AGREEMENT AND PLAN OF REORGANIZATION
by and between
TERRA NETWORKS, S.A.
and
LYCOS, INC.
Dated as of May 16, 2000
TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF REORGANIZATION
ARTICLE I
THE REINCORPORATION MERGER
1.1 The Reincorporation Merger...................................... 1
1.2 Reincorporation Effective Time.................................. 2
1.3 Effects of the Reincorporation Merger........................... 2
1.4 Conversion of Lycos Common Stock................................ 2
1.5 Options......................................................... 2
1.6 Articles of Incorporation....................................... 3
1.7 ByLaws.......................................................... 3
1.8 Tax and Accounting Consequences................................. 3
1.9 Board of Directors; Management.................................. 3
ARTICLE II
THE SHARE EXCHANGE
2.1 The Share Exchange.............................................. 3
2.2 Exchange Effective Time......................................... 4
2.3 Effects of the Share Exchange................................... 4
2.4 Conversion of Lycos Virginia Common Stock....................... 4
2.5 Terra Capital Stock............................................. 5
2.6 Options......................................................... 5
2.7 Tax and Accounting Consequences................................. 6
ARTICLE III
EXCHANGE OF SHARES
3.1 Terra to Make Shares Available.................................. 6
3.2 Exchange of Shares.............................................. 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LYCOS
4.1 Corporate Organization.......................................... 8
4.2 Capitalization.................................................. 9
4.3 Authority; No Violation......................................... 10
4.4 Consents and Approvals.......................................... 11
4.5 SEC Reports and Financial Statements............................ 11
4.6 Broker's Fees................................................... 12
4.7 Absence of Certain Changes or Events............................ 13
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4.8 Legal Proceedings............................................... 13
4.9 Taxes and Tax Returns........................................... 13
4.10 Employees....................................................... 14
4.11 Compliance with Applicable Law.................................. 16
4.12 Certain Contracts............................................... 16
4.13 Environmental Liability......................................... 17
4.14 State Takeover Laws............................................. 17
4.15 Intellectual Property; Proprietary Rights; Employee Restrictions 17
4.16 Insurance....................................................... 19
4.17 Opinions........................................................ 19
4.18 Lycos Information............................................... 19
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF TERRA
5.1 Corporate Organization.......................................... 19
5.2 Capitalization.................................................. 20
5.3 Authority; No Violation......................................... 21
5.4 Consents and Approvals.......................................... 22
5.5 SEC Reports and Financial Statements............................ 22
5.6 Broker's Fees................................................... 23
5.7 Absence of Certain Changes or Events............................ 23
5.8 Legal Proceedings............................................... 24
5.9 Taxes and Tax Returns........................................... 24
5.10 Employees....................................................... 25
5.11 Compliance with Applicable Law.................................. 25
5.12 Certain Contracts............................................... 25
5.13 Environmental Liability......................................... 26
5.14 Intellectual Property; Proprietary Rights; Employee Restrictions 27
5.15 Insurance....................................................... 28
5.16 Opinions........................................................ 28
5.17 Terra Information............................................... 28
5.18 Telefonica Ownership............................................ 29
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Conduct of Businesses Prior to the Effective Time............... 29
6.2 Lycos Forbearances.............................................. 29
6.3 Terra Forbearances.............................................. 31
6.4 Taxes........................................................... 32
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ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Regulatory Matters.............................................. 32
7.2 Access to Information........................................... 33
7.3 Shareholder and Terra Board Approvals........................... 34
7.4 Affiliates...................................................... 35
7.5 Stock Exchange Listing.......................................... 35
7.6 Employee Benefit Plans.......................................... 35
7.7 Indemnification; Directors' and Officers' Insurance............. 36
7.8 Additional Agreements........................................... 36
7.9 Advice of Changes............................................... 37
7.10 Exemption from Liability Under Section 16(b).................... 37
7.11 Reasonable Best Efforts......................................... 37
7.12 Acquisition Proposals........................................... 37
7.13 Board of Directors.............................................. 88
7.14 Capital Increase................................................ 38
7.15 Transfer Taxes.................................................. 39
7.16 Lycos Virginia.................................................. 39
7.17 Employee Stock Purchase Plan.................................... 39
7.18 State Takeover Laws............................................. 39
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation to Effect the
Reincorporation Merger and the Share Exchange................. 39
8.2 Conditions to Obligations of Lycos.............................. 41
8.3 Conditions to Obligations of Terra.............................. 41
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination..................................................... 42
9.2 Effect of Termination........................................... 43
9.3 Amendment....................................................... 44
9.4 Extension; Waiver............................................... 44
ARTICLE X
GENERAL PROVISIONS
10.1 Closing......................................................... 45
10.2 Nonsurvival of Representations, Warranties and Agreements....... 45
10.3 Expenses........................................................ 45
10.4 Notices......................................................... 45
10.5 Interpretation.................................................. 47
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10.6 Counterparts.................................................... 47
10.7 Entire Agreement................................................ 47
10.8 Governing Law................................................... 47
10.9 Publicity....................................................... 47
10.10 Assignment; Third Party Beneficiaries........................... 47
10.11 Submission to Jurisdiction; Waivers; Consent to Service of
Process....................................................... 47
10.12 Enforcement of Agreement........................................ 48
10.13 Waiver of Jury Trial............................................ 48
Exhibit 6.5 - Form of Affiliate Letter Addressed to Terra
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INDEX OF DEFINED TERMS
Section Page No.
Acquisition Proposal................ 7.12 38
Agreement........................... Recitals 1
Authorized Agent.................... 10.11(c) 48
Board Reports....................... 7.1(b) 32
CERCLA.............................. 4.13 17
Closing............................. 10.1 45
Closing Date........................ 10.1 40
Code................................ Recitals 1
Commercial Registry................. 2.3 4
Confidentiality Agreement........... 7.2(b) 34
Depositary.......................... 3.1 6
Depositary Agreement................ 2.4 5
DGCL................................ 1.1 1
ERISA............................... 4.10(a) 15
ESPP................................ 7.17 39
Exchange Act........................ 4.5(b) 12
Exchange Agent...................... 3.1 6
Exchange Effective Time............. 2.2 4
Exchange Fund....................... 3.1 6
Exchange Ratio...................... 2.4 4
F-4................................. 4.4 11
Governmental Entity................. 4.4 11
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HSR Act............................. 4.4 11
IRS................................. 4.9(a) 14
Liens............................... 4.2(b) 6
Lycos............................... Recitals 1
Lycos 1999 10-K..................... 4.5(b) 12
Lycos Benefit Plans................. 4.10(a) 15
Lycos Board......................... Recitals 1
Lycos Capital Stock................. 4.2(a) 9
Lycos Common Certificate............ 1.4(b) 2
Lycos Common Stock.................. 1.4(a) 2
Lycos Contract...................... 4.12(a) 17
Lycos Disclosure Schedule........... 4.1 8
Lycos DRIP.......................... 4.2(a) 19
Lycos Employees..................... 7.6(a) 35
Lycos ERISA Affiliate............... 4.10(a) 15
Lycos ESPP.......................... 4.2(a) 16
Lycos Insiders...................... 7.10 37
Lycos Preferred Stock............... 4.2(a) 9
Lycos Rights........................ 4.2(a) 9
Lycos SEC Reports................... 4.5(a) 12
Lycos Stock Plans................... 4.2(a) 10
Lycos Stockholder Approval.......... 4.3(a) 10
Lycos Stockholder Meeting........... 7.3(a) 34
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Lycos Virginia...................... Recitals 1
Lycos Virginia Articles............. 1.6 3
Lycos Virginia By-Laws.............. 1.7 3
Lycos Virginia Certificate.......... 2.1 4
Lycos Virginia Common Certificates.. 1.4(b) 2
Lycos Virginia Common Stock......... 1.4(a) 2
Material Adverse Effect............. 4.1(a) 9
New Benefit Plans................... 7.6(a) 31
Nasdaq.............................. 5.4 22
NSEC................................ 5.4 22
Prospectus.......................... 5.4 22
Proxy Statement..................... 4.4 11
Reincorporation Effective Time...... 1.2 2
Reincorporation Merger.............. Recitals 1
Representatives..................... 7.12 34
Requisite Regulatory Approvals...... 8.1(c) 35
Restraints.......................... 8.1(e) 40
SCL................................. 2.1 4
SCME................................ 2.4(a) 4
Section 16 Information.............. 7.10 37
Securities Act...................... 4.5(a) 12
Share Exchange...................... Recitals 1
Shareholder Transfer Tax............ 7.15 35
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Spanish GAAP........................ 5.5(b) 23
Subsidiary.......................... 4.1(a) 9
Surviving Corporation............... 1.1 1
Tax................................. 4.9(c) 14
Taxes............................... 4.9(c) 14
Termination Fee..................... 9.2(b) 38
Terra............................... Recitals 1
Terra ADSs.......................... 2.4 4
Terra Articles...................... 5.1(a) 20
Terra Average Price................. 2.4(a) 4
Terra Board......................... Recitals 1
Terra By-Laws....................... 5.1(a 20
Terra Capital Stock................. 5.2(a) 00
Xxxxx Xxxxxx Stock.................. 1.4(a) 2
Terra Contract...................... 5.12(a) 26
Terra Disclosure Schedule........... Article V 19
Terra Employment Benefit Plans...... 5.10 25
Terra Registration Statement........ 5.5(b) 23
Terra Rights........................ 5.2(a) 20
Terra Rights Agreement.............. 1.4(a) 3
Terra SEC Reports................... 5.5(a) 22
Terra Shareholder Approval.......... 5.3(c) 34
Terra Shares........................ 5.2(a) 00
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Xxxxx Stock Plans................... 5.2(a) 20
Transfer Tax........................ 7.15 39
VSCA................................ Recitals 1
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of May 16, 2000 (this
"Agreement"), by and between Terra Networks, S.A., a company organized under
the laws of the Kingdom of Spain ("Terra"), and Lycos, Inc., a Delaware
corporation ("Lycos").
W I T N E S S E T H :
WHEREAS, the Boards of Directors of each of Terra (the "Terra
Board") and Lycos (the "Lycos Board") have approved the strategic business
combination transaction provided for herein in which Lycos will, subject to
the terms and conditions set forth herein, merge with and into a newly formed,
wholly owned subsidiary of Lycos incorporated in Virginia ("Lycos Virginia"),
with Lycos Virginia surviving such merger (the "Reincorporation Merger"),
which shall be immediately followed by a statutory share exchange pursuant to
the Virginia Stock Corporation Act (the "VSCA") such that Lycos will become a
wholly owned subsidiary of Terra (the "Share Exchange" and, together with the
Reincorporation Merger, the "Reorganization");
WHEREAS, it is the intent of the parties hereto that, for U.S.
federal income tax purposes, each of the Reincorporation Merger and the Share
Exchange shall constitute a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Sections 354 and 361 of the Code;
WHEREAS, for U.S. federal income tax purposes, it is intended that
the Share Exchange result in no gain recognition to the shareholders of Lycos
Virginia pursuant to Section 367(a) of the Code; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Reorganization and also to
prescribe certain conditions to the Reorganization;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to
be legally bound hereby, the parties agree as follows:
ARTICLE I
THE REINCORPORATION MERGER
1.1 The Reincorporation Merger. Subject to the terms and
conditions of this Agreement, in accordance with the General Corporation Law
of Delaware (the "DGCL") and the VSCA, at the Reincorporation Effective Time
(as defined in Section 1.2), Lycos shall merge with and into Lycos Virginia.
Lycos Virginia shall be the surviving corporation (the "Surviving
Corporation") in the Reincorporation Merger and shall continue its corporate
existence under the laws of the Commonwealth of Virginia. Upon consummation of
the Reincorporation Merger, the separate corporate existence of Lycos shall
terminate.
1.2 Reincorporation Effective Time. The Reincorporation Merger
shall become effective in accordance with the Plan of Merger set forth in
Annex B hereto on the Closing Date (as defined in Section 10.1) at the time
that is specified in the certificate of merger relating to the Reincorporation
Merger issued by the Virginia State Corporation Commission (the
"Reincorporation Effective Time").
1.3 Effects of the Reincorporation Merger. At and after the
Reincorporation Effective Time, the Reincorporation Merger shall have the
effects set forth in the DGCL and the VSCA.
1.4 Conversion of Lycos Common Stock. (a) At the
Reincorporation Effective Time, by virtue of the Reincorporation Merger and
without any action on the part of Lycos, Lycos Virginia or any holder of
common stock, par value $0.01 per share, of Lycos ("Lycos Common Stock"), each
share of Lycos Common Stock issued and outstanding immediately prior to the
Reincorporation Effective Time shall be converted into one share of common
stock, par value $0.01 per share, of Lycos Virginia ("Lycos Virginia Common
Stock").
(b) All of the shares of Lycos Common Stock converted into
shares of Lycos Virginia Common Stock pursuant to Section 1.4(a) shall no
longer be outstanding and shall automatically be canceled and shall cease to
exist as of the Reincorporation Effective Time, and each certificate
previously representing any such shares ("Lycos Common Certificate") shall
thereafter represent, without the requirement of any exchange thereof, that
number of shares of Lycos Virginia Common Stock into which such shares of
Lycos Common Stock represented by such Lycos Common Certificate have been
converted pursuant to Section 1.4(a) (such certificates following the
Reincorporation Merger, the "Lycos Virginia Common Certificates").
1.5 Options. Lycos and Lycos Virginia shall take all requisite
action such that, at the Reincorporation Effective Time, each option granted
by Lycos to purchase shares of Lycos Common Stock that is outstanding and
unexercised immediately prior thereto shall cease to represent a right to
acquire shares of Lycos Common Stock and shall be converted automatically into
an option to purchase a number of shares of Lycos Virginia Common Stock equal
to the number of shares of Lycos Common Stock subject to such option
immediately prior to the Reincorporation Effective Time at an exercise price
per share of Lycos Virginia Common Stock equal to the exercise price per share
of Lycos Common Stock in effect immediately prior to the Reincorporation
Effective Time and otherwise subject to the terms of the Lycos Stock Plans (as
defined in Section 4.2) under which such options were issued and the
agreements evidencing grants thereunder (including accelerated vesting
provisions under such agreements evidencing grants thereunder or under any
employment agreements between employees of Lycos and Lycos). The adjustment
provided herein with respect to any options that are "incentive stock options"
(as defined in Section 422 of the Code) shall be and is intended to be
effected in a manner which is consistent with Section 424(a) of the Code. The
duration and other terms of the new option shall be the same as the original
option except that all references to Lycos shall be deemed to be references to
Lycos Virginia. Notwithstanding anything to the contrary herein, each option
granted by Lycos to a non-employee director prior to the Reincorporation
Effective Time shall be fully vested, to the extent not already vested, as of
the Reincorporation Effective Time.
1.6 Articles of Incorporation. Subject to the terms and conditions
of
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this Agreement, at the Reincorporation Effective Time, the Articles of
Incorporation of Lycos Virginia (the "Lycos Virginia Articles") in effect
immediately prior to the Reincorporation Merger shall be shall be the Articles
of Incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable law (it being understood and agreed that the Lycos
Virginia Articles shall be substantially consistent with the Restated
Certificate of Incorporation of Lycos as in effect immediately prior to the
Reincorporation Effective Time with such changes as are required by the VSCA
and otherwise as proposed by Terra and not reasonably objected to by Lycos).
The Lycos Virginia Articles shall provide that authorization of a share
exchange pursuant to Section 13.1-718 of the VSCA shall require the approval
of a majority of all of the votes entitled to be cast on such matter by
holders of Lycos Virginia Common Stock.
1.7 ByLaws. Subject to the terms and conditions of this
Agreement, at the Reincorporation Effective Time, the Bylaws of Lycos Virginia
(the "Lycos Virginia By-Laws") in effect immediately prior to the
Reincorporation Merger shall be the Bylaws of the Surviving Corporation until
thereafter amended in accordance with applicable law (it being understood and
agreed that the Lycos Virginia By-Laws shall be substantially consistent with
the Restated By-Laws of Lycos as in effect immediately prior to the
Reincorporation Effective Time with such changes as are required by the VSCA
and otherwise as proposed by Terra and not reasonably objected to by Lycos).
1.8 Tax and Accounting Consequences. It is intended that the
Reincorporation Merger shall constitute a "reorganization" within the meaning
of Section 368(a) of the Code and that this Agreement shall constitute a "plan
of reorganization" for the purposes of Sections 354 and 361 of the Code.
1.9 Board of Directors; Management. The directors and officers
of Lycos immediately prior to the Reincorporation Effective Time shall be the
directors and officers of Lycos Virginia, each to hold office in accordance
with the Lycos Virginia Articles until their respective successors are duly
elected or appointed and qualified.
ARTICLE II
THE SHARE EXCHANGE
2.1 The Share Exchange. Subject to the terms and conditions of
this Agreement, in accordance with the VSCA and the Spanish Corporation Law of
1989 (Texto Refundido de xx Xxx de Sociedades Anonimas) (the "SCL"), at the
Exchange Effective Time, pursuant to the provisions of Section 13.1-172 of the
VSCA, Lycos Virginia shall become a wholly owned subsidiary of Terra through
the exchange of each outstanding Tiger Share (as defined in Section 5.2) (such
shares to be issued in the form of Terra ADSs (as defined in Section 2.4)
except as otherwise provided in Section 2.4) determined in accordance with
Section 2.4(a). The separate corporate existence of each of Lycos Virginia and
Terra shall continue following the Share Exchange.
