Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXXXX.XXX, INC.
OM COMBINATION, INC.
AND
EARTHLINK, INC.
JUNE 7, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER....................................................................................1
SECTION 1.1. THE MERGER. ..........................................................................1
SECTION 1.2. EFFECTIVE TIME........................................................................2
SECTION 1.3. EFFECTS OF THE MERGER.................................................................2
SECTION 1.4. CERTIFICATE OF INCORPORATION AND BYLAWS...............................................2
SECTION 1.5. DIRECTORS AND OFFICERS................................................................3
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES .................................................3
SECTION 2.1. EFFECT ON CAPITAL STOCK ..............................................................3
(a) CANCELLATION OF TREASURY STOCK.............................................................3
(b) CONVERSION OF COMPANY SHARES...............................................................3
(c) NO FRACTIONAL EARTHLINK SHARES.............................................................4
SECTION 2.2. EXCHANGE OF CERTIFICATES...............................................................4
(a) EXCHANGE AGENT.............................................................................4
(b) PAYMENT OF MERGER CONSIDERATION............................................................4
(c) EXCHANGE PROCEDURE.........................................................................5
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED COMPANY SHARES...................................5
(e) NO FURTHER OWNERSHIP RIGHTS IN COMPANY SHARES..............................................6
(f) NO LIABILITY...............................................................................6
(g) LOST, STOLEN OR DESTROYED CERTIFICATES.....................................................6
SECTION 2.3. CONVERSION OF STOCK OPTIONS AND CERTAIN WARRANTS.......................................6
SECTION 2.4. CONVERTIBLE DEBENTURES.................................................................8
SECTION 2.5. STOCK TRANSFER BOOKS...................................................................8
SECTION 2.6. CERTAIN ADJUSTMENTS....................................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES..............................................................9
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SUBSIDIARIES ...................9
(a) ORGANIZATION; STANDING AND POWER...........................................................9
(b) SUBSIDIARIES; OTHER INVESTMENTS............................................................9
(c) CAPITAL STRUCTURE.........................................................................10
(d) AUTHORITY; NON-CONTRAVENTION..............................................................11
(e) SEC DOCUMENTS.............................................................................13
(f) MATERIAL CONTRACTS........................................................................13
(g) INFORMATION SUPPLIED......................................................................15
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS......................................................15
(i) STATE TAKEOVER STATUTES; ANTI-TAKEOVER PROVISIONS.........................................16
(j) BROKERS...................................................................................16
(k) LITIGATION................................................................................16
(l) ACCOUNTING MATTERS........................................................................16
(m) TAXES.....................................................................................17
(n) COMPLIANCE WITH LAWS......................................................................17
(o) INTELLECTUAL PROPERTY.....................................................................18
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(p) NO DEFAULT................................................................................18
(q) Y2K READINESS.............................................................................19
(r) OPINION OF COMPANY FINANCIAL ADVISORS.....................................................19
(s) TRANSACTIONS WITH AFFILIATES..............................................................19
(t) LICENSES..................................................................................19
(u) SUBSCRIBER ACCOUNTS.......................................................................20
(v) EMPLOYEE BENEFIT MATTERS..................................................................20
(w) EMPLOYMENT MATTERS........................................................................23
(x) NO EXCESS PARACHUTE PAYMENTS..............................................................23
(y) ENVIRONMENTAL MATTERS.....................................................................23
(z) TITLE TO AND CONDITIONS OF PROPERTIES.....................................................24
(aa) UNDISCLOSED LIABILITIES..................................................................24
(bb) INSURANCE................................................................................25
(cc) FULL DISCLOSURE..........................................................................25
(dd) [reserved]...............................................................................25
(ee) SEVERANCE PAYMENTS.......................................................................25
(ff) WARN ACT.................................................................................25
(gg) EARNOUT PAYMENTS.........................................................................26
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF EARTHLINK AND COMBINATION COMPANY .................26
(a) ORGANIZATION; STANDING AND POWER..........................................................26
(b) CAPITAL STRUCTURE.........................................................................26
(c) AUTHORITY; NON-CONTRAVENTION..............................................................27
(d) SEC DOCUMENTS.............................................................................28
(e) INFORMATION SUPPLIED......................................................................28
(f) BROKERS...................................................................................29
(g) UNDISCLOSED LIABILITIES...................................................................29
(h) LITIGATION................................................................................29
(i) OPINION OF EARTHLINK FINANCIAL ADVISORS...................................................29
(j) FULL DISCLOSURE...........................................................................30
(k) ABSENCE OF CERTAIN CHANGES OR EVENTS......................................................30
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS...................................................30
SECTION 4.1. CONDUCT OF BUSINESS OF THE COMPANY ..................................................30
(a) INTEGRATION; ORDINARY COURSE..............................................................30
(b) CHANGES IN EMPLOYMENT ARRANGEMENTS........................................................33
(c) SEVERANCE ARRANGEMENTS....................................................................34
(d) OTHER ACTIONS.............................................................................34
(e) COMPANY STOCK PURCHASE PLAN...............................................................34
ARTICLE V ADDITIONAL AGREEMENTS........................................................................34
SECTION 5.1. STOCKHOLDER APPROVAL; PREPARATION OF PROXY STATEMENT;
PREPARATION OF REGISTRATION STATEMENT ........................................................34
SECTION 5.2. ACCESS TO INFORMATION.................................................................36
SECTION 5.3. REASONABLE EFFORTS; NOTIFICATION......................................................37
SECTION 5.4. FEES AND EXPENSES.....................................................................38
SECTION 5.5. PUBLIC ANNOUNCEMENTS..................................................................39
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SECTION 5.6. AGREEMENT TO DEFEND...................................................................39
SECTION 5.7. OTHER ACTIONS.........................................................................39
SECTION 5.8. RETENTION PLAN........................................................................39
SECTION 5.9. INDEMNIFICATION.......................................................................39
SECTION 5.10. BLUE SKY.............................................................................40
SECTION 5.11. COMBINATION COMPANY..................................................................40
SECTION 5.12. [Reserved]...........................................................................40
SECTION 5.13. EXEMPTION FROM LIABILITY UNDER SECTION 16(b).........................................40
SECTION 5.14. EMPLOYEE MATTERS.....................................................................40
ARTICLE VI CONDITIONS PRECEDENT........................................................................41
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER ...........................41
(a) STOCKHOLDER APPROVAL......................................................................41
(b) NASDAQ....................................................................................41
(c) HSR ACT; OTHER APPROVALS..................................................................41
(d) NO INJUNCTIONS OR RESTRAINTS..............................................................41
(e) REGISTRATION STATEMENT EFFECTIVENESS......................................................41
(f) BLUE SKY FILINGS..........................................................................41
SECTION 6.2. CONDITIONS OF EARTHLINK ..............................................................42
(a) COMPLIANCE................................................................................42
(b) CERTIFICATIONS............................................................................42
(c) REPRESENTATIONS AND WARRANTIES TRUE.......................................................42
(d) COMPANY AFFILIATE LETTERS.................................................................42
(e) CONSENTS; RELATED MATTERS.................................................................42
(f) NO LITIGATION.............................................................................43
(g) RESIGNATIONS..............................................................................43
(h) NOTE TERMINATION..........................................................................43
(i) TERMINATION OF AGREEMENTS; REPAYMENT OF SEVERANCE OBLIGATIONS.............................43
SECTION 6.3. CONDITIONS OF THE COMPANY ............................................................44
(a) COMPLIANCE........................................................................44
(b) CERTIFICATIONS AND OPINION........................................................44
(c) REPRESENTATIONS AND WARRANTIES TRUE...............................................44
(d) NO LITIGATION.....................................................................44
(e) REGISTRATIONS.....................................................................45
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER..........................................................45
SECTION 7.1. TERMINATION ..........................................................................45
SECTION 7.2. EFFECT OF TERMINATION.................................................................46
SECTION 7.3. AMENDMENT.............................................................................47
SECTION 7.4. EXTENSION; WAIVER.....................................................................47
SECTION 7.5. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER.............................47
ARTICLE VIII SPECIAL PROVISIONS AS TO CERTAIN MATTERS..................................................47
SECTION 8.1. NO SOLICITATION ......................................................................47
(a) RESTRICTED ACTIONS................................................................47
(b) PERMITTED ACTIONS.................................................................48
(c) NOTICES...........................................................................50
(d) TERMINATION OF NEGOTIATIONS.......................................................51
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SECTION 8.2. TAKEOVER DEFENSES ....................................................................51
SECTION 8.3. FEE AND EXPENSE REIMBURSEMENTS...........................................51
SECTION 8.4. CONFIDENTIALITY..........................................................52
ARTICLE IX GENERAL PROVISIONS..........................................................................53
SECTION 9.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES ........................................53
SECTION 9.2. NOTICES...............................................................................53
SECTION 9.3. DEFINITIONS...........................................................................54
SECTION 9.4. INTERPRETATION........................................................................55
SECTION 9.5. COUNTERPARTS; FACSIMILE EXECUTION.....................................................55
SECTION 9.6. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES........................................55
SECTION 9.7. GOVERNING LAW.........................................................................55
SECTION 9.8. ASSIGNMENT............................................................................55
SECTION 9.9. ENFORCEMENT OF THE AGREEMENT..........................................................56
SECTION 9.10. SEVERABILITY.........................................................................56
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LIST OF EXHIBITS AND ANNEX
Exhibit A Certificate of Incorporation of the Combination Company
Exhibit B Bylaws of the Combination Company
Exhibit C Note and Warrant Termination Agreement
Exhibit D Voting Agreement
Annex A Purchase Price Calculation
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Affiliate...................................................................................Section 9.3(a)
Affiliate Letter............................................................................Section 6.2(d)
Aggregate Purchase Price.................................................................Declarations Page
Agreement................................................................................Declarations Page
Agreement to Vote Stock.....................................................................Section 3.1(d)
Alternative Transaction........................................................................Section 8.3
Approval Items..............................................................................Section 4.1(a)
Approval Mechanism..........................................................................Section 4.1(a)
Cash Portion................................................................................Section 2.1(b)
Certificate of Merger..........................................................................Section 1.2
Certificates................................................................................Section 2.2(c)
Closing........................................................................................Section 1.2
Closing Date...................................................................................Section 1.2
Code.....................................................................................Declarations Page
Combination Company......................................................................Declarations Page
Company..................................................................................Declarations Page
Company Beneficiary......................................................................Section 3.1(v)(i)
Company Benefit Plans....................................................................Section 3.1(v)(i)
Company Common Stock........................................................................Section 3.1(c)
Company Disclosure Schedule....................................................................Section 3.1
Company ERISA Affiliate................................................................Section 3.1(v)(iii)
Company Financial Advisor...................................................................Section 3.1(j)
Company Insiders..............................................................................Section 5.13
Company Intellectual Property Rights.....................................................Section 3.1(o)(i)
Company Options.............................................................................Section 2.3(a)
Company Permits.............................................................................Section 3.1(n)
Company Preferred Stock.....................................................................Section 3.1(c)
Company SEC Documents.......................................................................Section 3.1(e)
Company Share............................................................................Declarations Page
Company Stock Plans.........................................................................Section 2.3(a)
Company Stockholder Approval................................................................Section 3.1(d)
Company Stockholders Meeting...................................................................Section 1.2
Company Termination Fee........................................................................Section 8.3
Confidentiality Agreement......................................................................Section 5.2
Contracts...................................................................................Section 3.1(f)
Convertible Options.........................................................................Section 2.3(a)
Default.....................................................................................Section 3.1(d)
DGCL...........................................................................................Section 1.1
DOL..................................................................................Section 3.1(v)(ii)(3)
Earnouts...................................................................................Section 3.1(gg)
Effective Time of the Merger...................................................................Section 1.2
EarthLink................................................................................Declarations Page
EarthLink Common Stock...................................................................Declarations Page
EarthLink Options...........................................................................Section 2.3(a)
EarthLink Preferred Stock...................................................................Section 3.2(b)
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EarthLink SEC Documents.....................................................................Section 3.2(d)
EarthLink Stock Plans.......................................................................Section 2.3(a)
EarthLink Stock Portion.....................................................................Section 2.1(b)
ERISA....................................................................................Section 3.1(v)(i)
Exchange Act................................................................................Section 3.1(d)
Exchange Agent..............................................................................Section 2.2(a)
Exchange Fund...............................................................................Section 2.2(b)
Exchange Ratios.............................................................................Section 2.3(a)
Family Affiliate............................................................................Section 3.1(s)
Fully Diluted Basis.........................................................................Section 9.3(b)
Governmental Entity.........................................................................Section 3.1(d)
HSR Act.....................................................................................Section 3.1(d)
HSR Documents...........................................................................Section 5.3(c)(ii)
Indemnified Parties.........................................................................Section 5.9(a)
Initial Consideration Period.............................................................Section 8.1(b)(i)
Integration Plan............................................................................Section 4.1(a)
IRS..................................................................................Section 3.1(v)(ii)(2)
Knowledge...................................................................................Section 9.3(c)
Licenses....................................................................................Section 3.1(t)
Liens.......................................................................................Section 3.1(b)
Material Adverse Effect.....................................................................Section 9.3(d)
Material Contracts..........................................................................Section 3.1(f)
Merger...................................................................................Declarations Page
Merger Consideration........................................................................Section 2.1(b)
Mindspring..................................................................................Section 3.2(d)
NASD........................................................................................Section 3.1(d)
Nasdaq......................................................................................Section 3.1(d)
Nasdaq Closing Price........................................................................Section 9.3(e)
Negotiation Activities......................................................................Section 8.1(b)
Negotiation Period......................................................................Section 8.1(b)(ii)
Note and Warrant Termination...................................................................Section 2.4
Note and Warrant Termination Agreement.........................................................Section 2.4
Noteholder Warrants............................................................................Section 2.4
Noteholders....................................................................................Section 2.4
Notes..........................................................................................Section 2.4
Offer Letters...........................................................................Section 3.1(w)(ii)
Offeror..................................................................................Section 8.1(b)(i)
Old EarthLink...............................................................................Section 3.2(d)
OM Integration..............................................................................Section 4.1(a)
Per Share Price..........................................................................Declarations Page
Person......................................................................................Section 9.3(f)
Proxy Statement.............................................................................Section 3.1(d)
Registration Statement......................................................................Section 5.1(b)
Representatives.............................................................................Section 8.1(a)
S-8 Registration Statement..................................................................Section 6.3(e)
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Salary/Severance List......................................................................Section 3.1(ee)
SEC.........................................................................................Section 3.1(d)
Section 16 Information........................................................................Section 5.13
Securities Act..............................................................................Section 3.1(e)
Stock Ratio.................................................................................Section 2.1(b)
Subscriber Accounts.........................................................................Section 3.1(u)
Subsequent Negotiation Period............................................................Section 8.1(b)(v)
Subsequent Proposal......................................................................Section 8.1(b)(v)
Subsequent Superior Proposal.............................................................Section 8.1(b)(v)
Subsidiary..................................................................................Section 9.3(g)
Superior Proposal...........................................................................Section 9.3(h)
Surviving Corporation..........................................................................Section 1.1
Takeover Proposal...........................................................................Section 8.1(a)
Tax.........................................................................................Section 3.1(m)
Tax Return..................................................................................Section 3.1(m)
Taxes.......................................................................................Section 3.1(m)
Terminated Subsequent Proposal.........................................................Section 8.1(b)(vii)
Terminated Superior Proposal............................................................Section 8.1(b)(iv)
Treasury Stock..............................................................................Section 2.1(a)
Year 2000 Readiness Disclosure Statement....................................................Section 3.1(q)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 7, 2000 (the
"AGREEMENT"), by and among XXXXXXX.XXX, INC., a Delaware corporation
("COMPANY"), OM COMBINATION, INC., a Delaware corporation and wholly-owned
subsidiary of EarthLink ("COMBINATION COMPANY"), and EARTHLINK, INC., a Delaware
corporation ("EARTHLINK").
WHEREAS, the respective Boards of Directors of EarthLink, Combination
Company and the Company have approved the merger of the Company with and into
the Combination Company (the "MERGER"), upon the terms and subject to the
conditions of this Agreement and Plan of Merger (this "AGREEMENT"), whereby each
issued and outstanding share of the Company's common stock, $.001 par value per
share (a "COMPANY SHARE") will be converted into the right to receive a per
share amount (the "PER SHARE PRICE") based on (a) $308,059,333 (the "AGGREGATE
PURCHASE PRICE") DIVIDED BY (b) 25,804,064 Company Shares (the total number of
Company Shares outstanding on a Fully Diluted Basis on the date hereof (using
the treasury method for Options outstanding as of the date hereof), with each
Per Share Price consisting of $5.97 in cash and .3511 of a share of EarthLink
common stock, $.01 par value per share ("EARTHLINK COMMON STOCK") all as
provided herein and as subject to adjustment as set forth in Section 2.1(b)
hereof.
WHEREAS, for federal income tax purposes, it is intended that the
parties will use their commercially reasonable best efforts to qualify the
Merger as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "CODE"), if possible; and
WHEREAS, EarthLink, Combination Company and the Company desire to make
certain representations, warranties and agreements in connection with the Merger
and also to prescribe various conditions to the Merger; and
WHEREAS, certain of the officers, directors and significant
stockholders of the Company have each entered into a voting agreement with
EarthLink pursuant to which such officers, directors and significant
stockholders have agreed to vote the Company Shares owned by them in favor of
the Merger; and
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions hereof and
in accordance with the Delaware General Corporation Law, as amended (the
"DGCL"), the Company shall be merged with and into the Combination Company at
the Effective Time of the Merger (as hereinafter defined). Following the Merger,
the separate
corporate existence of the Company shall cease and the Combination Company shall
continue as the surviving corporation (the "SURVIVING CORPORATION") and shall
succeed to and assume all the rights and obligations of the Company in
accordance with the DGCL.
SECTION 1.2. EFFECTIVE TIME. As soon as practicable following the satisfaction
or, to the extent permitted hereunder, waiver of the conditions set forth in
ARTICLE VI, the Surviving Corporation shall file the certificate of merger
required by the DGCL with respect to the Merger (the "CERTIFICATE OF MERGER")
and other appropriate documents executed in accordance with the relevant
provisions of the DGCL. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Delaware Secretary of State, or at
such other time as EarthLink and the Company shall agree should be specified in
the Certificate of Merger (the time the Merger becomes effective being the
"EFFECTIVE TIME OF THE MERGER"). The closing of the Merger (the "CLOSING") shall
take place at the offices of Hunton & Xxxxxxxx, Bank of America Plaza, 000
Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000, on the date of the
meeting of the Company's stockholders to approve the Merger (the "COMPANY
STOCKHOLDERS MEETING"), or, if any of the conditions set forth in ARTICLE VI
have not been satisfied, then as soon as practicable thereafter, or at such
other time and place or such other date as EarthLink and the Company shall agree
(the "CLOSING DATE").
