AGREEMENT AND PLAN OF MERGER
AMONG
NETWORK EVENT THEATER, INC.,
COMMON PLACES, LLC,
YOUTHSTREAM MEDIA NETWORKS, INC.,
NUNET, INC.,
NUCOMMON, INC.,
XXXXXX X. XXXXX ,
XXXXXXXX XXXXX,
XXXXXXX XXXXXXXX
AND
XXXX XXXXXX
Dated June 28, 1999
AGREEMENT AND PLAN OF MERGER
Dated June 28, 1999
The parties to this agreement and plan of merger are Network Event
Theater, Inc., a Delaware corporation ("Net"), Common Places, LLC, a Delaware
limited liability company ("CP"), YouthStream Media Networks, Inc., a Delaware
corporation ("New Parent"), Nunet, Inc., a Delaware corporation and a
wholly-owned subsidiary of New Parent ("Transitory Net Sub"), Nucommon, Inc., a
Delaware corporation and a wholly-owned subsidiary of New Parent ("Transitory CP
Sub"), Xxxxxx X. Xxxxx, Xxxxxxxx Xxxxx ("Xxxxx"), Xxxxxxx Xxxxxxxx and Xxxx
Xxxxxx.
The parties agree as follows:
1. The Mergers
1.1 The Mergers. Upon the terms of this agreement and subject to the
provisions of the Delaware General Corporation Law (the "DGCL"), Transitory Net
Sub shall be merged with and into Net (the "Net Merger") and Transitory CP Sub
shall be merged with and into CP (the "CP Merger") as soon as practicable
following the satisfaction or waiver, if permissible, of the conditions set
forth in sections 6 and 7. Net shall be the surviving corporation in the Net
Merger (the "Surviving Net Corporation"), and CP shall be the surviving limited
liability company in the CP Merger (the "Surviving CP LLC").
1.2 Consummation of the Mergers. Subject to the provisions of this
agreement, the parties shall cause the Mergers to be consummated by filing with
the secretary of state of the state of Delaware duly executed and verified
certificates of merger, and shall take all other action required by law to
effect the Mergers. The Net Merger and the CP Merger (collectively, the
"Mergers") shall become effective simultaneously upon the later to occur of the
two filings referred to in the preceding sentence. At the time the two Mergers
become effective (the "Effective Time"), the separate corporate existence of
each of Transitory Net Sub and Transitory CP Sub shall cease.
1.3 Closing. Subject to earlier termination as provided in section 9, at
10:00 a.m., New York time, on the third business day following the satisfaction
of the conditions set forth in sections 6.5 and 7.5 (or such other time as Net
and CP may agree) and immediately prior to the filings referred to in section
1.2, a closing (the "Closing") shall be held at the offices of Xxxxxxxxx Xxxx
XXX, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx (or such other place as Net and CP may
agree).
1.4 Organizational Documents. The certificate of incorporation and by-laws
of Net, as in effect on the date of this agreement, shall be the certificate of
incorporation and by-laws, respectively, of the Surviving Net Corporation; the
certificate of formation of CP, as in effect on the date of this agreement, and
the amended and restated limited liability company agreement in the form of
exhibit 1.4(a) to this agreement shall be the certificate of formation and
limited liability company agreement, respectively, of the Surviving CP LLC; and
the certificate of incorporation and by-laws of New Parent in effect as of the
Effective Time shall be substantially in the form of
exhibit 1.4(b) and (c), respectively. At the Effective Time, New Parent shall
have entered into a rights agreement substantially in the form of exhibit
1.4(d).
1.5 Directors, Officers and Managers. The persons to be named upon mutual
agreement of Xxxxx and Xxxxx shall be the directors, officers and managers of
the Surviving Net Corporation and the Surviving CP LLC until their respective
successors are duly elected and qualified. The persons to be named upon mutual
agreement of Xxxxx and Bassi shall be the directors and officers of New Parent
as of the Effective Time.
1.6 Conversions
(a) At the Effective time, the shares of Net, the membership
interests in CP, and the shares of Transitory Net Sub and of Transitory CP,
shall be converted as follows:
(i) each share of common stock, $.01 par value, of Net ("Net
Common Stock") issued and outstanding immediately prior to the Effective Time
(other than shares held in the treasury of Net, all of which shall be cancelled)
shall, by virtue of the Net Merger and without any action on the part of New
Parent, Net, Transitory Net Sub or the holder, be converted into the right to
receive one share of common stock, $.01 par value, of New Parent ("New Parent
Common Stock");
(ii) each common unit of CP ("CP Common Unit") issued and
outstanding immediately prior to the Effective Time (other than CP Common Units
owned by Net, which shall remain unchanged by virtue of the CP Merger) shall, by
virtue of the CP Merger and without any action on the part of New Parent, CP,
Transitory CP Sub or the holder, be converted into the right to receive 0.89
shares of New Parent Common Stock; and
(iii) each share of common stock, $.01 par value, of each of
Transitory Net Sub and Transitory CP Sub issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Mergers and without any
action on the part of any person or entity, be converted into and become one
share of Net Common Stock and one CP Common Unit, respectively.
(b) All New Parent Common Stock issued in the Mergers will be duly
authorized, validly issued, and fully paid and non-assessable, and shall be free
and clear of all liens (other than any liens that may arise from any action of
the shareholder to whom the shares are issued).
(c) By virtue of the CP Merger and automatically without any further
action, all CP Common Units held by Bassi that are unvested pursuant to section
3.3 of the Amended and Restated Limited Liability Company Agreement of CP dated
March 10, 1999 (the "LLC Agreement") shall become fully vested and shall
thereupon be converted into fully vested shares of New Parent Common Stock. By
virtue of the CP Merger and automatically without any further action, certain of
the CP Common Units held by Xxxx Xxxxxx and Xxxxxxx Xxxxxxxx that are unvested
pursuant to section 3.3 of the LLC Agreement shall become fully vested and shall
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thereupon be convert into fully vested shares of New Parent Common Stock and the
balance of the CP Common Units held by Xxxx Xxxxxx and Xxxxxxx Xxxxxxxx shall be
converted into shares of New Parent Common Stock that are subject to vesting as
set forth in Vesting Letters referred to in section 6.10.
(d) The holders of shares of Net Common Stock and CP Common Units
(other than CP Common Units owned by Net) immediately prior to the Effective
Time shall cease to have any rights as stockholders of Net or members of CP,
respectively, and their sole right shall be the right to receive the number of
whole shares of New Parent Common Stock into which their shares of Net Common
Stock or CP Common Units have been converted pursuant to section 1.6(a) and the
right to receive the cash value of any fraction of a share of New Parent Common
Stock pursuant to section 1.7(f).
(e) The following provisions shall apply to outstanding options and
warrants of Net and CP:
(i) At the Effective Time, each outstanding option or warrant
to purchase shares of Net Common Stock (a "Net Stock Option") issued pursuant to
Net's 1996 Stock Option Plan and 1997 Stock Option Plan (collectively, the "Net
Stock Option Plan") or otherwise and each outstanding option to purchase CP
Common Units (a "CP Membership Unit Option") issued pursuant to CP's 1999 Unit
Plan (the "CP Plan"), as set forth in the Disclosure Letter, shall be assumed by
New Parent and shall be deemed to constitute an option or warrant, as the case
may be (an "option"), to acquire, on the same terms and conditions that were
applicable to the Net Stock Option or CP Common Unit Option, as the case may be,
the same number of shares of New Parent Common Stock as the holder of the Net
Stock Option or CP Common Unit Option, as the case may be, would have been
entitled to receive pursuant to section 1.6(a), had the holder exercised the
option or warrant in full immediately prior to the Effective Time, at a price
per share equal to the aggregate exercise price under the Net Stock Option or CP
Common Unit Option, as the case may be, divided by the number of full shares of
New Parent Common Stock deemed to be purchasable pursuant to the option;
provided, however, that (i) the number of shares of New Parent Common Stock that
may be purchased under the option shall not include any fractional share, but
shall be rounded to the next lower number of whole shares, and (ii) in the case
of the Net Stock Options issued pursuant to the Net Stock Option Plan that are
incentive stock options, the determination of the option price, the number of
shares purchasable pursuant to the option and the terms and conditions of
exercise of the option shall in all respects comply with section 424(a) of the
Internal Revenue Code (the "Code").
(ii) As soon as practicable after the Effective Time, New
Parent shall issue to the holders of Net Stock Options and CP Common Unit
Options appropriate option agreements representing the right to acquire shares
of New Parent Common Stock on the same terms and conditions as in the
outstanding Net Stock Options and CP Common Unit Options, respectively, upon the
surrender of the outstanding Net Stock Options and CP Common Unit Options,
respectively.
(iii) New Parent shall take all necessary action to ensure
that the New
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Parent stock options that replace the Net Stock Options that qualified as
"incentive stock options" pursuant to section 422 of the Code ("Incentive
Options") continue to qualify as Incentive Options following the Mergers.
(iv) New Parent shall take all necessary action to reserve
sufficient shares of New Parent Common Stock issuable upon exercise of the
options referred to above.
(v) New Parent shall, as soon as practicable after the
Effective Time, file a registration statement on Form S-8 with respect to the
New Parent Common Stock issuable upon exercise of the options referred to above
(to the extent Form S-8 may be utilized with respect thereto), and shall use all
reasonable efforts to maintain the effectiveness of the registration statement
(and maintain the current status of the prospectus included in the registration
statement), as long as the options remain outstanding.
(vi) Nothing in this agreement shall prohibit the holder of
any Net Stock Option or CP Membership Unit Option from exercising that option
(to the extent the option is vested) prior to the Effective Time.
1.7 Exchange of Certificates Representing New Parent Common Stock
(a) As soon as practicable after the Effective Time, New Parent
shall make available for exchange and conversion in accordance with this
agreement, by making available to the Exchange Agent (as defined in section
1.7(b)) for the benefit of the stockholders of Net and the members of CP (other
than Net), certificates representing the number of shares of New Parent Common
Stock issuable in exchange for outstanding shares of Net Common Stock or CP
Common Units, as the case may be, pursuant to section 1.6 (net of the aggregate
number of fractional shares of New Parent Common Stock, in lieu of which cash
shall be paid pursuant to section 1.7(f)). In addition, New Parent shall from
time to time, upon the request of the Exchange Agent, make available to the
Exchange Agent such cash as may be necessary to make the cash payments in
respect of fractional shares of New Parent Common Stock, as provided in section
1.7(f).
(b) As soon as practicable after the Effective Time, a bank or trust
company selected by New Parent, acting as exchange agent to effect the issuance
of certificates representing New Parent Common Stock pursuant to the Mergers
(the "Exchange Agent"), shall mail to each holder of record (other than Net) of
outstanding shares of Net Common Stock and outstanding CP Common Units (i) a
form of letter of transmittal and (ii) instructions for use in obtaining
certificates representing New Parent Common Stock in exchange for certificates
representing shares of Net Common Stock and CP Common Units (the "Old
Certificates"). Upon surrender to the Exchange Agent of the Old Certificates for
cancellation, together with the letter of transmittal, duly executed, (i) each
holder of the Old Certificates shall be entitled to receive in exchange therefor
certificates representing that number of whole shares of New Parent Common Stock
into which the shares of Net Common Stock or CP Common Units, as the case may
be, shall have been converted pursuant to section 1.6(a) and a check for the
amount payable in lieu of any fractional shares pursuant to section 1.7(f), and
(ii) the Old Certificates so surrendered shall be cancelled.