2.2 Exchange Effective Time. The Share Exchange shall become
effective (the "Exchange Effective Time") in accordance with the Plan of Share
Exchange set
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forth in Annex A hereto on the Closing Date at the time that is
specified in the certificate of share exchange relating to the Share Exchange
issued by the Virginia State Corporation Commission and that Terra receives
the Lycos Virginia Certificate in exchange for the Terra Shares being issued
pursuant to Section 2.3(a). As used in this Agreement, "Lycos Virginia
Certificate" shall mean the certificate representing the shares of Lycos
Virginia Common Stock being received by Terra pursuant to the terms hereof.
2.3 Effects of the Share Exchange. At and after the Exchange
Effective Time, the Share Exchange shall have the effects set forth in the
VSCA. The Share Exchange shall be effected in accordance with Articles 153(a)
and 155 of the SCL by the Terra Board's execution of the approval of the
shareholders of Terra to increase the share capital of Terra against a
contribution in kind (Aumento con aportaciones no dinerarias) and shall be
registered pursuant to the Deed of Capital Increase with the Commercial
Registry (Registro Mercantil) for the Province of Madrid (the "Commercial
Registry"). The Deed of Capital Increase shall be delivered to the Settlement
and Clearing System, for the new shares to be registered in the name of the
Depositary (as defined below), and to the Spanish Stock Exchange, for the
admission authorization of the Terra Shares to be listed.
2.4 Conversion of Lycos Virginia Common Stock. Subject to
Section 3.2(e), at the Exchange Effective Time, by virtue of the Share
Exchange and without any action on the part of Lycos Virginia or any holder of
Lycos Virginia Common Stock, each share of Lycos Virginia Common Stock issued
and outstanding immediately prior to the Exchange Effective Time shall be
exchanged for that number of shares of Terra Capital Stock (as defined in
Section 5.2) determined by dividing (i) $97.55 by (ii) the average closing
price (rounded to the nearest thousandth of a dollar, or if there shall not be
a nearest thousandth, the next higher thousandth) of Terra Shares (the "Terra
Average Price") on the Continuous Market Exchange (Systema de Interconexion
Bursatil-Xxxxxxx Continuo) (the "SCME") for the ten full SCME trading days
ending on the tenth SCME trading day prior to the Closing Date (excluding the
Closing Date), each closing price expressed in U.S. dollars using the noon
buying rate of Euro for U.S. dollars as reported by the U.S. Federal Reserve
as of each day on which such average closing price is measured (such quotient,
as it may be adjusted as provided herein, the "Exchange Ratio"); provided,
however, that if the Terra Average Price is equal to or greater than $68.06,
the Exchange Ratio shall be 1.433, and if the Terra Average Price is equal to
or less than $45.37, the Exchange Ratio as shall be 2.150. The Terra Shares to
be issued in exchange for the shares of Lycos Virginia Common Stock exchanged
hereunder shall be registered in the name of the Depositary by the Settlement
and Clearing System and then delivered (x) in the form of American depositary
shares representing Terra Shares ("Terra ADSs"), and such Terra ADSs shall be
issued in accordance with the Depositary Agreement, dated as of November 15,
1999, by and between Terra, Citibank, N.A., as depositary, and the holders of
Terra ADSs (as such agreement may be amended to deposit the Terra Shares being
issued pursuant hereto and to deliver the Terra ADSs being delivered hereto)
or a depositary agreement to be entered into after the date of this Agreement
in form and substance not reasonably objected to by Lycos (the "Depositary
Agreement") or (y) if and to the extent elected by any holder in the manner
provided in Section 3.2(b), in the form of Terra Shares, in account entry
form, rather than Terra ADSs. Following the Exchange Effective Time, each
Lycos Virginia Common Certificate exchanged for Terra Shares pursuant to this
Section 2.4 shall cease to represent shares of Lycos Virginia Common Stock and
shall thereafter represent only the right to receive (i) a receipt issued in
accordance with the Depositary Agreement representing the number of whole
Terra ADSs or such number of Terra Shares in account entry form and (ii) cash
in lieu of fractional
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Terra ADSs or Terra Shares, in each case, into which the shares of Lycos
Virginia Common Stock represented by such Lycos Virginia Common Certificate
have been converted pursuant to this Section 2.4 and Section 3.2(e),
respectively. Certificates previously representing shares of Lycos Virginia
Common Stock shall be exchanged for receipts representing whole Terra ADSs or
Terra Shares in account entry form and cash in lieu of fractional Terra ADSs
Terra Shares issued and paid in consideration therefor upon the surrender of
such Lycos Virginia Common Certificates in accordance with Section 3.2,
without any interest thereon. If, prior to the Exchange Effective Time, the
outstanding shares of Terra Capital Stock, Lycos Common Stock or Lycos
Virginia Common Stock shall have been changed into or exchanged for a
different number or kind of shares or securities as a result of a merger,
consolidation or other business combination, of a reorganization,
recapitalization or reclassification, or of a stock dividend, stock split,
reverse stock split or other similar change in capitalization, an appropriate
and proportionate adjustment shall be made to the Exchange Ratio to provide to
the stockholders of Lycos the same economic effect, including any premiums, as
contemplated by this Agreement prior to such event.
2.5 Terra Capital Stock. At and after the Effective Time, each
share of Terra Capital Stock issued and outstanding immediately prior to the
Closing Date shall remain an issued and outstanding share of Terra Capital
Stock and shall not be affected by the Share Exchange.
2.6 Options. (a) At the Exchange Effective Time, each option
granted by Lycos Virginia to purchase shares of Lycos Virginia Common Stock
that is outstanding and unexercised immediately prior thereto shall cease to
represent a right to acquire shares of Lycos Virginia Common Stock and shall
be converted automatically into an option to purchase Terra ADSs in an amount
and at an exercise price determined as provided below (and otherwise subject
to the terms of the Lycos Stock Plans and the agreements evidencing grants
thereunder):
(b) The number of Terra ADSs to be subject to the new option
shall be equal to the product of the number of shares of Lycos Virginia Common
Stock subject to the original option and the Exchange Ratio, provided that any
fractional Terra ADS resulting from such multiplication shall be rounded to
the nearest whole share; and
(c) The exercise price per Terra ADS under the new option shall
be equal to the exercise price per share of Lycos Virginia Common Stock under
the original option divided by the Exchange Ratio, provided that such exercise
price shall be rounded to the nearest whole cent.
(d) The adjustment provided herein with respect to any options
that are "incentive stock options" (as defined in Section 422 of the Code)
shall be and is intended to be effected in a manner that is consistent with
Section 424(a) of the Code. The duration and other terms of the new option
shall be the same as the original option, except that all references to Lycos
or Lycos Virginia shall be deemed to be references to Terra.
2.7 Tax and Accounting Consequences. It is intended that the
Share Exchange shall constitute a "reorganization" within the meaning of
Section 368(a) of the Code and not result in gain recognition to the
shareholders of Lycos Virginia pursuant to Section 367(a) of the Code, and
that this Agreement shall constitute a "plan of reorganization" for the
purposes of Sections 354 and 361 of the Code.
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ARTICLE III
EXCHANGE OF SHARES
3.1 Terra to Make Shares Available. Promptly following the
Exchange Effective Time, Terra shall provide (i) to Citibank, N.A., as
depositary (or to such other depositary as Terra may select and which shall
not be reasonably objected to by Lycos) (the "Depositary"), the Terra Shares
being issued in the form of Terra ADSs in accordance with this Article III and
cash in lieu of any fractional Terra Shares, and the Depositary shall deposit
with a bank or trust company appointed by Lycos (which shall pay all fees of
such bank or trust company) and not reasonably objected to by Terra (the
"Exchange Agent"), for the benefit of the holders of Lycos Virginia Common
Certificates, for exchange in accordance with this Article III, receipts
representing the Terra ADSs, and cash in lieu of any fractional Terra ADSs and
(ii) to the Exchange Agent, the Terra Shares being issued in account entry
form in accordance with this Article III and cash in lieu of any fractional
Terra Shares, for the benefit of the holders of Lycos Virginia Common
Certificates, for exchange in accordance with this Article III, the Terra
Shares in account entry form and cash in lieu of any fractional Terra Shares
(such cash, receipts for Terra ADSs and Terra Shares in account entry form,
together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund"), to be issued pursuant to
Section 2.3 and paid pursuant to Section 3.2(a) in exchange for outstanding
shares of Lycos Virginia Common Stock.
3.2 Exchange of Shares. (a) As soon as practicable after the
Exchange Effective Time, and in no event later than five business days
thereafter, the Exchange Agent shall mail to each holder of record of one or
more Lycos Virginia Common Certificates (i) a letter of transmittal, which
shall specify that delivery shall be effected, and risk of loss and title to
the Lycos Virginia Common Certificates shall pass, only upon delivery of the
Lycos Virginia Common Certificates to the Exchange Agent), and which letter of
transmittal shall include a form of election by which each such holder may
elect to receive all or any part of the Terra ADSs to which such holder is
entitled in the form of Terra Shares in account entry form, rather than in the
form of Terra ADSs (such Terra Shares or Terra ADSs to be received by a holder
pursuant to this Agreement being referred to as "Terra Stock") and (ii)
instructions for use in effecting the surrender of the Lycos Virginia Common
Certificates i exchange for receipts representing the Terra ADSs or Terra
Shares in account entry form and any cash in lieu of fractional shares into
which the shares of Lycos Virginia Common Stock represented by such Lycos
Virginia Common Certificate or Lycos Virginia Common Certificates shall have
been converted pursuant to this Agreement. Upon proper surrender of a Lycos
Virginia Common Certificate or Lycos Virginia Common Certificates for exchange
and cancellation to the Exchange Agent, together with such properly completed
letter of transmittal, duly executed, the holder of such Lycos Virginia Common
Certificate or Lycos Virginia Common Certificates shall be entitled to receive
in exchange therefor, as applicable, (i) a receipt representing that number of
whole Terra ADSs or Terra Shares in account entry form to which such holder of
Lycos Virginia Common Stock shall have become entitled pursuant to the
provisions of Article II and (ii) a check representing the amount of any cash
in lieu of fractional shares that suc holder has the right to receive in
respect of the Lycos Virginia Common Certificate or Lycos Virginia Common
Certificates surrendered pursuant to the provisions of this Article III. No
interest will be paid or accrued on any cash in lieu of fractional shares or
on any unpaid dividends and distributions payable to holders of Certificates.
Upon proper surrender of a Lycos Virginia Common Certificate or Lycos Virginia
Common Certificates for exchange and cancellation to
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the Exchange Agent, the Exchange Agent shall contribute such certificates to
Terra for Terra's Board of Directors to execute the Capital Increase against
such contribution in kind. The Deed of Capital Increase shall be registered
pursuant to the Deed of Capital Increase with the Commercial Registry and
delivered to the Settlement and Clearing System, for the new shares to be
registered in the name of the Exchange Agent who will then issue Terra Stock.
(b) No dividends or other distributions declared with respect
to Terra Stock shall be paid to the holder of any unsurrendered Lycos Virginia
Common Certificate until the holder thereof shall surrender such Lycos
Virginia Common Certificate in accordance with this Article III. After the
surrender of a Lycos Virginia Common Certificate in accordance with this
Article III, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, that
theretofore had become payable with respect to Terra Stock represented by such
Certificate.
(c) If any receipt representing Terra ADSs or Terra Shares in
account entry form are to be issued in a name other than that in which the
Lycos Virginia Common Certificate or Lycos Virginia Common Certificates
surrendered in exchange therefor is or are registered, it shall be a condition
of the issuance thereof that the Lycos Virginia Common Certificate or Lycos
Virginia Common Certificates so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer, and that the person requesting such exchange shall pay to
the Exchange Agent in advance any transfer or other taxes required by reason
of the issuance of a receipt representing Terra ADSs or Terra Shares in
account entry form in any name other than that of the registered holder of the
Lycos Virginia Common Certificate or Lycos Virginia Common Certificates
surrendered, or required for any other reason, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) After the Exchange Effective Time, there shall be no
transfers on the stock transfer books of Lycos Virginia of the shares of Lycos
Virginia Common Stock that were issued and outstanding immediately prior to
the Exchange Effective Time. If, after the Exchange Effective Time, Lycos
Virginia Common Certificate are presented for transfer to the Exchange Agent,
they shall be cancelled and exchanged for receipts representing Terra ADSs or
Terra Shares in account entry form as provided in this Article III.
(e) Notwithstanding anything to the contrary contained herein,
no receipts or scrip representing fractional Terra ADS or Terra Shares in
account entry form shall be issued upon the surrender for exchange of Lycos
Virginia Common Certificates, no dividend or distribution with respect to
Terra Stock shall be payable on or with respect to any fractional share, and
such fractional share interests shall not entitle the owner thereof to vote or
to any other rights of a shareholder of Terra. In lieu of the issuance of any
such fractional share, Terra shall pay to each former shareholder of Lycos
Virginia who otherwise would be entitled to receive such fractional share an
amount in cash determined by multiplying (i) the Terra Average Price by (ii)
the fraction of a Terra ADS or Terra Share (rounded to the nearest thousandth
when expressed in decimal form) to which such holder would otherwise be
entitled to receive pursuant to Section 2.3.
(f) Any portion of the Exchange Fund that remains unclaimed by
the shareholders of Lycos Virginia for 12 months after the Exchange Effective
Time shall be paid to Terra. Any former shareholders of Lycos Virginia who
have not theretofore complied with this
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Article III shall thereafter look only to Terra for payment of the Terra
Stock, cash in lieu of any fractional shares and any unpaid dividends and
distributions on the Terra Stock deliverable in respect of each share of Lycos
Virginia Common Stock, as the case may be, such shareholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of Lycos, Lycos Virginia, Terra,
the Exchange Agent or any other person shall be liable to any former holder of
shares of Lycos Virginia Common Stock for any amount delivered in good faith
to a public official pursuant to applicable abandoned property, escheat or
similar laws.
(g) In the event any Lycos Virginia Common Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Lycos Virginia Common Certificate to be lost,
stolen or destroyed and, if reasonably required by Terra, the posting by such
person of a bond in such amount as Terra may determine is reasonably necessary
as indemnity against any claim that may be made against it with respect to
such Lycos Virginia Common Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Lycos Virginia Common Certificate
the receipt representing Terra ADSs or Terra Shares in account entry form as
provided pursuant to this Agreement and any cash in lieu of fractional shares
deliverable in respect thereof pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LYCOS
Except as disclosed in the Lycos disclosure schedule delivered to
Terra concurrently herewith (the "Lycos Disclosure Schedule"), Lycos hereby
represents and warrants to Terra as follows:
4.1 Corporate Organization. (a) Lycos is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Lycos has the corporate power and authority to own or lease all
of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not and would not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect (as defined
below) on Lycos. As used in this Agreement, the term "Material Adverse Effect"
means, with respect to Lycos, Terra or the Surviving Corporation, as the case
may be, a material adverse effect on (i) the business, results of operations
or financial condition of such party and its Subsidiaries taken as a whole or
(ii) the ability of such party to timely consummate the transactions
contemplated hereby; provided, however, that Material Adverse Effect shall not
be deemed to include the impact of any change, event, occurrence, condition or
effect relating to (a) the United States, Spanish or global economy or
securities markets in general, (b) the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby or the
announcement thereof or (c) such party's industry in general and not
specifically relating to Lycos or Terra, as the case may be, or its respective
Subsidiaries (as defined below). As used in this Agreement, the word
"Subsidiary," when used with respect to any party, means any corporation,
partnership, limited liability company or other organization, whether
incorporated or unincorporated, which is consolidated with such party for
financial reporting
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purposes. True and complete copies of the Lycos Certificate and the Lycos
By-Laws, in each case, as in effect as of the date of this Agreement, have
previously been made available by Lycos to Terra.
(b) Each Lycos Subsidiary (i) is duly organized and validly
existing under the laws of its jurisdiction of organization, (ii) is duly
qualified to do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of property
or the conduct of its business requires it to be so qualified and in which the
failure to be so qualified would have a Material Adverse Effect on Lycos and
(iii) has all requisite corporate power and authority to own or lease its
properties and assets and to carry on its business as now conducted.