SECTION 1.3. EFFECTS OF THE MERGER. The Merger shall have the effects set forth
herein and in Section 251, 259 and 261 of the DGCL. If at any time after the
Effective Time of the Merger, the Surviving Corporation shall consider or be
advised that any further assignments or assurances in law or otherwise are
necessary or desirable to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, all rights, title and interests in all real estate
and other property and all privileges, powers and franchises of the Company and
the Combination Company, the Surviving Corporation and its proper officers and
directors, in the name and on behalf of the Company and the Combination Company,
shall execute and deliver all such proper deeds, assignments and assurances in
law and do all things necessary and proper to vest, perfect or confirm title to
such property or rights in the Surviving Corporation and otherwise to carry out
the purpose of this Agreement, and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company and the
Combination Company or otherwise to take any and all such action.
SECTION 1.4. CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) The Certificate of Incorporation of the Combination Company,
as in effect immediately prior to the Effective Time of the Merger as set forth
in EXHIBIT A hereto, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) The Bylaws of the Combination Company, as in effect
immediately prior to the Effective Time of the Merger as set forth in EXHIBIT B
hereto, shall be the Bylaws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
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SECTION 1.5. DIRECTORS AND OFFICERS. The directors and officers of Combination
Company shall, from and after the Effective Time of the Merger, be the directors
and officers of the Surviving Corporation and shall serve until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1. EFFECT ON CAPITAL STOCK. As of the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the Company,
Combination Company, EarthLink or the holders of any Company Shares or capital
stock of Combination Company:
(a) CANCELLATION OF TREASURY STOCK. All shares of capital stock of
the Company held in the treasury of the Company immediately prior to the
Effective Time of the Merger, if any ("TREASURY STOCK") shall be cancelled and
extinguished as of the Effective Time of the Merger, without any conversion
thereof and no amount or other consideration shall be delivered or deliverable
in exchange therefor.
(b) CONVERSION OF COMPANY SHARES. Subject to SECTIONS 2.1(a) and
2.1(c), each Company Share issued and outstanding immediately prior to the
Effective Time of the Merger shall be converted automatically into the right to
receive, upon the surrender of the certificate formerly representing such
Company Shares pursuant to SECTION 2.2, a Per Share Price equal to $5.97 in cash
(the "CASH PORTION") and .3511 (the "STOCK RATIO") of a share of EarthLink
Common Stock (the "EARTHLINK STOCK PORTION"), subject to adjustment as set forth
herein. The Cash Portion and the EarthLink Stock Portion of the Per Share Price
payable and issuable to the holders of Company Shares outstanding on the day
immediately prior to the date on which the Effective Time of the Merger occurs
pursuant hereto (the "MEASUREMENT DATE"), together with payments of cash in lieu
of fractional shares as provided in Section 2.1(c) hereof, shall be referred to
herein as the "MERGER CONSIDERATION". On the Measurement Date, the parties shall
recalculate the Per Share Price (as so recalculated, the "FINAL PER SHARE
Price"), the EarthLink Stock Portion, the Cash Portion and the Stock Ratio on
such date, based on the then-existing closing stock price of the EarthLink
Common Stock (determined by reference to closing quotation from Nasdaq-National
Market--the "CLOSING PRICE"), as set forth in ANNEX A attached hereto,
PROVIDED, that for purposes of such adjustments, if the Closing Price on the
Measurement Date is below $5.00 per share or above $50.00 per share, the Cash
Portion and the Stock Ratio shall be determined using the $5.00 and $50.00
Closing Price levels, respectively, and PROVIDED further, that if the Closing
Price is other than a whole Dollar amount between a $5 and $50 Closing Price,
the adjustment to the Cash Portion, the Stock Ratio, the EarthLink Stock Portion
and the Intrinsic Option Value shall be on a
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pro rata basis between such whole Dollar amounts and otherwise consistent with
this provision.
All such Company Shares shall automatically be cancelled and retired
and shall cease to exist, and each certificate previously evidencing any such
shares shall thereafter represent only the right to receive the Merger
Consideration. At the Effective Time of the Merger, the holders of Company
Shares outstanding immediately prior to the Effective Time of the Merger shall
cease to have any rights with respect to such shares of the Company Shares,
except the right to receive the Merger Consideration and as otherwise provided
herein or pursuant to any rights of appraisal under any applicable law.
(c) NO FRACTIONAL EARTHLINK SHARES. No fractional shares of
EarthLink Common Stock shall be issued in the Merger. All fractional shares of
EarthLink Common Stock that a holder of Company Shares would otherwise be
entitled to receive as a result of the Merger shall be aggregated and if a
fractional share of EarthLink Common Stock results from such aggregation, such
holder shall be entitled to receive, in lieu thereof, an amount in cash
determined by multiplying the closing sale price per share of a share of
EarthLink Common Stock on Nasdaq-National Market on the first trading day
immediately preceding the Effective Time of the Merger by the fraction of a
share of EarthLink Common Stock to which such holder would otherwise have been
entitled pursuant to this sentence. No such cash in lieu of fractional shares of
EarthLink Common Stock shall be paid to any holder of fractional EarthLink
Common Stock until that holder's Certificates (as defined in SECTION 2.2(c)) are
surrendered and exchanged in accordance with SECTION 2.2(c).
SECTION 2.2. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time of the Merger,
EarthLink shall engage American Stock Transfer and Trust Company to act as
exchange agent (the "EXCHANGE AGENT") for the issuance of the Merger
Consideration upon surrender of Certificates (as defined in SECTION 2.2(c)).
(b) PAYMENT OF MERGER CONSIDERATION. As of the Effective Time of
the Merger, EarthLink shall have delivered to the Exchange Agent the Merger
Consideration consisting of the certificates for the EarthLink Common Stock
comprising the EarthLink Stock Portion to be issued upon the conversion of the
Company Shares pursuant to SECTION 2.1(b), the Cash Portion to be issued to each
Stockholder of the Company, and any cash necessary to make payments in lieu of
fractional shares pursuant to SECTION 2.1(c) (such shares of EarthLink Common
Stock and cash being hereinafter referred to as the "EXCHANGE FUND"). At the
Effective Time of the Merger, EarthLink shall cause the Exchange Agent, pursuant
to irrevocable instructions delivered to the Exchange Agent prior thereto, to
deliver EarthLink Common Stock, the Cash Portion and cash for fractional shares
contemplated to be issued and paid pursuant to SECTION 2.1 out of the Exchange
Fund. The Exchange Fund shall not be used for any purpose other than as set
forth in this SECTION 2.2(b).
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(c) EXCHANGE PROCEDURE. As soon as practicable after the Effective
Time of the Merger, the Exchange Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time of the
Merger represented outstanding Company Shares (the "CERTIFICATES"), other than
the Company, and any wholly owned Subsidiary of the Company, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in a form and have such other
provisions as EarthLink may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the certificates
representing the EarthLink Stock Portion and cash (in payment of the Cash
Portion) and any additional cash in lieu of a fractional share of EarthLink
Common Stock. Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the
applicable amount of the Merger Consideration consisting of (i) a certificate or
certificates representing the number of whole shares of EarthLink Common Stock
and cash into which the Company Shares theretofore represented by such
Certificate shall have been converted pursuant to SECTION 2.1, and (ii) any cash
payable in lieu of a fractional share of EarthLink Common Stock, and the
Certificate so surrendered shall forthwith be canceled. If the shares of
EarthLink Common Stock are to be issued to a Person other than the Person in
whose name the Certificate so surrendered is registered, it shall be a condition
of exchange that such Certificate shall be properly endorsed or otherwise in
proper form for transfer and that the Person requesting such exchange shall pay
any transfer or other taxes required by reason of the exchange to a Person other
than the registered holder of such Certificate or establish to the reasonable
satisfaction of EarthLink that such tax has been paid or is not applicable.
Until surrendered as contemplated by this SECTION 2.2, each Certificate shall be
deemed at any time after the Effective Time of the Merger to represent only the
right to receive, upon surrender of such Certificate in accordance with this
SECTION 2.2(c), the applicable amount of the Merger Consideration consisting of
the number of shares of EarthLink Common Stock and cash and, additional cash, if
any, in lieu of a fractional share of EarthLink Common Stock into which the
Company Shares theretofore represented by such Certificate shall have been
converted pursuant to SECTION 2.1. The Exchange Agent shall not be entitled to
vote or exercise any rights of ownership with respect to the EarthLink Common
Stock held by it from time to time hereunder, except that it shall receive and
hold all dividends or other distributions paid or distributed with respect
thereto for the account of Persons entitled thereto.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED COMPANY SHARES. No
dividends or other distributions declared or made after the Effective Time of
the Merger with respect to the EarthLink Common Stock with a record date after
the Effective Time of the Merger shall be paid to the holder of any
unsurrendered Certificate with respect to the EarthLink Common Stock issuable
upon exchange of such Certificates pursuant to this Agreement, and no cash
payment (including any cash payment in lieu of fractional shares) shall be paid
to any such holder pursuant to SECTION 2.1 until the holder of record
5
of such Certificate shall surrender such Certificate in accordance with SECTION
2.2(c). Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid to the record holder of the certificates
representing the EarthLink Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of cash payable pursuant
to SECTION 2.1(b) and any additional cash payable in lieu of a fractional share
of EarthLink Common Stock to which such holder is entitled pursuant to SECTION
2.1(c) and the amount of dividends or other distributions with a record date
after the Effective Time of the Merger theretofore paid with respect to such
EarthLink Common Stock, as the case may be, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time of the Merger but prior to surrender and a payment date
subsequent to surrender payable with respect to such EarthLink Common Stock.
(e) NO FURTHER OWNERSHIP RIGHTS IN COMPANY SHARES. All shares of
EarthLink Common Stock issued and all cash paid upon the surrender of
Certificates in accordance with the terms of this ARTICLE II, together with any
dividends payable thereon to the extent contemplated by this SECTION 2.2, shall
be deemed to have been exchanged and paid in full satisfaction of all rights
pertaining to the Company Shares theretofore represented by such Certificates
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the Company Shares represented by such
Certificates that were outstanding immediately prior to the Effective Time of
the Merger. If, after the Effective Time of the Merger, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this ARTICLE II, except as otherwise provided by
applicable law.
(f) NO LIABILITY. Neither EarthLink nor the Company nor any of
their Subsidiaries shall be liable to any holder of Company Shares for any
shares of EarthLink Common Stock (or dividends or distributions with respect
thereto) or cash (including any cash in lieu of fractional shares of EarthLink
Common Stock) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit setting forth that fact by the Person claiming such loss, theft or
destruction and, the granting of a reasonable indemnity against any claim that
may be made against EarthLink or the Exchange Agent with respect to such
Certificate, EarthLink shall cause the Exchange Agent to issue to such Person
the applicable amount of the Merger Consideration with respect to such lost,
stolen or destroyed Certificate to which the holder thereof may be entitled
pursuant to this ARTICLE II.
SECTION 2.3. CONVERSION OF STOCK OPTIONS AND CERTAIN WARRANTS.
(a) At the Effective Time of the Merger, each option or other
right to purchase shares of Company Common Stock (as hereinafter defined)
pursuant to stock options (the "COMPANY OPTIONS") granted by the Company under
any of the Amended and Restated XxxXxxx.xxx, Inc. 1999 Stock Option and
Incentive Plan and the XxxXxxx.xxx, Inc.
6
1999 Plan (together, the "COMPANY STOCK PLANS") and which have an exercise price
equal to or below the Final Per Share Price on the Measurement Date (the
"CONVERTIBLE OPTIONS"), shall be converted into an option to purchase EarthLink
Common Stock and become a right with respect to EarthLink Common Stock based on
the Exchange Ratio (as defined below), and upon conversion each such Company
Option shall be subject to the terms of the EarthLink Stock Incentive Plan and
EarthLink Stock Option Plan for Non-Employee Directors (the "EARTHLINK STOCK
PLANS"), as applicable, and the stock option agreement issued by EarthLink by
which it is evidenced upon, at and as of the Effective Time of the Merger (such
converted Company Options shall be referred to as "EARTHLINK OPTIONS"). For
purposes of this Agreement, the term "EXCHANGE RATIO" shall mean the ratio
derived by dividing the Final Per Share Price by the Closing Price. The
Convertible Options shall be converted into the number of EarthLink Options as
determined by multiplying the Convertible Options by the Exchange Ratio. The
applicable exercise price for the EarthLink Options issued upon conversion of
the Convertible Options shall be determined by dividing the exercise price of
such Convertible Options by the Exchange Ratio. Attached hereto as Section
2.3(a) of the Company Disclosure Schedule is a list of the Company Options,
applicable strike prices and other information related to the Company Options as
of the date hereof, which list is true, accurate and complete in all material
respects.
Notwithstanding the above, EarthLink shall not be obligated to issue
any EarthLink Option exercisable into a fraction of a share of EarthLink Common
Stock. The EarthLink Options issued upon conversion of the Company Options as
provided herein that are "incentive stock options" (as defined in Section 422 of
the Code) are reasonably intended to be effected in a manner that is consistent
with continued treatment of such EarthLink Options as "incentive stock options"
under Section 424(a) of the Code. Each of the Company and EarthLink agrees to
take all reasonably necessary steps to effectuate the foregoing provisions of
this SECTION 2.3, including using its reasonable best efforts to obtain from
each holder of a Company Option any consent or contract that may be deemed
necessary or advisable in order to effect the transactions contemplated by this
SECTION 2.3.
At the Effective Time of the Merger, each Company Option granted by the
Company under any of the Company Stock Plans and which have an exercise price
above the Final Per Share Price and/or which are unvested as of the Effective
Time of the Merger shall terminate in full as of the Effective Time of the
Merger. At the Effective Time of the Merger, all Company Options that are not at
that time converted into EarthLink Options or exercised by the holders thereof,
regardless of exercise price, shall terminate in full as of the Effective Time
of the Merger.
(b) As soon as practicable after the Effective Time of the Merger,
EarthLink shall deliver to the participants in each Company Stock Plan an
appropriate notice setting forth such participant's rights pursuant thereto, and
the grants subject to such Company Stock Plan shall continue in effect on the
same terms and conditions (subject to the adjustments required by SECTION 2.3(a)
after giving effect to the Merger). At or prior to the Effective Time of the
Merger, EarthLink shall take all corporate action necessary to
7
reserve for issuance sufficient shares of EarthLink Common Stock for delivery
upon exercise of Company Options assumed by it in accordance with this SECTION
2.3.
(c) EarthLink shall: (i) prior to the Effective Time of the Merger
file all necessary registration statements on Form S-8 (or amend existing
registration statements on Form S-8) in order to effectively register the shares
of EarthLink Common Stock subject to Company Options converted pursuant to this
SECTION 2.3 that were granted under the Company Stock Plans; (ii) use reasonable
efforts to maintain the effectiveness of such registration statement(s) (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such converted Company Options remain outstanding; and (iii)
prior to the Effective Time of the Merger (subject to official notice of
issuance), prepare and submit to Nasdaq the Notification of Additional Listing
of Shares relating to inclusion for quotation on Nasdaq the shares of EarthLink
Common Stock subject to such converted Company Options and use reasonable
efforts to cause such securities to be approved for quotation on Nasdaq.
(d) As of the Effective Time of the Merger, the warrant issued by
the Company to Xxxxxxxx & Struggles exercisable into 15,000 shares of Company
Shares shall be converted into and replaced by a warrant to purchase EarthLink
Common Stock, based on the applicable Exchange Ratio.
SECTION 2.4. CONVERTIBLE DEBENTURES. The Company shall: (a) repurchase and
terminate in full all outstanding 6.75% Convertible Debentures of the Company
due 2003 (the "NOTES") from the holders thereof (the "NOTEHOLDERS") on or prior
to the Closing Date, (b) effect the replacement of the warrants granted to the
Noteholders (the "NOTEHOLDER WARRANTS") with a warrant to purchase EarthLink
Common Stock (as acceptable to EarthLink) in accordance herewith, (c) terminate
in full the Convertible Debenture Purchase Agreement, the Registration Rights
Agreement and all other agreements related to such agreements, including without
limitation the termination of any obligation of the Company to issue Second and
Third Tranches (as defined therein) of Notes and all other future obligations to
issue securities thereunder, and (d) effect the replacement of such Registration
Rights Agreement with a Registration Rights Agreement to which EarthLink is a
party (as acceptable to EarthLink) (the "NOTE AND WARRANT TERMINATION"). The
written, binding agreement pursuant to which the Note and Warrant Termination
shall be effectuated and the new EarthLink warrants to be issued (the "NOTE AND
WARRANT TERMINATION AGREEMENT") is attached hereto as EXHIBIT C. As set forth in
the Note and Warrant Termination Agreement, the Noteholder Warrants shall be
replaced by warrants to purchase EarthLink Common Stock as set forth therein.
SECTION 2.5. STOCK TRANSFER BOOKS. At the Effective Time of the Merger, the
transfer books of the Company with respect to all shares of capital stock or
other securities of the Company shall be closed and no further registration of
transfers of such shares of capital stock or other securities shall thereafter
be made on the records of the Company.
8
SECTION 2.6. CERTAIN ADJUSTMENTS. If between the date hereof and the Effective
Time of the Merger, the outstanding shares of Company Common Stock or EarthLink
Common Stock shall be changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of shares,
or any dividend payable in stock or other securities shall be declared thereon
with a record date within such period, the Per Share Price, Exchange Ratio,
EarthLink Stock Portion and Cash Portion shall be adjusted accordingly to
provide the same economic effect as contemplated by this Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange or dividend.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SUBSIDIARIES.
The Company, for and in respect of itself and, where indicated, for and in
respect of its Subsidiaries, represents and warrants to, and agree with,
EarthLink and Combination Company as follows, subject to any exceptions
specified in the Disclosure Schedule of the Company provided to EarthLink on the
date hereof (the "COMPANY DISCLOSURE SCHEDULE"); it being understood and agreed
that the Company may cross reference disclosures within the Company Disclosure
Schedule:
(a) ORGANIZATION; STANDING AND POWER.The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure to be so qualified
to do business or in good standing (individually, or in the aggregate) would not
have a Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole.