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(c) No dividends or other distributions declared with respect to New
Parent Common Stock and payable to the holders of New Parent Common Stock after
the Effective Time shall be paid to the holders of Net Common Stock or CP Common
Units (other than Net), until the holders shall have executed and delivered the
letters of transmittal referred to above and shall have surrendered the Old
Certificates. Subject to the effect, if any, of applicable escheat laws, after
the subsequent execution and delivery of the letters of transmittal and
surrender and exchange of Old Certificates, the holders of shares of New Parent
Common Stock into which the shares of Net Common Stock or CP Common Units shall
have been converted shall be entitled to receive any such dividends or other
distributions, without any interest, that theretofore became payable with
respect to those shares of New Parent Common Stock. Any certificates
representing shares of New Parent Common Stock delivered to the Exchange Agent
and not issued and delivered pursuant to this section 1.8 within six months
after the Effective Time shall be returned by the Exchange Agent to New Parent,
which shall thereafter act as Exchange Agent, subject to the rights under this
agreement of former holders of shares of Net Common Stock and CP Common Units.
(d) If any certificate representing shares of New Parent Common
Stock is to be issued in a name other than that in which a surrendered Old
Certificate is registered, it shall be a condition of the issuance that the Old
Certificate so surrendered shall be properly endorsed and the signature on the
Old Certificate properly guaranteed and otherwise in proper form for transfer,
and that the person requesting the exchange shall pay the Exchange Agent any
transfer or other taxes required by reason of the issuance of a certificate
representing shares of New Parent Common Stock in any name other than that of
the registered holder of the surrendered Old Certificate, or otherwise required,
or shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
(e) After the Effective Time, there shall be no further registration
of transfers of the shares of Net Common Stock or CP Common Units (other than CP
Common Units owned by Net) that were outstanding immediately prior to the
Effective Time.
(f) No certificates or scrip representing fractional shares of New
Parent Common Stock shall be issued under this agreement, no dividend or other
distribution by New Parent shall relate to any fractional share and such
fractional share interests shall not entitle the owner to vote or to any rights
of a stockholder of New Parent. In lieu of any fractional share a former holder
of Net Common Stock or CP Common Units otherwise would be entitled to receive
under this agreement, the Exchange Agent shall, upon execution and delivery of a
letter of transmittal and surrender of an Old Certificate, pay the former holder
an amount of cash (without interest) equal to that fraction multiplied by the
closing price of a share of Net Common Stock on the NASDAQ National Market
("NASDAQ") or any comparable system, or, if the closing price of Net Common
Stock is not available from NASDAQ or a comparable system, the average of the
highest reported bid and lowest reported asked prices of Net Common Stock, as
furnished by NASDAQ or a comparable system, in each case on the day prior to the
day of conversion (or, if that day is not a trading day on NASDAQ, on the next
preceding day on which NASDAQ was open for business). If more than one Old
Certificate is surrendered for exchange at any one time by the same holder, the
number of shares of New Parent Common Stock shall be computed on the basis of
the aggregate number of such shares so surrendered.
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1.8 Adjustments. If, between the date of this agreement and the Effective
Time, the outstanding shares of Net Common Stock or CP Common Units shall have
been changed into a different number or class by reason of any reclassification,
recapitalization, split-up, combination, exchange or readjustment, or a dividend
or distribution having a comparable effect shall be declared with a record date
within that period, the number of shares of New Parent Common Stock to be issued
and delivered in exchange for each outstanding CP Common Unit as provided in
this agreement shall be correspondingly adjusted.
1.9 New Parent Stock Option Plan. Prior to the Effective Time, New Parent
shall adopt an employee stock option plan in the form of exhibit 1.9 covering a
maximum of 1,000,000 shares of New Parent (in addition to shares, if any,
issuable upon exercise of options referred to in section 1.6(e)). The plan shall
provide that options may be granted by a committee of the board of directors
that meets the requirements of Rule 16b-3(d)(1) under the Securities Exchange
Act of 1934.
2. Representations and Warranties of Net. Net represents and warrants to CP as
follows:
2.1 Organization and Qualification. Each of Net and its subsidiaries
(other than CP) (collectively, the "Net Companies") and each of New Parent,
Transitory Net Sub and Transitory CP Sub (collectively, the "New Parent
Companies") is a validly existing corporation in good standing under the law of
the state of Delaware, with the corporate power and authority to own its
properties and conduct its business as now being conducted, and is duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the character of the properties owned or
held under lease by it or the nature of the business transacted by it makes such
qualification necessary, except where the failure to be so qualified and in good
standing would not have a Material Adverse Effect (as defined in section 10.11).
A list of Net's subsidiaries and their respective jurisdictions of incorporation
is set forth in the disclosure letter dated this date, which sets forth certain
matters referred to in this agreement and has been delivered by the parties to
this agreement to each other prior to the execution of this agreement (the
"Disclosure Letter").
2.2 Capitalization
(a) The authorized capital stock of Net consists of 32,000,000
shares of Net Common Stock and 1,000,000 shares of preferred stock, $.01 par
value (the "Preferred Stock"). As of the close of business on June 23, 1999,
14,896,749 shares of Net Common were issued and outstanding; no shares of
Preferred Stock were issued or outstanding; no shares of Net Common Stock were
held in Net's treasury; and there were outstanding Net Stock Options to purchase
an aggregate of 839,767 shares of Net Common Stock under the Net Stock Option
Plan and other options and warrants to purchase an aggregate of 1,451,180 shares
of Net Common Stock under option and warrant agreements referred to in section
2.2(a) of the Disclosure Letter. Since June 23, 1999, the Company has not (i)
issued any shares of Net Common Stock, other than upon the exercise of Net Stock
Options or warrants then outstanding, (ii) granted any options, warrants or
other rights to purchase shares of Net Common Stock (under the Net Stock Option
Plan or otherwise) or (iii) split, combined or reclassified any of its shares of
capital stock. All the
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outstanding shares of Net Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable and are free of preemptive rights.
Except as set forth in this section 2.2 or in section 2.2(a) of the Disclosure
Letter, there are no outstanding (i) shares of capital stock or other voting
securities of Net, (ii) securities of Net convertible into or exchangeable for
shares of capital stock or voting securities of Net or (iii) options, warrants,
rights or other agreements or commitments to acquire from Net, or obligations of
Net to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of Net, or
obligations of Net to grant, extend or enter into any subscription, warrant,
right, convertible or exchangeable security or other similar agreement or
commitment (the items in clauses (i), (ii) and (iii), collectively, the "Net
Securities"). Except as set forth in section 2.2(a) of the Disclosure Letter,
there are no outstanding obligations of Net or any subsidiary of Net to
repurchase, redeem or otherwise acquire any Net Securities, and there are no
other outstanding stock related awards. Except as set forth in section 2.2(a) of
the Disclosure Letter, there are no voting trusts or other agreements or
understandings to which Net or any of its subsidiaries is a party with respect
to the voting of capital stock of Net or any of its subsidiaries. It is
understood and agreed that, when reference is made in this agreement to a
subsidiary or subsidiaries of Net, the term does not include CP.
(b) Except as set forth in section 2.2(b) of the Disclosure Letter,
Net is, directly or indirectly, the record and beneficial owner of all the
outstanding shares of capital stock of each of its subsidiaries, free and clear
of any lien, mortgage, pledge, restriction (voting, transfer or otherwise),
charge, security interest or encumbrance (a "Lien"), and there are no
irrevocable proxies with respect to any such shares. Except as set forth in
section 2.2(b) of the Disclosure Letter, there are no outstanding (i) securities
of Net or any subsidiary convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any subsidiary, or
(ii) options, warrants or other rights to acquire from Net or any of its
subsidiaries, or other obligations of Net or any of its subsidiaries to issue,
any capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any of its subsidiaries, or other
obligations of Net or any of its subsidiaries to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable security or other
similar agreement or commitment (the items in clauses (i) and (ii),
collectively, the "Subsidiary Securities"). Except as set forth in section
2.2(b) of the Disclosure Letter, there are no outstanding obligations of Net or
any of its subsidiaries to repurchase, redeem or otherwise acquire any
outstanding Subsidiary Securities.
(c) The authorized capital stock of each of the New Parent Companies
is as set forth in section 2.2(c) of the Disclosure Letter. As of the date of
this agreement, the issued and outstanding shares of capital stock of each of
the New Parent Companies, and the record owners of such shares, are as set forth
in section 2.2(c) of the Disclosure Letter. There are no outstanding (i) shares
of capital stock or other voting securities of any of the New Parent Companies,
(ii) securities of any of the New Parent Companies convertible into or
exchangeable for shares of capital stock or voting securities of any of the New
Parent Companies or (iii) options, warrants, rights or other agreements or
commitments to acquire from any of the New Parent Companies, or obligations of
any of the New Parent Companies to issue, and capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of any of the New Parent
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Companies, or obligations of any of the New Parent Companies to grant, extend or
enter into any subscription, warrant, right, convertible or exchangeable
security or other similar agreement or commitment (the items in clauses (i),
(ii) and (iii), collectively, the "New Parent Securities"). Except as
contemplated by this agreement or the Stockholders Agreement and Voting Trust
Agreement (as defined in section 6.10), (i) there are no outstanding obligations
of any of the New Parent Companies to repurchase, redeem or otherwise acquire
any New Parent Company Securities and there are no other outstanding stock
related awards, and (ii) there are no voting trusts or other agreements or
understandings to which any of the New Parent Companies is a party with respect
to the voting of capital stock of any of the New Parent Companies. Except for a
nominal amount of assets and except for liabilities and obligations contemplated
by this agreement, none of the New Parent Companies has any assets, liabilities
or obligations of any kind. Each of the New Parent Companies was formed solely
for the purpose of engaging in the transactions contemplated by this agreement,
and has not engaged in any business activities or conducted any operations,
other than in connection with the transactions contemplated by this agreement.
2.3 Authority for this Agreement. Each of Net and the New Parent Companies
has the requisite corporate power and authority to execute and deliver this
agreement and the other agreements to be executed and delivered by it pursuant
to this agreement (collectively, the "Agreements") and to consummate the
transactions contemplated by the Agreements. No other corporate proceedings on
the part of Net or any of the New Parent Companies are necessary to authorize
the Agreements or to consummate the transactions so contemplated (other than the
approval and adoption of the agreement merger (within the meaning of section 251
of the DGCL) in this agreement by the board of directors and the holders of a
majority of the shares of Net Common Stock prior to the consummation of the Net
Merger). This agreement has been duly and validly executed and delivered by each
of Net and the New Parent Companies and, when the other Agreements are executed
and delivered by the parties to them and assuming each Agreement constitutes the
valid and binding obligation of each of the parties to them (other than Net and
the New Parent Companies), subject to approval by Net's board of directors and
stockholders of this agreement and the transactions contemplated by it, each
Agreement constitutes or will constitute a valid and binding agreement of each
of Net and the New Parent Companies that is a party to it, enforceable against
each of them in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and subject to general principles of equity (whether
considered in a proceeding in equity or at law).