4.2 Capitalization. (a) The authorized capital stock of Lycos
consists of (i) 300,000,000 shares of Lycos Common Stock, of which, as of May
15, 2000, 112,192,815 shares were issued and outstanding and 2,024,799 shares
were held in treasury, and (ii) 5,000,000 shares of preferred stock, par value
$0.01 per share (the "Lycos Preferred Stock" and together with the Lycos
Common Stock, the "Lycos Capital Stock"), of which no shares are issued or
outstanding as of the date of this Agreement. All of the issued and
outstanding shares of Lycos Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with
no personal liability attaching to the ownership thereof. As of the date of
this Agreement, except as described in this Section 4.2(a) and except pursuant
to the terms of options issued pursuant to the Lycos Stock Plans (as defined
below), Lycos does not have and is not bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling
for the purchase or issuance of any shares of Lycos Capital Stock or any other
equity securities of Lycos or any securities representing the right to
purchase or otherwise receive any shares of Lycos Capital Stock (collectively,
the "Lycos Rights"). As of the date of this Agreement Lycos had outstanding
warrants providing for the issuance of 18,000 shares of Lycos Common Stock. As
of May 15, 2000, no shares of Lycos Capital Stock were reserved for issuance,
except for 913,595 shares of Lycos Common Stock reserved for issuance in
connection with the Lycos, Inc. 1996 Employee Stock Purchase Plan (the "Lycos
ESPP") and 14,514,427 shares of Lycos Common Stock reserved for issuance upon
the exercise of stock options pursuant to the Lycos, Inc. 1995 Stock Option
Plan, Lycos, Inc. 1996 Stock Option Plan, Lycos, Inc. 2000 Stock Option Plan,
Lycos, Inc. 1996 Non-Employee Director Stock Option Plan, 1995 Tripod Stock
Option Plan, 1995 WiseWire Stock Option Plan, 1996 WiseWire Stock Option Plan
or 1995 WhoWhere? Stock Option Plan (the "Lycos Stock Plans"). From May 15,
2000 to and including the date of this Agreement, Lycos has not issued any
shares of its capital stock or any securities convertible into or exercisable
or exchangeable for any shares of its capital stock. As of the date of this
Agreement, there are no outstanding bonds, debentures, notes or other
indebtedness or other securities of Lycos having the right to vote (or
convertible into, or exchangeable or exercisable for, securities having the
right to vote) on any matters on which stockholders of Lycos may vote. There
are no voting, sale, transfer or other similar agreements to which Lycos is a
party with respect to the Lycos Capital Stock or any other securities of Lycos
that are convertible into or exchangeable or exercisable for shares of the
Lycos Capital Stock. In any event, the maximum number of shares of Lycos
Virginia Common Stock that will be outstanding (on a fully diluted basis) at
the Exchange Effective Time shall be not more than 158,568,703.
(b) As of the date of this Agreement, Lycos owns, directly or
indirectly, all of the issued and outstanding shares of capital stock and
other equity ownership
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interests of each of the Lycos Subsidiaries, free and clear of any liens,
pledges, charges, encumbrances and security interests whatsoever ("Liens"),
and all of such shares and equity ownership interests are duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. No
Lycos Subsidiary has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other equity
security of such Subsidiary. There are no voting, sale, transfer or other
similar agreements to which any Lycos Subsidiary is a party with respect to
its capital stock or any other securities of it that are convertible or
exchangeable into or exercisable for shares of the capital stock of any Lycos
Subsidiary. Section 4.2(b) of the Lycos Disclosure Schedule sets forth a list
as of the date of this Agreement of all material investments of Lycos in
corporations, joint ventures, partnerships, limited liability companies and
other entities other than its Subsidiaries.
4.3 Authority; No Violation. (a) Lycos has full corporate
power and authority to execute and deliver this Agreement and upon receipt of
the Lycos Stockholder Approval (as defined below) will have full corporate
power and authority to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by
unanimous vote of the Board of Directors of Lycos. The Board of Directors of
Lycos has directed that this Agreement and the transactions contemplated
hereby be submitted to Lycos's stockholders for adoption at a special meeting
of such stockholders and, except for the adoption of this Agreement by the
affirmative vote of the holders of a majority of the outstanding shares of
Lycos Common Stock (the "Lycos Stockholder Approval"), no other corporate
proceedings on the part of Lycos are necessary to approve this Agreement and
to consummate the transaction contemplated hereby. This Agreement has been
duly and validly executed and delivered by Lycos and (assuming due
authorization, execution and delivery by Terra) constitutes a valid and
binding obligation of Lycos, enforceable against Lycos in accordance with its
terms.
(b) Neither the execution and delivery of this Agreement by
Lycos nor the consummation by Lycos of the transactions contemplated hereby,
nor compliance by Lycos with any of the terms or provisions hereof, will (i)
violate any provision of the Lycos Certificate or Lycos By-Laws or any
provision of any comparable organizational documents of any Lycos Subsidiary
(ii) assuming that the consents and approvals referred to in Section 4.4 are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Lycos, any of its
Subsidiaries or any of their respective properties or assets or (y) violate,
conflict with, result in a breach of any provision of or the loss of any
benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Lien upon any of the respective
properties or assets of Lycos or any of its Subsidiaries under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
Lycos or any of its Subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected, except (in the case
of clause (ii) above) for such violations, conflicts, breaches or defaults
which, either individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect on Lycos.
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4.4 Consents and Approvals. Except for (i) the filings
required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and the expiration or termination of any applicable
waiting period and the filing of a notification with the European Commission
under Council Regulation (EEC) No. 4064/89 or similar antitrust filings or
notifications in other jurisdictions, as applicable, (ii) the filing with the
Securities and Exchange Commission (the "SEC") of the proxy statement (the
"Proxy Statement") in definitive form relating to the special meeting of
Lycos's stockholders to be held in connection with this Agreement and the
transactions contemplated hereby and the filing and declaration of
effectiveness of the registration statement of Terra on Form F-4 (the "F-4")
in which the Proxy Statement will be included as a prospectus of Terra, and
any filings required under applicable state securities or "blue sky" laws,
(iii) the filing of the certificate of merger and other appropriate merger
documents as required by the DGCL and the filing of the articles of merger and
articles of share exchange and other appropriate merger and share exchange
documents required by the VSCA and the issuance by the Virginia State
Corporation Commission of the certificate of merger and certificate of
exchange pursuant to the VSCA and (iv) the Lycos Stockholder Approval, no
consents or approvals of or filings or registrations with any court,
administrative agency or commission or other governmental or regulatory
authority or instrumentality (each a "Governmental Entity"), or of or with any
third party, are necessary in connection with the execution and delivery by
Lycos of this Agreement and the consummation by Lycos of the transactions
contemplated hereby and compliance by Lycos with any of the provisions hereof
other than those the failure of which to obtain or make have not had and would
not reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect on Lycos.
4.5 SEC Reports and Financial Statements.
(a) Lycos and its subsidiaries have filed with the SEC all
forms, reports, schedules, registration statements and definitive proxy
statements required to be filed by them with the SEC since August 1, 1998 (as
amended since the time of their filing and prior to the date of this
Agreement, collectively, the "Lycos SEC Reports") and has heretofore made
available to Terra complete and correct copies of all such forms, reports,
schedules, registration statements, and proxy statements. As of their
respective dates, the Lycos SEC Reports complied in all material respects with
the requirements of the Securities Exchange Act of 1934, as amended, including
the rules and regulations of the SEC promulgated thereunder (the "Exchange
Act"), or the Securities Act of 1933, as amended, including the rules and
regulations of the SEC promulgated thereunder (the "Securities Act")
applicable, as the case may be, to such Lycos SEC Reports, and none of the
Lycos SEC Reports contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they
were made, not misleading.
(b) Lycos has previously made available to Terra copies of the
consolidated balance sheet of Lycos and its Subsidiaries as of July 31, for
each of the fiscal years 1997, 1998 and 1999, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
fiscal years 1997 through 1999, inclusive, as reported in Lycos's Annual
Report on Form 10-K for the fiscal year ended July 31, 1999 (the "Lycos 1999
10-K") filed with the SEC under the Exchange Act in each case accompanied by
the audit report of KPMG LLP, independent public accountants with respect to
Lycos. The July 31, 1999 consolidated balance sheet of Lycos (including the
related notes, where applicable) included in
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the Lycos 1999 10-K fairly presents in all material respects the consolidated
financial position of Lycos and its Subsidiaries as of the date thereof, and
the other financial statements referred to in this Section 4.5(b) (including
the related notes, where applicable) fairly present in all material respects
the results of the consolidated operations and changes in stockholders' equity
and cash flows of Lycos and its Subsidiaries for the respective fiscal periods
or as of the respective dates therein set forth; each of such statements
(including the related notes, where applicable) complies in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; and each of such statements
(including the related notes, where applicable) has been prepared in all
material respects in accordance with U.S. generally accepted accounting
principles ("U.S. GAAP") consistently applied during the periods involved,
except, in each case, as indicated in such statements or in the notes thereto.
Except as fully reflected or reserved against in the July 31, 1999
consolidated balance sheet of Lycos (including the related notes, where
applicable) included in the Lycos 1999 10-K, since July 31, 1999 through to
and including the date of this Agreement, neither Lycos nor any of its
subsidiaries has incurred any liabilities or obligations of any nature
whatsoever (absolute, accrued, fixed, contingent or otherwise), other than
liabilities incurred in the ordinary course of business consistent with past
practice since the date of such balance sheet and which have not had and would
not reasonably be expected to have a Material Adverse Effect on Lycos. The
books and records of Lycos and its Subsidiaries have been, and are being,
maintained in all material respects in accordance with U.S. GAAP and any other
applicable legal and accounting requirements and reflect only actual
transactions.
4.6 Broker's Fees. Neither Lycos nor any Lycos Subsidiary nor
any of their respective officers or directors has employed any broker or
finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of the transactions contemplated by this
Agreement, except Credit Suisse First Boston, whose fees and expenses will be
paid by Lycos.
4.7 Absence of Certain Changes or Events. (a) Except as
publicly disclosed in Lycos SEC Reports filed prior to the date hereof, since
July 31, 1999, no event or events have occurred that have had or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect on Lycos.
(b) Except as publicly disclosed in Lycos SEC Reports filed
prior to the date hereof, from July 31, 1999 to the date of this Agreement,
Lycos and its Subsidiaries have carried on their respective businesses in all
material respects in the ordinary course.
(c) From July 31, 1999 to the date of this Agreement, neither
Lycos nor any of its Subsidiaries has (i) except for normal increases for
employees (other than officers subject to the reporting requirements of
Section 16(a) of the Exchange Act) made in the ordinary course of business
consistent with past practice or as required by applicable law, increased the
wages, salaries, compensation, pension, or other fringe benefits or
perquisites payable to any executive officer, employee, or director from the
amount thereof in effect as of July 31, 1999, granted any severance or
termination pay, entered into any contract to make or grant any severance or
termination pay, or paid any bonus, in each case, other than the customary
year-end bonuses for fiscal 1998 and 1999 in amounts consistent with past
practice and other than agreements expressly contemplated by or permitted
under this Agreement, (ii) granted any stock appreciation rights or granted
any rights to acquire any shares of its capital stock to any executive
officer, director or employee, in each case, other than grants to employees
(other than
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officers subject to the reporting requirements of Section 16(a) of the
Exchange Act) made in the ordinary course of business consistent with past
practice under the Lycos Stock Plans and other than grants expressly
contemplated by or permitted under this Agreement or (iii) suffered any
strike, work stoppage, slow-down, or other labor disturbance.
4.8 Legal Proceedings. (a) Except as publicly disclosed in
Lycos SEC Reports filed prior to the date hereof, as of the date of this
Agreement, neither Lycos nor any of its Subsidiaries is a party to any, and
there are no pending or, to the best of Lycos's knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against Lycos or any of its
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement as to which, in any such case, there is a
reasonable probability of an adverse determination and which, if adversely
determined, either individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Lycos.
(b) As of the date of this Agreement, there is no injunction,
order, judgment, decree or regulatory restriction imposed upon Lycos, any of
its Subsidiaries or the assets of Lycos or any of its Subsidiaries that has
had, or would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on Lycos or the Surviving Corporation.
4.9 Taxes and Tax Returns. (a) Each of Lycos and its
Subsidiaries has duly filed all U.S. federal, state, local, and foreign
information returns and Tax returns required to be filed by it on or prior to
the date of this Agreement and has duly paid or made provisions for the
payment of all Taxes which have been incurred by it or are due from it to U.S.
federal, state, local, and foreign taxing authorities on or prior to the date
of this Agreement (including, without limitation, if and to the extent
applicable, those due in respect of its properties, income, business, capital
stock, franchises, licenses, sales and payrolls) other than (i) Taxes which
are not yet delinquent or are being contested in good faith and have not been
finally determined, or (ii) information returns, Tax returns, Taxes or other
governmental charges as to which the failure to file, pay or make provision
for would not reasonably be expected to, either individually or in the
aggregate, have a Material Adverse Effect on Lycos. The federal income Tax
returns of Lycos and its Subsidiaries are being examined by the Internal
Revenue Service (the "IRS") for the fiscal years ended on July 31, 1996, 1997
and 1998 and no liabilities with respect to deficiencies are reasonably
expected to be asserted as a result of such examination other than
deficiencies that would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect on Lycos. To
Lycos's knowledge, there are no material disputes pending with respect to, or
claims asserted for, Taxes or assessments upon Lycos or any of its
Subsidiaries for which Lycos does not have adequate reserves other than
disputes, claims, assessments or inadequacies that would not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect on Lycos.
(b) Except for actions expressly contemplated by Articles I,
II, III and VII of this Agreement, neither Lycos nor any of its Subsidiaries
has taken or agreed to take any action, or intends or plans to take any action
or knows of any agreement, plan or intention to take any action that is
reasonably likely to (i) prevent either of the Reincorporation Merger and the
Share Exchange from constituting a reorganization described in Section 368(a)
of the Code or (ii) result in gain recognition to the shareholders of Lycos
Virginia pursuant to Section 367(a) of the Code.
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(c) As used in this Agreement, the term "Tax" or "Taxes"
means all Spanish, U.S. federal, state, province, local, and foreign income,
excise, gross receipts, gross income, ad valorem, profits, gains, property,
capital, sales, transfer, use, value-added, payroll, employment, severance,
withholding, duties, intangibles, franchise, backup withholding, and other
taxes, charges, levies or like assessments together with all penalties and
additions to tax and interest thereon.
(d) No disallowance of a deduction under Section 162(m) of
the Code for employee remuneration of any amount paid or payable by Lycos or
any of its Subsidiaries under any contract, plan, program, arrangement or
understanding in effect prior to the Exchange Effective Time would be
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Lycos.
4.10 Employees. (a) The Lycos Disclosure Schedule sets forth
a true and complete list of each material employee or director benefit or
compensation plan, arrangement or agreement, and all material bonus,
incentive, deferred compensation, vacation, stock purchase, stock option,
severance, employment, change of control or fringe benefit plan, program or
agreement that is maintained, or contributed to, as of the date of this
Agreement (the "Lycos Benefit Plans") by Lycos, any of its Subsidiaries or by
any trade or business, whether or not incorporated (a "Lycos ERISA
Affiliate"), all of which together with Lycos would be deemed a "single
employer" within the meaning of Section 4001 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
(b) Lycos has heretofore made available to Terra true and
complete copies of each of the Lycos Benefit Plans and certain related
documents, including, but not limited to, (i) the actuarial report for such
Lycos Benefit Plan (if applicable) for each of the last two years, (ii) the
most recent annual report (Form 5500 Series) and accompanying schedule and
(iii) the most recent determination letter from the IRS (if applicable) for
such Lycos Benefit Plan.
(c) Except as have not or would not reasonably be expected to
result, individually or in the aggregate, in a Material Adverse Effect on
Lycos, (i) each of the Lycos Benefit Plans has been operated and administered
in all respects in compliance with applicable laws, including, but not limited
to, ERISA and the Code, (ii) each of the Lycos Benefit Plans intended to be
"qualified" within the meaning of Section 401 (a) of the Code is so qualified
and is listed on the Lycos Disclosure Schedule, and there are no existing
circumstances or any events that have occurred that are reasonably likely to
adversely affect the qualified status of any such Lycos Benefit Plan, (iii)
with respect to each Lycos Benefit Plan that is subject to Title IV of ERISA,
the present value of accrued benefits under such Lycos Benefit Plan, based
upon the actuarial assumptions used for funding purposes in the most recent
actuarial report prepared by such Lycos Benefit Plan's actuary with respect to
such Lycos Benefit Plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such Lycos Benefit Plan allocable to such
accrued benefits, (iv) no Lycos Benefit Plan provides benefits, including,
without limitation, death or medical benefits (whether or not insured), with
respect to current or former employees or directors of Lycos or its
Subsidiaries beyond their retirement or other termination of service, other
than (A) coverage mandated by applicable law, (B) death benefits or retirement
benefits under any "employee pension plan" (as such term is defined in Section
3(2) of ERISA), (C) deferred compensation benefits accrued as liabilities on
the books of Lycos or its Subsidiaries or (D) benefits the full cost of which
is borne by the current or former
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employee or director (or his beneficiary), (v) no liability under Title IV of
ERISA has been incurred by Lycos, its Subsidiaries or any Lycos ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to Lycos, its Subsidiaries or any Lycos ERISA
Affiliate of incurring a liability thereunder, (vi) no Lycos Benefit Plan is
or was a "multiemployer plan" (as such term is defined in Section 3(37) and
Section 4001(a)(3) of ERISA) or a "multiple employer plan" (as such term is
defined in Section 4063 of ERISA), (vii) all contributions or other amounts
payable by Lycos or its Subsidiaries as of the Reincorporation Effective Time
with respect to each Lycos Benefit Plan in respect of current or prior plan
years have been paid or accrued in accordance with U.S. GAAP and Section 412
of the Code, (viii) none of Lycos, its Subsidiaries or, to the knowledge of
Lycos, any other person, including any fiduciary, has engaged in a transaction
in connection with which Lycos, its Subsidiaries or any Lycos Benefit Plan is
reasonably likely to be subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant
to Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Lycos
there are no pending, threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of or against any of the Lycos Benefit
Plans or any trusts related thereto and (ix) each Lycos Benefit Plan that is
an employee welfare benefit plan under Section 3(1) of ERISA is either
unfunded or is funded through an insurance company contract and is not a
"welfare benefit fund" as defined in Section 419 of the Code.