(b) SUBSIDIARIES; OTHER INVESTMENTS. Except as set forth in
SECTION 3.1(b) of the Company's Disclosure Schedule, the Company does not own,
directly or indirectly, any capital stock or other ownership interest in any
Person. SECTION 3.1(b) of the Company Disclosure Schedule contains a complete
and accurate list of the Company's direct and indirect Subsidiaries and the
respective capital structure of each Subsidiary (authorized capital stock, par
value, outstanding capital stock, owner of capital stock). Except as set forth
on SECTION 3.1(b) of the Company Disclosure Schedule, the Company's Subsidiaries
are all corporations and are duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of incorporation and
have the requisite corporate power and authority to carry on their respective
businesses as they are now being conducted and to own, operate and lease the
assets they now own, operate or hold under lease, except where failure of any of
the above would not have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole. The Company's Subsidiaries are duly qualified to
do business and are in good standing in each
9
jurisdiction in which the nature of their respective businesses or the ownership
or leasing of their respective properties makes such qualification necessary,
other than in such jurisdictions where the failure to be so qualified or in good
standing would not have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole. All the outstanding shares of capital stock of
the Company's Subsidiaries are owned by the Company or its Subsidiaries. All the
outstanding shares of capital stock of the Company's Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable and were not
issued in violation of any preemptive rights or other preferential rights of
subscription or purchase of any Person other than those that have been waived or
otherwise cured or satisfied, except for immaterial breaches thereof. All such
stock and ownership interests are free and clear of all liens, pledges, security
interests, charges, claims, rights of third parties and other encumbrances of
any kind or nature ("LIENS"), except for immaterial Liens.
(c) CAPITAL STRUCTURE.The authorized capital stock of the Company
consists of 100,000,000 shares of common stock, $.001 par value ("COMPANY COMMON
STOCK"), and 10,000,000 shares of preferred stock, $.001 par value ("COMPANY
PREFERRED STOCK"). As of the date hereof, 25,126,471 shares of Company Common
Stock were issued and outstanding and no shares of Company Preferred Stock were
issued and outstanding. In addition, at the date hereof, an aggregate of options
to purchase 7,734,197 shares of Company capital stock in total (the "TOTAL
OPTION NUMBER") and options to purchase 698,647 shares of Company capital stock
(based on the treasury method) are issued and outstanding and 35,280,857 shares
of Company Common Stock were reserved for issuance pursuant to various employee
and director plans and agreements of the Company, all as accurately described in
SECTION 3.1(c) of the Company Disclosure Schedule. For purposes of the Total
Option Number above and the definition of "Material Adverse Effect" in Section
9.3(d) hereof, any inaccuracy of the Total Option Number shall constitute a
Material Adverse Effect only if: (X) the actual intrinsic value of the
in-the-money and vested (vested either now or upon a change of control) Company
Options (as of the date hereof based on the Per Share Price) is not more than
$8,847,945; and/or (Y) the Company has at least 75,000 more vested and
in-the-money Company Options at the Measurement Date than as set forth on
Section 2.3(a) of the Company Disclosure Schedule. The intrinsic value of the
Company's in-the-money and vested (vested either now or upon a change of
control) options as of the Measurement Date does not exceed the intrinsic value
of such options at the Closing Price on the Measurement Date as set forth on
ANNEX A hereto, PROVIDED, that violation of this terms of this sentence shall
NOT be an automatic Material Adverse Effect as set forth in the definition of
that term in Section 9.3 hereof.
Except as set forth above, no shares of capital stock or other equity
or voting securities of the Company are reserved for issuance or outstanding.
All outstanding shares of capital stock of the Company are, and all such shares
issuable upon the exercise of outstanding stock options will be, validly issued,
fully paid and nonassessable and not subject to preemptive rights. All of such
issued and outstanding shares of capital stock of the Company were offered and
sold in compliance with all applicable state and Federal securities laws, rules
and regulations. Except as set forth in SECTION 3.1(c) of the
10
Company Disclosure Schedule, no capital stock has been issued by the Company
since May 24, 2000, other than shares of Company Common Stock issued (i)
pursuant to the exercise of options outstanding on or prior to such date in
accordance with their terms at such date, and (ii) pursuant to the Company's
existing employee stock purchase plan. Except as set forth in SECTION 3.1(c) of
the Company Disclosure Schedule, there are no outstanding or authorized
securities, options, warrants, calls, rights, commitments, preemptive rights,
agreements, arrangements or undertakings of any kind to which the Company or any
of its Subsidiaries is a party, or by which any of them is bound, obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, any shares of capital stock or other equity or voting
securities of, or other ownership interests in, the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking, except for immaterial
breaches hereof with respect to any of the Subsidiaries. Except as set forth in
SECTION 3.1(c) of the Company Disclosure Schedule, all of which shall be
terminated without cost to the Company by the Effective Time of the Merger,
there are not as of the date hereof and there will not be at the Effective Time
of the Merger any registration rights agreements, stockholder agreements, voting
trusts or other agreements or understandings to which the Company is a party or
by which it is bound relating to the voting of any shares of the capital stock
of the Company. There are no restrictions on the Company with respect to voting
or declaring or paying dividends or other distributions in respect of the stock
of any of its Subsidiaries.
(d) AUTHORITY; NON-CONTRAVENTION. The Board of Directors of the
Company has approved the Merger and this Agreement and declared the Merger and
this Agreement to be in the best interests of the stockholders of the Company.
Certain officers, directors and significant stockholders of the Company selected
by EarthLink have executed an agreement to vote in favor of the Merger and vote
against alternative proposals, which agreement is attached hereto as EXHIBIT D
(the "AGREEMENT TO VOTE STOCK"). The Company has the requisite corporate power
and authority to enter into this Agreement and, subject to obtaining the
requisite approval of the Merger and this Agreement by the Company's
stockholders as required by the DGCL ("COMPANY STOCKHOLDER APPROVAL") to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to Company Stockholder
Approval. This Agreement has been duly and validly executed and delivered by the
Company and, assuming due authorization and delivery by EarthLink and
Combination Company, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that and as
(i) such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws or judicial decisions now or hereafter in
effect relating to creditors' rights generally and the application of general
principles of equity, (ii) the remedy of specific performance and injunctive
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought and (iii) the enforceability
of any indemnification
11
provision contained herein may be limited by applicable federal or state
securities laws. The execution, delivery and performance of this Agreement by
the Company do not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, or result in
any violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
or "put" right with respect to any obligation or loss of a material benefit
under, or result in the creation of any Lien, upon any of the properties or
assets of the Company or any of its Subsidiaries, individually or collectively
(a "DEFAULT") under, any provision of (i) the Certificate of Incorporation and
Bylaws of the Company or any provision of the comparable organizational
documents of its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease, or other agreement, instrument, permit, concession,
franchise or license to which the Company or any of its Subsidiaries is a party
or by which it or they or any of their respective properties or assets is bound
(individually, a "CONTRACTUAL DOCUMENT" and collectively, the "CONTRACTUAL
DOCUMENTS"), except any such Default or Defaults that, individually or in the
aggregate under one such Contractual Document or several such Contractual
Documents, would not have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole, or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation or arbitration award
applicable to the Company or any of its Subsidiaries or their respective
properties or assets, except any such Default or Defaults that, individually or
in the aggregate, would not have a Material Adverse Effect on the Company and
its Subsidiaries taken as a whole. SECTION 3.1(d) of the Company Disclosure
Schedule sets forth, to the Company's Knowledge, the Company's Defaults under
the provisions described in (i), (ii), and (iii) immediately above. No consent,
approval, order or authorization of, or registration, declaration or filing with
("CONSENT"), any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign, including local
authorities (a "GOVERNMENTAL ENTITY") or other Person, is required by or with
respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby, except where lack of such
Consents would not be material, and except for (i) the filing by the Company of
a pre-merger notification and report form under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR ACT") and the expiration or
termination of the waiting period thereunder, (ii) the filing with the
Securities Exchange Commission ("SEC") of (A) a proxy statement/ prospectus
relating to the Company Stockholder Meeting (such proxy statement/ prospectus as
amended or supplemented from time to time, the "PROXY STATEMENT") and (B) the
Registration Statement (as defined in SECTION 5.1(b)) and (C) such reports under
SECTION 13(a) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), as may be required in connection with this Agreement and the transactions
contemplated hereby, (iii) Company Stockholder Approval, (iv) the filing of the
Certificate of Merger with and approval by the Delaware Secretary of State with
respect to the Merger as provided in the DGCL and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, (v) applicable requirements, if any, of the National Association of
Securities Dealers, Inc.
12
(the "NASD") and the Nasdaq National Market ("NASDAQ"), (vi) applicable
requirements, if any, of the consents, approvals, authorizations or permits
described in SECTION 3.1(d) of the Company Disclosure Schedule.
(e) SEC DOCUMENTS. The Company has filed all required reports,
schedules, forms, statements and other documents required to be filed with the
SEC since March 31, 1999 (such documents, together with all exhibits and
schedules thereto, collectively referred to herein as the "COMPANY SEC
DOCUMENTS"). As of their respective dates, (i) the Company SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Company SEC Documents, and (ii) at the time they were filed, none of the
Company SEC Documents 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, except to the extent corrected by a subsequently
filed Company SEC Document, PROVIDED that all such corrections were for
immaterial errors or omissions. The consolidated financial statements of the
Company included in the Company SEC Documents complied in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Rule 10-01 of Regulation S-X of
the SEC) and present fairly the consolidated financial position of the Company
and its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments and
other adjustments described therein, which in the aggregate were not material),
except to the extent corrected by a subsequently filed Company SEC Document,
PROVIDED, that all of such corrections were for immaterial errors or omissions.
(f) MATERIAL CONTRACTS. SECTION 3.1(f) of the Company Disclosure
Schedule sets forth in reasonable detail all written or oral contracts,
agreements, leases, instruments or legally binding contractual commitments
("CONTRACTS") to which the Company is a party that meet any of the following
criteria (as applicable). "Material Contracts" means any Contract to which the
Company and/or any of its Subsidiaries is a party and that meets any of the
following criteria (as applicable) (collectively, the "MATERIAL CONTRACTS"):
(i) Any Contract with a customer of the Company (and/or
any of its Subsidiaries) or with any entity that purchases goods or
services from the Company for consideration paid to the Company (and/or
any of its Subsidiaries) of $100,000 or more in any fiscal year;
(ii) any Contract for capital expenditures or the
acquisition or construction of fixed assets in excess of $100,000 in
any fiscal year;
13
(iii) any Contract for the purchase or lease of goods or
services (including without limitation, equipment, materials, software,
hardware, supplies, merchandise, parts or other property, assets or
services), requiring aggregate future payments in excess of $100,000 in
any fiscal year, other than standard inventory purchase orders executed
in the ordinary course of business;
(iv) any Contract relating to the borrowing of money or
guaranty of indebtedness in excess of $100,000 in any fiscal year;
(v) any collective bargaining or other arrangement with
any labor union;
(vi) any Contract granting a first refusal, first offer or
similar preferential right to purchase or acquire any of the Company's
(or any of the Subsidiaries') capital stock or assets;
(vii) any Contract limiting, restricting or prohibiting the
Company (or any of the Subsidiaries) from conducting business anywhere
in the United States or elsewhere in the world or any Contract limiting
the freedom of the Company (or any Subsidiary) to engage in any line of
business or to compete in any respects with any other Person;
(viii) any joint venture or partnership Contract;
(ix) Contracts, individually or in the aggregate,
requiring future payments of $100,000 or more in any fiscal year that
require the consent of the other party thereto in connection with the
transactions contemplated hereby;
(x) any employment Contract, severance agreement or other
similar binding agreement or policy with any employee; and
(xi) without Dollar or size thresholds, any Contract
(other than `shrinkwrap', `clickwrap' or similar Contracts for widely
distributed commercially available software, for or with: (1) web
browser software, (2) exclusive arrangements for marketing, branding or
services, (3) content providers, and (4) software licenses (both server
side and client side), and (5) call center provider agreements.
The Company has provided (or will provide within 10 calendar days after
the date of this Agreement) to EarthLink a true and complete copy of each
written Contract (and a written description of each oral Contract), including
all amendments or other modifications thereto. Except as set forth on SECTION
3.1(f) of the Company Disclosure Schedule, each Material Contract is a valid and
legally binding obligation of the Company and/or its Subsidiary a party thereto,
enforceable against the Company and/or its Subsidiary a party thereto in
accordance with its terms, subject only to bankruptcy, reorganization,
receivership or other laws affecting creditors' rights generally and general
14
principles of equity (whether applied in an action at law or in equity). Except
as set forth on SECTION 3.1(f) of the Company Disclosure Schedule, the Company
and/or its Subsidiary a party thereto has performed all obligations required to
be performed by it under the Material Contracts and the Company and/or its
Subsidiary a party thereto is not in breach or default thereunder, except for
immaterial breaches of and defaults under the Material Contracts.
(g) INFORMATION SUPPLIED. None of the information supplied or
required to be supplied by the Company for inclusion or incorporation by
reference in (i) the Registration Statement will, at the time the Registration
Statement is filed with the SEC, and at any time it is amended or supplemented
or at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any 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 (ii) the Proxy
Statement relating to the Company Stockholders Meeting, at the date the Proxy
Statement is first mailed to the Company's stockholders and at the time of the
Company Stockholders Meeting, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement, as
it relates to the Company Stockholders Meeting, will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder. Notwithstanding the foregoing, no representation or
warranty is made by the Company with respect to statements made or incorporated
by reference contained in or omitted from any of the foregoing documents based
on information supplied or required to be supplied by EarthLink for inclusion or
incorporation by reference therein
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
SECTION 3.1(h) of the Company Disclosure Schedule or the Company SEC Documents,
since December 31, 1999 the Company has conducted its business only in the
ordinary course consistent with past practice, and there has not been (i) as of
the date hereof, any change, event or condition with respect to the Company that
has had a Material Adverse Effect on the Company and its Subsidiaries taken as a
whole; (ii) any declaration, setting aside or payment of any dividend (whether
in cash, stock or property) with respect to any of the Company's capital stock;
(iii) (A) any granting by the Company or any of its Subsidiaries to any
executive officer of the Company or any of its Subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements described in SECTION
3.1(h) to the Company Disclosure Schedule, (B) any granting by the Company or
any of its Subsidiaries to any such executive officer of any increase in
severance or termination pay, except as was required under employment, severance
or termination agreements listed in SECTION 3.1(h) to the Company Disclosure
Schedule, true copies of which have been provided to EarthLink, or (C) any entry
by the Company or any of its Subsidiaries into any employment, severance or
termination agreement with any such executive officer, except in each case in
this paragraph (iii), for immaterial breaches hereof; (iv) any amendment of any
material term of any outstanding equity security of the Company or
15
any Subsidiary; (v) any repurchase, redemption or other acquisition by the
Company or any Subsidiary of any outstanding shares of capital stock or other
equity securities of, or other ownership interests in, the Company or any
Subsidiary, except as contemplated by any employee benefit plans of the Company;
(vi) any material damage, destruction or other property loss, whether or not
covered by insurance; or (vii) any change in accounting methods, principles or
practices by the Company that has had a Material Adverse Effect on the Company
and its Subsidiaries taken as a whole except insofar as may have been required
by a change in generally accepted accounting principles.
(i) STATE TAKEOVER STATUTES; ANTI-TAKEOVER PROVISIONS. The Company
has taken all action to assure that no state takeover statute, "control share
acquisition," "fair price," or similar statute or regulation shall apply to the
Merger or any of the other transactions contemplated hereby. The Company has
also taken such other action with respect to any other anti-takeover provisions
in its Bylaws or Certificate of Incorporation to the extent necessary to
consummate the Merger on the terms set forth in this Agreement.
(j) BROKERS. Except as set forth on SCHEDULE 3.1(j) and for
Xxxxxxxxx & Company, Inc. (the "COMPANY FINANCIAL ADVISOR"), whose fees are to
be paid by the Company, no broker, investment banker or other Person is entitled
to receive from the Company or any of its Subsidiaries any investment banking,
broker's, finder's or similar fee or commission in connection with this
Agreement or the transactions contemplated hereby, including any fee for any
opinion rendered by any investment banker.
(k) LITIGATION. Except as disclosed in SECTION 3.1(k) of the
Company Disclosure Schedule or the Company SEC Documents, (x) there is no
material claim, suit, action, proceeding or investigation pending or, to the
Company's Knowledge, threatened against or affecting the Company or any of its
Subsidiaries, and (y) there is no claim, suit, action, proceeding or
investigation pending, or to the Company's Knowledge, threatened against the
Company or any of its Subsidiaries that could prevent or materially delay the
ability of the Company to consummate the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or any of its
Subsidiaries having, or which, insofar as reasonably can be foreseen, in the
future could have, any such effect.
(l) ACCOUNTING MATTERS. The books, records and accounts of the
Company and its Subsidiaries (i) have been maintained in accordance with good
business practices on a basis consistent with prior years, (ii) are stated in
reasonable detail and accurately and fairly reflect in all material respects the
transactions and dispositions of the assets of the Company and its Subsidiaries
and (iii) accurately and fairly reflect in all material respects the basis for
the Company's financial statements. Except as disclosed in SECTION 3.1(l) of the
Company Disclosure Schedule, the Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization and (ii) transactions are recorded as necessary (A) to permit
preparation of financial
16
statements in conformity with generally accepted accounting principles and (B)
to maintain accountability for assets.
(m) TAXES. Except as set forth in SECTION 3.1(m) of the Company
Disclosure Schedule: (i) each of the Company and each of its Subsidiaries, and
any consolidated, combined, unitary or aggregate group for Tax (as defined
below) purposes of which the Company or any of its Subsidiaries is or has been a
member, has timely filed all Tax Returns, or has valid extensions of time for
filing such Tax Returns, required to be filed by it and has timely paid or
deposited (or the Company has paid or deposited on its behalf) all Taxes which
are required to be paid or deposited, (ii) each of the Tax Returns filed by the
Company or any of its Subsidiaries is accurate and complete in all material
respects; (iii) the most recent consolidated financial statements of the Company
contained in the filed Company SEC Documents reflect an adequate reserve for all
Taxes payable by the Company and its Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements whether or not
shown as being due on any Tax Returns; (iv) no material deficiencies for any
Taxes have been proposed, asserted or assessed against the Company or any of its
Subsidiaries; no requests for waivers of the time to assess any such Taxes have
been granted or are pending; and there are no tax liens upon any assets of the
Company or any of its Subsidiaries except liens relating to current Taxes not
yet due; and (v) there are no current examinations or audits of any Tax Return
of the Company or any of its Subsidiaries being conducted and there are no
settlements or any prior examinations which could reasonably be expected to
adversely affect any taxable period for which the statute of limitations has not
run. The consummation of the transactions contemplated hereby will not
accelerate or otherwise cause to come due any Taxes or obligation with respect
to Taxes (including any indemnification of a third party for their Tax
liability) of the Company or any of its Subsidiaries, other than any
acceleration arising solely as a result of the Company being required to file a
Tax Return for a period ending before its normal taxable year, PROVIDED, that in
the event the transaction contemplated by this Agreement does not qualify for
tax-free treatment under Section 368 of the Code as a result of the final
combination of the Cash Portion and EarthLink Stock Portion, such event shall be
deemed not to be a breach of this provision by the Company. As used herein,
"TAX" or "TAXES" shall mean all taxes of any kind, including, without
limitation, those on or measured by or referred to as income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, estimated, excise, severance, stamp, occupation, premium, value
added, property or windfall profits taxes, customs, duties or similar fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any
Governmental Entity, domestic or foreign. As used herein, "TAX RETURN" shall
mean any return, report, statement or information required to be filed with any
Governmental Entity with respect to Taxes.