2.4 Absence of Certain Changes. Except as disclosed in the SEC Reports (as
defined in section 2.5) or in section 2.4 of the Disclosure Letter, since March
31, 1999: (a) Net and its subsidiaries have not suffered any Material Adverse
Effect, (b) Net and its subsidiaries have conducted their respective businesses
only in the ordinary course consistent with past practice and (c) there has not
been (i) any declaration, setting aside or payment of any dividend or other
distribution in respect of the shares of Net Common Stock or any repurchase,
redemption or other acquisition by Net or any of its subsidiaries of any
outstanding shares of capital stock or other securities in, or other ownership
interests in, Net or any of its subsidiaries; (ii) any entry into any written
employment agreement (other than the agreements that are to be entered into at
the Closing with the 6.10 Individuals (as defined in section 6.10)) with, or any
increase in the rate or terms (including, without limitation, any acceleration
of the right to receive payment pursuant to
8
arrangements set forth in section 2.4 of the Disclosure Letter) of compensation
payable or to become payable by Net or any of its subsidiaries to, their
respective directors or officers; (iii) any increase in the rate or terms
(including, without limitation, any acceleration of the right to receive
payment) of any bonus, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with any such directors, officers or key
employees, except increases occurring in the ordinary course of business or as
required by law or as necessary to maintain tax-qualified status; or (iv) any
action by Net that, if taken after the date of this agreement, would constitute
a breach of section 4.1.
2.5 Reports
(a) Net has filed with the Securities and Exchange Commission (the
"SEC") all forms, reports and documents required to be filed by it pursuant to
applicable law, all of which have complied as of their respective filing dates
in all material respects with all applicable requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules under the Exchange Act.
None of the filings by Net with the SEC (the "SEC Reports"), including, without
limitation, any financial statements or schedules included or incorporated by
reference in the SEC Reports, at the time filed, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Net is in compliance in all material respects with all reporting and
filing requirements of the Exchange Act.
(b) The consolidated financial statements of Net included (or
incorporated by reference) in the SEC Reports have been prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis (except to the extent set forth in those financial statements,
including the notes, if any) and present fairly in all material respects the
consolidated financial position of Net as of their respective dates, and the
consolidated results of operations and changes in financial condition and cash
flows for the periods presented, subject, in the case of the unaudited interim
financial statements, to normal, recurring, year-end adjustments. The
consolidated balance sheet of Net as of March 31, 1999 and the notes thereto
included in the SEC Reports reflect all liabilities required by generally
accepted accounting principles applied on a consistent basis to be reflected
therein.
2.6 Consents and Approvals; No Violation. Neither the execution and
delivery of the Agreements by Net or any of the New Parent Companies nor the
consummation of the transactions contemplated by the Agreements will, except as
disclosed in section 2.6 of the Disclosure Letter, (a) conflict with or result
in a breach of any provision of the certificate of incorporation or by-laws (or
other similar governing documents) of Net, any of its subsidiaries or any of the
New Parent Companies; (b) require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or regulatory authority,
except (i) pursuant to the Exchange Act or the Securities Act of 1933 (the
"Securities Act"), (ii) the filing of certificates of merger pursuant to the
DGCL or (iii) any applicable filings under state securities, or "Blue Sky",
laws; (c) result in a material default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any material note, license, agreement or other instrument or
9
obligation to which Net, any of its subsidiaries or any of the New Parent
Companies is a party or by which any of them or any of their assets may be
bound; or (d) violate in any material respect any material order, writ,
injunction, decree, statute, rule or regulation applicable to Net, any of its
subsidiaries or any of the New Parent Companies or by which any material portion
of their assets are bound.
2.7 Litigation, etc. Except as set forth in section 2.7 of the Disclosure
Letter or as disclosed in the SEC Reports, there is no claim, action, proceeding
or governmental investigation pending or, to the knowledge of Net, threatened
against Net or any of its subsidiaries before any court or governmental or
regulatory authority that, individually or in the aggregate, (a) could
reasonably be expected to have a Material Adverse Effect or (b) has had or could
reasonably be expected to have a material adverse effect on the ability of Net
or any of the New Parent Companies to consummate the transactions contemplated
by this agreement or in any manner challenges or seeks to prevent, enjoin or
delay the Mergers.
2.8 Compliance with Law. Except as set forth in section 2.8 of the
Disclosure Letter or in the SEC Reports, to the knowledge of Net, neither Net,
nor any of its subsidiaries nor any of the New Parent Companies is in conflict
with, or in default or violation of, any law, rule, or regulation (including,
but not limited to, any applicable law, rule or regulation respecting employment
and employment practices, terms and conditions of employment and wages and
hours), or any order, judgment or decree applicable to it or by which any of its
property or assets is bound or affected, except where such conflicts, defaults
or violations, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
2.9 Required Vote of Net Stockholders. The only vote of the stockholders
of Net required to approve and adopt the agreement of merger in this agreement
and approve the Net Merger is the affirmative vote of the holders of not less
than a majority of the outstanding shares of Net Common Stock. No other vote of
the stockholders of Net is required by law, the certificate of incorporation or
the by-laws of Net or otherwise to adopt the agreement of merger in this
agreement and approve the Net Merger.
2.10 Absence of Defaults. There are no material breaches or defaults under
any material agreements to which Net is a party or by which Net is bound.
2.11 Permits and Licenses. Net has all permits, licenses, franchises and
other authorizations ("Licenses") necessary for the conduct of its business, and
all such Licenses are valid and in full force and effect, except where the
failure to have such would not have a Material Adverse Effect. All Licenses held
by Net that are material to its business are set forth in section 2.11 of the
Disclosure Letter.
2.12 Tax Matters. Except as set forth in section 2.12 of the Disclosure
Letter:
(i) all returns and reports relating to Taxes required to be filed
with respect to Net or any of its income, properties or operations have been
duly filed in a timely manner (taking into account all extensions of due dates),
and, to the knowledge of Net, all information in such
10
returns, declarations and reports is true, correct and complete in all material
respects;
(ii) all Taxes attributable to Net that were shown to be due and
payable on such returns and reports have been paid;
(iii) there is no claim or assessment pending or, to the knowledge
of Net, threatened against Net for any alleged material deficiency in Taxes
attributable to Net; and
(iv) Net has satisfied in all material respects for all periods all
applicable withholding Tax requirements (including, without limitation, income,
social security and employment tax withholding for all types of compensation).
2.13 Certain Plans. Except as set forth in section 2.13 of the Disclosure
Letter or pursuant to written agreements or plans in effect as of the date of
this agreement that are disclosed elsewhere in the Disclosure Letter or have
otherwise previously been disclosed to Bassi and CP, Net has no plans as of the
date of this agreement to incur a material amount of additional indebtedness for
borrowed money or to issue any equity securities.
2.14 Representations and Warranties of CP. To the knowledge of Net, as of
the date of this agreement none of the representations or warranties in section
3 is untrue or incorrect.
2.15 Brokers. No broker, finder or other investment banker (other than
Xxxxx & Company Incorporated) is entitled to receive any brokerage, finder's or
other fee or commission in connection with this agreement or the transactions
contemplated by this agreement based upon agreements made by or on behalf of
Net, any of its subsidiaries or any of the New Parent Companies.
3. Representations and Warranties of CP. CP represents and warrants to Net as
follows:
3.1 Organization and Qualification. CP is a validly existing limited
liability company in good standing under the law of the state of Delaware, with
all requisite limited liability company power and authority to own its
properties and conduct its business as now being conducted, and is duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the character of the properties owned or
held under lease by it or the nature of the business transacted by it makes such
qualification necessary, except where the failure to be so qualified and in good
standing would not have a Material Adverse Effect.
3.2 Capitalization. As of the close of business on June 23, 1999,
10,376,755 CP Common Units were issued and outstanding; and there were
outstanding options to purchase an aggregate of 642,750 CP Common Units. Since
June 23, 1999, CP has not (i) issued any CP Common Units, other than upon the
exercise of CP Stock Options then outstanding, (ii) granted any options or
rights to purchase CP Common Units (under CP's Stock Option Plan or otherwise)
or (iii) split, combined or reclassified any CP Common Units. All the
outstanding CP Common Units have been duly authorized and validly issued and are
fully paid and nonassessable and are free of
11
preemptive rights. Except as set forth in this section 3.2 or in section 3.2 of
the Disclosure Letter, there are no outstanding (i) membership interests or
voting securities of CP, (ii) securities of CP convertible into or exchangeable
for membership interests or voting securities of CP or (iii) options, warrants,
rights or other agreements or commitments to acquire from CP, or obligations of
CP to issue, any membership interests, voting securities or securities
convertible into or exchangeable for membership interests or voting securities
of CP, or obligations of CP to grant, extend or enter into any subscription,
warrant, right, convertible or exchangeable security or other similar agreement
or commitment (the items in clauses (i), (ii) and (iii), collectively, the "CP
Securities"). Except as set forth in section 3.2 of the Disclosure Letter, there
are no outstanding obligations of CP to repurchase, redeem or otherwise acquire
any CP Securities and there are no other outstanding equity related awards.
Except as set forth in section 3.2 of the Disclosure Letter, there are no voting
trusts or other agreements or understandings to which CP is a party with respect
to the voting of capital stock of CP. CP does not own or have any liability or
obligation to acquire any securities or other interest in any other business or
entity.
3.3 Authority for this Agreement. CP has the requisite limited liability
company power and authority to execute and deliver this agreement and to
consummate the transactions contemplated by this agreement. The execution and
delivery of this agreement by CP and the consummation by CP of the transactions
contemplated by this agreement have been duly and validly authorized and no
other proceedings on the part of CP are necessary to authorize this agreement or
to consummate the transactions so contemplated. This agreement has been duly and
validly executed and delivered by CP and, assuming the representation and
warranty in the last sentence of section 2.3 is true and correct and that this
agreement constitutes the valid and binding obligation of Xxxxxx X. Xxxxx,
constitutes a valid and binding agreement of CP, enforceable against CP in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject to general principles of equity (whether considered in a proceeding
in equity or at law).
3.4 Absence of Certain Changes. Except as disclosed in section 3.4 of the
Disclosure letter, since March 31, 1999: (a) CP has not suffered any Material
Adverse Effect, (b) CP has conducted its business only in the ordinary course
consistent with past practice and (c) there has not been (i) any declaration,
setting aside or payment of any dividend or other distribution in respect of CP
Common Units or any repurchase, redemption or other acquisition by CP of any
outstanding CP Common Units or other securities in, or other ownership interests
in, CP; (ii) any entry into any written employment agreement with, or any
increase in the rate or terms (including, without limitation, any acceleration
of the right to receive payment pursuant to arrangements set forth in section
3.4 of the Disclosure Letter) of compensation payable or to become payable by CP
to, its managers or officers; (iii) any increase in the rate or terms
(including, without limitation, any acceleration of the right to receive
payment) of any bonus, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with any such managers, officers or key
employees, except increases occurring in the ordinary course of business or as
required by law or as necessary to maintain tax-qualified status; or (iv) any
action by CP that, if taken after the date of this agreement, would constitute a
breach of section 5.1.
