable as an arbitration decision in any court having jurisdiction and venue over such parties. Each party shall pay its own attorneys' fees and expenses in connection with such proceeding. The parties shall equally bear the Arbitrator's fees and expenses. 53 9.4. THIRD PERSON CLAIMS. If a claim by a third Person is made against an Indemnified Party, and if such party intends to seek indemnity with respect thereto under this ARTICLE IX, such Indemnified Party shall promptly notify the Indemnitor in writing of such claims, setting forth such claims in reasonable detail. The Indemnitor shall be relieved of its indemnification obligations hereunder to the extent that notice is not delivered promptly and the Indemnitor is prejudiced thereby. The Indemnitor shall have twenty days after receipt of such notice to undertake, conduct and control, through counsel of its own choosing and at its own expense, the settlement or defense thereof, and the Indemnified Party shall cooperate with it in connection therewith; provided that the Indemnified Party may participate in such settlement or defense through counsel chosen by such Indemnified Party and paid at its own expense; and PROVIDED FURTHER that, if in the reasonable opinion of counsel for the Indemnitor, there is a reasonable likelihood of a conflict of interest between the Indemnitor and the Indemnified Party, the Indemnitor shall be responsible for reasonable fees and expenses of one counsel to such Indemnified Party in connection with such defense. So long as the Indemnitor is reasonably contesting any such claim in good faith, the Indemnified Party shall not pay or settle any such claim without the consent of the Indemnitor. If the Indemnitor does not notify the Indemnified Party within ten days after receipt of the Indemnified Party's notice of a claim of indemnity hereunder that it elects to undertake the defense thereof, the Indemnified Party shall have the right to undertake, at Indemnitor's cost, risk and expense, the defense, compromise or settlement of the claim but shall not thereby waive any right to indemnity therefore pursuant to this Agreement. The Indemnitor shall not, except with the consent of the Indemnified Party, enter into any settlement that does not include as an unconditional term thereof the giving by the person or persons asserting such claim to all Indemnified Parties (I.E., the Shareholder Indemnified Party or the Purchaser Indemnified Party, as the case may be) of an unconditional release from all liability with respect to such claim or consent to entry of any judgment. 9.5. LIMITATION ON INDEMNITY. (a) Notwithstanding the foregoing, an Indemnitor shall not be obligated to indemnify an Indemnified Party under SECTIONS 9.2(a) or (b) unless and until the aggregate of all Damages suffered by such Indemnified Parties hereunder exceeds U.S.$200,000 (the "THRESHOLD AMOUNT"), whereupon, provided the other requirements of this ARTICLE IX have been complied with, the full amount of such Damages, and all subsequent Damages, shall become due and payable. Notwithstanding the foregoing, (a) no Threshold Amount shall apply to the Company's representations and warranties set forth in SECTIONS 4.2, 4.4, 4.19 and 4.28 hereof, (b) no Threshold Amount shall apply to Parent's and Purchaser's representations and warranties set forth in SECTION 5.6 hereof and (c) no Threshold Amount shall apply to the obligations of any party hereto to the extent a breach results from actual fraud, intentional misrepresentation or active concealment. (b) The total indemnity obligations of the Shareholders shall not exceed the sum of U.S.$5,000,000 and all Earn-Out Amounts (the "CAP"). With respect to indemnification pursuant to SECTION 9.2(a), each Named Shareholder's maximum individual indemnity obligations shall be the product of the Cap multiplied by such Named Shareholder's percentage ownership of the Company immediately prior to the Closing Date, as reflected on SCHEDULE I attached hereto, as amended immediately prior to the Closing, grossed up such that the total individual indemnity obligations of the Named Shareholders shall be equal to 100% of the Cap. 54 The Cap shall not limit indemnification with respect to breaches by the Shareholders or the Company of the representations and warranties set forth in 4.2, 4.4, 4.19, 4.28, 4.33 and 4.34. (c) Except as provided in SECTION 9.5(a), the Threshold Amount and Cap shall apply to all Damages regardless of whether asserted as a breach under the Agreement or under any other theory or cause of action. 9.6. RIGHT OF OFFSET. Purchaser shall have the right to offset any Damages suffered by the Purchaser Indemnified Parties, as finally determined in accordance with this ARTICLE IX, not previously indemnified by the Shareholders against any Earn-Out Amount to be paid to the Shareholders prior to payment by Purchaser of such Earn-Out Amount. In addition, Purchaser shall have the right to offset any Damages suffered by the Purchaser Indemnified Parties, in an amount not to exceed U.S.