(n) COMPLIANCE WITH LAWS. Except as set forth on SECTION 3.1(n) of
the Company Disclosure Schedule, the Company and its Subsidiaries hold all
material required, necessary or applicable permits, licenses, variances,
exemptions, orders, franchises and approvals of all Governmental Entities that
are required for the operation of the businesses of the Company and its
Subsidiaries as presently conducted and the
17
ownership, operation, lease and holding by the Company and its Subsidiaries of
their respective properties and assets (the "COMPANY PERMITS"). The Company and
its Subsidiaries are in material compliance with the terms of the Company
Permits. Neither the Company nor any of its Subsidiaries has violated or failed
to comply with, nor has it received any written notice of any alleged violation
of or failure to comply with, any statute, law, ordinance, regulation, rule,
permit or order of any Governmental Entity, any arbitration award or any
judgment, decree or order of any court or other Governmental Entity, applicable
to the Company or any of its Subsidiaries or their respective businesses, assets
or operations.
(o) INTELLECTUAL PROPERTY.
(i) Set forth on SECTION 3.1(o)(i) of the Company
Disclosure Schedule is a true and complete list of the registered
intellectual property of the Company and its Subsidiaries. Each of the
Company and its Subsidiaries owns, or possesses adequate licenses or
other valid rights to use, all existing United States and foreign
patents, trademarks, trade names, service marks, copyrights, trade
secrets, domain names and applications therefor used in their
respective business and operations as presently conducted, including
without limitation the items set forth on SECTION 3.1(o)(i) of the
Company Disclosure Schedule (the "COMPANY INTELLECTUAL PROPERTY
RIGHTS").
(ii) Neither the Company nor any of its Subsidiaries has
received communications alleging (and, to the Knowledge of the Company,
is not aware of any facts that could reasonably be expected to lead to
an allegation) that the Company and/or any of its Subsidiaries does not
have valid right or title to the Company Intellectual Property Rights.
(iii) Except as set forth in SECTION 3.1(o)(iii) of the
Company Disclosure Schedule, the conduct of the business of the Company
and/or any of its Subsidiaries as now conducted does not, to the
Knowledge of the Company, infringe any valid (registered or
unregistered) patents, trademarks, trade names, service marks,
copyrights or domain name rights of others. Except as set forth in
SECTION 3.1(o)(iii) of the Company Disclosure Schedule, the
consummation of the transactions completed hereby will not result in
the loss or impairment of any Company Intellectual Property Rights.
(iv) The Company has taken steps it believes appropriate
to protect and maintain its trade secrets as such, except in cases
where the Company has elected to rely on patent or copyright protection
in lieu of trade secret protection.
(p) NO DEFAULT. Neither the Company nor any of its Subsidiaries is
in default or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation) of any material
term, condition or provision of: (i) the respective articles/certificate of
incorporation and bylaws of the Company and its Subsidiaries, (ii) any
Contractual Document, except any such defaults or violations that,
18
individually or in the aggregate under one such Contractual Document or several
such Contractual Documents, would not have a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole, or (iii) any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its Subsidiaries, except any such defaults or violations that, individually
or in the aggregate, would not have a Material Adverse Effect on the Company and
its Subsidiaries taken as a whole. SECTION 3.1(p) of the Company's Disclosure
Schedules sets forth, to the Company's Knowledge, all such defaults and
violations as described in subsections (i), (ii), and (iii) set forth above.
(q) Y2K READINESS. The statements of the Company under the heading
"YEAR 2000 READINESS DISCLOSURE STATEMENT" in the Company's Registration
Statement on Form S-4 (as amended) first filed with the SEC on February 2, 2000,
relating to the Company's year 2000 readiness do not contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made. The Company has not
incurred any material disruptions, delays, failures or other interruptions in
its computer or business systems related to year 2000 problems.
(r) OPINION OF COMPANY FINANCIAL ADVISORS. The Company's Board of
Directors has received an opinion from the Company Financial Advisor, to the
effect that, as of the date of this Agreement, the Merger Consideration to be
received by the holders of the Company Shares in the Merger is fair from a
financial point of view.
(s) TRANSACTIONS WITH AFFILIATES. Except as set forth in SECTION
3.1(s) of the Company Disclosure Schedule, or as contemplated by this Agreement,
since December 31, 1999 neither the Company nor any of its Subsidiaries has, in
the ordinary course of business or otherwise, purchased, leased or otherwise
acquired any material property or assets or obtained any material services from,
or sold, leased or otherwise disposed of any material property or assets or
provided any material services to (except with respect to remuneration for
services rendered as a director, officer or employee of either of the Company or
any of its Subsidiaries in the ordinary course), (i) any employee of the Company
and/or any of its Subsidiaries, (ii) any stockholder of the Company, (iii) any
person, firm or corporation that directly or indirectly controls, is controlled
by or is under common control with the Company, or (iv) any member of the
immediate family of any of the foregoing persons (collectively, a "FAMILY
AFFILIATE"). Except as set forth in SECTION 3.1(t) of the Company Disclosure
Schedule, (a) the Material Contracts do not include any obligation or commitment
between the Company and any Affiliate, (b) the assets of the Company and/or any
of its Subsidiaries do not include any receivable or other obligation or
commitment from an Affiliate to the Company and/or any of its Subsidiaries, and
(c) the liabilities reflected on the financial statements of the Company
included in the Company SEC Documents do not include any obligation or
commitment to any Affiliate.
(t) LICENSES. All material licenses issued by the Federal
Communications Commission and any similar applicable state agencies (the
"LICENSES") required for the operation of the business of the Company and its
Subsidiaries are in full force and effect
19
and there are no pending or, to the Company's Knowledge, threatened
modifications, amendments or revocation proceedings which would adversely affect
the operations of the Company and its Subsidiaries in any material respect. All
fees due and payable to governmental authorities pursuant to the rules governing
the Licenses have been paid and, to the Company's Knowledge, no event has
occurred with respect to the Licenses held by the Company and/or any of its
Subsidiaries which, with the giving of notice or the lapse of time or both,
would constitute grounds for revocation thereof. The Company and its
Subsidiaries are in compliance in all material respects with the terms of the
Licenses, as applicable, and there is no condition, event or occurrence
existing, nor is there any proceeding being conducted of which the Company has
received notice, nor, to the Company's Knowledge, is there any proceeding
threatened, by any governmental authority, which would cause the termination,
suspension, cancellation or nonrenewal of any of the Licenses, or the imposition
of any penalty or fine by any regulatory authority.
(u) SUBSCRIBER ACCOUNTS. As of May 31, 2000 and at all times
through the Effective Time of the Merger, the Company (together with its
Subsidiaries) had and will have not less than 761,367 active and paying
Subscriber Accounts in good standing; as of May 31, 2000, the Company (together
with its Subsidiaries) had not more than 12,000 non-paying Subscriber Accounts.
"SUBSCRIBER ACCOUNTS" shall mean the Company's personal and business customer
accounts for: (i) dial-up Internet access, (ii) high speed Internet access (DSL,
ISDN), (iii) web site hosting, (iv) e-mail, and (v) all other Internet-related
services and products provided by the Company. SECTION 3.1(u) of the Company
Disclosure Schedule sets forth a list of the following as of May 31, 2000: (i)
type of services provided (dial-up, broadband/ high speed, web hosting, etc.),
(ii) total number of Subscriber Accounts, (iii) total number of paying and
non-paying Subscriber Accounts, and (iii) average revenue per Subscriber Account
by category.
(v) EMPLOYEE BENEFIT MATTERS.
(i) BENEFIT PLANS. SECTION 3.1(v)(i) of the Company
Disclosure Schedule contains a true and complete list of (1) all
employee welfare benefit and employee pension benefit plans as defined
in sections 3(1) and 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), including, but not limited to, plans
that provide retirement income or result in a deferral of income by
employees for periods extending to termination of employment or beyond,
and plans that provide medical, surgical, or hospital care benefits or
benefits in the event of sickness, accident, disability, death or
unemployment and (2) all other employee benefit agreements or
arrangements, including without limitation deferred compensation plans,
incentive plans, bonus plans or arrangements, stock option plans, stock
purchase plans, stock award plans, golden parachute agreements,
severance pay plans, dependent care plans, cafeteria plans, employee
assistance programs, scholarship programs, employee discount programs,
retention incentive agreements and other similar plans, agreements and
arrangements that are currently in effect as of the date of this
Agreement, or have been approved before this date but are not yet
effective, for the benefit of any director, officer, employee or former
employee (or any of their
20
beneficiaries) of the Company or any of its Subsidiaries (collectively,
a "COMPANY BENEFICIARY"), or with respect to which the Company or any
of its Subsidiaries may have any material liability ("COMPANY BENEFIT
PLAN").
(ii) DISCLOSURE OF DOCUMENTS. With respect to each Company
Benefit Plan, the Company has heretofore made available to EarthLink,
as applicable, complete and correct copies of each of the following
documents which the Company has prepared or has been required to
prepare:
(1) the Company Benefit Plan and any amendments
thereto (or if the Company Benefit Plan is not a written
agreement, a description thereof);
(2) the three most recent annual Form 5500
reports filed with the Internal Revenue Service (the "IRS");
(3) the most recent statement filed with the
Department of Labor (the "DOL") pursuant to 29 U.S.C. Section
2520.104-23;
(4) the three most recent annual Form 990 and
1041 reports filed with the IRS;
(5) the three most recent actuarial reports;
(6) the three most recent reports prepared in
accordance with Statement of Financial Accounting Standards
No. 106;
(7) the most recent summary plan description and
summaries of material modifications thereto;
(8) the trust agreement, group annuity contract
or other funding agreement that provides for the funding of
the Company Benefit Plan;
(9) the most recent financial statement;
(10) the most recent determination letter
received from the IRS; and
(11) any agreement pursuant to which the Company
or any Subsidiaries is obligated to indemnify any person.
(iii) CONTRIBUTIONS AND PAYMENTS. All contributions and
other payments required to have been made by the Company or any entity
(whether or not incorporated) that is treated as a single employer with
the Company under section 414 of the Code (a "COMPANY ERISA AFFILIATE")
with respect to any Company Benefit Plan (or to any person pursuant to
the terms thereof) have been made in all material respects or will be
timely made and all such amounts properly accrued
21
through the date of this Agreement have been reflected in the financial
statements of the Company included in the Company SEC Documents.
(iv) QUALIFICATION; COMPLIANCE. The terms of all Company
Benefit Plans that are intended to be "qualified" within the meaning of
section 401(a) of the Code have been determined by the IRS to be so
qualified or the applicable remedial periods will not have ended prior
to the Effective Time of the Merger. Except as disclosed in SECTION
3.1(v)(iv) of the Company Disclosure Schedule, no event or condition
exists or has occurred that could cause the IRS to disqualify any
Company Benefit Plan that is intended to be qualified under Section
401(a) of the Code. Except as disclosed in SECTION 3.1(v)(iv) of the
Company Disclosure Schedule, with respect to each Company Benefit Plan,
the Company and each Company ERISA Affiliate are in compliance in all
material respects with, and each Company Benefit Plan and related
source of benefit payment is and has been operated in compliance in all
material respects with, its terms, all applicable laws, rules and
regulations governing such plan or source, including, without
limitation, ERISA, the Code and applicable local law. To the Knowledge
of the Company, except as set forth in SECTION 3.1(v)(iv) of the
Company Disclosure Schedule, no Company Benefit Plan is subject to any
ongoing audit, investigation, or other administrative proceeding of the
IRS, the DOL, or any other federal, state, or local governmental entity
or is scheduled to be subject to such an audit investigation or
proceeding.
(v) LIABILITIES. With respect to each Company Benefit
Plan, to the Knowledge of the Company, there exists no condition or set
of circumstances that could subject the Company or any Company ERISA
Affiliate to any liability arising under the Code, ERISA or any other
applicable law (including, without limitation, any liability to or
under any such plan or under any indemnity agreement to which the
Company or any Company ERISA Affiliate is a party), which liability,
excluding liability for benefit claims and funding obligations, each
payable in the ordinary course, could reasonably be expected to have a
Material Adverse Effect on the Company. No claim, action or litigation
has been made, commenced or, to the Knowledge of the Company,
threatened, by or against and Company Benefit Plan or the Company or
any of its Subsidiaries with respect to any Company Benefit Plan (other
than for benefits in the ordinary course) that could reasonably be
expected to have a Material Adverse Effect on the Company.
(vi) RETIREE WELFARE PLANS. Except as disclosed in SECTION
3.1(v)(vi) of the Company Disclosure Schedule, no Company Benefit Plan
that is a "welfare benefit plan" (within the meaning of section 3(1) of
ERISA) provides benefits for any retired or former employees (other
than as required under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, or other applicable state or local law that
specifically mandates continued health coverage).
(vii) PAYMENTS RESULTING FROM MERGER. Except as disclosed
in SECTION 3.1(v)(vii) of the Company Disclosure Schedule, the
consummation or
22
announcement of any transaction contemplated by this Agreement will not
(either alone or in conjunction with another event, including
termination of employment) result in (A) any payment (whether of
severance pay or otherwise) becoming due from the Company or any of its
Subsidiaries to any Company Beneficiary or to the trustee under any
"rabbi trust" or similar arrangement, or (B) any benefit under any
Company Benefit Plan being established or increased, or becoming
accelerated, vested or payable.
(viii) DEFINED BENEFIT PENSION PLANS. Neither the Company nor
any entity that was at any time during the six-year period ending on
the date of this Agreement a Company ERISA Affiliate has ever
maintained, had an obligation to contribute to, contributed to, or had
any liability with respect to any plan that is or was a pension plan
(as defined in Section 3(2) of ERISA) that is or was subject to Title
IV of ERISA.
(w) EMPLOYMENT MATTERS.
(i) Neither the Company nor any of its Subsidiaries is
subject to or bound by any labor agreement or collective bargaining
agreement, there is no labor dispute, grievance, controversy, strike or
request for union representation pending or to the Knowledge of the
Company threatened against the Company or any of its Subsidiaries
relating to or affecting the business or operations of the Company or
any of its Subsidiaries.
(ii) Attached hereto as SECTION 3.1(w) of the Company
Disclosure Schedules is a true and complete list of all outstanding
offers of employment with the Company or any Subsidiary (oral or
written) to any person other than call center employees or other hourly
wage employees (the "OFFER LETTERS"). The Company has provided to
EarthLink a copy of all such outstanding written Offer Letters and a
summary of all material terms of oral Offer Letters.
(x) NO EXCESS PARACHUTE PAYMENTS. No amount that could be received
either in cash or property or the vesting of property as a result of any of any
transaction contemplated by this Agreement, either alone or in conjunction with
another event, including termination of employment, by any employee, officer or
director of the Company or any of its affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any Company Benefit Plan would be characterized as an "excess
parachute payment" (as such term is defined in section 280G(b)(1) of the Code).
(y) ENVIRONMENTAL MATTERS. (i) The business and operations of the
Company and its Subsidiaries are being conducted in compliance in all material
respects with all limitations, restrictions, standards and requirements
established under all environmental laws, (ii) no facts or circumstances exist
that impose, or, to the Company's Knowledge, with the passage of time, notice,
cessation of operations or otherwise will impose, on the Company or any of its
Subsidiaries an obligation under environmental laws to conduct
23
any removal, remediation or similar response action, at present or in the
future, (iii) there is no obligation, undertaking or liability arising out of or
relating to environmental laws that the Company or any of its Subsidiaries has
agreed to, assumed or retained, by contract or otherwise, or that has been
imposed on the Company or any of its Subsidiaries by any writ, injunction,
decree, order or judgment, and (iv) there are no actions, suits, claims,
investigations, inquiries or proceedings pending or, to the Company's Knowledge,
threatened against the Company or any of its Subsidiaries that arise out of or
relate to environmental laws.
(z) TITLE TO AND CONDITIONS OF PROPERTIES.
(i) Each of the Company and its Subsidiaries has good
title to, or valid leasehold interests in, all its properties and
assets purported to be owned by it in the Company SEC Documents, except
for such as are no longer used or useful in the conduct of its
businesses or as have been disposed of in the ordinary course of
business and except for minor defects in title, easements, restrictive
covenants and similar encumbrances or impediments that, in the
aggregate do not and will not materially interfere with its ability to
conduct its business as currently conducted. Except as set forth on
SECTION 3.1(z) of the Company Disclosure Schedule, all such assets and
properties, other than assets and properties in which the Company or
any of the Subsidiaries has leasehold interests, are free and clear of
all Liens, other than those set forth in the Company SEC Documents and
except for minor Liens, that, in the aggregate, do not and will not
materially interfere with the ability of the Company or any of its
Subsidiaries to conduct business as currently conducted or as
reasonably expected to be conducted.
(ii) Each of the Company and each of its Subsidiaries has
complied in all material respects with the terms of all leases to which
it is a party and under which it is in occupancy, and all such leases
are in full force and effect. Except as set forth in SECTION 3.1(z) of
the Company Disclosure Schedules, each of the Company and each of its
Subsidiaries enjoys peaceful and undisturbed possession under all such
leases.
(iii) Except as set forth on SECTION 3.1(z) of the Company
Disclosure Schedule, to the Knowledge of the Company, the buildings and
premises of the Company and each of its Subsidiaries that are used in
its business are in reasonably good operating condition and in a state
of reasonably good maintenance and repair, normal wear and tear
excepted, and are reasonably adequate and suitable for the purpose for
which they are currently being used, and have access to adequate
utility services necessary for the conduct of the business. All items
of operating equipment of the Company and its Subsidiaries are in
reasonably good operating condition and in a state of reasonable
maintenance and repair, ordinary wear and tear excepted.