3.5 Financial Statements and other Information. The financial statements
of CP listed in
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the Disclosure Letter, copies of which previously have been furnished to Net,
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis (except to the extent set
forth in those financial statements, including the notes, if any) and present
fairly in all material respects the financial position of CP as of their
respective dates, and the results of operations and changes in financial
condition and cash flows for the periods presented, subject, in the case of the
unaudited interim financial statements, to normal, recurring, year-end
adjustments. Such financial statements, and other information included in this
section 3 and in the Disclosure Letter regarding CP [(including, without
limitation, the private placement memorandum referred to in section 3.5 of the
Disclosure Letter)], do not, taken as a whole, contain any untrue statement of a
material fact or omit 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.
3.6 Absence of Undisclosed Liabilities. As of the date of this agreement,
CP does not have any liability or obligation of any kind, whether accrued,
absolute, contingent or otherwise, other than (a) liabilities and obligations
under leases, commitments and other agreements entered into in the ordinary
course of business (which, to the extent required by this agreement, are set
forth in the Disclosure Letter), (b) accounts payable and accrued expenses
incurred in the ordinary course of business and (c) the liabilities set forth in
section 3.6 of the Disclosure Letter. CP does not know of any basis for the
assertion against it of any other liability as of the date of this agreement.
3.7 Consents and Approvals; No Violation. Neither the execution and
delivery of this agreement by CP nor the consummation of the transactions
contemplated by this agreement will, except as disclosed in section 3.7 of the
Disclosure Letter, (a) conflict with or result in a breach of any provision of
the certificate of formation or amended and restated limited liability company
agreement of CP; (b) require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
except (i) pursuant to the Exchange Act or the Securities Act, (ii) the filing
of a certificate of merger pursuant to the DGCL or (iii) any applicable filings
under state securities, or "Blue Sky", laws; (c) result in a material default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any material note, license,
agreement or other instrument or obligation to which CP is a party or by which
CP or any of its assets may be bound; or (d) violate in any material respect any
material order, writ, injunction, decree, statute, rule or regulation applicable
to CP or by which any material portion of its assets are bound.
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3.8 Employee Benefit Matters
(a) For purposes of this agreement, the term "Plan" refers to the
following maintained on behalf of any employee of CP (whether current, former or
retired), or their beneficiaries, by CP, or any entity that would be deemed a
"single employer" with CP under section 414(b), (c), (m) or (o) of the Code or
section 4001 of the Employee Retirement Income Security Act of 1974 ("ERISA")
(an "ERISA Affiliate"): any "employee benefit plan" (within the meaning of
section 3(3) of ERISA), or any other plan, program, agreement or commitment, an
employment, consulting or deferred compensation agreement, or an executive
compensation, incentive bonus or other bonus, employee pension, profit-sharing,
savings, retirement, stock option, stock purchase, severance pay, life, health,
disability or accident insurance plan (other than a Net Plan). Section 3.8(a) of
the Disclosure Letter lists each CP Plan.
(b) Neither CP nor any of the ERISA Affiliates nor any of their
respective predecessors has ever contributed to or contributes to, or otherwise
participated in or participates in any "multiemployer plan" (within the meaning
of section 4001(a)(3) of ERISA or section 414(f) of the Code), any single
employer pension plan (within the meaning of section 4001(a)(15) of ERISA) that
is subject to sections 4063 and 4064 of ERISA or any plan that is subject to
Title IV of ERISA or section 412 of the Code.
(c) CP, each ERISA Affiliate, each Plan and each "plan sponsor"
(within the meaning of section 3(16) of ERISA) of each "welfare benefit plan"
(within the meaning of section 3(1) of ERISA) has complied in all respects with
the requirements of section 4980B of the Code and Title I, Subtitle B, Part 6 of
ERISA, except for a failure or failures to comply that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(d) With respect to each Plan:
(i) each Plan intended to qualify under section 401(a) of the
Code has been qualified since its inception and has received a determination
letter from the Internal Revenue Service (the "IRS") to the effect that the Plan
is qualified under section 401 of the Code and any trust maintained pursuant to
the Plan is exempt from federal income taxation under section 501 of the Code
and nothing has occurred that would cause the loss of such qualification or
exemption or the imposition of any material penalty or tax liability upon CP; CP
or an ERISA Affiliate, as the case may be, has applied, or prior to the end of
the remedial amendment period will apply, for a determination letter from the
IRS pursuant to Revenue Procedure 93-39, for each Plan intended to qualify under
section 401(a) of the Code;
(ii) no event has occurred in connection with which CP or any
ERISA Affiliate could be subject to any material liability under ERISA, the Code
or any other law, regulation or governmental order applicable to any Plan,
including, without limitation, section 406, 409, 502(i) or 502(l) of ERISA, or
section 4975 of the Code; and
(iii) each material Plan complies in all material respects
with the applicable
14
requirements of ERISA and the Code.
(e) CP has furnished Net with respect to each Plan:
(i) a copy of each annual report, if required by ERISA to be
prepared, with respect to the Plan, together with a copy of all financial
statements for each Plan, if required by ERISA to be prepared;
(ii) a copy of the most recent Summary Plan Description,
together with each Summary of Material Modifications, required under ERISA with
respect to the Plan, and, unless the Plan is embodied entirely in an insurance
policy to which CP is a party, a true and complete copy of the Plan; and
(iii) if the Plan is funded through a trust or any third party
funding vehicle (other than an insurance policy), a copy of the trust or other
funding agreement and the latest related financial statements, if any.
(f) Except as set forth in section 3.8(f) of the Disclosure Letter,
CP has not announced any plan or commitment to create any additional Plans or,
except in the ordinary course of business in accordance with its customary
practices or as required by law or as necessary to maintain tax-qualified
status, to amend or modify any Plan.
(g) Except as set forth in section 3.8(g) of the Disclosure Letter,
CP is not a party to any collective bargaining agreement.
(h) Except as in section 3.8(h) of the Disclosure Letter, the
consummation of the transactions contemplated by this agreement will not give
rise to any liability for severance pay, unemployment compensation, termination
pay or withdrawal liability, or accelerate the time of payment or vesting or
increase the amount of compensation or benefits due to any current, former, or
retired employee or their beneficiaries solely by reason of such transactions.
No amounts payable under any Plan will fail to be deductible for federal income
tax purposes by virtue of section 280G of the Code.
(i) Except as in section 3.8(i) of the Disclosure Letter, neither CP
nor any ERISA Affiliate maintains, contributes to or in any way provides for any
benefits (other than under section 4980B of the Code, the Federal Social
Security Act or a plan qualified under section 401(a) of the Code) to any
current or future retiree or terminated employee.
3.9 Litigation, etc. Except as set forth in section 3.9 of the Disclosure
Letter, there is no claim, action, proceeding or governmental investigation
pending or, to the knowledge of CP, threatened against CP before any court or
governmental or regulatory authority that, individually or in the aggregate, (a)
could reasonably be expected to have a Material Adverse Effect or (b) has had or
could reasonably be expected to have a material adverse effect on the ability of
CP to consummate the transactions contemplated by this agreement or in any
manner challenges or seeks to prevent, enjoin or delay the Mergers.
15
3.10 Tax Matters
(a) CP is not an association taxable as a corporation for purposes
of the Code.
(b) Except as set forth in section 3.10(b) of the Disclosure Letter:
(i) all returns and reports relating to Taxes required to be
filed with respect to CP or any of its income, properties or operations have
been duly filed in a timely manner (taking into account all extensions of due
dates), and, to the knowledge of CP, all information in such returns,
declarations and reports is true, correct and complete in all material respects;
(ii) all Taxes attributable to CP that were shown to be due
and payable on such returns and reports have been paid;
(iii) there is no claim or assessment pending or, to the
knowledge of CP, threatened against CP for any alleged material deficiency in
Taxes attributable to CP;
(iv) CP has satisfied in all material respects for all periods
all applicable withholding Tax requirements (including, without limitation,
income, social security and employment tax withholding for all types of
compensation); and
(v) CP has furnished Net complete and accurate copies of all
Tax returns, and all related amendments, filed by or on behalf of CP.
(c) Except as set forth in section 3.10(c) of the Disclosure Letter,
there are no agreements in effect to extend the period of limitations for the
assessment or collection of any income, franchise or material other Tax for
which CP may be liable.
3.11 Compliance with Law. Except as set forth in section 3.11 of the
Disclosure Letter, to the knowledge of CP, CP is not in conflict with, or in
default or violation of, any law, rule or regulation (including, but not limited
to, any applicable law, rule or regulation respecting employment and employment
practices, terms and conditions of employment and wages and hours), or any
order, judgment or decree applicable to CP or by which any property or asset of
CP is bound or affected, except where such conflicts, defaults or violations,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
3.12 Contracts. Section 3.12 of the Disclosure Letter contains an accurate
and complete list of: (a) all of CP's commitments and other agreements for the
purchase of materials, supplies, equipment, and software, other than commitments
and other agreements that were entered into in the ordinary course of business
and involve an expenditure by CP of less than $25,000 for any one commitment or
two or more related commitments; (b) all notes and agreements relating to any
indebtedness of CP; (c) all leases or other rental agreements under which CP is
either lessor or lessee; and (d) all of CP's other agreements, commitments and
understandings (written or oral) that require payment by CP of more than $25,000
individually. True and complete copies of all written
16
leases, commitments and other agreements referred to on in section 3.12 of the
Disclosure Letter have been delivered or made available to NET. There are no
material breaches or defaults by CP under any such agreements, and, to the
knowledge of CP, there are no material breaches or defaults by the other party
under any such agreements and all such agreements are in full force and effect
and are binding obligations of the parties to such agreements.
3.13 Title to Assets. Except as set forth in section 3.13 of the
Disclosure Letter and except for the lien, if any, of current taxes not yet due
and payable, CP has valid title, free and clear of any Lien, to all the assets,
tangible and intangible, used in or needed to conduct CP's business, and those
assets will be sufficient to enable it to continue after the Effective Time to
operate all aspects of its business in the manner in which it has been operated.
3.14 Related Party Transactions. Except as set forth in the LLC Agreement,
CP does not owe any amount to, or have any contract with or commitment to, or
use any property (real or personal) in its business owned or leased by, any of
its members, or any manager, officer, employee, agent or representative of CP or
any of their respective affiliates.
3.15 Permits and Licenses. CP has all permits, licenses, franchises and
other authorizations ("Licenses") necessary for the conduct of its business, and
all such Licenses are valid and in full force and effect, except where the
failure to have such would not have a Material Adverse Effect. All Licenses held
by CP that are material to its business are set forth in section 3.15 of the
Disclosure Letter.