$5,000,000, even if not finally determined in accordance with this ARTICLE IX, against any Earn-Out Amount to be paid to the Shareholders with respect to the Fiscal Year ending December 31, 2001 prior to payment by Purchaser of such Earn-Out Amount. 9.7. REMEDIES. The remedies in this ARTICLE IX shall be the exclusive remedies of the parties with respect to any breach of the respective representations, warranties, covenants and agreements pursuant to this Agreement or otherwise arising out of this Agreement, regardless of the theory or cause of action plead, except for the remedies of specific performance, injunction and other equitable relief; PROVIDED, HOWEVER, that no party hereto shall be deemed to have waived any rights, claims, causes of action or remedies if and to the extent such rights, claims, causes of action or remedies may not be waived under applicable law or actual fraud, intentional misrepresentation or active concealment is proven on the part of a party by another party hereto. ARTICLE X. MISCELLANEOUS 10.1. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their successors and permitted assigns, in accordance with the terms hereof. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by the Company or the Shareholders without the prior written consent of Purchaser, or by Purchaser without the prior written consent of the Shareholders, except that Purchaser may, without such consent, assign the rights and obligations hereunder (both before and after the Closing Date), to an Affiliate of Purchaser; PROVIDED, HOWEVER, that no such assignment shall release Purchaser of any of its obligations under this Agreement. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and no other Person shall have any right, benefit or obligation hereunder. 10.2. NOTICES. Unless otherwise provided herein, any notice, request, instruction or other document to be given hereunder by any party to the other shall be in writing and delivered in person or by courier, telegraphed, telexed or by facsimile transmission or mailed by registered or certified mail, postage prepaid, return receipt requested (such mailed notice to be effective on the date of such receipt is acknowledged), as follows: 55 If to Purchaser or Parent: Ticketmaster Online-CitySearch, Inc. 790 E. Colorado Blvd., Suite 200 Pasadena, CA 91101 Attn: Bradley K. Serwin Telephone: (626) 660-2567 Fax: (626) 405-9929 With copies to: Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, California 90071 Attention: Kenneth M. Doran Telephone: (213) 229-7000 Fax: (213) 229-7520 Torys Maritime Life Tower Box 270, TD Centre Toronto, Ontario M5K IN2 Canada Attention: Philip Mohtadi Telephone: (416) 865-0040 Fax: (416) 865-7380 If to the Company or the Shareholders: ReserveAmerica Holdings, Inc. 401 Wheelabrator Way Milton ON L9T 4B7 Attention: Robert Manherz Telephone: (905) 875-1158 Fax: (905) 875-2612 With copies to: Cassels Brock & Blackwell LLP Suite 2100, 40 King Street West Toronto ON M5H 3C2 Attention: Norman F. Findlay Telephone: (416) 860-5212 Fax: (416) 350-6944 Lemery MacKrell Greisler 10 Railroad Place Saratoga Springs, NY 12866 56 Attention: Robert J. May and James A. Carminucci Telephone: (518) 581-8800 Fax: (518) 581-8823 Any party may, from time to time, designate any other address to which any such notice to such party shall be sent. Any such notice shall be deemed to have been delivered upon receipt. 10.3. CHOICE OF LAW. This Agreement shall be construed, interpreted and the rights of the parties determined in accordance with the laws of the State of Delaware, as applied to agreements among Delaware residents entered into and wholly to be performed within the State of Delaware (without reference to any choice of law rules that would require the application of the laws of any other jurisdiction). 10.4. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, together with the Ancillary Agreements and all exhibits and schedules hereto and thereto, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. No supplement, modification or other amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 10.5. COUNTERPARTS. This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.6. SEVERABILITY. If any provision of this Agreement is deemed or held to be illegal, invalid or unenforceable, this Agreement shall be considered divisible and inoperative as to such provision to the extent it is deemed to be illegal, invalid or unenforceable, and in all other respects this Agreement shall remain in full force and effect; PROVIDED, HOWEVER, that if any provision of this Agreement is deemed or held to be illegal, invalid or unenforceable there shall be added hereto automatically a provision as similar as possible to such illegal, invalid or unenforceable provision that is legal, valid and enforceable. Further, should any provision contained in this Agreement ever be reformed or rewritten by any judicial body of competent jurisdiction, such provision as so reformed or rewritten shall be binding upon all parties hereto. 