(aa) UNDISCLOSED LIABILITIES. Except as set forth in the Company
SEC Documents or SECTION 3.1(aa) of the Company Disclosure Schedule (and other
than those
24
directly incurred in connection with the execution of this Agreement), at the
date of the most recent audited financial statements of the Company included in
the Company SEC Documents, neither the Company nor any of its Subsidiaries had,
and since such date neither the Company nor any of such Subsidiaries has
incurred (except in the ordinary course of business), any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
required by generally accepted accounting principles to be set forth on a
financial statement or in the notes thereto or which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole.
(bb) INSURANCE. SECTION 3.1(bb) of the Company Disclosure Schedule
accurately lists in reasonable detail all insurance policies maintained by the
Company. The Company maintains insurance coverage reasonably adequate for the
operation of the business of the Company and each of its Subsidiaries, and the
transactions contemplated hereby will not materially adversely affect such
coverage.
(cc) FULL DISCLOSURE. No representation or warranty made by the
Company or any Subsidiaries contained in this Agreement and no statement
contained in any certificate or schedule furnished or to be furnished by the
Company or any Subsidiaries to EarthLink in, or pursuant to the provisions of,
this Agreement (including the Company Disclosure Schedule), contains or shall
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary, in the light of the circumstances under which it
was made, in order to make statements herein or therein not misleading.
(dd) [reserved]
(ee) SEVERANCE PAYMENTS. Attached hereto as SECTION 3.1(ee) of the
Company Disclosure Schedules is a true and complete list of the Company's and
its Subsidiaries' salaried employees with severance pay arrangements and the
total amount of potential severance payments for each such person (the
"SALARY/SEVERANCE LIST"). Such list sets forth the employee's name, total amount
of potential severance pay and other related information. From the date of this
Agreement through the Effective Time of the Merger, the Company's and
Subsidiaries' total aggregate future "Qualified Severance Expenditures" (as
defined herein) (whether paid, incurred or accrued prior to the Effective Time
of the Merger--"Paid") for severance and all similar payments to employees
identified on the Salary/Severance List shall not exceed $1,700,000 (the
"SEVERANCE LIMIT"). For purposes hereof, a "Qualified Severance Expenditure"
shall mean any severance payment or expenditure Paid by the Company to persons
from the Salary/Severance List that have declined a comparable job offer from
EarthLink. The Severance Limit shall not include any severance payments by the
Company or its Subsidiaries related to its or their ongoing reduction in force
and reserved for on the Company's consolidated balance sheet as of March 31,
2001.
(ff) WARN ACT. In connection with the Company's planned reductions
in workforce and terminations of employees pursuant to its Integration Plan or
otherwise, the Company has complied and will comply in all material respects
with its obligations
25
under the Worker Adjustment and Retraining Notification Act (29 U.S.C. Section
2101 et seq.), and all applicable regulations all similar state laws.
(gg) EARNOUT PAYMENTS. SECTION 3.1(gg) of the Company Disclosure
Schedule sets forth a true, accurate and complete list of all the Company's and
Subsidiaries' `earnout' and similar payment obligations and receivables of every
type, related to prior acquisitions or otherwise (the "EARNOUTS"). No such
Earnouts require the Company or any Subsidiary to issue capital stock, options,
warrants or other types of securities in connection therewith.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF EARTHLINK AND COMBINATION
COMPANY. EarthLink and the Combination Company each represents and warrants to,
and agrees with, the Company as follows, except as expressly contemplated by
this Agreement:
(a) ORGANIZATION; STANDING AND POWER. EarthLink and Combination
Company are each respectively corporations duly organized, validly existing and
in good standing under the laws of the State of Delaware and have the requisite
corporate power and authority to carry on their respective businesses as now
being conducted. EarthLink and Combination Company are each respectively duly
qualified to do business and are in good standing in each jurisdiction in which
the nature of their respective businesses or the ownership or leasing of their
respective properties makes such qualification necessary, other than in such
jurisdictions where the failure to be so qualified to do business or in good
standing would not have a Material Adverse Effect on EarthLink and its
Subsidiaries, taken as a whole. Combination Company was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement. As of
the date of this Agreement, except for obligations or liabilities incurred in
connection with the transactions contemplated hereby, the Combination Company
has no material assets or liabilities of any type.
(b) CAPITAL STRUCTURE. The authorized capital stock of EarthLink
consists of 300,000,000 shares of EarthLink Common Stock, $.01 par value, and
100,000,000 shares of preferred stock, $.01 par value ("EARTHLINK PREFERRED
STOCK"). As of March 31, 2000, 118,174,099 shares of EarthLink Common Stock were
issued and outstanding, and 16,734,057 shares of EarthLink Preferred Stock were
issued and outstanding. In addition, as of the date hereof, a total of
20,350,000 shares of common stock are reserved for issuance under EarthLink's
Stock Incentive Plan and Stock Option Plan for Non-Employee Directors. All
outstanding shares of capital stock of EarthLink are validly issued, fully paid
and nonassessable and not subject to preemptive rights. The shares of EarthLink
Common Stock to be issued pursuant to the terms of this Agreement and upon
exercise of any converted Company Options and Warrants have been adequately
reserved and will, when issued, be validly issued, fully paid and non-assessable
and not subject to preemptive rights. Such shares of EarthLink Common Stock
will, when issued, be registered under the Securities Act and the Exchange Act
and will, when issued, be approved for trading on Nasdaq-National Market. The
authorized capital stock of Combination Company consists of 10,000 shares of
common stock, $.01 par value, and
26
no shares of preferred stock, $.01 par value. As of the date of this Agreement,
ten (10) shares of Combination Company common stock are issued and outstanding
in the name of EarthLink, and no other shares of capital stock of Combination
Company are issued and outstanding. All outstanding shares of capital stock of
Combination Company are validly issued, fully paid and nonassessable and not
subject to preemptive rights.
(c) AUTHORITY; NON-CONTRAVENTION. The Board of Directors of
EarthLink and Combination Company, respectively have approved the Merger and
this Agreement and determined the Merger and this Agreement to be in the best
interests of EarthLink and Combination Company and their respective
stockholders. EarthLink and Combination Company, respectively, have the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by EarthLink and the Combination Company and the consummation by
EarthLink and Combination Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of EarthLink
and Combination Company, respectively. This Agreement has been duly and validly
executed and delivered by EarthLink and Combination Company and constitutes a
valid and binding obligation of EarthLink and Combination Company, respectively,
enforceable against EarthLink and Combination Company in accordance with its
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws or judicial
decisions now or hereafter in effect relating to creditors' rights generally,
(ii) the remedy of specific performance and injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought and (iii) the enforceability of any
indemnification provision contained herein may be limited by applicable federal
or state securities laws. The execution, delivery and performance of this
Agreement by EarthLink does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not, conflict
with, or result in any violation of or any default under or give rise to a right
of termination, cancellation or acceleration with respect to (i) the Amended and
Restated Certificate of Incorporation or the Bylaws of EarthLink or any
provision of the comparable organizational documents of Combination Company or
any of their Subsidiaries, (ii) any material: contract, loan, note, bond or
other evidence of indebtedness, or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation or arbitration award
applicable to EarthLink or any of its Subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii) and (iii), for any
immaterial defaults, conflicts or violations. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity or other Person is required by or with respect to EarthLink or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
EarthLink or the consummation by EarthLink of the transactions contemplated
hereby, except for (i) the filing by EarthLink of a pre-merger notification and
report form under the HSR Act and the expiration or termination of the waiting
period thereunder, (ii) the filing with the SEC of (A) the Proxy Statement, (B)
the Registration Statement (as defined in SECTION 5.1(b)), and (C) such reports
under Section 13(a) of the Exchange Act as may be required in connection with
27
this Agreement and the transactions contemplated hereby, and (iii) the filing of
the Certificate of Merger with and approval by the Delaware Secretary of State
with respect to the Merger as provided in the DGCL and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business and such other consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the "takeover"
or "blue sky" laws of various states and such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not have a Material Adverse Effect on EarthLink and
its Subsidiaries, taken as a whole. No vote of the stockholders of EarthLink is
necessary or required to approve or consummate any of the transactions
contemplated hereby. The affirmative vote of EarthLink as the sole stockholder
of Combination Company, is the only vote of the holders of any class or series
of capital stock of Combination Company necessary to approve the transaction
contemplated hereby.
(d) SEC DOCUMENTS. EarthLink, EarthLink Network, Inc., a Delaware
corporation ("OLD EARTHLINK") and MindSpring Enterprises, Inc., a Delaware
corporation ("MINDSPRING"), each has filed all required reports, schedules,
forms, statements and other documents with the SEC as follows: for EarthLink,
since February 4, 2000, for Old EarthLink, since January 1, 1999 and for
MindSpring, since January 1, 1999 (such documents, together with all exhibits
and schedules thereto and documents incorporated by reference therein
collectively referred to herein as the "EARTHLINK SEC DOCUMENTS"). As of their
respective dates, the EarthLink SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such EarthLink SEC Documents, and none of the EarthLink SEC Documents
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. The consolidated financial statements of EarthLink included in the
EarthLink SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC)
and fairly present the consolidated financial position of EarthLink and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments and other
adjustments described therein).
(e) INFORMATION SUPPLIED. None of the information supplied or
required to be supplied by EarthLink or Combination Company for inclusion or
incorporation by reference in (i) the Registration Statement will, at the time
the Registration Statement is filed with the SEC, and at any time it is amended
or supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
28
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
(ii) the Proxy Statement relating to the Company's Stockholders Meeting, at the
date the Proxy Statement is first mailed to the Company's stockholders and at
the time of the Company Stockholders Meeting, will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. Notwithstanding the
foregoing, no representation or warranty is made by EarthLink with respect to
statements made or incorporated by reference contained in or omitted from any of
the foregoing documents based on information supplied or required to be supplied
by the Company for inclusion or incorporation by reference therein. All
documents that EarthLink is responsible for filing with the SEC in connection
with the transactions contemplated herein will comply as to form and substance
in all material respects with the applicable requirements of the Securities Act
and the Exchange Act.
(f) BROKERS. Other than Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation, no broker, investment banker or other Person is entitled to receive
from EarthLink or any of its Subsidiaries any investment banking, broker's,
finder's or similar fee or commission in connection with this Agreement or the
transactions contemplated hereby, including any fee for any opinion rendered by
any investment banker.
(g) UNDISCLOSED LIABILITIES. Except as set forth in the EarthLink
SEC Documents, at the date of the most recent audited financial statements of
EarthLink included in the EarthLink SEC Documents neither EarthLink nor any of
its Subsidiaries had, and since such date neither EarthLink nor any of such
Subsidiaries has incurred (except in the ordinary course of business), any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise), required by generally accepted accounting principles to be set
forth on a financial statement or in the notes thereto or which, individually or
in the aggregate, could reasonably be expected to have a Material Adverse Effect
on EarthLink and its Subsidiaries, taken as a whole.
(h) LITIGATION. Except as disclosed in the EarthLink SEC
Documents, (x) there is no material claim, suit, action, proceeding or
investigation pending or, to EarthLink's Knowledge, threatened against or
affecting EarthLink, the Combination Company or any of their Subsidiaries, and
(y) there is no claim, suit, action, proceeding or investigation pending or, to
EarthLink's Knowledge, threatened against or affecting EarthLink that could
prevent or materially delay the ability of EarthLink or the Combination Company
to consummate the transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against EarthLink or the Combination Company or any of
their Subsidiaries having, or which, insofar as reasonably can be foreseen, in
the future could have, any such effect.
(i) OPINION OF EARTHLINK FINANCIAL ADVISORS. EarthLink's Board of
Directors has received an opinion from Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation to the
29
effect that, as of the date of this Agreement, the aggregate consideration,
which includes cash consideration and EarthLink stock consideration (based on
the closing stock price of EarthLink Common Stock on June 7, 2000), to be paid
by EarthLink (excluding any consideration to be paid to stockholders of the
Company who perfect their appraisal rights under Delaware law) pursuant to this
Agreement is fair to EarthLink from a financial point of view.
(j) FULL DISCLOSURE. No representation or warranty made by
EarthLink or any Subsidiary of EarthLink contained in this Agreement, and no
statement contained in any certificate or schedule furnished to or to be
furnished by EarthLink or any Subsidiary of EarthLink contains or shall contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in the light of the circumstances under which it was
made, in order to make statements herein or therein not misleading.
(k) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the EarthLink SEC Documents, since February 4, 2000, EarthLink has conducted its
business only in the ordinary course of business consistent with past practice,
and there has not been (i) as of the date hereof, any changes events or
conditions with respect to EarthLink that has had or is reasonably likely to
have a Material Adverse Effect on EarthLink and its Subsidiaries, taken as a
whole; (ii) any amendment of any material term of any outstanding equity
security of EarthLink or any Subsidiary; (iii) any material damage, destruction,
loss, whether or not covered by insurance; or (iv) any change in accounting
methods, principles or practices by EarthLink materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
generally accepted accounting principles.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1. CONDUCT OF BUSINESS OF THE COMPANY.
(a) INTEGRATION; ORDINARY COURSE. In furtherance of integrating
the Company and its Subsidiaries with EarthLink (the "OM INTEGRATION"), prior to
the Effective Time of the Merger, the Company and its Subsidiaries shall provide
to EarthLink and its representatives reasonable and full access (during business
hours and upon reasonable advance notice) to the Company's and Subsidiaries'
facilities, systems, records, employees (all levels and types) and other
personnel as requested by EarthLink. The Company and EarthLink agree to
cooperate and communicate in good faith in all aspects of the OM Integration,
with principal goals of facilitating the integration of the Company's and
Subsidiaries' operations into EarthLink and to minimize the Company's potential
contractual default/breaches, costs and other problems arising as a result of
the Merger. As part of the OM Integration, the Company and Subsidiary
representatives shall cooperate and work in good faith with EarthLink
representatives and take commercially
30
reasonable actions in order to identify, minimize and if possible eliminate
potential violations (related to or caused by the Merger) of the Company's and
Subsidiaries' contracts, agreements and leases, including without limitation
working directly with the Company's and Subsidiaries' vendors and other
contractual parties for these purposes.
As has been disclosed to EarthLink, the Company and its Subsidiaries
are currently engaged in a series of integration steps whereby the Company's
Subsidiaries and regional operations are to be integrated into the Company's
national Internet service plan pursuant to the Company's Integration Plan as
provided in writing to EarthLink (the "INTEGRATION PLAN"). During the period
from the date of this Agreement to the Effective Time of the Merger (except as
otherwise specifically contemplated by the terms of this Agreement or as set
forth in the Company Disclosure Schedules), the Company shall and shall cause
its Subsidiaries to carry on the Company's Integration Plan and their respective
businesses in the usual, regular and ordinary course consistent with the
Integration Plan and in substantially the same manner as heretofore conducted
and, to the extent consistent therewith, use all commercially reasonable efforts
to preserve intact their current business organizations, keep available the
services of their current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them, in each case consistent with past
practice in the ordinary course of business to the end that their goodwill and
ongoing businesses shall be unimpaired to the fullest extent possible at the
Effective Time of the Merger. The Company shall use its best efforts to sell,
transfer or otherwise dispose of its leasehold and other interests in that
certain airplane currently leased by the Company.
In connection with the Integration Plan, without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
this Agreement or as set forth in the Company Disclosure Schedules, from the
date hereof until the Effective Time of the Merger, without prior approval from
EarthLink in accordance with the following "APPROVAL Mechanism", the Company
shall not, and shall not permit any of its Subsidiaries of which it owns
directly or indirectly more than 50% of the voting or equity interests in to
take any of the actions set forth below (the "APPROVAL ITEMS"). The Approval
Mechanism shall be as follows: for each proposed Approval Action set forth
below, a Company representative (the President or his designee) shall contact
EarthLink (the President or his designee) via telephone or email with the
request and reasonable detail on the proposed Approval Item. EarthLink shall
then have two (2) business days after receipt of such request to either approve
or deny the proposed Approval Item, which decision shall be communicated by
EarthLink to the Company via telephone or email. A lack of response to the
Company by EarthLink as required by 5:00 p.m. on the second business day
following the request shall be considered an approval for such request. The
Approval Items, which are applicable to the Company and its Subsidiaries as
appropriate, are as follows:
(i) (A) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock,
other than dividends and distributions by any direct or indirect wholly
owned Subsidiary of the Company to
31
the Company or a wholly owned Subsidiary of the Company and immaterial
dividends, distributions and other similar transactions involving
existing Subsidiaries, (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or (C) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its Subsidiaries or
any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(ii) (A) authorize, issue, deliver, sell, pledge or
otherwise encumber any securities (equity or debt or otherwise)
whatsoever, including without limitation, capital stock, common stock,
preferred stock, notes, bonds, debentures and any other securities
convertible into capital stock or other securities, including without
limitation warrants, options or otherwise (other than pursuant to the
Offer Letters, pursuant to Company Options outstanding on the date of
this Agreement or pursuant to elections under the Stock Purchase Plan
made prior to the date of this Agreement);
(iii) amend the Company's or any Subsidiaries'
Articles/Certificate of Incorporation, Bylaws or other governing
documents;
(iv) acquire or agree to acquire any business,
corporation, partnership, association, joint venture, limited liability
company or other entity or division thereof.
(v) incur any obligation for borrowed money, whether or
not evidenced by a note, bond, debenture or similar instrument, except
for (a) purchase money indebtedness, (b) capitalized leases or
operating leases, and (c) such borrowings under the Company existing
revolving credit facilities or letters of credit that would add
additional outstanding indebtedness of the Company and its Subsidiaries
on a consolidated basis of more than $100,000;
(vi) sell, lease, mortgage, pledge or xxxxx x Xxxx on or
otherwise encumber or dispose of any of its material properties or
assets, except (A) sales of inventory in the ordinary course of
business consistent with past practice, (B) immaterial liens not
relating to the borrowing of money or the incurrence of any monetary
obligation and (C) other immaterial transactions not in excess of
$100,000 in the aggregate;
(vii) make any material election relating to Taxes or
settle or compromise any material Tax liability;
(viii) adopt a plan of complete or partial liquidation of
the Company or any of its Subsidiaries or resolutions providing for or
authorizing such a liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or reorganization; PROVIDED, HOWEVER,
that in connection with the Company's
32
Integration Plan, the Company's Subsidiaries or any one of them may
merge into the Company or any other Company Subsidiary.