3.16 Banks; Powers of Attorney. Section 3.16 of the Disclosure Letter sets
forth (a) the names and locations of all banks, trust companies, savings and
loan associations and other financial institutions at which CP maintains safe
deposit boxes or accounts of any nature and the names of all persons authorized
to draw thereon, make withdrawals therefrom or have access thereto, and (b) the
names of all persons to whom CP has granted a power of attorney, together with a
description thereof. CP has provided Net with true and complete copies of all
bank statements received by it prior to the date of this agreement.
3.17 Intangible Property. Section 3.17 of the Disclosure Letter sets forth
a complete list of the trademarks, trade names, copyrights and logos used by CP.
CP owns, free and clear of any Lien, each of those trademarks, trade names,
copyrights and logos (including registrations and applications for registration
of any of them), and they constitute all the trademarks, copyrights, trade names
and logos necessary for the continued operation of CP's business in a manner
consistent with past practice. CP is not infringing upon any trademark, trade
name, copyright or other rights of any third party; no proceedings are pending
or overtly threatened alleging any such infringement; and no claim has been
received by CP alleging any such infringement. To the knowledge of CP, there is
no violation by others of any right of CP with respect to any trademark, trade
name or copyright.
3.18 Software and Databases. CP owns or possesses adequate licenses or
other rights to use all computer software used by it, except where the failure
to have such would not be materially adverse. Any license of CP to use any
software is valid and does not infringe the property rights of
17
any third party. CP has not granted to any person or entity any interest, as
licensee or otherwise, in any of its owned software or databases or in any of
its lists.
3.19 Insurance. Section 3.19 of the Disclosure Letter sets forth a
complete list of all the insurance policies held by CP, specifying with respect
to each policy the policy limit, type of coverage, location of the property
covered, annual premium, premium payment date and expiration date. True and
complete copies of all those policies have been made available to Net.
3.20 Brokers. No broker, finder or other investment banker is entitled to
receive any brokerage, finder's or other fee or commission in connection with
this agreement or the transactions contemplated by this agreement based upon
agreements made by or on behalf of CP.
4. Covenants of Net
4.1 Regular Course of Business. Net shall, and shall cause each of its
subsidiaries to, (a) conduct its business in the ordinary course, consistent
with past practice; (b) use its best efforts to preserve all present
relationships with persons having business dealings with it; and (c) use its
best efforts to maintain, preserve and protect its assets and goodwill.
4.2 Restricted Activities and Transactions. Net shall not, and shall not
permit any of its subsidiaries or any of the New Parent Companies to, engage in
any of the following activities or transactions without the consent of CP:
(a) amend its certificate of incorporation or by-laws (true and
correct copies of which have been furnished to CP);
(b) except for issuances of stock pursuant to outstanding options or
warrants that are listed in the Disclosure Letter or, in the case of Net, at a
price (or having a conversion or exercise price) equal to or greater than the
closing price per share of Net Common Stock on NASDAQ on the date of issuance,
issue, sell or deliver, or agree to issue, sell or deliver, any shares of its
capital stock or any securities convertible into or exchangeable for shares of
its capital stock, or grant or issue, or agree to grant or issue, any options,
warrants, incentive awards or other rights to acquire any such securities;
(c) sell or transfer, or agree to sell or transfer, a material
amount of its assets, tangible or intangible, other than in the ordinary course
of business;
(d) except as contemplated by this agreement, merge or consolidate
with any other entity, or acquire any stock, or, except in the ordinary course
of business, any business, property or assets of any other person or entity,
except, in the case of Net and its subsidiaries, where the consideration paid or
received is not material to Net and its subsidiaries taken as a whole; or
(e) take any other action that would cause any of Net's
representations and warranties in this agreement not to be true and correct in
all material respects on and as of the date of the Closing with the same force
and effect as if made on and as of the date of the Closing.
18
4.3 Dividends and Distributions. Net shall not declare or pay any dividend
or make any distribution on or in respect of Net Common Stock, whether in cash,
stock or property, or, directly or indirectly, redeem purchase or otherwise
acquire any of its own stock or make any other distribution of its assets to the
holders of Net Common Stock.
4.4 Supplements to Schedules and Financial Statements. Net shall promptly
deliver to CP any information concerning events subsequent to the date of this
agreement necessary to supplement the representations and warranties of Net in
this agreement in order that the information be kept current, complete and
accurate in all material respects, it being understood and agreed that the
delivery of such information shall not constitute a waiver by CP of any rights
as a result of a misrepresentation or breach of warranty in section 2. Except as
set forth in section 2.13 of the Disclosure Letter or pursuant to written
agreements or plans in effect on the date of this agreement that are disclosed
elsewhere in the Disclosure Letter or have otherwise previously been disclosed
to Bassi and CP, prior to the Effective Time, Net shall not, without prior
consultation with Bassi, incur a material amount of additional indebtedness for
borrowed money or issue any equity securities.
4.5 Confidentiality. In the event of termination of this agreement, Net
shall return to CP all non-public documents, work papers and other material
(including, to the extent practicable, all copies) obtained pursuant to this
agreement or in connection with the transactions contemplated by this agreement.
Net shall use all reasonable efforts to keep confidential any information
obtained pursuant to this agreement or in connection with the transactions
contemplated by this agreement, unless such information is readily ascertainable
from public or published information or trade sources or is otherwise available
to Net as a member of CP.
4.6 Public Announcements. If the board of directors of Net approves this
agreement and the transactions contemplated by it, Net shall promptly thereafter
issue a press release in substantially the form of exhibit 4.6. Net shall not
make, issue or release any other public announcement concerning the terms,
conditions or status of the transactions contemplated by this agreement, without
giving CP reasonable advance notice and making a good faith attempt to obtain
the prior approval of CP with respect to the contents of such announcement,
which approval shall not be unreasonably withheld or delayed.
4.7 SEC Matters. Net shall use all reasonable efforts to cause the New
Parent to prepare and file with the SEC, not later than July 30, 1999, a
registration statement on Form S-4 under the Securities Act for the purpose of
registering the shares of New Parent Stock to be issued pursuant to the Mergers
(the "Registration Statement") and a proxy statement to be included therein and
to be used in soliciting proxies of the Net stockholders with respect to the
Mergers (the "Proxy Statement"). Net shall cause the information about itself,
its subsidiaries and the New Parent Companies included in the Registration
Statement and the Proxy Statement, at the respective times the Registration
Statement is filed with the SEC and becomes effective, and the Proxy Statement
is mailed to stockholders, not to contain any untrue statement of a material
fact, or to 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, or, in the case of the Proxy
19
Statement or any amendment or supplement, at the time of the meeting of
stockholders of Net referred to in section 4.8 and at the Effective Time, to
contain any untrue statement of a material fact, or omit to state any material
fact required to be stated therein or necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
meeting in connection with which the Proxy Statement is mailed. Net shall
furnish to CP prior to filing with the SEC drafts of the Registration Statement
and Proxy Statement, shall furnish copies of the Registration Statement and
Prospectus to CP promptly after filing with the SEC, and shall use reasonable
efforts to cause the Registration Statement to become effective at the earliest
practicable date. Net shall use reasonable efforts to cause New Parent to comply
with applicable state law in connection with Registration Statement,
4.8 Stockholder Approval. Net shall use reasonable efforts to call a
meeting of its stockholders in accordance with law as promptly as practicable
and, in any event, no later than 30 days after the SEC declares the Registration
Statement effective, for the purpose of voting upon the Net Merger and related
matters and shall, through its board of directors, use all reasonable efforts to
solicit the requisite vote of approval. The board of directors of Net shall
recommend to the stockholders that they approve the proposed transactions.
4.9 CP Employees. Net shall offer all the individuals employed by CP
immediately before the Effective Time continued employment by CP immediately
after the Effective Time at the same salary and with the same title and
responsibilities as, and otherwise on terms that, taken as a whole, are no less
favorable to them than, in effect immediately before the Effective Time.
4.10 Further Assurances. Net shall (a) execute and deliver such
instruments and take such other action as CP may reasonably request to carry out
this agreement, (b) use all reasonable efforts to obtain the consents of all
parties to all agreements and other documents necessary for the consummation of
the transactions contemplated by this agreement and (c) use all reasonable
efforts, including, without limitation, causing New Parent to execute and
deliver the Agreements and other documents required by this agreement to be
executed and delivered by it, so that the conditions to the obligations of CP in
section 6 are satisfied. Prior to the Closing, Net shall provide CP with
reasonable "due diligence" access to information regarding Net and its
subsidiaries.
5. Covenants of CP
5.1 Regular Course of Business. CP shall (a) conduct its business in the
ordinary course, consistent with past practice; (b) use its best efforts to
preserve all present relationships with persons having business dealings with
it; and (c) use its best efforts to maintain, preserve and protect its assets
and goodwill.
5.2 Restricted Activities and Transactions. CP shall not engage in any of
the following activities or transactions without the prior written approval of
at least one Net representative on CP's board of managers:
(a) amend its certificate of formation or amended and restated
limited liability company agreement;
20
(b) except for issuances of CP Common Units pursuant to outstanding
options, issue, sell or deliver, or agree to issue, sell or deliver, any CP
Common Units or any securities convertible into or exchangeable for CP Common
Units, or grant or issue, or agree to grant or issue, any options, warrants,
incentive awards or other rights to acquire any such securities;
(c) borrow or agree to borrow any funds or incur, or assume or
become subject to, whether directly or by way of guarantee or otherwise, any
obligation or liability (absolute or contingent), other than indebtedness for
borrowed money incurred in the ordinary course of business pursuant to existing
loan agreements or lines of credit and any other liability incurred in the
ordinary course of business, or issue, sell or deliver, or agree to issue, sell
or deliver, any bonds, debentures, notes or other debt securities;
(d) sell, transfer or acquire, or agree to sell, transfer or
acquire, any properties or assets, tangible or intangible, other than in the
ordinary course of business and for consideration at least equal to the fair
market value of the properties or assets transferred;
(e) except as specifically permitted by this agreement, enter into
any contract, agreement, lease or understanding, other than any contract,
agreement, lease or understanding entered into in the ordinary course of
business that is not material;
(f) grant any increase in compensation or enter into any employment
agreement, other than in the ordinary course consistent with past practice;
(g) become liable for or make any material change in any
profit-sharing, bonus, deferred compensation, insurance, pension, retirement or
other employee or executive benefit plan, payment or arrangement, except as
required by law;
(h) except as contemplated by this agreement, merge or consolidate
with any other entity, or acquire stock or, except in the ordinary course of
business, any business, property or assets of any other person or entity;
(i) except as required by law or by subsequently promulgated
generally accepted accounting principles, alter the manner of keeping its books,
accounts or records, or alter the accounting practices reflected in such books,
accounts or records; or
(j) take any other action that would cause any of CP's
representations and warranties in this agreement not to be true and correct in
all material respects on and as of the date of the Closing with the same force
and effect as if made on and as of the date of the Closing.