(d) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (either alone or
in conjunction with any other event) (i) except as set forth in a report
prepared by Ernst & Young LLP, which has been provided to Terra prior to the
date hereof, result in any payment (including, without limitation, severance,
unemployment compensation, "excess parachute payment" (within the meaning of
Section 280G of the Code), forgiveness of indebtedness or otherwise) becoming
due to any director or any employee of Lycos or any of its affiliates from
Lycos or any of its affiliates under any Lycos Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Lycos Benefit Plan or (iii)
result in any acceleration of the time of payment or vesting of any such
benefits.
(e) Except as have not or would not reasonably be expected to
result, individually or in the aggregate, in a Material Adverse Effect on
Lycos, all Lycos Benefit Plans subject to the laws of any jurisdiction outside
of the United States (i) have been maintained in accordance with all
applicable requirements, (ii) if they are intended to qualify for special tax
treatment meet all requirements for such treatment, and (iii) if they are
intended to be funded and/or book-reserved are fully funded and/or book
reserved, as appropriate, based upon reasonable actuarial assumptions.
4.11 Compliance with Applicable Law. Except as publicly
disclosed in Lycos SEC Reports filed prior to the date hereof, Lycos and each
of its Subsidiaries hold all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to each, and have complied in all respects with and are not in
default in any material respect under any, applicable law, statute, order,
rule, regulation, policy and/or guideline of any Governmental Entity relating
to Lycos or any of its Subsidiaries, except where the failure to hold such
license, franchise, permit or authorization or such noncompliance or default
has not had and would not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect on Lycos.
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4.12 Certain Contracts. (a) As of the date of this Agreement,
neither Lycos nor any of its Subsidiaries is a party to or bound by any
contract, arrangement, commitment or understanding (whether written or oral)
(i) with respect to the employment of any directors, officers or employees,
other than in the ordinary course of business consistent with past practice,
(ii) which, upon the consummation or stockholder approval of the transactions
contemplated by this Agreement will (either alone or upon the occurrence of
any additional acts or events) result in any payment (whether of severance pay
or otherwise) becoming due from Terra, Lycos, the Surviving Corporation, or
any of their respective Subsidiaries to any officer or employee thereof, (iii)
which is a "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in the Lycos SEC Reports,
(iv) which materially restricts the conduct of any line of business by Lycos
or upon consummation of the Reincorporation Merger will materially restrict
the business of the Surviving Corporation or Terra, (v) with or to a labor
union or guild (including any collective bargaining agreement) or (vi)
(including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan) any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any stockholder approval or the consummation of any of the
transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. Lycos has previously made available to Terra
true and correct copies of all employment and deferred compensation agreements
in effect as of the date of this Agreement which are in writing and to which
Lycos or any of its Subsidiaries is a party. Each contract, arrangement,
commitment or understanding of the type described in this Section 4.12(a),
whether or not set forth in the Lycos Disclosure Schedule, is referred to
herein as a "Lycos Contract," and neither Lycos nor any of its Subsidiaries
knows of, or has received notice of, any violation of the above by any of the
other parties thereto which has had or would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect on Lycos.
(b) (i) As of the Date of this Agreement, each Lycos Contract
is valid and binding on Lycos or any of its Subsidiaries, as applicable, and
in full force and effect, (ii) Lycos and each of its Subsidiaries has in all
material respects performed all obligations required to be performed by it to
date under each Lycos Contract, except where such noncompliance would not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect on Lycos, and (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, will constitute, a
material default on the part of Lycos or any of its Subsidiaries under any
such Lycos Contract, except where such default, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect
on Lycos.
4.13 Environmental Liability. There are no legal,
administrative, arbitral or other proceedings, claims, actions, causes of
action, private environmental investigations or remediation activities or
governmental investigations of any nature seeking to impose, or that could
reasonably result in the imposition, on Lycos of any liability or obligation
arising under common law or under any local, state or federal environmental
statute, regulation or ordinance including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA"), pending or threatened against Lycos, which liability or
obligation, either individually or in the aggregate, has had or would
reasonably be expected to
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have a Material Adverse Effect on Lycos. To the knowledge of Lycos, there is
no reasonable basis for any such proceeding, claim action or governmental
investigation that would impose any liability or obligation that could
reasonably be expecte to have, either individually or in the aggregate, a
Material Adverse Effect on Lycos. Lycos is not subject to any agreement,
order, judgment, decree, letter or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any
liability or obligation with respect to the foregoing that will have or would
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect on Lycos.
4.14 State Takeover Laws. The Board of Directors of Lycos has
approved the transactions contemplated by this Agreement for purposes of
Section 203 of the DGCL such that the restrictions contained in Section 203 of
the DGCL will not apply to this Agreement or any of the transactions
contemplated hereby.
4.15 Intellectual Property; Proprietary Rights; Employee
Restrictions. (a) All Intellectual Property Rights used by Lycos or its
Subsidiaries in their respective businesses are owned by Lycos or such
Subsidiaries by operation of law, have been validly assigned to Lycos or such
Subsidiaries or Lycos otherwise has the right to use such Intellectual
Property Rights in its business as currently conducted except for such
failures that would not reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect on Lycos. Lycos or one of its
Subsidiaries has exclusive ownership of or a license to use all Intellectual
Property Rights used by Lycos or its Subsidiaries in Lycos's business as
presently conducted, including all other registered Intellectual Property
Rights used in connection with or contained in all versions of Lycos's World
Wide Web sites and all licenses, assignments and releases of Intellectual
Property Rights of others without which Lycos or its Subsidiaries could not
offer the services they currently offer or has obtained any licenses, releases
or assignments reasonably necessary to use all third parties' Intellectual
Property Rights in works embodied in its services, except, for such failures
as, either individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect on Lycos. The present
business activities or products of Lycos do not infringe any Intellectual
Property Rights of others, except as have not had and would not reasonably be
expected to have a Material Adverse Effect on Lycos. To its knowledge, as of
the date of this Agreement Lycos has not received any notice or other claim
from any person asserting that any of Lycos's present activities infringe or
may infringe any Intellectual Property Rights of such person, except for such
notices or claims which, either individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Lycos.
(b) Except as have not had and would not reasonably be expected
to have a Material Adverse Effect on Lycos, (i) Lycos has the right to use all
trade secrets, customer lists, hardware designs, programming processes,
software and other information required for its services or its business as
presently conducted or contemplated; (ii) Lycos has taken all reasonable
measures to protect and preserve the security and confidentiality of its trade
secrets and other confidential information; (iii) all employees and
consultants of Lycos or its Subsidiaries involved in the design, review,
evaluation or development of products or Intellectual Property Rights have
executed nondisclosure and assignment of inventions agreements to protect the
confidentiality of Lycos's trade secrets and other confidential information
and to vest in Lycos exclusive ownership of such Intellectual Property Rights;
(iv) to the knowledge of Lycos, all trade secrets and other confidential
information of Lycos are not part of the public domain or knowledge, nor, to
the knowledge of Lycos, have they been misappropriated by any person having an
obligation to maintain such trade secrets or other confidential information in
confidence for Lycos; (v) to the knowledge of Lycos, no employee or consultant
of Lycos or any of its Subsidiaries has used any trade secrets or other
confidential
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information of any other person in the course of their work for Lycos or any
such Subsidiary.
(c) To the knowledge of Lycos, no university, government agency
(whether federal or state) or other organization sponsored research and
development conducted by Lycos or any of its Subsidiaries or has any claim of
right to or ownership of or other encumbrance upon any of the Intellectual
Property Rights of Lycos, except for such claims or other encumbrances that
would not reasonably be expected to have a Material Adverse Effect on Lycos.
Lycos is not aware of any infringement by others of its copyrights or other
Intellectual Proprietary Rights in any of its technology or services, or any
violation of the confidentiality of any of its proprietary information, except
for such infringement and violations that would not reasonably be expected to
have a Material Adverse Effect on Lycos. To Lycos's knowledge, Lycos is not
making unlawful use of any confidential information or trade secrets of any
past or present employees of Lycos or any of its Subsidiaries, except for such
use that would not reasonably be expected to have a Material Adverse Effect on
Lycos, except for such infringement and violations that would not reasonably
be expected to have a Material Adverse Effect on Lycos. For the purposes of
this Section 4.15, and except where the context otherwise requires,
Intellectual Property Rights also includes any and all intellectual property
rights, licenses, databases, computer programs and other computer software
user interfaces, know-how, trade secrets, customer lists, proprietary
technology, processes and formulae, source code, object code, algorithms,
architecture, structure, display screens, layouts, development tools,
instructions, templates, marketing materials created by Lycos or its
Subsidiaries, inventions, trade dress, logos and designs.
4.16 Insurance. Lycos and its Subsidiaries have in effect
insurance coverage with reputable insurers or are self-insured, which in
respect of amounts, premiums, types and risks insured, constitutes reasonably
adequate coverage against all risks customarily insured against by companies
and their subsidiaries comparable in size and operations to Lycos and its
Subsidiaries which are engaged in Lycos's industry.
4.17 Opinions. Prior to the execution of this Agreement, Lycos
has received an opinion from Credit Suisse First Boston to the effect that as
of the date thereof and based upon and subject to the matters set forth
therein, the Exchange Ratio is fair to the stockholders of Lycos from a
financial point of view. Such opinion has not been amended or rescinded as of
the date of this Agreement.
4.18 Lycos Information. The information relating to Lycos and
its Subsidiaries that is provided by Lycos or its representatives for
inclusion in the Proxy Statement, the F-4, the Prospectus and any supplements
thereto and any circulars or documents issued to shareholders, employees or
debenture holders of Terra or in any other document filed with any other
regulatory agency in connection herewith, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances in which they are
made, not misleading. The Proxy Statement (except for such portions thereof
that relate only to Terra or any of its Subsidiaries) will comply with the
provisions of the Exchange Act and the rules and regulations thereunder.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF TERRA
Except as set forth in the disclosure schedule delivered by Terra to
Lycos concurrently herewith (the "Terra Disclosure Schedule"), Terra hereby
represents and warrants to Lycos as follows:
5.1 Corporate Organization. (a) Terra is a corporation duly
organized, validly existing and in good standing under the laws of the Kingdom
of Spain. Terra has the corporate power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not have and would not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect on
Terra. True and complete copies of the Articles of Incorporation of Terra
(escritura de constitucion) (the "Terra Articles") and the Revised Bylaws of
Terra (estatutos) (the "Terra By-Laws"), in each case, as in effect as of the
date of this Agreement, have previously been made available by Terra to Lycos.
(b) Each Terra Subsidiary (i) is duly organized and validly
existing under the laws of its jurisdiction of organization, (ii) is duly
qualified to do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of property
or the conduct of its business requires it to be so qualified and in which the
failure to be so qualified would have or would reasonably be expected to have
a Material Adverse Effect on Terra, and (iii) has all requisite corporate
power and authority to own or lease its properties and assets and to carry on
its business as now conducted.
5.2 Capitalization. (a) As of May 15, 2000, the authorized
share capital of Terra consists solely of 560,000,000 Euros represented by
280,500,000 ordinary shares ("Terra Shares" or "Terra Capital Stock"). All of
the issued and outstanding shares of Terra Capital Stock have been duly
authorized and validly issued and are fully paid and nonassessable, with no
personal liability attaching to the ownership thereof. Except as provided by
the SCL, no shares of Terra Capital Stock are entitled to preemptive rights,
and assuming adoption of the resolution regarding preemptive rights referred
to in Section 5.3, such preemptive rights do not apply to the transactions
contemplated hereby. As of the date of this Agreement, except as described in
this Section 4.2(a) and except pursuant to the terms of options issued
pursuant to the Terra Employee Stock Option Plan (the "Terra Stock Plans"),
Terra does not have and is not bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling
for the purchase or issuance of any shares of Terra Capital Stock or any other
equity securities of Terra or any securities representing the right to
purchase or otherwise receive any shares of Terra Capital Stock (collectively
the "Terra Rights"). As of May 15, 2000, no shares of Terra Capital Stock were
reserved for issuance, except for 14,000,000 shares of Terra Common Stock
reserved for issuance upon exercise of the options issued pursuant to the
Terra Employee Stock Option Plan. From May 15, 2000, to and including the date
of this Agreement, Terra has not issued any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital
stock. As of the date of this
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Agreement, there are no outstanding bonds, debentures, notes or other
indebtedness or other securities of Terra having the right to vote (or
convertible into, or exchangeable or exercisable for, securities having the
right to vote) on any matter on which stockholders of Terra may vote. There
are no voting, sale, transfer or other similar agreements to which Terra is a
party with respect to the capital stock of Terra or any other securities of
Terra that are convertible or exchangeable into or exercisable for shares of
the capital stock of Terra.
(b) Terra owns, directly or indirectly, all of the issued and
outstanding shares of capital stock or other equity ownership interests of
each of the Terra Subsidiaries, free and clear of any Liens, and all of such
shares or equity ownership interests are duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. No Terra Subsidiary has
or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or
issuance of any shares of capital stock or any other equity security of such
Subsidiary or any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security of such
Subsidiary. There are no voting, sale, transfer or other similar agreements to
which any Terra Subsidiary is a party with respect to the capital stock of
such Subsidiary or any other securities of any such Subsidiary that are
convertible or exchangeable into or exercisable for shares of the capital
stock of any Terra Subsidiary. Section 5.2(b) of the Terra Disclosure Schedule
sets forth a list as of the date of this Agreement of the material investments
of Terra in corporations, joint ventures, partnerships, limited liability
companies and other entities other than its Subsidiaries.
5.3 Authority; No Violation. (a) Terra has full corporate
power and authority to execute and deliver this Agreement and upon receipt of
the Terra Shareholder Approval (as defined below) will have full corporate
power and authority to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by
unanimous vote of each of the Board of Directors of Terra. The Board of
Directors of Terra has proposed to call the Terra Shareholder Meeting to seek
the approval of the shareholders of Terra for the delegation in favor of the
Terra Board to approve the capital increase required in connection with the
Share Exchange, including approval in accordance with Section 159 of the SCL
of a resolution abolishing the preemptive rights of Terra shareholders to
subscribe for the shares of Terra Common Stock being issued in the Share
Exchange, which approval shall require the affirmative vote of the holders of
a majority of the outstanding shares of Terra Common Stock present in person
or represented by proxy at a duly constituted meeting of Terra shareholders at
which meeting, if on first call, a quorum of at least one-half of the issued
share capital is present or represented by proxy or, if on second call, a
quorum of at least one-quarter of the issued share capital is present or
represented by proxy (provided, however, if, on second call, less than
one-half of the issued share capital is present or represented by proxy, the
matters being voted upon must be adopted by at least two-thirds of the share
capital present or represented at such meeting) ("Terra Shareholder
Approval"), no other corporate proceedings on the part of Terra is necessary
to approve this Agreement and to consummate the transactions contemplated
hereby other than the resolution of the Terra Board approving the Capital
Increase against contribution in kind of the shares of Lycos Virginia Common
Stock. The affirmative vote of the shares of Terra Capital Stock held by
Telefonica, S.A. ("Telefonica") are sufficient to obtain the Terra Shareholder
Approval. Neither a withdrawal or a modification of the Terra Board's
recommendation relating to this Agreement or any of the transactions
contemplated hereby will affect (i) Terra's obligation or ability to call or
convene the meeting of its
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shareholders referred to above or (ii) Telefonica's obligation to vote its
shares of Terra Capital Stock in favor of the approval of the matters set
forth in the second sentence of this Section 5.3. This Agreement has been duly
and validly executed and delivered by Terra and (assuming due authorization,
execution and delivery by Lycos) constitutes a valid and binding obligation of
Terra, enforceable against Terra in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by
Terra nor the consummation by Terra of the transactions contemplated hereby,
nor compliance by Terra with any of the terms or provisions hereof, will (i)
violate any provision of the Terra Articles or By-Laws or (ii) assuming that
the consents and approvals referred to in Section 5.4 are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Terra or any of Terra's Subsidiaries or any
of their respective properties or assets or (y) violate, conflict with, result
in a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of Terra or Terra's Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Terra or any of
Terra's Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected, except (in the case of clause
(ii) above) for such violations, conflicts, breaches or defaults which, either
individually or in the aggregate, would not have and would not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect on Terra.
5.4 Consents and Approvals. Except for (i) the filings
required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the expiration or termination of any applicable
waiting period, and the filing of a notification with the European Commission
under Council Regulation (EEC) No. 4064/89 or similar antitrust filings or
notifications in other jurisdictions, as applicable, (ii) the filing with the
SEC of the Proxy Statement and declaration of effectiveness of the F-4 in
which the Proxy Statement will be included as a prospectus, and any filings
required under applicable state securities or "blue sky" laws, (iii) the
filing of the articles of share exchange and other appropriate documents as
required by the VSCA and the issuance by the Virginia State Corporation
Commission of the certificate of share exchange pursuant to the VSCA, (iv)
receipt of the Terra Shareholder Approval, (v) the registration with and
verification by the National Securities Exchange Commission of Spain (Comision
Nacional del Xxxxxxx de Valores) (the "NSEC") of a prospectus (folleto)
relating to the Share Exchange (the "Prospectus"), (vi) the filing of the Deed
of execution of the Capital Increase against contribution in kind declaring
that the capital increase has been subscribed by the Lycos Virginia
Stockholders, the filing of the necessary auditors' report and the filing of
the necessary report of the expert designated by the Commercial Registry
relating to the fair value of the assets acquired by Terra in the Share
Exchange (vi) the authorization of the listing of Terra Shares on the SCME by
the NSEC and the Managing Companies of the Spanish Stock Exchanges and (viii)
the filing with and approval of the Nasdaq National Market (the "NASDAQ") to
authorize the quotation of the ADSs on such market, no consents or approvals
of or filings or registrations with any Governmental Entity or of or with any
third party are necessary in connection with the execution and delivery by
Terra of this Agreement and the consummation by Terra of the transactions
contemplated hereby and compliance by Terra with any of the provisions hereof
other than those the failure of which to obtain or make have not had and would
not reasonably be expected to have a Material Adverse
-21-
Effect on Terra.