(ix) change any material accounting principle used by it,
except as required by regulations promulgated by the SEC;
(x) fail to maintain insurance upon all its properties
and with respect to the conduct of its business of such kinds and in
such amounts as is current in effect;
(xi) accelerate the vesting schedule of any options,
warrants or any other rights exercisable into capital stock of the
Company or any Subsidiary (except to extent required by the Company's
option agreements or warrants and the Company's Stock Option Plan
existing on the date hereof);
(xii) [reserved];
(xiii) authorize or make any payment to an Affiliate of the
Company except in the ordinary course of business or pursuant to any
agreement, arrangement or understanding existing on the date of this
Agreement and disclosed in writing to EarthLink;
(xiv) authorize any cash expenditure for any reason that
exceeds $100,000;
(xv) make any earnout or any similar type payments, except
those set forth on SECTION 3.1(gg) of the Company Disclosure Schedule;
and (xvi) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) CHANGES IN EMPLOYMENT ARRANGEMENTS. Except as may occur in
connection with the merger of certain of the Company's 401(k) Plans occurring as
part of the Integration Pan or as required by the Company's 401(k) Plans,
neither the Company nor any of its Subsidiaries shall (except as may be required
in order to give effect to the requirements of this Agreement) with respect to
any Company or Subsidiary officer, employee, consultant or otherwise: (i) adopt
or amend (except as may be required by law) any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or other
arrangement (including any Company Benefit Plan) for the benefit or welfare of
any employee, director or former director or employee, (ii) increase the
compensation or any fringe benefits of any employee of the Company or any of its
Subsidiaries, or, (iii) increase the compensation, bonus or fringe benefits of
any employee or former employee or pay any benefit, PROVIDED, that the Company
may increase the wage or salary of any employee only on the anniversary of their
previous wage or salary increase, PROVIDED, that the aggregate of such wage or
salary increases may not exceed 5% in total or 10% for any one individual.
33
(c) SEVERANCE ARRANGEMENTS. Except as may occur in connection
severance obligations set forth in SECTION 3.1(ee) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries shall grant, pay or
agree to grant or pay any severance, termination or similar arrangement or
otherwise modify or amend in any manner whatsoever (including without limitation
an increase or acceleration of such benefits) any existing severance,
termination or similar benefits, except as specifically permitted and as limited
pursuant to the Salary/Severance List and SECTION 3.1(ee) hereof.
Prior to the Effective Time of the Merger, the Company shall pay and
discharge in full all its severance obligations set forth in the portion of
Section 3.1(ee) of the Company Disclosure Schedules described as "Previously
Terminated Employees to whom the Company has Severance Obligations."
(d) OTHER ACTIONS. The Company shall not, and shall not permit any
of its Subsidiaries to, take any action that would, or that could reasonably be
expected to, result in any of the representations and warranties of the Company
set forth in this Agreement becoming untrue in any material respect.
(e) COMPANY STOCK PURCHASE PLAN. Upon execution of this Agreement,
the Company shall suspend in full (and shall not reactivate) the Company's Stock
Purchase Plan effective as of the last day of the current Offering Period (as
such term is defined in the Stock Purchase Plan), which day is July 31, 2000.
Any rights to purchase Company Common Stock that are outstanding as of such date
may be exercised in accordance with the terms of the Stock Purchase Plan. The
Company shall not issue any Company Shares or any rights to acquire Company
Shares under the Stock Purchase Plan prior to the Effective Time of the Merger
(other than shares issued pursuant to elections existing under the Stock
Purchase Plan on the date hereof), and shall terminate the Stock Purchase Plan
in full as of the Effective Time of the Merger.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. STOCKHOLDER APPROVAL; PREPARATION OF PROXY STATEMENT; PREPARATION
OF REGISTRATION STATEMENT.
(a) The Company shall, as soon as practicable following the
execution and delivery of this Agreement on a date to be agreed upon between
EarthLink and the Company, which date shall be set taking into account the
status of pending regulatory matters pertaining to the transactions contemplated
hereby, duly call, give notice of, convene and hold the Company Stockholders
Meeting for the purpose of approving the Merger, this Agreement and the
transactions contemplated hereby. Unless withdrawn pursuant to this Agreement,
the Company will, through its Board of Directors, recommend to its stockholders
the approval and adoption of the Merger. The Company
34
and EarthLink shall coordinate and cooperate with respect to the timing of the
Company Stockholders Meeting and shall endeavor to hold such meeting as soon as
reasonably practical after the date hereof.
(b) Promptly following the date of this Agreement, EarthLink shall
prepare and file with the SEC, and the parties hereto shall cooperate and use
their reasonable best efforts to prepare and file, a registration statement on
Form S-4 (in which the Proxy Statement will be included), and any necessary
amendments or supplements thereto relating to the registration under the
Securities Act of the EarthLink Common Stock to be issued in the Merger (the
"REGISTRATION STATEMENT"). Each of the Company and EarthLink shall use its
reasonable best efforts as promptly as practicable, subject to the setting of
the date for the Company Stockholders Meeting as provided in SECTION 5.1(a), to
have the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing. Each of the Company and EarthLink
will use its reasonable best efforts to cause the Proxy Statement to be mailed
to the Company's stockholders as promptly as practicable after the Registration
Statement is declared effective under the Securities Act. EarthLink shall also
take such reasonable actions (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) as may be required to be taken
under any applicable state securities laws in connection with the issuance of
EarthLink Common Stock in the Merger, and the Company shall furnish all
information concerning the Company and the holders of the Company Shares and
rights to acquire Company Shares pursuant to the Company Stock Plans as may be
reasonably requested in connection with any such action. The Company and
EarthLink will notify each other promptly of the receipt of any written or oral
comments from the SEC or its staff and of any request by the SEC or its staff
for amendments or supplements to the Proxy Statement, the Registration Statement
or for additional information and will supply each other with copies of all
correspondence between the Company or EarthLink, respectively, or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement, the Registration Statement or the Merger.
No filing of, or amendment or supplement to, the Registration Statement or the
Proxy Statement will be made by EarthLink without the Company's prior consent
(which shall not be unreasonably withheld, delayed or conditioned) and without
providing the Company the reasonable and adequate opportunity to review and
comment thereon. EarthLink shall advise the Company, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or when any supplement or amendment has been filed, the issuance of any stop
order, the suspension of the qualification of EarthLink Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement or the Registration
Statement or comments thereon and responses thereto or requests by the SEC for
additional information. If at any time prior to the Effective Time of the Merger
any information relating to the Company or EarthLink, or any of their respective
Affiliates, officers or directors, should be discovered by the Company or
EarthLink which should be set forth in an amendment or supplement to any of the
Registration Statement or the Proxy Statement, so that any of such documents
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the
35
statements therein, in light of the circumstances under which they were made,
not misleading, the party which discovers such information shall promptly notify
the other parties hereto and an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and, to the extent
required by law, disseminated to the stockholders of the Company and EarthLink.
EarthLink shall, prior to the Closing Date file with Nasdaq a Notification for
Additional Listing of Shares providing for inclusion for quotation on
Nasdaq-National Market of the shares of EarthLink Common Stock issuable in
connection with the Merger and upon the exercise of any Company Options and
Noteholder Warrant converted or replaced pursuant to this Agreement and shall
use its reasonable best efforts to cause the shares of EarthLink Common Stock
issuable in connection with the Merger and upon the exercise of any Company
Options and Noteholder Warrant converted pursuant to this Agreement to be
approved for quotation on Nasdaq-National Market, subject to official notice of
issuance, prior to the Closing Date.
(c) The Company will cause its transfer agent to make stock
transfer records relating to the Company available to the extent reasonably
necessary to effectuate the intent of this Agreement.
SECTION 5.2. ACCESS TO INFORMATION. Upon reasonable notice, the Company and
EarthLink shall each (and shall cause each of their respective Subsidiaries to)
afford to the officers, employees, accountants, counsel and other
representatives of the other, reasonable access during normal business hours
during the period from the date hereof to the Effective Time of the Merger, to
all of its properties, books, contracts, commitments and records, and during
such period, each of the Company and EarthLink shall (and shall cause each of
their respective Subsidiaries to) furnish promptly to the other (i) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of the Exchange
Act or the Securities Act (including all comment letters from the staff of the
SEC) and (ii) all other information concerning its business, properties and
personnel as such other party may reasonably request; PROVIDED, HOWEVER, that
notwithstanding the foregoing provisions of this SECTION 5.2 or any other
provision of this Agreement, neither the Company nor EarthLink shall be required
to provide to the other party any information that is subject to a
confidentiality agreement and that relates primarily to a party other than the
Company, EarthLink or any Subsidiary or former Subsidiary of the Company or
EarthLink. Each of the Company and EarthLink agrees that it will not, and it
will cause its respective representatives not to, use any information obtained
pursuant to this SECTION 5.2 for any purpose unrelated to the consummation of
the transactions contemplated by this Agreement. The Confidentiality and
Standstill Agreement dated May 24, 2000 (the "CONFIDENTIALITY AGREEMENT"), by
and between the Company and EarthLink, shall apply with respect to information
furnished by the Company, EarthLink and their respective Subsidiaries and
representatives thereunder or hereunder and any other activities contemplated
thereby. The parties agree that this Agreement and the transactions contemplated
hereby shall not constitute a violation of the Confidentiality Agreement and
that the provisions hereof shall supersede all provisions of the Confidentiality
Agreement in the event of a conflict.
36
SECTION 5.3. REASONABLE EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, except to the extent otherwise required by United States regulatory
considerations and otherwise provided in this SECTION 5.3, each of the parties
agrees to use commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger, and
the other transactions contemplated by this Agreement, including (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if any)
and the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments (including any required supplemental indentures) necessary to
consummate the transactions contemplated by this Agreement. Notwithstanding the
foregoing, neither party shall be required to agree to any consent, approval or
waiver that would require such party to take an action that would impair the
value that such party reasonably attributes to the Merger and the transactions
contemplated thereby. In connection with and without limiting the foregoing,
each of the Company and EarthLink and its respective Board of Directors shall
(i) take all action reasonably necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to the Merger
and (ii) if any state takeover statute or similar statute or regulation becomes
applicable to the Merger, take all action reasonably necessary to ensure that
the Merger may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the Merger.
(b) The Company shall give prompt notice to EarthLink, and
EarthLink shall give prompt notice to the Company, of (i) any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate in
any material respect or (ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; PROVIDED, HOWEVER, that no such
notification shall affect the representations or warranties or covenants or
agreements of the parties or the conditions to the obligations of the parties
hereunder.
(c) (i) Each of the parties hereto shall file a premerger
notification and report form under the HSR Act with respect to the Merger as
promptly as reasonably possible following execution and delivery of this
Agreement, but in no event later than fifteen (15) calendar days after the date
hereof. Each of the parties agrees to use
37
reasonable best efforts to promptly respond to any request for additional
information pursuant to Section (e)(1) of the HSR Act.
(ii) Except as otherwise required by United States
regulatory considerations, the Company and EarthLink will each furnish
to the other, copies of all correspondence, filings or communications
(or memoranda setting forth the substance thereof) (collectively, "HSR
DOCUMENTS") between the Company and EarthLink, respectively, or any of
their respective representatives, on the one hand, and any Governmental
Entity, or members of the staff of such agency or authority, with
respect to this Agreement or the Merger; PROVIDED, HOWEVER, that (x)
with respect to documents and other materials filed by or on behalf of
either the Company or EarthLink, with the Antitrust Division of the
Department of Justice, the Federal Trade Commission, or any state
attorneys general that are available for review by the other party,
copies will not be required to be provided to such other party, and (y)
with respect to any HSR Documents (1) that contain any information
which, in the reasonable judgment of Xxxxx & Xxxxxxx L.L.P., on behalf
of the Company, and Hunton & Xxxxxxxx, on behalf of EarthLink, should
not be furnished to the Company or EarthLink, as applicable, because of
antitrust considerations or (2) relating to a request for additional
information pursuant to Section (e)(1) of the HSR Act, the obligation
of the Company or EarthLink, as applicable, to furnish any such HSR
Documents to the other party, shall be satisfied by the delivery of
such HSR Documents on a confidential basis to such party's counsel
pursuant to a confidentiality agreement in form and substance
reasonably satisfactory to each party.
(iii) Nothing contained in this Agreement shall be
construed so as to require EarthLink or the Company, or any of their
respective Subsidiaries or affiliates, to sell, license, dispose of, or
hold separate, or to operate in any specified manner, any material
assets or businesses of EarthLink, the Company or the Surviving
Corporation (or to require EarthLink, the Company or any of their
respective Subsidiaries or affiliates to agree to any of the
foregoing). The obligations of each party under SECTION 5.4(a) to use
reasonable best efforts with respect to antitrust matters shall be
limited to compliance with the reporting provisions of the HSR Act and
with its obligations under this SECTION 5.4(c).
SECTION 5.4. FEES AND EXPENSES. Except as provided in ARTICLE VIII, all fees and
expenses incurred in connection with the Merger, this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees
or expenses, whether or not the Merger is consummated; PROVIDED, that in
connection with the actions contemplated in SECTION 5.1 hereof, (a) EarthLink
and the Company shall each be responsible for 50% of the fees related to the
financial printer, printing and mailing of the Proxy Statement, (b) the SEC and
blue sky registration fees and Nasdaq listing fees shall be paid by EarthLink,
and (c) each party shall pay the filing fee related to its Xxxx-Xxxxx-Xxxxxx
filings and clearance. The Company has delivered to EarthLink an estimate of the
fees and expenses to be incurred by the Company in connection with this
Agreement and the transactions contemplated hereby.
38
SECTION 5.5. PUBLIC ANNOUNCEMENTS. EarthLink and the Company will consult with
each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation, except that each party may respond to questions from
stockholders and may respond to inquiries from financial analysts and media
representatives in a manner consistent with its past practice and each party may
make such disclosure as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities exchange without
prior consultation to the extent such consultation is not reasonably
practicable. The parties agree that the initial press release or releases to be
issued in connection with the execution of this Agreement shall be mutually
agreed upon prior to the issuance thereof.
SECTION 5.6. AGREEMENT TO DEFEND. In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other Person or
other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages in
connection therewith, the parties hereto agree to cooperate and use their
reasonable best efforts to defend against and respond thereto.
SECTION 5.7. OTHER ACTIONS. Except as contemplated by this Agreement, neither
EarthLink nor the Company shall, and neither shall permit any of its
Subsidiaries to, take or agree or commit to take any action that is reasonably
likely to result in any of its respective representations or warranties
hereunder being untrue in any material respect or in any of the conditions to
the Merger set forth in ARTICLE VI not being satisfied.
SECTION 5.8. RETENTION PLAN. The Company and EarthLink shall cooperate and
communicate in good faith on a plan for retaining key Company employees.
SECTION 5.9. INDEMNIFICATION.
(a) EarthLink agrees that all rights to indemnification (including
rights to advancement of expenses) and exculpation for acts or omissions
occurring prior to the Effective Time of the Merger now existing in favor of the
current or former directors, officers, employees and agents of the Company and
its Subsidiaries (the "INDEMNIFIED PARTIES") as provided in their respective
certificates of incorporation or bylaws and indemnity agreements shall survive
the Merger, and the Surviving Corporation shall continue such indemnification
rights in full force and effect in accordance with their terms and be
financially responsible therefor. EarthLink shall maintain and continue for a
period of five (5) years from the Effective Time of the Merger any directors and
officers insurance policies in place at the Company as of the Effective Time of
the Merger, PROVIDED, that EarthLink shall not have to pay more than 150% of the
current annual policy premiums.
(b) The obligations under this SECTION 5.9 shall not be
terminated, modified or assigned in such a manner as to adversely affect any
Indemnified Party without the
39
consent of such Indemnified Party. The provisions of this SECTION 5.9 are
intended to be for the benefit of, and shall be enforceable by, the parties
hereto and each Indemnified Party, his heirs and his
representatives. This SECTION 5.9 shall be binding upon all successors and
assigns of the Company, EarthLink and the Surviving Corporation.
SECTION 5.10. BLUE SKY. EarthLink shall use reasonable efforts to obtain prior
to the Closing Date any necessary permits and approvals under all applicable
state securities or blue sky laws required to permit the distribution of the
shares of EarthLink Common Stock to be issued in connection with the Merger and
upon exercise of the assumed Company Options assumed or converted pursuant to
this Agreement.
SECTION 5.11. COMBINATION COMPANY.
EarthLink shall cause Combination Company to approve and adopt, and to
perform its obligations in accordance with, this Agreement and shall take any
and all steps reasonably necessary to cause Combination Company to effect the
transactions contemplated hereby.
SECTION 5.12. [Reserved]
SECTION 5.13. EXEMPTION FROM LIABILITY UNDER SECTION 16(b). The Board of
Directors of EarthLink, or a committee of Non-Employee Directors thereof (as
such term is defined for purposes of Rule 16b-3(d) under the Exchange Act) shall
adopt a resolution in advance of the Effective Time of the Merger providing that
the receipt by the Company Insiders of EarthLink Common Stock or other equity
securities of EarthLink pursuant to the Merger or the other transactions
contemplated hereby and, to the extent such securities are listed in the Section
16 Information, are intended to be exempt from liability pursuant to Rule 16b-3
under the Exchange Act. "SECTION 16 INFORMATION" shall mean information accurate
in all respects regarding the Company Insiders, the number of shares of
EarthLink Common Stock or other EarthLink equity securities to be acquired by
each such Company Insider in connection with the Merger and other transactions
contemplated by this Agreement. "COMPANY INSIDERS" shall mean those officers and
directors of the Company who will become subject to the reporting requirements
of Section 16(a) of the Exchange Act as insiders of EarthLink in conjunction
with this Merger.
SECTION 5.14. EMPLOYEE MATTERS.
Each of the employee benefit plans of the Company and each of its
Subsidiaries shall be terminated prior to or concurrent with the Effective Time
of the Merger, including without limitation all stock option plans, 401(k) and
health plans. All employees that join EarthLink after the Merger will be
eligible to participate in all of EarthLink's employee benefit plans that are
generally available to all other EarthLink employees, and EarthLink shall make
such participation available at Closing.
40
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. The Company Stockholder Approval shall
have been obtained.
(b) NASDAQ. The shares of EarthLink Common Stock issuable to the
Company's stockholders pursuant to the Merger and issuable upon exercise of the
Company Options and any Noteholder Warrants converted pursuant to this Agreement
shall have been approved for trading and included for quotation on the
Nasdaq-National Market prior to or simultaneous with the Effective Time of the
Merger, subject to official notice of issuance.