10.7. HEADINGS. The headings of the Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 10.8. SCHEDULES. The Schedules and the Exhibits referenced in this Agreement are a material part hereof and shall be treated as if fully incorporated into the body of the Agreement. 10.9. NO THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement (and their 57 successors and assigns) any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. 10.10. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity without the necessity of demonstrating the inadequacy of monetary damages. 10.11. NO STRICT CONSTRUCTION. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. 10.12. EXPENSES. Except as otherwise specifically provided in this Agreement, (a) Purchaser will pay its and Parent's fees and expenses incident to this Agreement and the transactions contemplated hereby, including legal and accounting fees, investment banking fees, fees and points to any lender, consulting fees and related disbursements in connection with any of the foregoing ("TRANSACTION FEES"), (b) the aggregate Transaction Fees of the Company and the Shareholders shall be paid by the Shareholders. 10.13. DISCLOSURE SCHEDULES. Any information disclosed on a particular Schedule or Schedules shall also be deemed to have been disclosed for purposes of any other Schedule, even if not actually disclosed on such other Schedule, unless such disclosure is of a nature that does not reasonably inform or notify the reader of its applicability to a Schedule in which it is required to be disclosed. 58 10.14. SHAREHOLDERS' REPRESENTATIVE. (a) By executing this Agreement, each Shareholder irrevocably constitutes and appoints Robert Manherz as the true and lawful agent and attorney-in-fact (hereinafter referred to as the "SHAREHOLDERS' REPRESENTATIVE") of each Shareholder, with full powers of substitution, to act in the name, place and stead of each Shareholder with respect to the transactions contemplated hereby in accordance with the provisions of this Agreement and the Escrow Agreement, including, without limitation, to grant waivers on behalf of each Shareholder or to enter into amendments to this Agreement and to do or refrain from doing all such further acts and things, to execute all such certificates, instruments and other documents, as such Shareholders' Representative may deem necessary or appropriate in connection with any of the transactions contemplated under this Agreement or the Escrow Agreement, to give and receive notices and communications, to authorize delivery to Purchaser of the Escrowed Shares or other property from the Escrow Account in satisfaction of claims by Purchaser, to object to such deliveries, to agree to, negotiate, enter into settlements and compromises of, and demand arbitration and comply with orders of courts and awards of arbitrators with respect to such claims and to take all actions necessary or appropriate in the judgment of the Shareholders' Representative for the accomplishment of the foregoing. Such agency may be changed by the Shareholder from time to time upon not less than thirty days prior written notice to Purchaser; PROVIDED, HOWEVER, that the Shareholders' Representative may not be removed unless holders of a two-thirds interest in the Escrow Account agree to such removal and to the identity of the substituted shareholders' representative. Any vacancy in the position of Shareholders' Representative may be filled by approval of the holders of a majority in interest of the Escrow Account. The Shareholders agree that any such action, if material to the rights and obligations of the Shareholders in the reasonable judgment of the Shareholders' Representative, shall be taken in the same manner with respect to all Shareholders, unless otherwise agreed by each Shareholder. The appointment of the Shareholders' Representative shall be deemed coupled with an interest and shall be irrevocable, and Purchaser, Parent and any other Person may conclusively and absolutely rely, without inquiry, upon any actions of the Shareholders' Representative as the act of the Shareholders in all matters referred to in this Agreement. The Shareholders' Representative shall not be liable for any act done or omitted hereunder as Shareholders' Representative while acting in good faith and in the exercise of reasonable judgment. (b) The power of attorney granted in this section is not intended to be a continuing power of attorney within the meaning of and governed by the Substitute Decisions Act (Ontario) or any similar power of attorney under equivalent legislation in any other jurisdiction (a "CPOA"). The execution of this Agreement shall not terminate any such CPOA granted by any Shareholder previously and shall not be terminated by the execution by that Shareholder in the future of a CPOA, and each Shareholder hereby agrees not to take any action in the future (other than as expressly permitted by this section) which results in the termination of this power of attorney. 