5.5 SEC Reports and Financial Statements.
(a) Terra has filed with the SEC all forms, reports, schedules,
registration statements and definitive proxy statements required to be filed
by them with the SEC since the date of its initial public offering (as amended
since the time of their filing and prior to the date of this Agreement, and
together with the Terra Registration Statement (as defined below)
collectively, the "Terra SEC Reports") and has heretofore made available to
Lycos complete and correct copies of all such forms, reports, schedules,
registration statements, and proxy statements. As of their respective dates,
the Terra SEC Reports (including, but not limited to, any financial statements
or schedules included or incorporated by reference therein) complied in all
material respects with the requirements of the Exchange Act or the Securities
Act applicable, as the case may be, to such Terra SEC Reports, and none of the
Terra SEC Reports contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they
were made, not misleading.
(b) Terra has previously made available to Lycos copies of the
consolidated balance sheet of Terra and its Subsidiaries for the year ended
December 31, 1999, for the six months ended June 30, 1999, and for the fiscal
years ended December 31, 1997 and 1998, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for such
periods, as previously provided by Terra to Lycos (in the case of information
as of or for December 31, 1999) and (for all other information) as reported in
Terra's Registration Statement No. 333-89997 on Form F-1 filed with the SEC on
October 29, 1999, as amended (the "Terra Registration Statement"), in each
case accompanied by the audit report of Xxxxxx Xxxxxxxx, independent public
accountants with respect to Terra. The December 31, 1999 consolidated balance
sheet of Terra (including the related notes, where applicable) included in the
Terra Registration Statement fairly presents in all material respects the
consolidated financial position of Terra and its Subsidiaries as of the date
thereof, and the other financial statements referred to in this Section 5.5(b)
(including the related notes, where applicable) fairly present in all material
respects the results of the consolidated operations and changes in
stockholders' equity and consolidated financial position of Terra and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) complies in all material respects with applicable accounting
requirements and with the published rules and regulations of the Spanish Stock
Exchange, the CNMV and the SEC with respect thereto; and each of such
statements (including the related notes, where applicable) has been prepared
in all material respects in accordance with Spanish generally accepted
accounting principles ("Spanish GAAP") consistently applied during the periods
involved, except, in each case, as indicated in such statements or in the
notes thereto. The related notes reconciling to U.S. GAAP the consolidated net
income and shareholders' equity of Terra and its Subsidiaries comply in all
material respects with the requirements of the SEC applicable to such
reconciliation. Except as fully reflected or reserved against in the December
31, 1999 consolidated balance sheet of Terra (including the related notes,
where applicable) included in the Terra Registration Statement, since December
31, 1999 through to and including the date of this Agreement, neither Terra
nor any of its Subsidiaries has incurred any liabilities or obligations of any
nature whatsoever (absolute, accrued, fixed, contingent or otherwise), other
than liabilities incurred in the ordinary course of business consistent with
past practice since the date of such balance and which have not had and would
-22-
not reasonably be expected to have a Material Adverse Effect on Terra. The
books and records of Terra and its Subsidiaries have been, an are being,
maintained in all material respects in accordance with Spanish GAAP and any
other applicable legal and accounting requirements and reflect only actual
transactions.
5.6 Broker's Fees. Neither Terra nor any of its Subsidiaries,
nor any of their respective officers or directors, has employed any broker or
finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of the transactions contemplated by this
Agreement except Lazard Freres & Co., whose fees and expenses will be paid by
Terra.
5.7 Absence of Certain Changes or Events. (a) Except as
publicly disclosed in Terra SEC Reports filed prior to the date hereof, since
December 31, 1999, no event or events have occurred that have had or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect on Terra.
(b) Except as publicly disclosed in Terra SEC Reports filed
prior to the date hereof, from December 31, 1999, to the date of this
Agreement, Terra and its Subsidiaries have carried on their respective
businesses in all material respects in the ordinary course.
(c) Since December 31, 1999, neither Terra nor any of its
Subsidiaries has (i) except for normal increases for employees (other than
officers that would be subject to the reporting requirements of Section 16(a)
of the Exchange Act if Terra were a U.S. company with reporting obligations
under Section 12 of the Exchange Act) made in the ordinary course of business
consistent with past practice or as required by applicable law, increased the
wages, salaries, compensation, pension, or other fringe benefits or
perquisites payable to any executive officer, employee, or director from the
amount thereof in effect as of December 31, 1999, granted any severance or
termination pay, entered into any contract to make or grant any severance or
termination pay, or paid any bonus other than the customary year-end bonuses
for fiscal 1999 in amounts consistent with past practice, (ii) granted any
stock appreciation rights or granted any rights to acquire any shares of its
capital stock to any executive officer, director or employee other than grants
to employees (other than officers subject to the reporting requirements of
Section 16(a) of the Exchange Act) made in the ordinary course of business
consistent with past practice under the Terra Stock Plans or (iii) suffered
any strike, work stoppage, slow-down, or other labor disturbance.
5.8 Legal Proceedings. (a) Except as publicly disclosed in
Terra SEC Reports filed prior to the date hereof, as of the date of this
Agreement neither Terra nor any of its Subsidiaries is a party to any, and
there are no pending or, to the best of Terra's knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against Terra or any of its
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement as to which, in any such case, there is a
reasonable probability of an adverse determination and which, if adversely
determined, either individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Terra.
(b) As of the date of this Agreement, there is no injunction,
order, judgment, decree, or regulatory restriction imposed upon Terra, any of
its Subsidiaries or the
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assets of Terra or any of its Subsidiaries that has had, or would reasonably
be expected to have, either individually or in the aggregate, a Material
Adverse Effect on Terra or the Surviving Corporation.
5.9 Taxes and Tax Returns. (a) Each of Terra and its
Subsidiaries has duly filed all Spanish, U.S. federal, state, province and
local, and foreign information returns and Tax returns required to be filed by
it on or prior to the date of this Agreement and has duly paid or made
provisions for the payment of all Taxes which have been incurred by it or are
due from it to Spanish, U.S. federal, state, province and local, and foreign
taxing authorities on or prior to the date of this Agreement (including,
without limitation, if and to the extent applicable, those due in respect of
its properties, income, business, capital stock, franchises, licenses, sales
and payrolls) other than (i) Taxes which are not yet delinquent or are being
contested in good faith and have not been finally determined, or (ii)
information returns, Tax returns or Taxes as to which the failure to file, pay
or make provision for would not reasonably be expected to, either individually
or in the aggregate, have a Material Adverse Effect on Terra. None of the
Spanish national income Tax returns of Terra or its subsidiaries have yet been
examined by the Spanish national Tax authorities. To Terra's knowledge, there
are no material disputes pending with respect to, or claims asserted for,
Taxes or assessments upon Terra or any of its Subsidiaries for which Terra
does not have adequate reserves other than such disputes, claims, assessments
or inadequacies that would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect on Terra.
(b) Except for actions expressly contemplated by Articles I,
II, III and VII of this Agreement, neither Terra nor any of its Subsidiaries
has taken or agreed to take any action, or intends or plans to take any action
or knows of any agreement, plan or intention to take any action that is
reasonably likely to (i) prevent either of the Reincorporation Merger and the
Share Exchange from constituting a reorganization described in Section 368(a)
of the Code or (ii) result in gain recognition to the shareholders of Lycos
Virginia pursuant to Section 367(a) of the Code.
5.10 Employees. Terra has made available to Lycos copies, as of
the date of this Agreement, of: (a) the current documentation and rules of
each of the material employee benefit plans to which Terra and its
Subsidiaries make or could become liable to make payments for providing
retirement, death, disability or life assurance benefits (the "Terra Employee
Benefit Plans") (including any draft amendments); (b) the most recently
prepared explanatory booklets and announcements relating to each of the Terra
Employee Benefit Plans; and (iii) the actuarial report for such Terra Employee
Benefit Plans (if applicable) for each of the last two years. The Terra
Employee Benefit Plans are each funded so as to comply with the minimum
funding requirement under the Spanish Law 8/1997 of June 8, the Spanish Royal
Decree 1307/1998 of September 30, both regulations as amended and where
applicable and there are no unfunded liabilities under any such plans that
would be reasonably likely to have a Material Adverse Effect on Terra. Each
Terra Employee Benefit Plan has been administered in accordance with its terms
and is in compliance with applicable law, other than instances of
non-compliance that, individually or in the aggregate, have not had and would
not reasonably be expected to have a Material Adverse Effect on Terra.
5.11 Compliance with Applicable Law. (a) Except as publicly
disclosed in Terra SEC Reports filed prior to the date hereof, Terra and each
of its Subsidiaries hold all material licenses, franchises, permits and
authorizations necessary for the lawful conduct
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of their respective businesses under and pursuant to each, and have complied
in all respects with and are not in default in any material respect under any,
applicable law, statute, order, rule, regulation, policy and/or guideline of
any Governmental Entity relating to Terra or any of its Subsidiaries, except
where the failure to hold such license, franchise, permit or authorization or
such noncompliance or default, either individually or in the aggregate, would
not have and would not reasonably be expected to have a Material Adverse
Effect on Terra.
5.12 Certain Contracts. (a) As of the date of this Agreement,
neither Terra nor any of its Subsidiaries is a party to or bound by any
contract, arrangement, commitment or understanding (whether written or oral)
(i) with respect to the employment of any directors, officers or employees,
other than in the ordinary course of business consistent with past practice,
(ii) which, upon the consummation or stockholder approval of the transactions
contemplated by this Agreement will (either alone or upon the occurrence of
any additional acts or events) result in any payment (whether of severance pay
or otherwise) becoming due from Lycos, Terra, the Surviving Corporation, or
any of their respective Subsidiaries to any officer or employee thereof, (iii)
which is a "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in the Terra SEC Reports,
(iv) which materially restricts the conduct of any line of business by Terra
or upon consummation of the Share Exchange will materially restrict the
business of Terra; (v) with or to a labor union or guild (including any
collective bargaining agreement) or (vi) (including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan)
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any stockholder approval or
the consummation of any of the transactions contemplated by this Agreement, or
the value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement. Terra has previously
made available to Lycos true and correct copies of all employment and deferred
compensation agreements in effect as of the date of this Agreement which are
in writing and to which Terra or any of its Subsidiaries is a party. Each
contract, arrangement, commitment or understanding of the type described in
this Section 5.12(a), whether or not set forth in the Terra Disclosure
Schedule, is referred to herein as a "Terra Contract," and neither Terra nor
any of its Subsidiaries knows of, or has received notice of, any violation of
the above by any of the other parties thereto which has had or would
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect on Terra.
(b) (i) As of the date of this Agreement, each Terra Contract
is valid and binding on Terra or any of its Subsidiaries, as applicable, and
in full force and effect, (ii) Terra and each of its Subsidiaries has in all
material respects performed all obligations required to be performed by it to
date under each Terra Contract, except where such noncompliance would not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect on Terra, and (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, will constitute, a
material default on the part of Terra or any of its Subsidiaries under any
such Terra Contract, except where such default, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect
on Terra.
5.13 Environmental Liability. There are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that could reasonably
result in the imposition, on Terra of any liability or obligation
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arising under common law or under any U.S., European Union, national, regional
or local laws, rules or regulations relating to pollution, the environment or
protection of human health as it relates to the environment pending or
threatened against Terra, which liability or obligation, either individually
or in the aggregate, has had or would reasonably be expected to have a
Material Adverse Effect on Terra. To the knowledge of Terra, there is no
reasonable basis for any such proceeding, claim action or governmental
investigation that would impose any liability or obligation that would
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect on Terra. Terra is not subject to any agreement,
order, judgment, decree, letter or memorandum by or with Governmental
Authority or third party imposing any liability or obligation with respect to
the foregoing that will or would reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect on Terra.
5.14 Intellectual Property; Proprietary Rights; Employee
Restrictions. (a) All Intellectual Property Rights used by Terra or its
Subsidiaries in their respective businesses are owned by Terra or such
Subsidiaries by operation of law, have been validly assigned to Terra or such
Subsidiaries or Terra otherwise has the right to use such Intellectual
Property Rights in its business as currently conducted except for such
failures that would not reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect on Terra. Terra reasonably
believes that the Intellectual Property Rights are sufficient to carry on the
business of Terra as presently conducted. Terra or one of its Subsidiaries has
exclusive ownership of or a license to use all Intellectual Property Rights
used by Terra or its Subsidiaries in Terra's business as presently conducted,
including all other registered Intellectual Property Rights used in connection
with or contained in all versions of Terra's World Wide Web sites and all
licenses, assignments and releases of Intellectual Property Rights of others
without which Terra or its Subsidiaries could not offer the services they
currently offer or has obtained any licenses, releases or assignments
reasonably necessary to use all third parties' Intellectual Property Rights in
works embodied in its services, except for such failures as, either
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect on Terra. The present business
activities or products of Terra do not infringe any Intellectual Property
Rights of others, except as have not had and would not reasonably be expected
to have a Material Adverse Effect on Terra. To its knowledge, as of the date
of this Agreement Terra has not received any notice or other claim from any
person asserting that any of Terra's present activities infringe or may
infringe any Intellectual Property Rights of such person except for such
notices or claims which, either individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Terra.
(b) Except as have not had and would not reasonably be expected
to have a Material Adverse Effect on Terra or as disclosed in the Terra SEC
Reports publicly filed prior to the date of this Agreement, (i) Terra has the
right to use all trade secrets, customer lists, hardware designs, programming
processes, software and other information required for its services or its
business as presently conducted or contemplated; (ii) Terra has taken all
reasonable measures to protect and preserve the security and confidentiality
of its trade secrets and other confidential information; (iii) all employees
and consultants of Terra or its Subsidiaries involved in the design, review,
evaluation or development of products or Intellectual Property Rights have
executed nondisclosure and assignment of inventions agreements to protect the
confidentiality of Terra's trade secrets and other confidential information
and to vest in Terra exclusive ownership of such Intellectual Property Rights;
(iv) t the knowledge of Terra, all trade secrets and other confidential
information of Terra are not part of the public domain or knowledge, nor, to
the knowledge of Terra, have they been
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misappropriated by any person having an obligation to maintain such trade
secrets or other confidential information in confidence for Terra; (v) to the
knowledge of Terra, no employee or consultant of Terra or any of its
Subsidiaries has used any trade secrets or other confidential information of
any other person in the course of their work for Terra or any such Subsidiary.
(c) To the knowledge of Terra, no university, government agency
(whether federal or state) or other organization sponsored research and
development conducted by Terra or any of its Subsidiaries or has any claim of
right to or ownership of or other encumbrance upon any of the Intellectual
Property Rights of Terra, except for such claims or other encumbrances that
would not reasonably be expected to have a Material Adverse Effect on Terra.
Terra is not aware of any infringement by others of its copyrights or other
Intellectual Proprietary Rights in any of its technology or services, or any
violation of the confidentiality of any of its proprietary information, except
for such infringement and violations that would not reasonably be expected to
have a Material Adverse Effect on Terra. To Terra's knowledge, Terra is not
making unlawful use of any confidential information or trade secrets of any
past or present employees of Terra or any of its Subsidiaries, except for such
use a would not reasonably be expected to have a Material Adverse Effect on
Terra. For the purposes of this Section 5.14, and except where the context
otherwise requires, Intellectual Property Rights also includes any and all
intellectual property rights, licenses, databases, computer programs and other
computer software user interfaces, know-how, trade secrets, customer lists,
proprietary technology, processes and formulae, source code, object code,
algorithms, architecture, structure, display screens, layouts, development
tools, instructions, templates, marketing materials created by Terra or its
Subsidiaries, inventions, trade dress, logos and designs.
5.15 Insurance. Terra and its Subsidiaries have in effect
insurance coverage with reputable insurers or are self-insured, which in
respect of amounts, premiums, types and risks insured, constitutes reasonably
adequate coverage against all risks customarily insured against by companies
and their subsidiaries comparable in size and operations to Terra and its
Subsidiaries which are engaged in Terra's industry.
5.16 Opinions. Prior to the execution of this Agreement, Terra
has received an opinion from Lazard Freres & Co. to the effect that as of the
date thereof and based upon and subject to the matters set forth therein, the
Exchange Ratio is fair to the stockholders of Terra from a financial point of
view. Such opinion has not been amended or rescinded as of the date of this
Agreement.