(c) HSR ACT; OTHER APPROVALS. The waiting period (and any
extension thereof) applicable to the Merger under the HSR Act shall have been
terminated or shall have expired and all filings required to be made prior to
the Effective Time of the Merger with, and all consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time of the Merger
from, any governmental entity in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
shall have been made or obtained (as the case may be), except where the failure
to obtain such consents, approvals, permits and authorizations could not
reasonably be expected to have a Material Adverse Effect on the Company or
EarthLink (assuming the Merger has taken place) or to materially adversely
affect the consummation of the Merger.
(d) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; PROVIDED, HOWEVER, that the
parties hereto shall, subject to SECTION 5.3, use reasonable best efforts to
have any such injunction, order, restraint or prohibition vacated.
(e) REGISTRATION STATEMENT EFFECTIVENESS. The Registration
Statement shall have become effective under the Securities Act prior to the
mailing of the Proxy Statement, and all post-effective amendments filed shall
have been declared effective or shall have been withdrawn; and no stop order
suspending the effectiveness thereof shall have been issued and no proceedings
for that purpose shall have been initiated or, to the knowledge of the parties,
threatened by the SEC.
(f) BLUE SKY FILINGS. There shall have been obtained any and all
material permits, approvals and consents of securities or "blue sky" authorities
of any jurisdiction
41
that are necessary so that the consummation of the Merger and the transactions
contemplated thereby will be in compliance in all material respects with
applicable laws.
SECTION 6.2. CONDITIONS OF EARTHLINK. The obligation of EarthLink to consummate
the Merger is further subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) COMPLIANCE. The agreements and covenants of the Company to be
complied with or performed on or before the Closing Date pursuant to the terms
hereof shall have been duly complied with or performed in all material respects
and EarthLink shall have received a certificate dated the Closing Date and
executed on behalf of the Company by the chief executive officer and the chief
financial officer of the Company to such effect.
(b) CERTIFICATIONS. The Company shall have furnished EarthLink
with a certified copy of a resolution or resolutions duly adopted by the Board
of Directors of the Company approving this Agreement and consummation of the
Merger and the transactions contemplated hereby and directing the submission of
the Merger to a vote of the stockholders of the Company.
(c) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Company and its Subsidiaries contained in this Agreement
(other than any representations and warranties made as of a specific date) shall
be true and correct in all material respects (except to the extent the
representation or warranty is already qualified by materiality and/or the phrase
`Material Adverse Effect', in which case it shall be true and correct in all
respects) on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, except
where the failure of such representation or warranty to be true and correct
would not, individually or on an aggregate basis, have a Material Adverse Effect
on the Company and its Subsidiaries taken as a whole, and EarthLink shall have
received a certificate to that effect dated the Closing Date and executed on
behalf of the Company by the chief executive officer or the chief financial
officer of the Company.
(d) COMPANY AFFILIATE LETTERS. Prior to executing this Agreement,
EarthLink shall have received an Affiliate Letter (as defined below) from each
such Person selected by EarthLink that may be "affiliates" of the Company,
within the meaning of Rule 145 of the SEC pursuant to the Securities Act. The
Affiliate Letters shall contain various undertakings in form satisfactory to
EarthLink that no shares of EarthLink Common Stock received or to be received by
such Affiliate pursuant to the Merger will be sold or disposed of except
pursuant to an effective registration statement under the Securities Act or in
accordance with the provisions of paragraph (d) of Rule 145 under the Securities
Act or another exemption from registration under the Securities Act (an
"AFFILIATE LETTER").
(e) CONSENTS; RELATED MATTERS. EarthLink shall have received
evidence, in form and substance reasonably satisfactory to it, that such
licenses, permits, consents,
42
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties as are reasonably necessary in connection with the
transactions contemplated hereby have been obtained, except such licenses,
permits, consents, approvals, authorizations, qualifications and orders which
are not, individually or in the aggregate, material to the Surviving Corporation
and its Subsidiaries, taken as a whole, or the failure of which to have received
would not (as compared to the situation in which such license, permit, consent,
approval, authorization, qualification or order had been obtained) have a
Material Adverse Effect on the Surviving Corporation and its Subsidiaries, taken
as a whole, after giving effect to the Merger.
(f) NO LITIGATION. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (or by any other Person any
pending suit, action or proceeding which has a reasonable likelihood of
success), (i) challenging or seeking to restrain or prohibit the consummation of
the Merger or any of the other transactions contemplated by this Agreement or
seeking to obtain from EarthLink or any of its Subsidiaries any damages that are
material in relation to EarthLink and its Subsidiaries taken as a whole, (ii)
seeking to prohibit or limit the ownership or operation by the Surviving
Corporation or any of its Subsidiaries of any material portion of the business
or assets of the Company, EarthLink or any of their respective Subsidiaries, to
dispose of or hold separate any material portion of the business or assets of
the Company, EarthLink or any of their respective Subsidiaries, as a result of
the Merger or any of the other transactions contemplated by this Agreement or
(iii) seeking to prohibit the Surviving Corporation or any of its Subsidiaries
from effectively controlling in any material respect the business or operations
of the Company or its respective Subsidiaries.
(g) RESIGNATIONS. EarthLink shall have received written
resignations from all corporate officers and directors of the Company, and from
all directors of each Subsidiary resigning from their positions in such
capacities as of the Effective Time of the Merger.
(h) NOTE TERMINATION. The Company shall have consummated in full
the Note and Warrant Termination and all of the transactions contemplated by the
Note and Warrant Termination Agreement, including without limitation the full
satisfaction of the conditions and obligations of each party thereto, and the
full payment of amounts owed pursuant thereto and termination and release of all
obligations between the parties thereto, and the Chief Executive Officer of the
Company shall have delivered a certificate certifying all of the above.
(i) TERMINATION OF AGREEMENTS; REPAYMENT OF SEVERANCE OBLIGATIONS.
The following agreements to which the Company or any Subsidiary is a party shall
have been cancelled prior to or simultaneous with the Effective Time of the
Merger: all registration rights agreements; all `lockup' agreements with the
Company's stockholders; all consulting (management and otherwise) agreements of
every type that expire after March 31, 2000; and all financial advisory and
securities brokerage agreements of every type. The Company shall have paid and
discharged in full its obligations pursuant to Section 4.1(c) hereof.
43
SECTION 6.3. CONDITIONS OF THE COMPANY. The obligation of the Company to
consummate the Merger is further subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) COMPLIANCE. The agreements and covenants of EarthLink and the
Combination Company to be complied with or performed on or before the Closing
Date pursuant to the terms hereof shall have been duly complied with or
performed in all material respects and the Company shall have received a
certificate dated the Closing Date on behalf of EarthLink and the Combination
Company by the chief executive officer and the chief financial officer of
EarthLink and the Combination Company to such effect.
(b) CERTIFICATIONS AND OPINION. EarthLink shall have furnished the
Company with a certified copy of a resolution or resolutions duly adopted by the
Board of Directors or a duly authorized committee thereof of EarthLink and the
Combination Company approving this Agreement and consummation of the Merger and
the transactions contemplated hereby, including the issuance, listing and
delivery of the shares of EarthLink Common Stock pursuant hereto;
(c) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of EarthLink and Combination Company contained in this Agreement
(other than any representations and warranties made as of a specific date) shall
be true and correct in all material respects (except to the extent the
representation or warranty is already qualified by materiality or the phrase
"Material Adverse Effect," in which case it shall be true and correct in all
respects) on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, except
where the failure of such representation or warranty to be true and correct
would not, individually or on an aggregate basis, have a Material Adverse Effect
on EarthLink and its Subsidiaries taken as a whole, and the Company shall have
received a certificate to that effect dated the Closing Date and executed on
behalf of EarthLink by the chief executive officer or the chief financial
officer of EarthLink.
(d) NO LITIGATION. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (i) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain from the
Company, the Surviving Corporation or any of their respective Subsidiaries any
damages that are material in relation to the Company and its Subsidiaries taken
as a whole, (ii) seeking to prohibit or limit the ownership or operation by the
Surviving Corporation or any of its Subsidiaries of any material portion of the
business or assets of the Company, EarthLink or any of their respective
Subsidiaries, to dispose of or hold separate any material portion of the
business or assets of the Company, EarthLink or any of their respective
Subsidiaries, as a result of the Merger or any of the other transactions
contemplated by this Agreement or (iii) seeking to prohibit the Surviving
Corporation or any of its Subsidiaries from effectively controlling in any
material respect the business or operations of the Company or its Subsidiaries.
44
(e) REGISTRATIONS. EarthLink shall have filed a registration
statement on Form S-8 ("S-8 REGISTRATION STATEMENT") or shall have amended an
existing S-8 Registration Statement and shall have submitted all documents
required by Nasdaq as required by SECTION 2.3(c) of this Agreement, and such S-8
Registration Statement or amendment thereto shall have become effective and the
EarthLink Common Stock issuable on exercise of the converted Company Options and
Noteholder Warrant shall be approved for quotation on Nasdaq, all as set forth
in and required by SECTION 2.3 of this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. TERMINATION. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time of the Merger, whether before
or after approval of this Agreement and the Merger by the stockholders of the
Company;
(a) by mutual written consent of EarthLink, Combination Company
and the Company;
(b) by either EarthLink or the Company:
(i) if the stockholders of the Company fail to give any
required approval of the Merger and the transactions contemplated
hereby upon a vote at duly held meetings of stockholders of the Company
or at any adjournment thereof;
(ii) if any court of competent jurisdiction or any
governmental, administrative or regulatory authority, agency or body
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger;
or
(iii) if the Merger shall not have been consummated on or
before October 30, 2000, PROVIDED, HOWEVER, that the right to terminate
this Agreement under this SECTION 7.1(b)(iii) shall not be available to
any party whose failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Effective
Time of the Merger to occur on or before such date.
(c) by EarthLink:
(i) if the Company (X) breaches in any material respect any of
its representations or warranties herein such that the condition set
forth in Section 6.2(c) not be satisfied within 20 calendar days
following receipt by the Company of notice of breach, or (Y) fails to
perform in any material respect any of its covenants, agreements or
obligations under this Agreement within 20 calendar days following
receipt by the Company of notice of breach, if such failures result in
or would reasonably be expected to result in a Material Adverse Effect
on the Company and its Subsidiaries taken as a whole;
45
(ii) if the Company breaches SECTION 8.1(a)(i);
(iii) if the Company fails to fully consummate the Note and
Warrant Termination Agreement as set forth herein on or prior to the
Effective Time of the Merger;
(iv) if, prior to the Effective Time of the Merger, the
Company's Board of Directors shall have: (X) withdrawn, modified,
amended or materially qualified in any respect adverse to EarthLink the
recommendation of the Company's Board of Directors; (Y) failed to mail
the Proxy Statement to its stockholders, or (Z) resolved to do any of
the above;
(v) if, in response to the (X) commencement of any tender
offer or exchange offer for 10% or more of the outstanding the Company
Common Shares, or (Y) public announcement or disclosure of any Takeover
Proposal, the Company failed to fully and unconditionally recommend
rejection of such tender or exchange offer or reject such other
Takeover Proposal (and publicly announce such rejection, in the case of
Takeover Proposals which have been publicly disclosed or became
publicly known) within ten (10) business days of such commencement,
announcement or disclosure; or resolved to support or recommend any
such Takeover Proposal, unless any of the foregoing are done or omitted
to be done in compliance with and pursuant to SECTION 8.1(b) hereof;
(vi) if, prior to the Effective Time of the Merger, the
Company shall have entered into a definitive agreement with respect to
any Takeover Proposal, Superior Proposal or Subsequent Superior
Proposal;
(vii) as permitted pursuant to SECTIONS 8.1(b)(iii); and
(viii) as permitted pursuant to SECTION 8.1(b)(vi).
(d) by the Company, (i) if EarthLink breaches in any material
respects any of its representations or warranties herein or fails to perform in
any material respect any of its covenants, agreements or obligations under this
Agreement upon 20 calendar days notice of breach, which breach has not been
cured within 20 calendar days following receipt by EarthLink of notice of
breach, or (ii) if the Company receives a Takeover Proposal that the Company's
Board of Directors by vote or resolution determines to constitute a Superior
Proposal or a Subsequent Superior Proposal as set forth in SECTION 8.1(b) or
enters into a definitive agreement with respect to a Superior Proposal or
Subsequent Superior Proposal, PROVIDED that the Company has complied with its
obligations under SECTIONS 8.1(b) AND 8.3.
SECTION 7.2. EFFECT OF XXXXXXXXXXX.Xx the event of termination of this Agreement
by either the Company or EarthLink as provided in SECTION 7.1, this Agreement
shall forthwith become void and have no effect, without any current or future
liability or obligation on the part of EarthLink or the Company, other than the
confidentiality
46
provisions of SECTION 5.2, the provisions of SECTION 8.3 and the provisions of
ARTICLE IX. Any termination of this Agreement pursuant to SECTION 7.1 hereof
shall not relieve any party hereto for liabilities related to any breach of any
of its representations, warranties, covenants or agreements in this Agreement,
which right to recover damages shall be in addition to (and not exclusive of)
any other remedy at law or in equity available to any party, including without
limitation the Company Termination Fee set forth in SECTION 8.3 hereof.
SECTION 7.3. AMENDMENT. This Agreement may be amended by the parties at any time
before or after any required approval of matters presented in connection with
the Merger by the stockholders of the Company; PROVIDED, HOWEVER, that after any
such approval, there shall be made no amendment that by law requires further
approval by such stockholders without the further approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
SECTION 7.4. EXTENSION; WAIVER. At any time prior to the Effective Time of the
Merger, the parties may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or the other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (c) subject to
the proviso of SECTION 7.3, waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
SECTION 7.5. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to SECTION 7.1, an amendment of this
Agreement pursuant to SECTION 7.3 or an extension or waiver pursuant to SECTION
7.4 shall, in order to be effective, require in the case of EarthLink or the
Company, action by its respective Board of Directors or the duly authorized
designee of such Board of Directors.
ARTICLE VIII
SPECIAL PROVISIONS AS TO CERTAIN MATTERS
SECTION 8.1. NO SOLICITATION.
(a) RESTRICTED ACTIONS. Following the execution of this Agreement,
SECTION 8 in the Confidentiality Agreement shall be superseded by this SECTION
8.1(a). Except as subject to and specifically permitted under SECTION 8.1(b)
(PROVIDED, that the actions described in SECTION 8.1(a)(i) below shall in no
event ever be permitted under this Agreement), following the execution of this
Agreement and before the Effective Time of the Merger, the Company shall not,
nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit
any officer, director or employee of or any investment banker,
47
attorney or other advisor, agent or representative of the Company or any of its
Subsidiaries (the "REPRESENTATIVES") to, directly or indirectly, (i) solicit,
initiate or encourage the submission of any Takeover Proposal (as defined
below), (ii) enter into any agreement with respect to any Takeover Proposal,
(iii) seek to sell or otherwise dispose of shares of capital stock of the
Company or any portion of the assets of the Company and its Subsidiaries outside
of the ordinary course of business, to any third party, or enter into any
agreements with any third party with respect to such a sale or disposition
(unless approved by EarthLink in compliance with SECTION 4.1 hereof), (iv)
participate in any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal, or (v) take any such Takeover
Proposal to the Company's Board of Directors or stockholders for consideration,
except in accordance with SECTION 8.1 hereof. Without limiting the foregoing, it
is understood that any violation of the restrictions set forth in the preceding
sentence by any officer, director or employee of the Company or any of its
Subsidiaries or any investment banker, attorney or other advisor, agent or
representative of the Company, whether or not such Person is purporting to act
on behalf of the Company or otherwise, shall be deemed to be a material breach
of this Agreement by the Company. For purposes of this Agreement, "TAKEOVER
PROPOSAL" means (i) any proposal or offer, other than a proposal or offer by
EarthLink or any of its Affiliates, for a merger, share exchange or other
business combination involving the Company (excluding an acquisition by the
Company or by a Subsidiary of the Company otherwise permitted to be made by the
Company under this Agreement), (ii) any proposal or offer, other than a proposal
or offer by EarthLink or any of its Affiliates, to acquire from the Company or
any of its Affiliates in any manner, directly or indirectly, all or any portion
voting or equity interest in the Company or the acquisition of a material amount
of the assets of the Company and its Subsidiaries, taken as a whole, including
an investment in or acquisition of securities of a Subsidiary of the Company, to
the extent so material, or (iii) any proposal or offer, other than a proposal or
offer by EarthLink or any of its Affiliates, to acquire from the stockholders of
the Company by tender offer, exchange offer or otherwise all or any material
portion of the Company Shares then outstanding.
(b) PERMITTED ACTIONS. In the event that after the date of this
Agreement, the Company receives a bona fide, unsolicited Takeover Proposal,
subject to the last paragraph of this SECTION 8.1(b), the Company (including the
Company's Board of Directors and the Company's Representatives, employees and
agents, for purposes of this SECTION 8.1) may engage in the applicable
activities set forth in SECTIONS 8.1(a)(ii), 8.1(a)(iii), 8.1(a)(iv) and/or
8.1(a)(v) above (excluding taking the Takeover Proposal to the Company's
stockholders - collectively, the "NEGOTIATION ACTIVITIES") as applicable and
only as specifically permitted herein, including furnishing information to such
third party, all within the following framework:
(i) the Company's Board of Directors shall have a 15
calendar day period following receipt by the Company of any such bona
fide, unsolicited Takeover Proposal (the "INITIAL CONSIDERATION
PERIOD") in which to engage in the actions permitted in SECTIONS
8.1(a)(iv) and 8.1(a)(v) (other than taking the
48
Takeover Proposal to the Company's stockholders for approval) in order
to determine if such Takeover Proposal constitutes a Superior Proposal;
PROVIDED, HOWEVER, that with respect to the activities set forth in
SECTION 8.1(a)(iv), the Company may perform such activities only to
determine whether or not such Takeover Proposal is a Superior Proposal,
and shall not directly or indirectly participate in any negotiations
with respect to such Takeover Proposal with the Person who has made
such Takeover Proposal or such Person's representatives, employees or
agents (the "OFFEROR") during the Initial Consideration Period, unless
and until the Company's Board of Directors determines that such
Takeover Proposal constitutes a Superior Proposal, as set forth below;
(ii) if within the Initial Consideration Period as
provided above, the Company's Board of Directors, in good faith
exercise of its fiduciary duties to the Company's stockholders,
determines by resolution that such Takeover Proposal constitutes a
Superior Proposal, then the Company's Board of Directors shall have a
15 calendar day period following the day on which the Company's Board
of Directors makes such determination (the "NEGOTIATION PERIOD") in
which to engage in the Negotiation Activities in order to negotiate and
enter into a definitive agreement with respect to such Superior
Proposal.