59 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year herein above first written. CITYSEARCH CANADA, INC., an Ontario corporation By: ----------------------------------- Name: ----------------------------- Title: ----------------------------- TICKETMASTER ONLINE-CITYSEARCH, INC., a Delaware corporation By: ----------------------------------- Name: ----------------------------- Title: ----------------------------- RESERVEAMERICA HOLDINGS, INC., an Ontario corporation By: ----------------------------------- Name: ----------------------------- Title: ----------------------------- SHAREHOLDERS: By: ----------------------------------- Name: ----------------------------- By: ----------------------------------- Name: ----------------------------- By: ----------------------------------- Name: ----------------------------- EX-5.1 4 a2036134zex-5_1.txt EXHIBIT 5.1 EXHIBIT 5.1 OPINION OF GIBSON, DUNN & CRUTCHER LLP JANUARY 24, 2001 (213) 229-7000 Ticketmaster Online-Citysearch, Inc. 790 E. Colorado Blvd., Suite 200 Pasadena, CA 91101 Re: REGISTRATION STATEMENT ON FORM S-3 Ladies and Gentlemen: We have examined the Registration Statement on Form S-3 (the "Registration Statement") of Ticketmaster Online-Citysearch, Inc., a Delaware corporation (the "Company"), filed with the Securities and Exchange Commission (the "Commission") pursuant to the Securities Act of 1933, as amended (the "Securities Act of 1933"), in connection with the offering from time to time by the stockholders identified therein of 299,954 shares of Class B Common Stock, par value $.01 per share, of the Company (the "Common Stock"). All capitalized terms which are not defined herein shall have the meanings assigned to them in the Registration Statement. For the purpose of the opinion set forth below, we have examined and are familiar with the proceedings taken and proposed to be taken by the Company in connection with the authorization and issuance of the Common Stock, including such corporate records of the Company and certificates of officers of the Company and of public officials and such other documents as we have deemed relevant and necessary as the basis for the opinion set forth below. In such examination, we have assumed the genuineness of all signatures on, and the authenticity of, all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies. With respect to agreements and instruments executed by natural persons, we have assumed the legal competency of such persons. On the basis of the foregoing examination and in reliance thereon, and subject to the assumptions stated and relying on the statements of fact contained in the documents we have examined, we are of the opinion that the Common Stock is validly issued, fully paid and non-assessable. We render no opinion herein as to matters involving the laws of any jurisdiction other than the laws of the United States of America and the General Corporation Law of the State of Delaware. In rendering this opinion, we assume no obligation to revise or supplement this opinion should current laws, or the interpretations thereof, be changed. We consent to the filing of this opinion as an exhibit to the Registration Statement, and we further consent to the use of our name under the caption "Legal Matters" in the Registration Statement and the prospectus which forms a part thereof. In giving these consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the Rules and Regulations of the Commission. Very truly yours, /s/ GIBSON, DUNN & CRUTCHER LLP ------------------------------- GIBSON, DUNN & CRUTCHER LLP KMD/PHB EX-23.1 5 a2036134zex-23_1.txt EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3) and related Prospectus of Ticketmaster Online-CitySearch, Inc. for the registration of 299,954 shares of its Class B common stock and to the incorporation by reference therein of our report dated January 26, 2000, with respect to the consolidated financial statements and schedule of Ticketmaster Online-CitySearch, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 1999, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Woodland Hills, California January 25, 2001 -----END PRIVACY-ENHANCED MESSAGE-----