5.17 Terra Information. The information relating to Terra and
its Subsidiaries to be contained in the Proxy Statement, the F-4, the
Prospectus and any supplements thereto and any circulars or documents issued
to shareholders, employees or debenture holders of Terra and the information
relating to Terra and its Subsidiaries that is provided by Terra and its
representatives for inclusion in any other document filed with any other
regulatory agency in connection herewith, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances in which they are
made, not misleading. The Proxy Statement (except for such portions thereof
that relate only to Lycos or any of its Subsidiaries) will comply with the
provisions of the Exchange Act and the rules and regulations thereunder. The
F-4 will comply with the provisions of the Securities Act and the rules and
regulations thereunder. The Prospectus and any supplements thereto and any
circulars or documents issued to shareholders, employees or debenture holders
of Terra will comply in all material respects with all applicable
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law and all information contained therein (except for such portions thereof
that relate only to Lycos or any of its Subsidiaries) and will be
substantially in accordance with the facts and will not omit anything material
likely to affect the import of such information.
5.18 Telefonica Ownership. Telefonica owns beneficially and of
record approximately 66.6% of the outstanding Terra Capital Stock.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS s
6.1 Conduct of Businesses Prior to the Effective Time. During
the period from the date of this Agreement to the Exchange Effective Time,
except as expressly contemplated or permitted by this Agreement (including the
Terra Disclosure Schedule and the Lycos Disclosure Schedule), each of Lycos
and Terra shall, and shall cause each of their respective Subsidiaries to, (a)
conduct its business in the ordinary course, (b) use reasonable best efforts
to maintain and preserve intact its business organization, employees and
advantageous business relationships and retain the services of its key
officers and key employees and (c) take no action that would adversely affect
or delay the ability of either Lycos or Terra to obtain any necessary
approvals of any Governmental Entity required for the transactions
contemplated hereby or to perform its covenants and agreements under this
Agreement or to consummate the transactions contemplated hereby.
6.2 Lycos Forbearances. During the period from the date of
this Agreement to the Exchange Effective Time, except as set forth in the
Lycos Disclosure Schedule and except as expressly contemplated or permitted by
this Agreement, Lycos shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of Terra (which consent shall not be
unreasonably withheld):
(a) other than in the ordinary course of business, incur any
indebtedness for borrowed money (other than short-term indebtedness incurred
to refinance short-term indebtedness, indebtedness of Lycos or any of its
wholly-owned Subsidiaries to Lycos or any of its Subsidiaries or indebtedness
incurred to finance investments expressly permitted by Section 6.2(d)),
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or other entity, or
make any loan or advance;
(b) (i) adjust, split, combine or reclassify any capital stock;
(ii) make, declare or pay any dividend, or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of
its capital stock or any securities or obligations convertible (whether
currently convertible or convertible only after the passage of time or the
occurrence of certain events) into or exchangeable for any shares of its
capital stock (except dividends paid by any of the Subsidiaries of Lycos to
Lycos); (iii) grant any stock appreciation rights or grant any individual,
corporation or other entity any right to acquire any shares of its capital
stock, other than pursuant to the Lycos Stock Plans in the ordinary course of
business and otherwise in accordance herewith; or (iv) issue any additional
shares of capital stock except (A) pursuant to the exercise of stock options
outstanding as of the date of this Agreement or issued in compliance with
Section 6.2(b)(iii), or (B) in the ordinary course of business and consistent
with past practice in connection with the Lycos ESPP and the Lycos Stock Plans
or (C) to
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finance acquisitions permitted by Section 6.2(d);
(c) sell, transfer, mortgage, encumber or otherwise dispose
of any of its material properties or assets, including by merger,
consolidation or otherwise, to any individual, corporation or other entity
other than a Subsidiary, or cancel, release or assign any indebtedness to any
such person or any claims held by any such person, in each case other than in
the ordinary course of business or pursuant to contracts or agreements in
force at the date of this Agreement;
(d) except for transactions in the ordinary course of business
or pursuant to contracts or agreements in force at the date of or permitted by
this Agreement or investments in an aggregate amount not in excess of
$250,000,000, make any material investment either by purchase of stock or
securities, contributions to capital, property transfers or purchase of any
property or assets, in each case, of or to any other individual, corporation
or other entity other than a Subsidiary thereof;
(e) except for transactions in the ordinary course of business,
terminate, or waive any material provision of any Lycos Contract or make any
change in any instrument or agreement governing the terms of any of its
securities, or material lease or contract, other than normal renewals of
contracts and leases without material adverse changes of terms;
(f) except as required by applicable law, increase, reduce or
modify in any manner the compensation or fringe benefits of any of its
employees or pay any pension or retirement allowance not required by any
existing plan or agreement to any such employees or become a party to, amend
or commit itself to any pension, retirement, profit-sharing or welfare benefit
plan or agreement or employment agreement with or for the benefit of any
employee other than in the ordinary course of business, or accelerate the
vesting of, or the lapsing of restrictions with respect to, any stock options
or other stock-based compensation;
(g) settle any material claim, action or proceeding involving
money damages, except in the ordinary course of business;
(h) amend its articles of incorporation, its bylaws or
comparable governing documents or otherwise take any action to exempt any
person or entity (other than Terra or any of its Subsidiaries) or any action
taken by such person or entity from any takeover statute or similarly
restrictive provisions of Lycos's organizational documents;
(i) take any action that is intended or expected to result in
any of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time prior to the Exchange
Effective Time, or in any of the conditions to the Share Exchange set forth in
Article VIII not being satisfied or in a violation of any provision of this
Agreement, except, in every case, as may be required by applicable law;
(j) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by U.S. GAAP or regulatory
guidelines;
(k) renew any current contract or agreement containing any
material exclusivity provisions or enter into any contract or agreement
containing any material exclusivity provision; or
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(l) agree to take, make any commitment to take, or adopt any
resolutions of its board of directors in support of, any of the actions
prohibited by this Section 6.2.
6.3 Terra Forbearances. During the period from the date of this
Agreement to the Exchange Effective Time, except as set forth in the Terra
Disclosure Schedule and except as expressly contemplated or permitted by this
Agreement, Terra shall not, and shall not permit any of its Subsidiaries to,
without the prior written consent of Lycos (which consent shall not be
unreasonably withheld):
(a) other than in the ordinary course of business, incur any
indebtedness for borrowed money (other than short-term indebtedness incurred
to refinance short-term indebtedness, indebtedness of Terra or any of its
wholly-owned Subsidiaries to Terra or any of its Subsidiaries or indebtedness
incurred to finance investments expressly permitted by Section 6.3(d)),
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or other entity, or
make any loan or advance;
(b) (i) adjust, split, combine or reclassify any capital stock;
(ii) make, declare or pay any dividend, or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of
its capital stock or any securities or obligations convertible (whether
currently convertible or convertible only after the passage of time or the
occurrence of certain events) into or exchangeable for any shares of its
capital stock (except dividends paid by any of the Subsidiaries of Terra to
Terra); (iii) grant any stock appreciation rights or grant any individual,
corporation or other entity any right to acquire any shares of its capital
stock, other than pursuant to the Terra Stock Plans in the ordinary course of
business and otherwise in accordance herewith; or (iv) issue any additional
shares of capital stock except (A) pursuant to the exercise of stock options
outstanding as of the date of this Agreement or issued in compliance with
Section 6.3(b)(iii), or (B) in the ordinary course of business and consistent
with past practice in connection with the Terra Stock Plans (as the same may
be amended from time to time excluding, however, amendments that would
increase the authorized shares thereunder) or (C) to finance acquisitions
permitted by Section 6.3(d);
(c) sell, transfer, mortgage, encumber or otherwise dispose of
any of its material properties or assets, including by merger, consolidation
or otherwise, to any individual, corporation or other entity other than a
Subsidiary, or cancel, release or assign any indebtedness to any such person
or any claims held by any such person, in each case other than in the ordinary
course of business or pursuant to contracts or agreements in force at the date
of this Agreement;
(d) except for transactions in the ordinary course of business
or pursuant to contracts or agreements in force at the date of or permitted by
this Agreement or investments in an aggregate amount not in excess of
$500,000,000, make any material investment either by purchase of stock or
securities, contributions to capital, property transfers or purchase of any
property or assets, in each case, of or to any other individual, corporation
or other entity other than a Subsidiary thereof;
(e) amend its articles of incorporation, its bylaws or
comparable governing documents, except as contemplated by this Agreement or as
otherwise required to
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facilitate actions otherwise permitted hereunder;
(f) take any action that is intended or expected to result in
any of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time prior to the Exchange
Effective Time, or in any of the conditions to the Share Exchange set forth in
Article VIII not being satisfied or in a violation of any provision of this
Agreement, except, in every case, as may be required by applicable law;
(g) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by Spanish GAAP or U.S.
GAAP or regulatory guidelines; or
(h) agree to take, make any commitment to take, or adopt any
resolutions of its board of directors in support of, any of the actions
prohibited by this Section 6.3.
6.4 Taxes. Neither Lycos nor Terra shall take any action or
fail to take any action, which action or failure to take action might
reasonably be expected to prevent the Reincorporation Merger or the Share
Exchange from qualifying as a reorganization within the meaning of Section
368(a) of the Code or might reasonably be expected to result in the
shareholders of Lycos Virginia recognizing gain under Section 367(a) of the
Code with respect to the Share Exchange. Terra and Lycos Virginia shall comply
with the "reporting requirements" of Treasury Regulation Section
1.367(a)-3(c)(6).
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Regulatory Matters. (a) Lycos and Terra shall promptly
prepare and file with the SEC the Proxy Statement and Terra shall promptly
prepare and file with the SEC the F-4, in which the Proxy Statement will be
included as a prospectus. Each of Lycos and Terra shall use their reasonable
best efforts to have the F-4 declared effective under the Securities Act as
promptly as practicable after such filing, and Lycos shall thereafter mail or
deliver the Proxy Statement to its stockholders. Terra shall also use its
reasonable best efforts to obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the transactions contemplated
by this Agreement, and Lycos shall furnish all information concerning Lycos
and the holders of Lycos Common Stock as may be reasonably requested in
connection with any such action.
(b) As soon as practicable, (i) the Terra Board of Directors
shall, with the reasonable assistance of Lycos, prepare reports (Informe del
consejo de administracion) to be made available to the holders of Terra Shares
in accordance with applicable law (the "Board Reports") in connection with the
Terra Shareholder Meeting containing information required by the SCL and (ii)
Terra shall prepare and arrange to have registered with and verified by the
NSEC a Prospectus. Terra will use its reasonable best efforts to cause the
Prospectus to receive the required registration with and verification of the
NSEC as soon as practicable after the date of this Agreement and to cause the
definitive Prospectus to be made available to the holders of Terra Shares in
accordance with applicable law as soon as reasonably practicable.
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(c) The parties hereto shall cooperate with each other and
use their reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities that are
necessary or advisable to consummate the transactions contemplated by this
Agreement, and to comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such Governmental Entities.
Lycos and Terra shall have the right to review in advance, and, to the extent
practicable, each will consult the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
relating to Terra or Lycos, as the case may be, and any of their respective
Subsidiaries, that appears in any filing made with, or written materials
submitted to, any third party or an Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing
rights of review and consultation, each of the parties hereto shall act
reasonably and as promptly as practicable. The parties hereto agree that they
will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions contemplated by
this Agreement and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated herein.
(d) Lycos and Terra shall, upon request, furnish each other
with all information concerning themselves, their Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement, the F-4, the
Board Reports and the Prospectus or any other statement, filing, notice or
application made by or on behalf of Lycos, Terra or any of their respective
Subsidiaries to any Governmental Entity in connection with the transactions
contemplated by this Agreement.
(e) Lycos and Terra shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement that causes such party to believe that there is a reasonable
likelihood that any approval of such Governmental Entity will not be obtained
or that the receipt of any such approval will be materially delayed.
7.2 Access to Information. (a) Upon reasonable notice and
subject to applicable laws relating to the exchange of information, each of
Lycos and Terra shall, and shall cause each of their respective Subsidiaries
to, afford to the officers, employees, accountants, counsel and other
representatives of the other party reasonable access, during normal business
hours during the period prior to the Exchange Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
each of Lycos and Terra shall, and shall cause their respective Subsidiaries
to, make available to the other party (i) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of U.S. federal or Spanish securities laws
and (ii) all other information concerning its business, properties and
personnel as such party may reasonably request. Neither Lycos nor Terra nor
any of their respective Subsidiaries shall be required to provide such access
or to disclose such information where such access or disclosure would violate
or prejudice the rights of Lycos's or Terra's, as the case may be, customers,
jeopardize the attorney-client privilege of the institution in possession or
control of such information or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into prior to
the date of this Agreement. The parties hereto will make appropriate
substitute disclosure arrangements under circumstances in which the
restrictions of
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the preceding sentence apply.
(b) Each of Lycos and Terra shall hold all information
furnished by or on behalf of the other party or any of such party's
Subsidiaries or representatives pursuant to Section 7.2(a) in confidence to
the extent required by, and in accordance with, the provisions of
confidentiality agreement, dated May 12, 2000, by and among Telefonica, Terra
and Lycos (the "Confidentiality Agreement").
(c) No investigation by either of the parties or their
respective representatives shall affect the representations and warranties of
the other set forth herein.
7.3 Shareholder and Terra Board Approvals. (a) Notwithstanding
any action taken pursuant to the proviso of the last sentence of this Section
7.3(a), Lycos shall call a meeting of its stockholders (the "Lycos Stockholder
Meeting") and shall use its reasonable best efforts to cause the Lycos
Stockholder Meeting to be held as soon as reasonably practicable following the
date of this Agreement for the purpose of voting upon this Agreement and the
transactions contemplated hereby, including, without limitation, the
Reincorporation Merger, and to ratify the actions theretofore taken by Lycos
as the sole shareholder of Lycos Virginia to approve the Share Exchange
pursuant to Section 7.3(b), and shall use its reasonable best efforts to cause
such meeting to occur as soon as reasonably practicable. Subject to the
proviso of the last sentence of this Section 7.3(a), the Board of Directors of
Lycos shall use its reasonable best efforts to obtain from such stockholders
the vote in favo of the adoption of this Agreement required by the DGCL and,
as applicable, the rules of the Nasdaq, to consummate the transactions
contemplated hereby and the ratification of such stockholders referred to in
the preceding sentence. The Lycos Board shall include in the Proxy Statement
its recommendation to the Lycos stockholders that they adopt this Agreement
and approve the Reorganization and ratify the actions to be taken by Lycos as
the sole shareholder of Lycos Virginia pursuant to Section 7.3(b); provided,
however, that the Lycos Board may, at any time prior to the vote of the
Stockholders of Lycos on the Reorganization, withdraw or modify such
recommendation to the extent that it determines, in good faith after
consulting with outside legal counsel, that such action is necessary to comply
with the fiduciary duties of the Lycos Board under applicable law.
(b) Lycos shall incorporate Lycos Virginia as a direct wholly
owned subsidiary as promptly as practicable after the date of this Agreement
and shall cause the Lycos Virginia Board to approve and adopt this Agreement
and the Share Exchange. Lycos, as the sole shareholder of Lycos Virginia,
shall approve and adopt this Agreement, the Reincorporation Merger and the
Share Exchange and shall waive any right to dissent (and any notice of such
right) from the Share Exchange for all purposes of Section 13.1-729 et seq. of
the VSCA, in each case prior to the Lycos Stockholder Meeting.
(c) Terra shall call a meeting of its stockholders to be held
as soon as reasonably practicable following the date of this Agreement for the
purpose of (i) approving the increase in capital of Terra required in
connection with the Share Exchange, (ii) approving a resolution abolishing the
preemptive rights of Terra shareholders and (iii) delegating to the Terra
Board the requisite authority to effectuate the Capital Increase following the
contribution to Terra of the shares of Lycos Virginia Common Stock (the "Terra
Shareholder Approval"), and shall use its reasonable best efforts to cause
such meetings to occur as soon as reasonably practicable. The Terra Board
shall use its reasonable best efforts to obtain from such stockholders the
vote in favor of such capital increase and abolishment of preemptive rights as
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required by the SCL.
7.4 Affiliates. Lycos shall use its reasonable best efforts to
cause each of its directors and executive officers and any other person who is
an "affiliate" (for purposes of Rule 145 under the Securities Act) of it to
deliver to Terra, as soon as practicable after the date of this Agreement, and
prior to the date of the Lycos Stockholder Meeting, a written agreement, in
the form of Exhibit 6.4 hereto.
7.5 Stock Exchange Listing. (a) Terra shall cause the Terra
ADSs to be issued in the Share Exchange to be approved for listing on the
Nasdaq, subject to official notice of issuance, prior to the Exchange
Effective Time.
(b) Terra shall amend the Depositary Agreement to establish
the Terra ADSs to be issued pursuant to the Share Exchange (or, alternatively,
enter into a new depositary agreement on substantially similar terms).