5.3 Dividends and Distributions. CP shall not declare or pay any dividend
or make any distribution on or in respect of CP Common Units, whether in cash,
stock or property or, directly or indirectly, redeem, purchase or otherwise
acquire any CP Common Units or make any other distribution of its assets to the
holders of CP Common Units, except that, with the prior written approval of at
least one Net representative on CP's board of directors, CP may redeem CP
21
Common Units of any employee whose employment is terminated.
5.4 Access to Records and Properties; Opportunity to Ask Questions. CP
shall make available for inspection by Net or its representatives, during normal
business hours, the premises, corporate records, books of account, contracts and
all other documents of CP reasonably requested by Net and its authorized
employees, counsel and auditors in order to permit Net and such representatives
to make a reasonable inspection and examination of the business and affairs of
CP. CP shall cause its managerial employees, counsel and independent accountants
to be available upon reasonable notice to answer questions of Net's
representatives concerning the business and affairs of CP, and shall cause them
to make available all relevant books and records in connection with such
inspection and examination, provided that Net conducts these activities in a
manner that does not unreasonably interfere with CP's business. Except with CP's
consent, Net shall not contact CP's vendors or customers in connection with its
activities under this section 5.4.
5.5 Supplements to Written Disclosures and Financial Statements. CP shall
promptly deliver to Net any information concerning events subsequent to the date
of this agreement necessary to supplement the representations and warranties of
CP in this agreement in order that the information be kept current, complete and
accurate in all material respects, it being understood and agreed that the
delivery of such information shall not constitute a waiver by Net of any rights
as a result of a misrepresentation or breach of warranty in section 3.
5.6 Confidentiality. In the event of termination of this agreement, CP
shall return to Net all non-public documents, work papers and other material
(including, to the extent practicable, all copies) obtained pursuant to this
agreement or in connection with the transactions contemplated by this agreement.
CP shall use its best efforts to keep confidential and not use any information
obtained pursuant to this agreement or in connection with the transactions
contemplated by this agreement, unless such information is readily ascertainable
from public or published information or trade sources.
5.7 Public Announcements. CP shall not make, issue or release any public
announcement concerning the terms, conditions or status of the transactions
contemplated by this agreement, without the prior approval of Net with respect
to the contents of such announcement.
5.8 SEC Matters. CP shall from time to time at Net's request promptly
furnish Net with information about CP and its members that Net may reasonably
request for inclusion in the Registration Statement or the Proxy Statement. CP
shall cause the information about itself to be supplied to Net for inclusion in
the Registration Statement and the Proxy Statement to be, at the respective
times the Registration Statement is filed with the SEC and becomes effective,
and the Proxy Statement is mailed to stockholders, not to contain any untrue
statement of a material fact, or to omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances in which they are made, not misleading, or, in the case of
the Proxy Statement or any amendment or supplement, at the time of the meeting
of stockholders of Net referred to in section 4.8 and at the Effective Time, to
contain any untrue statement of a material fact, or omit to state any material
fact required to be stated therein or necessary to correct any statement in any
earlier communication with respect to the solicitation of
22
any proxy for the meeting in connection with which the Proxy Statement is
mailed.
5.9 Further Assurances. CP shall (a) execute and deliver such instruments
and take such other action as Net may reasonably request to carry out this
agreement, (b) use all reasonable efforts to obtain the consents of all parties
to all agreements and other documents necessary for the consummation of the
transactions contemplated by this agreement and (c) use all reasonable efforts
so that the conditions to the obligations of Net in section 7 are satisfied.
6. Conditions to the Obligations of Net. The obligation of Net to consummate the
Mergers pursuant to this agreement is subject to the satisfaction (or waiver by
Net) of each of the following conditions on or before the Closing:
6.1 Representations and Warranties True as of Closing. The representations
and warranties of CP in this agreement shall be true and correct in all material
respects at the Closing with the same force and effect as if made at the
Closing, except for changes specifically permitted or contemplated by this
agreement.
6.2 Performance of Covenants. CP shall have performed and complied with
each covenant and agreement required by this agreement to be performed or
complied with by it prior to or at the Closing.
6.3 Litigation. No injunction shall be threatened by a governmental agency
to restrain, or shall be in effect restraining, the consummation of the Mergers
or the transactions contemplated by this agreement.
6.4 No Adverse Change. Since the date of this agreement, there shall have
occurred no material adverse change in the financial condition, results of
operations or business of CP taken as a whole.
6.5 Board of Directors and Stockholder Approval. The board of directors of
Net shall have approved this agreement and the transactions contemplated by it
on or before June 30, 1999, and holders representing not less than a majority of
the outstanding shares of Net Common Stock shall have adopted and approved this
agreement on or before November 30, 1999.
6.6 Consents and Approvals. All authorizations, consents, waivers,
approvals or other action required to be obtained by CP in connection with the
execution, delivery and performance of this agreement by CP and the consummation
by CP of the transactions contemplated by this agreement, or required to prevent
a conflict with, breach of, or default, right of termination or acceleration of
performance under, any term of any lease, contract, note or other document or
instrument to which it is a party or by which it is bound shall have been duly
obtained, except where the failure to obtain such authorization, consent, waiver
or approval would not have a material adverse effect on the business of CP taken
as a whole, and shall be in form and substance reasonably satisfactory to
counsel to Net, and copies shall have been delivered to Net.
6.7 Certificates. CP shall have delivered to Net a certificate, dated the
date of the
23
Closing, of its chief executive officer confirming satisfaction of the
conditions set forth in sections 6.1, 6.2, 6.3, 6.4 and 6.6, and a certificate
of a duly authorized officer of CP setting forth the resolutions of the board of
managers and the approval of the members authorizing the execution and delivery
of this agreement and the consummation of the transactions contemplated by this
agreement, and certifying that such resolutions were duly adopted and have not
been rescinded or amended as of the Closing.
6.8 Registration Statement Effective. The Registration Statement shall
have become effective prior to the mailing of the Proxy Statement to the
stockholders of Net, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC.
6.9 Opinion of Xxxxxxxx, Xxxxxxx & Xxxxxxx. CP shall have delivered to Net
an opinion of Xxxxxxxx, Xxxxxxx & Xxxxxxx, dated the date of the Closing, to the
effect that:
(a) CP is a limited liability company validly existing and in good
standing under the law of the state of Delaware and has the limited liability
company power and authority to own and operate its properties and to carry on
its business as being conducted;
(b) CP has the limited liability company power and authority to
execute, deliver and perform this agreement and to consummate the transactions
contemplated by this agreement; all necessary limited liability company,
manager, member and other action has been taken on the part of CP to authorize
and approve this agreement and the transactions contemplated by this agreement;
and this agreement has been duly executed and delivered by CP and is valid and
binding on CP in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting the enforcement of creditors' rights
generally and subject to general principles of equity (whether considered in a
proceeding in equity or at law); and
(c) the execution, delivery and performance of this agreement by CP
and the consummation by CP of the transactions contemplated by this agreement
will not result in a breach or a violation by CP of, or constitute a default by
CP under, the certificate of formation or amended and restated limited liability
company agreement of CP or any judgment, decree, order, or governmental permit
or license known to such counsel to which CP is a party or by which CP is bound.
6.10 Other Agreements. Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx and Xxxx Xxxxxx
shall have executed and delivered a voting trust agreement, dated the date of
the Closing, in the form of exhibit 6.10(a) (the "Voting Trust Agreement") and a
stockholders agreement, dated the date of the Closing, in the form of exhibit
6.10(b) (the "Stockholders Agreement"), Xxxxxxxx Xxxxx shall have executed and
delivered an employment agreement, dated the date of the Closing, in the form of
exhibit 6.10(c) (the "Bassi Employment Agreement"), Xxxxxxxx Xxxxx, Xxxxxxx
Xxxxxxxx, Xxxx Xxxxxx and each of the other individuals named in section 6.10 of
the Disclosure Letter shall have executed and delivered a letter, dated the date
of the Closing, in the form of exhibit 6.10(d) (the "Vesting Letter") and the
individuals to be mutually agreed upon by Xxxxx and Bassi (the "6.10
Individuals") shall have entered into employment agreements with Net or CP in
such form as Xxxxx
24
and Bassi mutually agree.
6.11 Opinion of Investment Banker. Prior to the approval of this agreement
by the board of directors of Net referred to in section 6.5, Xxxxx & Company
Incorporated shall have delivered its opinion to the board of directors of Net,
in form reasonably satisfactory to Net, stating that, in its opinion, the terms
of the Mergers are fair to the stockholders of Net from a financial point of
view, and, not more than five business days prior to the approval of this
agreement by the stockholders of Net referred to in section 6.5, Xxxxx & Company
Incorporated shall have reconfirmed that opinion.
7. Conditions to the Obligations of CP. The obligation of CP to consummate the
Mergers pursuant to this agreement is subject to the satisfaction (or waiver by
CP) of each of the following conditions on or before the Closing:
7.1 Representations and Warranties True as of Closing. The representations
and warranties of Net in this agreement shall be true and correct in all
material respects at the Closing with the same force and effect as if made at
the Closing, except for changes specifically permitted or contemplated by this
agreement.
7.2 Performance of Covenants. Net shall have performed and complied in all
material respects with each covenant and agreement required by this agreement to
be performed or complied with by it prior to or at the of Closing.
7.3 Litigation. No injunction shall be threatened by a governmental agency
to restrain, or shall be in effect restraining, the consummation of the Mergers
or the transactions contemplated by this agreement.
7.4 No Adverse Change. Since the date of this agreement, there shall have
occurred no material adverse change in the financial condition, results of
operations or business of Net and its subsidiaries taken as a whole.
7.5 Stockholder Approval. The board of directors of Net shall have
approved this agreement and the transactions contemplated by it on or before
June 30, 1999, and holders representing not less than a majority of the
outstanding shares of Net Common Stock shall have adopted and approved this
agreement on or before November 30, 1999.
7.6 Consents and Approvals. All authorizations, consents, waivers,
approvals or other action required to be obtained by Net in connection with the
execution, delivery and performance of this agreement by Net and the
consummation by Net of the transactions contemplated by this agreement, or
required to prevent a conflict with, breach of, or default, right of termination
or acceleration of performance under, any term of any lease, contract, note or
other document or instrument to which it is a party or by which it is bound
shall have been duly obtained, except where the failure to obtain such
authorization, consent, waiver or approval would not have a material adverse
effect on the business of Net and its subsidiaries taken as a whole, and shall
be in form and substance reasonably satisfactory to counsel to CP, and copies
shall have been delivered to CP.
25
7.7 Registration Statement Effective. The Registration Statement shall
have become effective prior to the mailing of the Proxy Statement to the
stockholders of Net, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC.
7.8 Certificates. Net shall have delivered to CP a certificate, dated the
date of the Closing, of its chief executive officer confirming satisfaction of
the conditions set forth in sections 7.1, 7.2, 7.3, 7.4, 7.5, 7.6 and 7.7, and a
certificate of a duly authorized officer of Net setting forth the resolutions of
the board of directors and stockholders of Net authorizing the execution and
delivery of this agreement and the consummation of the transactions contemplated
by this agreement, and certifying that such resolutions were duly adopted and
have not been rescinded or amended as of the Closing.