(iii) Upon determination that a Takeover Proposal
constitutes a Superior Proposal as set forth above, then the Company
shall so notify EarthLink pursuant to SECTION 8.1(c) hereof and
EarthLink may in its discretion terminate this Agreement and abandon
the Merger at any time during the Negotiation Period, but only if done
so prior to receiving written notification by the Company that it has
formally terminated negotiations with such Offeror, PROVIDED, HOWEVER,
that notwithstanding any other provision of this Agreement, the Company
shall not be required to pay the Company Termination Fee (including,
without limitation, any fees or expenses of EarthLink) pursuant to
SECTION 8.3 and SECTION 7.1(c)(vii) upon any such termination and
abandonment by EarthLink;
(iv) if the Company does not enter into a definitive
agreement with respect to such Superior Proposal within the Negotiation
Period, the Company shall promptly reject and shall be deemed to have
rejected such Superior Proposal and shall fully terminate and abandon
its negotiations and discussions with such Offeror (a "TERMINATED
SUPERIOR PROPOSAL)");
(v) if, after a Terminated Superior Proposal, the Company
subsequently receives another bona fide, unsolicited Takeover Proposal
from the same Offeror after the end of the Negotiation Period (a
"SUBSEQUENT PROPOSAL"), and the Company's Board of Directors, in good
faith exercise of its fiduciary duties to the Company's stockholders,
determines by vote or resolution that such Subsequent Proposal is
materially more favorable to the Company's stockholders from a
financial point of view than such Offeror's prior Superior Proposal (a
"SUBSEQUENT SUPERIOR PROPOSAL"), then the Company shall have a second
15 calendar day period following the day on which the Company's Board
of
49
Directors makes such determination (the "SUBSEQUENT NEGOTIATION
PERIOD") in which to engage in the Negotiation Activities and enter
into a definitive agreement with respect to such Subsequent Superior
Proposal;
(vi) Upon such determination by the Company's Board of
Directors that a Subsequent Proposal constitutes a Subsequent Superior
Proposal, then the Company shall so notify EarthLink pursuant to
SECTION 8.1(C) hereof and EarthLink may in its discretion terminate
this Agreement and abandon the Merger at any time during the Subsequent
Negotiation Period, but only if done so prior to receiving written
notification by the Company that it has formally terminated
negotiations with such Offeror, PROVIDED, HOWEVER, that the Company
shall be required to pay the Company Termination Fee (including,
without limitation, all fees or expenses of EarthLink) pursuant to
SECTION 8.3 and SECTION 7.1(c)(viii) upon any such termination and
abandonment by EarthLink; and
(vii) if the Company does not enter into a definitive
agreement with respect to such Subsequent Superior Proposal within the
Subsequent Negotiation Period, the Company and its Board of Directors
shall promptly reject and shall be deemed to have rejected such
Subsequent Superior Proposal and shall fully terminate and abandon its
negotiations and discussions with such Offeror (a "TERMINATED
SUBSEQUENT PROPOSAL");
PROVIDED, that the Company and its Representatives may engage in the activities
set forth in SECTIONS 8.1(a)(ii), 8.1(a)(iii), 8.1(a)(iv) and/or 8.1(a)(v) as
applicable and as specifically permitted in this SECTION 8.1(b) only if (i) the
Board of Directors of the Company determines in its good faith judgment, after
consultation with outside legal counsel of the Company, that such action or
activity is reasonably necessary in order for the Board of Directors of the
Company to comply with its fiduciary duties under applicable law, (II) the
Company has received from such third party Offeror an executed confidentiality
agreement with terms regarding confidentiality not less favorable to the Company
than those contained in the Confidentiality Agreement with EarthLink, and (III)
the Company has fully and completely complied with all other provisions of
SECTION 8.1.
(c) NOTICES. If the Company (a) receives a Takeover Proposal, or a
request for nonpublic information relating to the Company (or any of its
Subsidiaries) or for access to the properties, books or records of the Company
(or any of its Subsidiaries) by any Person who is considering making or has made
a Takeover Proposal, (b) determines that a Takeover Proposal constitutes a
Superior Proposal, (c) determines to enter into a Negotiation Period, (d) enters
into a definitive agreement with respect to a Takeover Proposal, Superior
Proposal or a Subsequent Superior Proposal, (e) receives a Subsequent Proposal,
(f) determines that a Subsequent Proposal is a Subsequent Superior Proposal,
and/or (g) determines to enter into a Subsequent Negotiation Period, the Company
shall immediately inform EarthLink orally and shall as promptly as practicable
(in any event within one (1) calendar day) inform EarthLink in writing of every
such event, including terms and conditions of such Takeover Proposal, Superior
Proposal or Subsequent Superior Proposal (any of such events, a "PROPOSAL") and
the identity of the person
50
making it, forwarding a copy of any written communications relating thereto. The
Company will keep EarthLink fully informed on as prompt a basis as is
practicable of the status and details of any such Proposal or request and any
related discussions or negotiations, including by forwarding copies of any
material written communications relating thereto. The Company will immediately
cease and cause its Subsidiaries, and its and their officers, directors, agents,
representatives and advisors, to cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing, except that it shall use its best efforts to cause any
such parties in possession of confidential information about the Company (or its
Subsidiaries) that was furnished by or on behalf of the Company (or its
Subsidiaries) in connection with any of the foregoing to return or destroy all
such information in the possession of any such party or in the possession of any
agent or advisor of any such party. The Company agrees not to release any third
party from, or waive any provisions of, any confidentiality or standstill
agreement to which it (or its Subsidiaries) is a party. The Company shall ensure
that the officers, directors and employees of the Company and its Subsidiaries
and any investment banking firm or other advisor or representative retained by
such party are aware of and instructed to comply with the restrictions described
in this SECTION 8.1. Notwithstanding any other provision of this Agreement,
nothing contained in this SECTION 8.1 shall prohibit the Board of Directors of
the Company, only to the minimum extent required, from complying with the
mandatory disclosure requirements of Rules 14e-2 and 14d-9 promulgated under the
Securities and Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder with regard to an any Proposal, after consultation with
outside legal counsel; PROVIDED, that any recommendation by the Board of
Directors other than to recommend rejection of such proposal shall be considered
an immediate breach of this SECTION 8.1 and be deemed to be a "withdrawal" as
provided in SECTION 7.1(c)(iv)(X) hereof.
(d) TERMINATION OF NEGOTIATIONS. The Company agrees to cease and
terminate immediately, and to cause its Representatives to cease and terminate
immediately any negotiations (other than with EarthLink) with respect to any
Takeover Proposal.
SECTION 8.2. TAKEOVER DEFENSES. The Company shall take such action with respect
to any anti-takeover provisions in its Certificate of Incorporation or Bylaws,
or afforded it by statute, to the extent necessary to consummate the Merger on
the terms set forth in the Agreement.
SECTION 8.3. FEE AND EXPENSE REIMBURSEMENTS. In the event this Agreement is
terminated pursuant to any of SECTION 7.1(b)(i), SECTION 7.1(c)(i), SECTION
7.1(c)(ii), SECTION 7.1(c)(iii), SECTION 7.1(c)(iv), SECTION 7.1(c)(v), SECTION
7.1(c)(vi) or SECTION 7.1(c)(viii) hereof, the Company agrees to pay to
EarthLink in immediately available funds Nine Million Dollars ($9,000,000) PLUS
reimbursement of all EarthLink Merger transaction expenses (including without
limitation all legal, accounting and investment banking fees and expenses) (the
"COMPANY TERMINATION FEE"); PROVIDED, HOWEVER, that if EarthLink terminates the
Agreement pursuant to SECTION 7.1(c)(i), and the Company also terminates this
Agreement pursuant to SECTION 7.1(d)(i), EarthLink shall nevertheless be
entitled to the Company Termination Fee, PROVIDED FURTHER, that if the
termination is
51
pursuant to SECTION 7.1(b)(i) above, such fee shall be payable only if within 12
months after the date of termination of this Agreement, the Company shall have
consummated (or entered into an agreement to consummate) an Alternative
Transaction (as defined below). An "ALTERNATIVE TRANSACTION" shall mean (i) a
merger, share exchange or other business combination or other transaction in
which more than 25% of the voting securities of the Company or all or
substantially all of the assets of the Company are acquired, including an
investment in or acquisition of securities of a Subsidiary of the Company to the
extent so material, or (ii) any acquisition from the stockholders of the Company
by tender offer, exchange offer or otherwise of more than 25% of the outstanding
Company Shares. The Company Termination Fee payable under this SECTION 8.3 shall
be payable as a condition to the consummation of the Alternative Transaction.
Payment of the Company Termination Fee shall be made within one (1) business day
following: (x) for terminations pursuant to SECTIONS 7.1(c) hereof, the date of
such formal written termination by EarthLink, and (y) for terminations pursuant
to SECTION 7.1(b)(i), the date the Company closes the transaction contemplated
by such definitive agreement for the Alternative Transaction. If the Company
does not pay the Company Termination Fee within such permitted periods, the
Company shall pay to EarthLink its costs and expenses (including legal fees and
expenses) incurred in connection with any actions or lawsuits taken to collect
such payment, together with interest on the amount of any unpaid fee and/or
expense (at the published prime rate of Citibank, N.A. from the date such fee
was required to be paid to the date of payment).
SECTION 8.4. CONFIDENTIALITY.
(a) Neither the Company nor EarthLink shall issue any statement or
communication to the public or press regarding the proposed Merger without the
prior consent and approval of the other party, except as otherwise may be
required by law or regulatory authorities.
(b) If this Agreement is terminated pursuant to ARTICLE VIII by
either the Company or EarthLink, the proposed terms of the Merger and all Merger
related discussions shall remain confidential and shall not be disclosed to any
person without the consent of the other party except as may be required by law
or regulatory authorities.
(c) Notwithstanding any other provision herein or in the
Confidentiality Agreement, Sections 1 through 7, 9 and 10 of the Confidentiality
Agreement shall remain in effect subsequent to the execution of this Agreement
and shall continue to govern the confidentiality obligations of the parties with
respect to the Evaluation Material (as therein defined). Except as set forth in
this SECTION 8.4(c), the balance of the Confidentiality Agreement is hereby
terminated.
52
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations, warranties, covenants or agreements in this Agreement or in any
instrument delivered by the Company or EarthLink pursuant to this Agreement
shall survive the Effective Time of the Merger, except any covenant or agreement
of the parties which by its terms contemplates performance after the Effective
Time of the Merger.
SECTION 9.2. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile or
sent by overnight courier to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to the Company, to
XxxXxxx.xxx, Inc.
0000 Xxxxxxx Xxxxxxx Xx., #000
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to:
Xxxxx & Xxxxxxx L.L.P.
Columbia Square
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attention: X. Xxxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to EarthLink, to
EarthLink
0000 Xxxx Xxxxxxxxx Xx., #000
Xxxxxxx, XX 00000
Attention: Chief Executive Officer
With copy to: General Counsel
Telephone: 000-000-0000
Facsimile: 000-000-0000
53
with a copy to:
Hunton & Xxxxxxxx
Bank of America Plaza, Suite 4100
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Hobby
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
SECTION 9.3. DEFINITIONS. For purposes of this Agreement:
(a) an "AFFILIATE(S)" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person;
(b) "FULLY DILUTED BASIS" means all issued and outstanding capital
stock of the Company including all convertible securities, rights, options and
warrants (calculated using the treasury method).
(c) "KNOWLEDGE" means, with respect to any matter stated herein to
be "to the Company's knowledge," or similar language, the knowledge of the
officers of the Company, after due inquiry.
(d) "MATERIAL ADVERSE EFFECT" shall mean, with respect to any
entity or group of entities, a material adverse effect individually or in the
aggregate on the business, operations, assets, liabilities, financial condition
or results of operations of such entity or group of entities taken as a whole,
other than any change, circumstance or effect (i) relating to the economy or
securities markets in general, (ii) relating to the industries in which the
Company or EarthLink operate and not specifically relating to the Company or
EarthLink, or (iii) resulting from the execution of this Agreement, the
announcement of this Agreement and the transactions contemplated hereby or any
change in the value, price or trading volume of Company or EarthLink Common
Stock relating to such execution or announcement; PROVIDED, HOWEVER, that any
breach, violation or failure of any of the following representations or
warranties to be true and correct shall constitute an automatic Material Adverse
Effect on the Company and its Subsidiaries taken as a whole under this Agreement
(including without limitation for purposes of SECTIONS 6.2(c) and 6.3(c)):
Section 3.1: (a), (b), (c), (d), (e), (h) except subsections (ii) and
(vi) thereof, (i), (j), (p), (u) and (aa).
(e) "NASDAQ CLOSING PRICE" means the closing price of the common
stock as quoted on the Nasdaq National Market System.
54
(f) "PERSON" means an individual, corporation, partnership, joint
venture, limited liability company, association, trust, unincorporated
organization or other entity; and
(g) a "SUBSIDIARY" of a Person means any corporation, partnership
or other legal entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
Persons performing similar functions are directly or indirectly owned by such
first mentioned Person.
(h) a "SUPERIOR PROPOSAL" means a Takeover Proposal that the Board
of Directors of the Company, in its good faith judgment and after consultation
with its financial advisors, believes is materially more favorable from a
financial point of view to the stockholders of the Company than the proposal set
forth in this Agreement.
SECTION 9.4. INTERPRETATION. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the word "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 9.5. COUNTERPARTS; FACSIMILE EXECUTION. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties. In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid and binding obligation of the executing party with the same force
and effect as if such facsimile signature page were an original thereof.
SECTION 9.6. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and (b) are not intended to confer
upon any Person other than the parties any rights or remedies hereunder, except
as otherwise specified herein.
SECTION 9.7. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
SECTION 9.8. ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties. This Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
55
SECTION 9.9. ENFORCEMENT OF THE AGREEMENT. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the
United States located in the State of Georgia, this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 9.10. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions, the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
56
IN WITNESS WHEREOF, EarthLink, Combination Company and the
Company have caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first written above.
EARTHLINK, INC.
By:__________________________________________
Name: _______________________________________
Title: ______________________________________
OM COMBINATION, INC.
By:__________________________________________
Name: _______________________________________
Title: ______________________________________
XXXXXXX.XXX, INC.
By:__________________________________________
Name: _______________________________________
Title: ______________________________________
57
ANNEX A
PURCHASE PRICE CALCULATION
-------------------------------------------------------------------------------------------------------------------
Per Share Calculation Metrics
--------------------------------------------------------------------------------------------------
EL Closing Cash Consideration Exchange Equity Value Closing Deal Intrinsic
Stock Price Per Share Ratio Per Share Value Per Share Option Value
$5.000 $6.050 0.3559 $1.779 $7.830 $2,600,599
$6.000 $6.041 0.3553 $2.132 $8.173 $3,044,669
$7.000 $6.032 0.3548 $2.484 $8.515 $3,490,291
$8.000 $6.024 0.3543 $2.835 $8.858 $3,935,913
$9.000 $6.016 0.3539 $3.185 $9.201 $4,385,201
$10.000 $6.009 0.3535 $3.535 $9.544 $4,835,374
$11.000 $6.002 0.3531 $3.884 $9.886 $5,285,547
$12.000 $5.996 0.3527 $4.233 $10.229 $5,735,720
$13.000 $5.991 0.3524 $4.581 $10.572 $6,190,416
$14.000 $5.985 0.3520 $4.929 $10.913 $6,662,191
$15.000 $5.979 0.3517 $5.276 $11.255 $7,133,966
$16.000 $5.974 0.3514 $5.623 $11.597 $7,611,131
$17.000 $5.969 0.3511 $5.969 $11.938 $8,089,381
$18.000 $5.965 0.3509 $6.315 $12.280 $8,568,341
$19.000 $5.960 0.3506 $6.661 $12.620 $9,073,006
$20.000 $5.955 0.3503 $7.005 $12.960 $9,602,560
$21.000 $5.949 0.3499 $7.348 $13.297 $10,189,166
$22.000 $5.942 0.3496 $7.690 $13.633 $10,823,953
$23.000 $5.936 0.3492 $8.031 $13.967 $11,477,798
$24.000 $5.930 0.3488 $8.371 $14.301 $12,160,406
$25.000 $5.921 0.3483 $8.708 $14.629 $12,976,137
$26.000 $5.913 0.3478 $9.044 $14.957 $13,798,729
$27.000 $5.905 0.3473 $9.378 $15.282 $14,675,069
$28.000 $5.896 0.3468 $9.711 $15.608 $15,562,866
$29.000 $5.887 0.3463 $10.043 $15.931 $16,506,631
$30.000 $5.879 0.3458 $10.374 $16.253 $17,476,013
$31.000 $5.869 0.3453 $10.703 $16.572 $18,501,266
$32.000 $5.860 0.3447 $11.030 $16.890 $19,582,508
$33.000 $5.850 0.3441 $11.356 $17.205 $20,716,921
$34.000 $5.840 0.3435 $11.680 $17.521 $21,855,416
$35.000 $5.831 0.3430 $12.005 $17.836 $22,995,362
$36.000 $5.822 0.3425 $12.329 $18.151 $24,137,837
$37.000 $5.813 0.3420 $12.653 $18.466 $25,287,642
$38.000 $5.805 0.3415 $12.976 $18.780 $26,444,914
$39.000 $5.797 0.3410 $13.298 $19.095 $27,613,198
$40.000 $5.789 0.3405 $13.620 $19.409 $28,782,864
$41.000 $5.781 0.3400 $13.942 $19.723 $29,953,942
$42.000 $5.773 0.3396 $14.263 $20.037 $31,125,047
$43.000 $5.766 0.3392 $14.585 $20.351 $32,296,908
$44.000 $5.759 0.3388 $14.906 $20.664 $33,468,836
$45.000 $5.752 0.3384 $15.226 $20.978 $34,640,765
$46.000 $5.746 0.3380 $15.547 $21.292 $35,812,693
$47.000 $5.739 0.3376 $15.867 $21.606 $36,986,438
$48.000 $5.733 0.3372 $16.187 $21.920 $38,171,371
$49.000 $5.721 0.3365 $16.490 $22.211 $39,910,257
$50.000 $5.708 0.3357 $16.787 $22.495 $41,839,830
-------------------------------------------------------------------------------------------------------------------