7.6 Employee Benefit Plans. (a) For a period of at least one
year after the Exchange Effective Time, the Lycos Benefit Plans (other than
equity or equity-based programs) in effect as of the date of this Agreement
shall remain in effect with respect to employees of Lycos (or its
Subsidiaries) covered by such plans at the Exchange Effective Time or such
Plans may be replaced by substitute plans providing benefits no less favorable
in the aggregate than the benefits provided for under such Plans at the
Exchange Effective Time. From and after the Exchange Effective Time, Terra
will, or will cause Lycos Virginia to, recognize the prior service with Lycos
or its subsidiaries of each employee of Lycos or any of its subsidiaries as of
the Exchange Effective Time (the "Lycos Employees") in connection with all
Terra employee benefit plans in which such Lycos Employees are eligible to
participate following the Exchange Effective Time, for purposes of
eligibility, vesting and levels o benefits (but not for purposes of benefit
accruals under any defined benefit pension plan). From and after the Effective
Time, Terra will, or will cause Lycos Virginia to, (i) cause any pre-existing
conditions or limitations and eligibility waiting periods under any group
health plans of Terra to be waived with respect to the Lycos Employees and
their eligible dependents and (ii) give each Lycos Employee credit for the
plan year in which the Exchange Effective Time occurs towards applicable
deductibles and annual out-of-pocket limits for expenses incurred prior to the
Exchange Effective Time.
(b) The foregoing notwithstanding, as of the Exchange Effective
Time Lycos Virginia agrees to honor in accordance with their terms all
benefits vested as of the Exchange Effective Time under the Lycos Benefit
Plans and all other contractual commitments of Lycos to its current and former
employees provided that such Lycos Benefit Plans and contractual commitments
are maintained and administered after the date of this Agreement not in
violation of Section 5.2(b) of this Agreement.
(c) Nothing in this Section 7.6 shall be interpreted as
preventing Lycos Virginia from amending, modifying or terminating any Lycos
Benefit Plans or other contracts, arrangements, commitments or understandings,
in accordance with their terms and applicable law, except that Lycos Virginia
shall in any event comply with its obligations set forth in this Section 7.6.
7.7 Indemnification; Directors' and Officers' Insurance. (a)
In the event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil,
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criminal or administrative, including, without limitation, any such claim,
action, suit, proceeding or investigation in which any individual (an
"Indemnified Party") who is now, or has been at any time prior to the date of
this Agreement, or who becomes prior to the Exchange Effective Time, a
director or officer of Lycos or Lycos Virginia or any of their respective
Subsidiaries is, or is threatened to be, made a party based in whole or in
part on, or arising in whole or in part out of, or pertaining to (i) the fact
that he or she is or was a director or officer of Lycos or Lycos Virginia or
any of their respective Subsidiaries or (ii) this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising
before or after the Exchange Effective Time, the parties hereto agree to
cooperate and use their best efforts to defend against and respond thereto. It
is understood and agreed that after the Exchange Effective Time, Terra shall
indemnify and hold harmless, pursuant to the Lycos Certificate, the Lycos
By-Laws, the Lycos Virginia Articles, the Lycos Virginia By-Laws and
indemnification agreements and otherwise as and to the fullest extent
permitted by law, each such Indemnified Party against any losses, claims,
damages, liabilities, costs, expenses (including reasonable attorney's fees
and expenses), judgments, fines and amounts paid in settlement in connection
with any such threatened or actual claim, action, suit, proceeding or
investigation, and shall advance costs and expenses to any Indemnified Party
in advance of the final disposition of any claim, suit, proceeding or
investigation to the fullest extent permitted by law upon receipt of any
undertaking required by applicable law.
(b) For a period of six years after the Exchange Effective
Time, Lycos Virginia shall, and Terra shall cause Lycos Virginia to maintain
in effect policies of directors' and officers' liability insurance with
coverage in amount and scope at least as favorable as Lycos's existing
policies with respect to claims arising from facts or events that occurred
prior to the Exchange Effective Time; provided, however, that during such
period, Lycos Virginia shall in no event be required to expend pursuant to
this Section 7.7(b) more than an amount per year equal to 200% of current
premiums paid by Lycos for such insurance, which current premium amount is set
forth in Section 7.7(b) of the Lycos Disclosure Schedule.
(c) In the event Terra or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Terra
assume the obligations set forth in this Section 7.7.
(d) The provisions of this Section 7.7 shall survive the
Exchange Effective Time and are intended to be for the benefit of, and shall
be enforceable by, each Indemnified Party and his or her heirs and
representatives.
7.8 Additional Agreements. In case at any time after the
Exchange Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement or to vest Lycos Virginia with full title
to all properties, assets, rights, approvals, immunities and franchises of any
of the parties to the Reincorporation Merger, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by Terra
or Lycos Virginia.
7.9 Advice of Changes. Lycos and Terra shall each promptly
advise the other party of any change or event (i) having a Material Adverse
Effect on it or (ii) that it
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believes would or would be reasonably likely to cause or constitute a material
breach of any of its representations, warranties or covenants contained
herein.
7.10 Exemption from Liability Under Section 16(b). Assuming that
Lycos delivers (as defined below) to Terra the Section 16 Information
reasonably in advance of the Exchange Effective Time, the Board of Directors
of Terra, or a committee of Non-Employee Directors thereof (as such term is
defined for purposes of Rule 16b-3(d) under the Exchange Act), shall
reasonably promptly thereafter and in any event prior to the Effective Time
adopt a resolution providing that the receipt by the Lycos Insiders (as
defined below) of Terra Stock in exchange for shares of Lycos Common Stock,
and of options to purchase Terra Stock upon conversion of options to purchase
shares of Lycos Common Stock, in each case pursuant to the transactions
contemplated hereby and to the extent such securities are listed in the
Section 16 Information provided by Lycos to Terra prior to the Exchange
Effective Time, are intended to be exempt from liability pursuant to Section
16(b) under the Exchange Act such that any such receipt shall be so exempt.
"Section 16 Information" shall mean information accurate in all respects
regarding the Lycos Insiders, the number of shares of Lycos Common Stock held
by each such Lycos Insider and expected to be exchanged for Terra Common Stock
in the Reincorporation Merger, and the number and description of the options
to purchase shares of Lycos Common Stock held by each such Lycos Insider and
expected to be converted into options to purchase shares of Terra Common Stock
in connection with the Reincorporation Merger. "Lycos Insiders" shall mean
those officers and directors of Lycos who are subject to the reporting
requirements of Section 16(a) of the Exchange Act and who are listed in the
Section 16 Information.
7.11 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each of Terra and Lycos agrees that it shall use
its reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Reorganization as promptly as practicable and otherwise to enable
consummation of the transactions contemplated hereby including, without
limitation, using its reasonable best efforts to obtain (and cooperating with
the other party hereto to obtain) any consent, authorization, order or
approval of, or any exemption by, any Governmental Authority and any other
third party that is required to be obtained by Lycos or Terra or any of their
respective Subsidiaries in connection with the Reorganization and the other
transactions contemplated by this Agreement.
7.12 Acquisition Proposals. Lycos will not, and will not permit
or cause any of its Subsidiaries or any of the officers and directors of it or
its Subsidiaries to, and shall direct and cause its and its Subsidiaries'
employees, agents and representatives (including any advisor, investment
banker, attorney or accountant retained by it or any of its Subsidiaries)
("Representatives") not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making of any proposal
or offer with respect to a merger, reorganization, share exchange,
consolidation or similar transaction involving, or any purchase of 15% or more
of the voting securities of Lycos or 15% or more of the consolidated assets of
Lycos and its Subsidiaries (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"). Lycos will not, and will not permit
or cause any of its Subsidiaries or any of the officers and directors of it or
its Subsidiaries to and shall direct and cause its and its Subsidiaries'
employees, agents and Representatives not to, directly or indirectly, engage
in any negotiations concerning, or provide any confidential information or
data to, or have any discussions with, any Person relating to an Acquisition
Proposal, whether made before or after
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the date of this Agreement, or otherwise facilitate any effort or attempt to
make or implement an Acquisition Proposal; provided, however, that (A) Lycos
may, and may authorize and permit its employees, agents and Representatives
to, furnish or cause to be furnished confidential information and may
participate in such negotiations and discussions, (B) the Lycos Board may take
the actions described in the last sentence of Section 7.3(a) as permitted
thereby, (C) the Lycos Board may recommend an Acquisition Proposal to the
Lycos stockholders and (D) may terminate this Agreement pursuant to Section
9.1(g) of this Agreement in order to immediately thereafter enter into a
definitive agreement with respect to such Acquisition Proposal, in each case,
if the Lycos Board determines, in good faith after consulting with outside
legal counsel, that such action is necessary to comply with the fiduciary
duties of the Lycos Board under applicable law, provided that prior to
furnishing non-public information to any such party, Lycos shall have entered
into a confidentiality agreement on customary terms as advised by outside
legal counsel; provided, further, however, that nothing contained in this
Agreement shall prevent Lycos or the Lycos Board from (x) complying with Rule
14e-2 promulgated under the Exchange Act or (y) making any disclosure to the
Lycos stockholders required by applicable law. Lycos will immediately cease
and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. Lycos agrees that it will take the necessary steps to promptly
inform the individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 7.12. Lycos will notify Terra
promptly if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of its officers, directors or
its Representatives indicating, in connection with such notice, the name of
such Person and the material terms and conditions of any proposals or offers.
Lycos also will promptly request each Person that has heretofore executed a
confidentiality agreement in connection with its consideration of an
Acquisition Proposal to return all confidential information heretofore
furnished to such Person by or on behalf of it or any of its Subsidiaries.
7.13 Board of Directors. The parties will take such actions with
respect to the Terra Board as are necessary to cause the Terra Board, from and
after the Exchange Effective Time, to be comprised of not more than 15
members, of which three shall be Xxxxxx X. Xxxxx, Xxxxxx X. Xxxxxx and one
member of the Lycos Board selected by Lycos prior to the Exchange Effective
Time and reasonably acceptable to Terra.
7.14 Capital Increase. The Terra Board shall execute the
approval of the shareholders of Terra to increase the share capital of Terra
against a contribution in kind (Aumento con aportaciones no dinerarias) and
shall register such action pursuant to the Deed of Capital Increase with the
Commercial Registry immediately following receipt of the Lycos Virginia
Certificate.
7.15 Transfer Taxes. All stock transfer, real estate transfer,
documentary, stamp, recording and other similar Taxes (including interest,
penalties and additions to any such Taxes) ("Transfer Taxes") incurred in
connection with the Reorganization shall be paid by the party incurring such
tax and the parties hereto shall cooperate in preparing, executing and filing
any tax returns with respect to such Transfer Taxes. Notwithstanding the
foregoing, any Transfer Taxes incurred by the shareholders of either Lycos or
Lycos Virginia in connection with the Reorganization ("Shareholder Transfer
Taxes") shall be paid by Lycos Virginia out of its own funds. No funds will be
supplied, directly or indirectly, by Terra for the purpose of paying
Shareholder Transfer Taxes, nor will Terra, directly or indirectly, reimburse
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Lycos Virginia for any such payment of Shareholder Transfer Taxes.
7.16 Lycos Virginia. Lycos and Terra agree that Lycos Virginia
shall become a party to this Agreement for all purposes hereunder as soon as
practicable after the formation of Lycos Virginia, and Lycos shall cause Lycos
Virginia to become a party to this Agreement for all purposes hereunder as
soon as practicable after such formation.
7.17 Employee Stock Purchase Plan. Lycos shall take all
necessary action to provide that the "purchase period" commencing February 1,
2000 under the ESPP shall be the final purchase period under such plan and
that the last day of such final purchase period shall occur on the earlier of
(1) the date on which such purchase period would terminate according to the
terms of the ESPP and (2) the last day of the payroll period immediately prior
to the Exchange Effective Time.
7.18 State Takeover Laws. The Lycos will cause the Board of
Directors of Lycos Virginia to approve the transactions contemplated by this
Agreement for purposes of Sections 13.1-725 et seq. and 13.1-728.1 et seq. of
the VSCA such that the provisions of such Sections will not apply to this
Agreement or any of the transactions contemplated hereby.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation to Effect the
Reincorporation Merger and the Share Exchange. The respective obligations of
the parties to effect each of the Reincorporation Merger and the Share
Exchange shall be subject to the satisfaction at or prior to the Effective
Time of the following conditions:
(a) Shareholder Approval. The Lycos Stockholder Approval and
the Terra Shareholder Approval each shall have been obtained.
(b) Listing. The Terra ADSs to be issued to the stockholders of
Lycos Virginia upon consummation of the Share Exchange shall have been
authorized for quotation on the Nasdaq, subject to official notice of
issuance.
(c) HSR Act; EC Merger Regulations; Deed of Execution. The
waiting period (and any extension thereof) applicable to the Reincorporation
Merger or the Share Exchange under the HSR Act shall have been terminated or
shall have expired, any required approval of the Reincorporation Merger or the
Share Exchange of the European Commission under Counsel Regulation (EEC) No.
4064/89 shall have been obtained and the execution of the Deed of execution of
Capital Increase, the filing of the necessary auditors' report and the filing
of the necessary report of the expert designated by the Commercial Registry
relating to the fair value of the assets acquired by Terra in the Share
Exchange shall have been filed or made.
(d) F-4. The F-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the F-4 shall
have been issued and no proceedings for that purpose shall have been initiated
or threatened by the SEC.
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(e) No Injunctions or Restraints; Illegality. No (i) order,
injunction, writ or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Reorganization or any of the other transactions
contemplated by this Agreement shall be in effect and (ii) statute, rule,
regulation, order, injunction, writ or decree shall have been enacted,
entered, promulgated or enforced by any Governmental Entity that prohibits, or
makes illegal consummation of the Reorganization (collectively, "Restraints").
(f) Federal Tax Opinion. Lycos shall each have received the
opinion of Cravath, Swaine & Xxxxx, and Terra shall have received the opinion
of Wachtell, Lipton, Xxxxx & Xxxx, in form and substance reasonably
satisfactory to Lycos and Terra, respectively, dated the Closing Date,
substantially to the effect that, for U.S. tax purposes on the basis of facts,
representations and assumptions set forth in each such opinion that are
consistent with the state of facts existing at the Reincorporation Effective
Time and at the Exchange Effective Time:
(i) Each of the Reincorporation Merger and the Share
Exchange will constitute a reorganization within the meaning of Section 368(a)
of the Code;
(ii) Lycos and Lycos Virginia will each be a party to
the reorganization within the meaning of Section 368(b) of the Code with
respect to the Reincorporation Merger and Lycos Virginia and Terra will each
be a party to the reorganization within the meaning of Section 368(b) of the
Code with respect to the Share Exchange;
(iii) No gain or loss will be recognized by Lycos or
Lycos Virginia as a result of the Reincorporation Merger or by Lycos Virginia
as a result of the Share Exchange; and
(iv) No gain or loss will be recognized by
shareholders of Lycos who exchange all of their Lycos Common Stock solely for
shares of Lycos Virginia Common Stock pursuant to the Reincorporation Merger
and no gain or loss will be recognized by shareholders of Lycos Virginia who
exchange all of their Lycos Virginia Common Stock solely for Terra Stock
pursuant to the Share Exchange (except with respect to cash received in lieu
of a fractional share interest in Terra Stock).
In rendering such opinions, counsel may require and rely upon
representations contained in certificates of officers of Lycos, Lycos Virginia
and Terra and may assume that any shareholder of Lycos that is a U.S. person
and a "five percent transferee shareholder" as defined in Treas. Xxx.xx.
1.367(a)-3(c)(5)(ii) will enter into a five-year gain recognition agreement in
the form provided in Treas. Xxx.xx. 1.367(a)-8.
(g) Prospectus Verification. The Prospectus shall have been
verified by, and registered with, the NSEC.
8.2 Conditions to Obligations of Lycos. The obligation of Lycos
to effect each of the Reincorporation Merger and the Share Exchange is also
subject to the satisfaction, or waiver by Lycos, at or prior to the Effective
Time, of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Terra set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak
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as of an earlier date) as of the Closing Date as though made on and as of the
Closing Date; provided, however, that for purposes of this Section 8.2(a),
Terra's representations and warranties shall be deemed to be true and correct
unless the failure or failures of such representations and warranties to be so
true and correct, either individually or in the aggregate, and without giving
effect to any qualification as to materiality or Material Adverse Effect set
forth in such representations or warranties, has had or would reasonably be
expected to have a Material Adverse Effect on Terra or the Surviving
Corporation. Lycos shall have received a certificate signed on behalf of Terra
by the Chief Executive Officer and the Chief Financial Officer of Terra to the
foregoing effect.
(b) Performance of Obligations of Terra. Terra shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Lycos shall have
received a certificate signed on behalf of Terra by the Chief Executive
Officer and the Chief Financial Officer of Terra to such effect.
(c) Completion of Rights Offering. Terra shall have completed,
and received the proceeds from, a rights offering in respect of Terra Shares
contemplated by the Rights Offering Agreement (as defined below) for aggregate
value, including a par value plus premium to be paid in by the subscribers, of
2.2 billion Euros;
(d) Entry into Wireless Agreement. Terra and Telefonica
Moviles, S.A., shall have entered into a definitive agreement with respect to
the matters set forth on Schedule 8.2 hereto.
(e) Performance of Obligations of Telefonica. Telefonica shall
have performed in all material respects all obligations required to be
performed by it under the Rights Offering Agreement dated the date hereof
between Telefonica, Terra and Lycos at or prior to the Closing Date.
8.3 Conditions to Obligations of Terra. The obligation of
Terra to effect the Share Exchange is also subject to the satisfaction or
waiver by Terra at or prior to the Reorganization Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Lycos set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, provided,
however, that for purposes of this Section 8.3(a), Lycos's representations and
warranties shall be deemed to be true and correct unless the failure or
failures of such representations and warranties to be so true and correct,
either individually or in the aggregate, and without giving effect to any
qualification as to materiality set forth in such representations or
warranties, has had or would reasonably be expected to have a Material Adverse
Effect on Lycos. Terra shall have received a certificate signed on behalf of
Lycos by the Chief Executive Officer and the Chief Financial Officer of Lycos
to the foregoing effect.