7.9 Opinion of Proskauer Rose LLP. Net shall have delivered to CP an
opinion of Proskauer Rose LLP, dated the date of the Closing, to the effect
that:
(a) each of Net and the New Parent Companies is a corporation
validly existing and in good standing under the law of the state of Delaware and
has the corporate power and authority to own and operate its properties and to
carry on its business as being conducted;
(b) each of Net and the New Parent Companies has the corporate power
and authority to execute, deliver and perform this agreement and to consummate
the transactions contemplated by this agreement; all necessary corporate,
stockholder and other action has been taken on the part of each of Net and the
New Parent Companies to authorize and approve this agreement and the
transactions contemplated by this agreement; and this agreement has been duly
executed and delivered by each of Net and the New Parent Companies and is valid
and binding on each of Net and the New Parent Companies in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally and subject to general principles
of equity (whether considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this agreement by
each Net and the New Parent Companies and the consummation by each of Net and
the New Parent Companies of the transactions contemplated by this agreement will
not result in a breach or a violation by any of them of, or constitute a default
by any of them under, its certificate of incorporation or by-laws, or any
judgment, decree, order, or governmental permit or license known to such counsel
to which any of them is a party or by which any of them is bound;
(d) New Parent has full legal power and authority to issue and
deliver the shares of New Parent Common Stock in the manner contemplated by this
agreement, and, upon the issuance of such shares in accordance with this
agreement, such shares will be duly authorized, validly issued, fully paid and
nonassessable; and
(e) the Registration Statement has become effective pursuant to the
Securities Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the
26
Registration Statement has been issued and no proceedings for that purpose have
been initiated or threatened by the SEC.
7.10 Other Agreements. Xxxxxx X. Xxxxx shall have executed and delivered
the Voting Trust Agreement, the Stockholders Agreement and an employment
agreement, dated the date of the Closing, in the form of exhibit 7.10(a) (the
"Xxxxx Employment Agreement"); New Parent shall have (a) executed and delivered
the Stockholders Agreement, the Bassi Employment Agreement, the Voting Letters
and the Xxxxx Employment Agreement, and (b) adopted a stock option plan in the
form of exhibit 1.9; and the 6.10 Individuals shall have entered into employment
agreements with Net or CP in such form, if any, as Xxxxx and Bassi mutually
agree.
7.11 Opinion of Investment Bankers. The condition to the obligation of Net
set forth in section 6.11 shall have been satisfied, and shall not have been
waived by Net.
8. Indemnification and Other Agreements
8.1 Indemnification
(a) From and after the Effective Time, New Parent shall cause all
rights to indemnification now existing in favor of the employees, agents,
directors or officers of Net, Net's subsidiaries and CP as provided in their
respective governing documents or otherwise in effect on the date of this
agreement to survive the Mergers and to continue in full force and effect for a
period of not fewer than six years from the Effective Time. New Parent shall
cause to be maintained in effect for not fewer than six years from the Effective
Time the current policies of the directors' and officers' liability insurance
maintained by Net, Net's subsidiaries and CP (provided that New Parent may
substitute therefor policies of at least the same coverage containing terms and
conditions that are not less advantageous to the beneficiaries) with respect to
matters occurring prior to the Effective Time.
(b) New Parent shall, in addition to any rights of the officers and
directors existing and assumed in accordance with section 8.1(a) or otherwise,
from and after the Effective Time, indemnify and hold harmless each person who
at the date of this agreement serves as a director or officer of Net or CP (the
"Indemnified Parties") against any losses, claims, damages, liabilities, costs,
expenses, judgments and amounts paid in settlement, as incurred, in connection
with any claim, action, suit, proceeding or investigation that arises from
actions taken or omission to act as officers or directors of Net or its
subsidiaries or of CP by such Indemnified Parties prior to the Effective Time or
that arises out of or pertains to any of the transactions contemplated by this
agreement, and, in the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnified Parties may retain counsel satisfactory to them, and New Parent
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received, and (ii) New Parent shall
use its best efforts to assist in the vigorous defense of any such matter;
provided, that New Parent shall not be liable for any such settlement effected
without its written consent, which consent shall not be unreasonably withheld.
The Indemnified Parties as a group may retain only one law firm to represent
them with respect to any such matter unless there is, under applicable standards
of
27
professional conduct, a conflict on any significant issue between the positions
of any two or more Indemnified Parties.
(c) This section 8.1 shall survive the Closing, is intended to
benefit Net, CP and each of the Indemnified Parties (each of whom shall be
entitled to enforce this section 8 against New Parent Company), and shall be
binding on all successors and assigns of New Parent.
8.2 Agreements of Xxxxxx X. Xxxxx, Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx and
Xxxx Xxxxxx
(a) At the Closing, (i) Xxxxxx X. Xxxxx shall execute and deliver
the Voting Trust Agreement, the Stockholders Agreement and the Xxxxx Employment
Agreement, (ii) Xxxxxxxx Xxxxx shall execute and deliver the Voting Trust
Agreement, the Stockholders Agreement, the Bassi Employment Agreement and a
Vesting Letter, (iii) each of Xxxxxxx Xxxxxxxx and Xxxx Xxxxxx shall execute and
deliver the Voting Trust Agreement, the Stockholders Agreement and a Vesting
Letter and (iv) Bassi shall use his best efforts to cause each of the
individuals named in section 6.10 of the Disclosure Letter to execute and
deliver a Vesting Letter.
(b) Each of Xxxxxx X. Xxxxx, Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx and
Xxxx Xxxxxx (i) shall vote all the shares of Net Common Stock in respect of
which he has, or hereafter acquires, voting control to be voted in favor of the
Mergers at the stockholders meeting referred to in section 4.8 and against any
other transaction or proposal that might conflict with the consummation of the
Mergers, and (ii) neither Xxxxxx X. Xxxxx, Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx nor
Xxxx Xxxxxx shall at any time prior to the date of that stockholders meeting (or
termination of this agreement pursuant to section 9) purchase, sell, exchange or
otherwise dispose of or encumber, any shares of Net Common Stock or CP Common
Units, or subject to any voting agreement or other restriction or agreement any
shares of Net Common Stock or any CP Common Units in respect of which he has
voting control on the date of this agreement.
(c)(i) Neither Xxxxxx X. Xxxxx, Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx nor
Xxxx Xxxxxx may at any time after the Effective Time disclose to anyone (except
in connection with the performance of services for, or otherwise on behalf of,
New Parent or any of its subsidiaries) or use in competition with New Parent or
any of its subsidiaries any confidential information or trade secrets with
respect to the business of New Parent or any of its subsidiaries; provided,
however, any such individual may disclose confidential information or trade
secrets to the extent required by applicable law.
(ii) Neither Xxxxxx X. Xxxxx, Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx
nor Xxxx Xxxxxx may, as long as he is an employee or stockholder of New Parent
or any of its subsidiaries and for a period of one year thereafter, directly or
indirectly, solicit for employment or hire any person who, during the 12-month
period preceding the date of solicitation or hiring, was an employee of New
Parent or any of its subsidiaries.
(iii) Neither Xxxxxx X. Xxxxx, Xxxxxxxx Xxxxx, Xxxxxxx
Xxxxxxxx nor Xxxx Xxxxxx may, as long as he is an employee or stockholder of New
Parent or any of its
28
subsidiaries and for a period of 18 months thereafter, except through New Parent
or any of its subsidiaries, directly or indirectly, engage or be interested in
the business of developing and operating an Internet portal targeted primarily
to individuals between the ages of 16 and 25, any business directly competitive
with any business resulting from an expansion of the Internet portal business of
New Parent or any of its subsidiaries into other Internet businesses or any
other business New Parent or any of its subsidiaries is then engaged in (any
such business, a "Restricted Business"); provided, however, that nothing in this
paragraph shall limit the right of any such individual to be employed by a media
company whose businesses include a Restricted Business, as long as he does not
provide any services to that Restricted Business. For this purpose, a person
shall be deemed to be directly or indirectly engaged or interested in a business
or entity, if he is engaged or interested in that business or entity as a
stockholder, member, partner, individual proprietor, director, officer,
employee, agent, lender, consultant or otherwise, but not if his interest is
limited solely to the ownership of 5% or less of any class of the equity or debt
securities of a corporation as to which he has only a passive role.
(iv) Each of Xxxxxx X. Xxxxx, Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx
and Xxxx Xxxxxx acknowledges that the remedy at law for breach of the provisions
of this section 8.2(c) will be inadequate and that, in addition to any other
remedy New Parent or any of its subsidiaries may have, it will be entitled to an
injunction restraining any such breach or threatened breach, without any bond or
other security being required and without the necessity of showing actual
damages or economic loss.
(v) Notwithstanding anything to the contrary in this section
8.2(c), if Bassi's employment is terminated pursuant to section 6.2 of the Bassi
Employment Agreement and New Parent does not exercise the option referred to in
section 6.3 of the Bassi Employment Agreement, Bassi shall not be bound by the
provisions of this section 8.2(c) after such termination of employment.
8.3 Tax Matters. The parties intend that the Net Merger and the CP Merger
will be treated for federal income tax purposes as the transfer by the holders
of the shares of Net Common Stock of those shares, and the transfer by the
holders of the CP Common Units (other than Net) of those units, respectively, to
New Parent in exchange for shares of New Parent Common Stock, in which exchanges
no gain or loss will be recognized pursuant to section 351(a) of the Code. The
parties shall prepare all tax returns in a manner consistent with the
immediately preceding sentence and not take any position inconsistent therewith.
9. Termination, Amendment and Waiver
9.1 Termination. This agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the stockholders of Net:
(a) by mutual consent of the board of directors of Net, the board of
managers of CP and Bassi;
29
(b) by Net, CP or Bassi, if, without fault of the terminating party,
the Mergers shall not have been consummated on or before November 30, 1999,
which date may be extended by mutual agreement of the board of directors of Net
and the board of managers of CP.
(c) by CP and Bassi, if any event shall have occurred that renders
any condition set forth in section 7 incapable of fulfillment and such condition
is not waived by CP and Bassi;
(d) by Net, if any event shall have occurred that renders any
condition set forth in section 6 incapable of fulfillment and such condition is
not waived by Net;
(e) by Net, CP or Bassi, if (i) New Parent's Registration Statement
has not been filed on or before August 31, 1999, (ii) this agreement shall not
have been submitted for approval to Net's stockholders on or before November 30,
1999, or (iii) this agreement shall have been submitted for approval to Net's
stockholders and such stockholders shall have failed to grant such approval; or
(f) by Net, if there has been any material adverse change in the
business, condition (financial or otherwise) or operation of CP, or by CP or
Bassi, if there has been any material adverse change in the business, condition
(financial or otherwise) or operation of Net, in each case since the date of
this agreement.
In the event of termination or abandonment of the Mergers pursuant
to this section 9.1, written notice of termination shall promptly be given to
each other party to this agreement.
9.2 Effect of Termination. The termination of this agreement under section
9.1 shall not relieve any party of any liability for breach of this agreement
prior to the date of termination; provided, however, that, notwithstanding
anything to the contrary in this agreement, no party to this agreement shall
have any liability under this agreement for misrepresentation or breach of
warranty, and the termination of this agreement pursuant to this section 9 shall
be the sole and exclusive remedy of the parties under this agreement for any
misrepresentation or breach of warranty.
9.3 Amendment; Action by CP.
(a) This agreement may be amended by the parties by action taken by
their respective boards of directors or board of managers, as the case may be,
at any time before or after approval by the stockholders of Net, but, after any
such approval, no amendment shall be made that changes the ratio at which CP
Common Units are to be converted into shares of New Parent Common Stock pursuant
to this agreement or in any way materially and adversely affects the rights of
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.
(b) Any action, waiver, consent or approval of CP under this
agreement and any amendment of this agreement shall be taken, given or made,
only if a majority of CP's board of managers, which majority must include Bassi,
has approved of that action, waiver, consent,
30
approval or amendment.
9.4 Waiver. Any term or provision of this agreement (other than the
requirement for stockholder approval) may be waived in writing at any time by
the party that is entitled to the benefits of that term or provision.
10. Miscellaneous
10.1 The representations and warranties in sections 2 and 3 shall not
survive beyond the Effective Time.
10.2 The parties agree that irreparable damage would occur in the event
any of the provisions of this agreement were not performed in accordance with
their specific terms or were otherwise breached. Accordingly, the parties agree
that they shall be entitled to an injunction to prevent breaches of this
agreement and to enforce specifically the terms and provisions of this agreement
in any federal or state court located in the Borough of Manhattan in the city of
New York (as to which the parties agree to submit to jurisdiction for the
purposes of such action), this being in addition to any other remedy to which
they are entitled at law or in equity.
10.3 Each of the parties shall bear its own expenses in connection with
the transactions contemplated by this agreement, and no party shall have any
liability to the others with respect to those expenses.
10.4 The invalidity or unenforceability of any provision of this agreement
shall not affect the validity or enforceability of any other provision of this
agreement, which shall remain in full force and effect, unless the invalidity or
unenforceability of such provision would (a) result in such a material change to
this agreement as to be unreasonable, or (b) materially or adversely frustrate
the obligations of the parties in this agreement as originally written.
31
10.5 All notices, requests, claims, demands and other communications under
this agreement shall be in writing and shall be deemed to have been duly given
when delivered in person, by facsimile transmission with confirmation of
receipt, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
if to Net, a Net Parent Company or Xxxxxx X. Xxxxx,
to it or him at:
c/o Network Event Theater, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Executive Vice President and Chief
Financial Officer
Fax No.: (000) 000-0000
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
if to CP, to it at:
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Fax No.: (000) 000-0000
if to Bassi, to him at:
00 Xxxxxxxx Xxxx
Xxxxxxxx, X.X. 00000
Fax No.: 000-000-0000
if to Xxxxxxx Xxxxxxxx, to him at:
0 Xxxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Fax No.: 000-000-0000
if to Xxxx Xxxxxx, to him at:
00 Xxxxxx Xxxx
Xxxxx Xxxxxxx, XX 00000
Fax No.: 000-000-0000
32
with a copy to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Fax No.: (000) 000-0000
or to such other address as the person or entity to whom notice is given may
have previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt of notice of the change).
10.6 This agreement shall be governed by and construed in accordance with
the law of the state of New York, regardless of the law that might otherwise
govern under principles of conflicts of laws applicable to this agreement,
except that the provisions of this agreement subject to the DGCL shall be
governed by and construed in accordance with the DGCL.
10.7 The headings in this agreement are for convenience of reference only
and are not intended to be part of or to affect the meaning or interpretation of
this agreement.
10.8 This agreement shall be binding upon and inure solely to the benefit
of each party to this agreement, and nothing in this agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature under or by reason of this agreement, except for section 8.1 (which
is intended to be for the benefit of the persons referred to in that section,
and may be enforced by such persons).
10.9 This agreement may be executed in counterparts, each of which shall
be deemed to be an original, but all of which together shall constitute one and
the same agreement.
10.10 Certain Definitions
(a) "Material Adverse Effect" means any adverse change in the
business or financial condition of a company or its subsidiaries that is
material to that company and its subsidiaries taken as a whole.
(b) A "subsidiary" of any entity is another entity a majority of the
outstanding voting securities of which are beneficially owned by the first
entity.
(c) "Tax" means all taxes or similar governmental charges, duties,
imposts or levies (including, without limitation, income taxes, franchise taxes,
gross receipt taxes, occupation taxes, real and personal property taxes,
transfer taxes or fees, stamp taxes, sales taxes, use taxes, excise taxes, ad
valorem taxes, withholding taxes, employee withholding taxes, worker's
compensation, payroll taxes, unemployment insurance, social security, minimum
taxes, customs
33
duties or windfall profits taxes), together with any related liabilities,
penalties, fines, additions to tax or interest, imposed by any country, any
state, county, provincial or local government or any subdivision or agency of
any of the foregoing.
34
10.11 Entire Agreement. This agreement and the Disclosure Letter and
exhibits to this agreement constitute the entire agreement among the parties
with respect to their subject matter and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to that
subject matter.
NETWORK EVENT THEATER, INC.
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------
Xxxxxx X. Xxxxx
COMMON PLACES, LLC
By: /s/ Xxxxxxxx Xxxxx
----------------------------------------
Xxxxxxxx Xxxxx
YOUTHSTREAM MEDIA NETWORKS, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
NUNET, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
NUCOMMON, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxx
----------------------------------------
Xxxxxx X. Xxxxx, Individually
/s/ Xxxxxxxx Xxxxx
----------------------------------------
Xxxxxxxx Xxxxx, Individually
/s/ Xxxxxxx Xxxxxxxx
----------------------------------------
Xxxxxxx Xxxxxxxx, Individually
/s/ Xxxx Xxxxxx
----------------------------------------
Xxxx Xxxxxx, Individually
35
TABLE OF CONTENTS
PAGE
----
1. The Mergers............................................................1
1.1 The Mergers......................................................1
1.2 Consummation of the Mergers......................................1
1.3 Closing..........................................................1
1.4 Organizational Documents.........................................1
1.5 Directors, Officers and Managers.................................2
1.6 Conversions......................................................2
1.7 Exchange of Certificates Representing New Parent Common Stock....4
1.8 Adjustments......................................................6
1.9 New Parent Stock Option Plan.....................................6
2. Representations and Warranties of Net..................................6
2.1 Organization and Qualification...................................6
2.2 Capitalization...................................................6
2.3 Authority for this Agreement.....................................8
2.4 Absence of Certain Changes.......................................8
2.5 Reports..........................................................9
2.6 Consents and Approvals; No Violation.............................9
2.7 Litigation, etc.................................................10
2.8 Compliance with Law.............................................10
2.9 Required Vote of Net Stockholders...............................10
2.10 Absence of Defaults.............................................10
2.11 Permits and Licenses............................................10
2.12 Tax Matters.....................................................11
2.13 Certain Plans...................................................11
2.14 Representations and Warranties of CP............................11
2.15 Brokers.........................................................11
3. Representations and Warranties of CP..................................11
3.1 Organization and Qualification..................................11
3.2 Capitalization..................................................11
3.3 Authority for this Agreement....................................12
3.4 Absence of Certain Changes......................................12
3.5 Financial Statements and other Information......................13
3.6 Absence of Undisclosed Liabilities..............................13
3.7 Consents and Approvals; No Violation............................13
3.8 Employee Benefit Matters........................................14
3.9 Litigation, etc.................................................15
3.10 Tax Matters.....................................................16
3.11 Compliance with Law.............................................16
3.12 Contracts.......................................................16
3.13 Title to Assets.................................................17
3.14 Related Party Transactions......................................17
3.15 Permits and Licenses............................................17
3.16 Banks; Powers of Attorney.......................................17
i
3.18 Software and Databases..........................................18
3.19 Insurance.......................................................18
3.20 Brokers.........................................................18
4. Covenants of Net......................................................18
4.1 Regular Course of Business......................................18
4.2 Restricted Activities and Transactions..........................18
4.3 Dividends and Distributions.....................................19
4.4 Supplements to Schedules and Financial Statements...............19
4.5 Confidentiality.................................................19
4.6 Public Announcements............................................19
4.7 SEC Matters.....................................................19
4.8 Stockholder Approval............................................20
4.9 CP Employees....................................................20
4.10 Further Assurances..............................................20
5. Covenants of CP.......................................................20
5.1 Regular Course of Business......................................20
5.2 Restricted Activities and Transactions..........................21
5.3 Dividends and Distributions.....................................22
5.4 Access to Records and Properties; Opportunity to Ask Questions..22
5.5 Supplements to Written Disclosures and Financial Statements.....22
5.6 Confidentiality.................................................22
5.7 Public Announcements............................................22
5.8 SEC Matters.....................................................22
5.9 Further Assurances..............................................23
6. Conditions to the Obligations of Net..................................23
6.1 Representations and Warranties True as of Closing...............23
6.2 Performance of Covenants........................................23
6.3 Litigation......................................................23
6.4 No Adverse Change...............................................23
6.5 Board of Directors and Stockholder Approval.....................23
6.6 Consents and Approvals..........................................24
6.7 Certificates....................................................24
6.8 Registration Statement Effective................................24
6.9 Opinion of Xxxxxxxx, Xxxxxxx & Xxxxxxx..........................24
6.10 Other Agreements................................................25
6.11 Opinion of Investment Banker....................................25
7. Conditions to the Obligations of CP...................................25
7.1 Representations and Warranties True as of Closing...............25
7.2 Performance of Covenants........................................25
7.3 Litigation......................................................25
7.4 No Adverse Change...............................................25
7.5 Stockholder Approval............................................26
7.6 Consents and Approvals..........................................26
7.7 Registration Statement Effective................................26
ii
7.8 Certificates....................................................26
7.9 Opinion of Proskauer Rose LLP...................................26
7.10 Other Agreements................................................27
7.11 Opinion of Investment Bankers...................................27
8. Indemnification and Other Agreements..................................27
8.1 Indemnification.................................................27
8.2 Agreements of Xxxxxx X. Xxxxx, Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx
and Xxxx Xxxxxx.................................................28
8.3 Tax Matters.....................................................29
9. Termination, Amendment and Waiver.....................................29
9.1 Termination.....................................................30
9.2 Effect of Termination...........................................30
9.3 Amendment; Action by CP.........................................31
10.1 Representations and Warranties..................................31
10.2 Enforcement of the Agreement....................................31
10.3 Expenses........................................................31
10.4 Validity........................................................31
10.5 Notices.........................................................32
10.6 Governing Law...................................................33
10.7 Headings........................................................33
10.8 Parties in Interest.............................................33
10.9 Counterparts....................................................33
10.10 Certain Definitions.............................................33
10.11 Entire Agreement................................................35
iii