(b) Performance of Obligations of Lycos. Lycos shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Terra shall have
received a certificate signed on behalf of Lycos by the Chief Executive
Officer and the Chief Financial Officer of Lycos to such effect.
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ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any time
prior to the Reorganization Effective Time, whether before or after (unless
otherwise provided below) approval of the matters presented in connection with
the Reincorporation Merger or the Share Exchange by the shareholders of Lycos
or Terra:
(a) by mutual consent of Lycos and Terra in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either the Board of Directors of Lycos or the Board of
Directors of Terra if any Restraint having any of the effects set forth in
Section 8.1(e) shall be in effect and shall have become final and
nonappealable, provided that such terminating party shall have used its
reasonable best efforts to prevent the entry of and to remove such Restraint;
(c) any shareholder approval required by Section 8.1(a) is not
obtained at shareholder meetings duly convened pursuant to Section 7.3 or at
any postponement or adjournment thereof;
(d) by either the Board of Directors of Lycos or the Board of
Directors of Terra if the Reorganization shall not have been consummated on or
before January 31, 2001, unless the failure of the Closing to occur by such
date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein;
(e) by either the Board of Directors of Lycos or the Board of
Directors of Terra (provided that the terminating party is not then in breach
of any representation, warranty, covenant or other agreement contained herein)
if there shall have been a breach of any of the covenants or agreements or any
of the representations or warranties set forth in this Agreement on the part
of Terra, in the case of a termination by Lycos, or Lycos, in the case of a
termination by Terra, which breach, either individually or in the aggregate,
would constitute, if occurring or continuing on the Closing Date, the failure
of the conditions set forth in Section 8.2 or 8.3, as the case may be, and
that is not cured within 30 days following written notice to the party
committing such breach or by its nature or timing cannot be cured prior to the
Closing Date;
(f) by Terra, (i) if the Board of Directors of Lycos withdraws,
modifies or changes its recommendation of this Agreement in a manner adverse
to Terra or shall have resolved to do so, (ii) if, after a bona fide
Acquisition Proposal shall have been made public, the Board of Directors of
Lycos shall have refused to affirm its recommendation of this Agreement as
promptly as practicable (but in any case within 10 business days) after
receipt of any written request from Terra (provided that Terra may only make
one such request in respect of each Acquisition Proposal), (iii) if the Board
of Directors of Lycos shall have recommended to the stockholders of Lycos an
Acquisition Proposal or shall have resolved to do so, or (iv) if a tender
offer or exchange offer for 15% or more of the outstanding shares of capital
stock of Lycos is commenced, and the Board of Directors of Lycos fails to
recommend against acceptance of such tender offer or exchange offer by its
stockholders (including by taking no
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position with respect to the acceptance of such tender offer or exchange offer
by its stockholders);
(g) by Lycos prior to the vote of the stockholders of Lycos on
the Agreement and the Reorganization, if, after receiving a bona fide
Acquisition Proposal, the Board of Directors of Lycos determines, in good
faith after consulting with outside legal counsel, that such action is
necessary to comply with the fiduciary duties of the Lycos Board under
applicable law; provided, however, that Lycos may not terminate this Agreement
pursuant to this subsection (g) until three business days have elapsed
following delivery to Terra of written notice of such determination of Lycos
(which written notice will inform Terra of the material terms and conditions
of the Acquisition Proposal); provided, further, however, that such
termination under this Section 9.1(g) shall not be effective until Lycos has
made payment to Terra of the amounts required to be paid pursuant to Section
9.2(b).
9.2 Effect of Termination. (a) In the event of termination of
this Agreement by either Lycos or Terra as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect, and none of Lycos,
Terra, any of their respective Subsidiaries or any of the officers or
directors of any of them shall have any liability of any nature whatsoever
hereunder, or in connection with the transactions contemplated hereby, except
that (i) Sections 9.2(b), 9.2, 10.3, and 10.12 through and including 10.15
shall survive any termination of this Agreement, and (ii) notwithstanding
anything to the contrary contained in this Agreement, neither Lycos nor Terra
shall be relieved or released from any liabilities or damages arising out of
its willful breach of any provision of this Agreement.
(b) In the event that (i) this Agreement is terminated by Terra
pursuant to clause (ii), (iii) or (iv) of Section 9.1(f) or (ii) this
Agreement is terminated by Lycos pursuant to Section 9.1(g) or (iii) (A) this
Agreement is terminated pursuant to (x) Section 9.1(c) due to the failure of
Lycos's stockholders to approve and adopt this Agreement, (y) Section 9.1(d)
without the Lycos Stockholder Meeting having occurred or (z) clause (i) of
Section 9.1(f) and (B) at the time of such failure to so approve and adopt
this Agreement (in the case of clause (x)) or at the time of such termination,
(in the case of clause (y)) or at the time of the withdrawal, modification or
change in recommendation (in the case of clause (z)) any person (other than
Terra) has made to Lycos or any of its Subsidiaries a bona fide Acquisition
Proposal which shall have been made known to the Lycos stockholders generally
or shall have publicly announced an intention (whether or not conditional) to
make an Acquisition Proposal and, within 12 months of the termination of this
Agreement, Lycos enters into a definitive agreement with any third party to
consummate, or consummates, an Acquisition Proposal (as defined in Section
7.12 except that the references to "15%" therein shall be deemed to be
references to "40%"), then in each of (i) - (iii), Lycos shall pay to Terra an
amount equal to 3% of the product of (A) the closing price of Terra Shares on
the SCME on May 16, 2000 expressed in U.S. dollars using the noon buying rate
of Euros for U.S. dollars as of such date as reported by the U.S. Federal
Reserve, (B) 1.72 and (C) 120,000,000 (the "Termination Fee").
(c) The Termination Fee required to be paid pursuant to Section
9.2(b)(i) shall be paid to Terra by wire transfer of immediately available
funds no later than two days after this Agreement has been terminated. The
Termination Fee required to be paid pursuant to Section 9.2(b)(ii) shall be
paid to Terra prior to, and shall be a pre-condition to effectiveness of,
termination of this Agreement pursuant to Section 9.1(g). The Termination Fee
required to be paid pursuant to Sections 9.2(b)(iii) shall be paid to Terra no
later than two days
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after the earlier to occur of the date of entrance by
Lycos or any of its Subsidiaries into the definitive agreement referenced in
Section 9.2(b)(iii) and the date of consummation of such Acquisition Proposal
referenced in Section 9.2(b)(iii).
(d) Each of Lycos and Terra agrees that the payments provided
for in Sections 9.2(b) shall be the sole and exclusive remedies of the parties
upon a termination of this Agreement pursuant to Section 9.1(c), (d), (f), or
(g), as the case may be, and such remedies shall be limited to the payments
stipulated in Section 9.2(b); provided, however, that nothing herein shall
relieve any party from liability for the willful breach of any of its
representations and warranties or the breach of any of its covenants or
agreements set forth in this Agreement.
(e) Any payment required to be made pursuant to Section 9.2(b)
shall be made by wire transfer of immediately available funds to an account
designated by the party entitled to receive payment.
9.3 Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized
by their respective Boards of Directors, at any time before or after approval
of the matters presented in connection with Reorganization by the shareholders
of Lycos and Terra; provided, however, that after any approval of the
transactions contemplated by this Agreement by the respective shareholders of
Lycos or Terra, there may not be, without further approval of such
shareholders, any amendment of this Agreement that changes the amount or the
form of the consideration to be delivered hereunder to the holders of Lycos
Common Stock, other than as contemplated by this Agreement, or that under
applicable law otherwise requires the further approval of such shareholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Exchange
Effective Time, the parties hereto, by action taken or authorized by their
respective Board of Directors, may, to the extent legally allowed, (a) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions contained
herein; provided, however, that after any approval of the transactions
contemplated by this Agreement by the respective shareholders of Lycos or
Terra, there may not be, without further approval of such shareholders, any
extension or waiver of this Agreement or any portion thereof that reduces the
amount or changes the form of the consideration to be delivered to the holders
of Lycos Common Stock hereunder, other than as contemplated by this Agreement,
or that under applicable law otherwise requires the further approval of such
shareholders. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party, but such extension or waiver or failure to
insist on strict compliance with an obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE X
GENERAL PROVISIONS
10.1 Closing. Subject to the terms and conditions of this
Agreement,
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the closing of the Reincorporation Merger and the Share Exchange (the
"Closing") will take place at 10:00 a.m. on a date and at a place to be
specified by the parties, which shall be no later than five business days
after the satisfaction (or, to the extent permitted by law or regulation,
waiver by all parties) of the conditions set forth in Section 8.01, or, if on
such day any condition set forth in Section 8.02 or 8.03 has not been
satisfied (or, to the extent permitted by law or regulation, waived by the
party or parties entitled to the benefits thereof), as soon as practicable
after all the conditions set forth in Article VIII have been satisfied (or, to
the extent permitted by law or regulation, waived by the parties entitled to
the benefits thereof), or at such other place, time and date as shall be
agreed in writing between Terra and Lycos. The date on which the Closing
occurs is referred to in this Agreement as the "Closing Date".
10.2 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement (other
than the Confidentiality Agreement, which shall terminate in accordance with
the terms thereof) shall survive the Closing, except for Section 7.7 and for
those other covenants and agreements contained herein and therein that by
their terms apply in whole or in part after the Closing.
10.3 Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expense, provided, however, that the costs and
expenses of printing and mailing the Proxy Statement, and all filing and other
fees paid to the SEC in connection with the Reincorporation Merger, shall be
shared equally by Lycos and Terra.
10.4 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), mailed by registered or certified mail (return
receipt requested) or delivered by an express courier (with confirmation) to
the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Lycos, to:
Lycos, Inc.
000-0 Xxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000-0000
Facsimile No.: 000-000-0000
Attn.: Xxxxxx X. Xxxxxx
With a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: 212-474-3700
Attn: Xxxxxx X. Xxxxxxx, Esq.
Xxxxx X. Xxxxx, Esq.
and
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(b) if to Terra, to:
Terra, S.A.
Xxx xx xxx Xxx Xxxxxxxxx
00, Complejo Atica, Edeficial
Xxxxxxx xx Xxxxxxx
00000 Xxxxxx
Xxxxx
Facsimile No.: 011-34-91-452-3305
Attention: Xxxxxxx xx Xxxxxxx
With a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xx.
Xxx Xxxx, XX
Facsimile: 212-403-2000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
and a copy to:
Xxxxxxxxx Xxxxxxx, LLP
The MetLife Building
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxxx X. Xxxxxxx, Esq.
10.5 Interpretation. When a reference is made in this Agreement
to Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
10.6 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
10.7 Entire Agreement. This Agreement (including the documents
and the instruments referred to herein) and the Confidentiality Agreement, the
Rights Offering Agreement, dated as of May 16, 2000, by and among Lycos, Terra
and Telefonica, and the [Bobcat] Agreement constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
10.8 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York, without regard
to any applicable conflicts of law principles.
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10.9 Publicity. Except as otherwise required by applicable law
or the rules of the Nasdaq or the CNMV, neither Lycos or Terra shall, or shall
permit any of its Subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to, or otherwise make any
public statement concerning, the transactions contemplated by this Agreement
without the consent of Terra, in the case of a proposed announcement or
statement by Lycos, or Lycos, in the case of a proposed announcement or
statement by Terra, which consent shall not be unreasonably withheld.
10.10 Assignment; Third Party Beneficiaries. Neither this
Agreement nor any of the rights, interests or obligations shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns. Except
as otherwise specifically provided in Section 7.7, this Agreement (including
the documents and instruments referred to herein) is not intended to confer
upon any person other than the parties hereto any rights or remedies
hereunder.
10.11 Submission to Jurisdiction; Waivers; Consent to
Service of Process. (a) Each of Terra and Lycos irrevocably agree that any
legal action or proceeding with respect to this Agreement or for recognition
and enforcement of any judgment in respect hereof brought by another party
hereto or its successors or assigns may be brought and determined in any
Delaware state court or Federal court sitting in the State of New York or the
State of Delaware, and each of Terra and Lycos hereby (x) irrevocably submits
with regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the exclusive personal
jurisdiction of the aforesaid courts in the event any dispute arises out of
this Agreement or any transaction contemplated hereby, (y) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (z) agrees that it will not bring
any action relating to this Agreement or any transaction contemplated hereby
in any court other than any Delaware state or Federal court sitting in the
State of New York or the State of Delaware. Any service of process to be made
in such action or proceeding may be made by delivery of process in accordance
with the notice provisions contained in Section 10.11(b). Each of Terra and
Lycos hereby irrevocably waives, and agrees not to assert, by way of motion,
as a defense, counterclaim or otherwise, in any action or proceeding with
respect to this Agreement, (a) the defense of sovereign immunity, (b) any
claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to serve process in accordance
with this Section 10.11, (c) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or
otherwise), and (d) to the fullest extent permitted by applicable law that (i)
the suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper and (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by
such courts.
(c) Terra hereby appoints National Registered Agents, Inc., with
offices on the date hereof at 0 Xxxx Xxxxxxxxxx Xxxxxx in the City of Dover,
County of Kent, State of Delaware, and with offices on the date hereof at 000
Xxxxx Xxxxxx, Xxxxx Xxxxx, in the City of New York, County of New York, State
of New York, as its authorized agent (the "Authorized Agent"), upon whom
process may be served in any suit, action or proceeding arising out of or
relating to this Agreement or any transaction contemplated by this Agreement
that may be instituted in any
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court described in Section 10.11(a). Telefonica agrees to take any and all
reasonable action, including the filing of any and all documents, that may be
necessary to establish and continue such appointment in full force and effect
as aforesaid. Telefonica agrees that service of process upon the Authorized
Agent shall be, in every respect, effective service of process upon
Telefonica.
10.12 Enforcement of Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specified terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of
competent jurisdiction, this being in addition to any other remedy to which
they are entitled at law or in equity.
10.13 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
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IN WITNESS WHEREOF, Lycos and Terra have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
TERRA NETWORKS, S.A.
By: /s/ Xxxx Xxxxxxx
-------------------------
Name: Xxxx Xxxxxxx
Title: Chief Executive Officer
LYCOS, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
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ANNEX A
PLAN OF SHARE EXCHANGE
BETWEEN
LION VIRGINIA, INC.
AND
TERRA NETWORKS, S.A.
Pursuant to this Plan of Share Exchange ("Plan of Share Exchange"),
Lion Virginia, Inc. ("Lion Virginia"), shall become a wholly-owned subsidiary
of Terra Networks, S.A., a company organized under the laws of the Kingdom of
Spain ("Terra"), pursuant to a statutory share exchange under Section 13.1-722
of the Virginia Stock Corporation Act.
ARTICLE I
TERMS OF THE SHARE EXCHANGE
1.1 THE SHARE EXCHANGE
Subject to the terms and conditions of the Agreement and Plan of
Reorganization between Lycos, Inc. and Terra (the "Agreement") at the Exchange
Effective Time (as defined Section 2.1 of this Plan of Share Exchange), Lion
Virginia shall become a wholly-owned subsidiary of Terra through the exchange
of each outstanding share of common stock of Lion Virginia for ordinary shares
of Terra (such shares to be issued in the form of American Depositary Shares,
except as otherwise provided in Section 2.1(a) of this Plan of Share Exchange)
in accordance with Section 2.1 of this Plan of Share Exchange and pursuant to
a statutory share exchange under Sections 13.1-717 and 13.1- 722 of the
Virginia Stock Corporation Act (the "Share Exchange"). At the Exchange
Effective Time, the Share Exchange shall have the effect as provided in
Section 13.1-721 of the Virginia Stock Corporation Act.
ARTICLE II
MANNER OF EXCHANGING SHARES
2.1 CONVERSION OF SHARES
Upon and by reason of the Share Exchange becoming effective pursuant
to the issuance of a Certificate of Share Exchange by the Virginia State
Corporation Commission (the "Exchange Effective Time"):
each share of Lion Virginia Common Stock issued and outstanding
immediately prior to the Exchange Effective Time shall be exchanged
for that number of shares of Terra Capital Stock (as defined in the
Agreement) determined by dividing (i) $97.55 by (ii) the average
closing price (rounded to the nearest thousandth, or if there shall
not be a nearest thousandth of a U.S. dollar, the next higher
thousandth) of Terra Shares (the "Terra Average Price") on the
Spanish Continuous Market Exchange (Systema de Interconexion
Bursatil-Xxxxxxx Continuo) (the "SCME") for the ten full SCME
trading days ending on the tenth SCME trading day prior to the
Closing Date (excluding the Closing Date), each closing price
expressed in U.S. dollars using the noon buying rate of Euros for
U.S. dollars as of each day on which such average closing price is
measured (such quotient, as it may be adjusted as provided herein,
the "Exchange Ratio"); provided, however, that if the Terra Average
Price is equal to or greater than
$68.06, the Exchange Ratio shall be 1.433, and if the Terra Average
Price is equal to or less than $45.37, the Exchange Ratio as shall
be 2.150. The Terra Shares to be issued in exchange for the shares
of Lion Virginia Common Stock exchanged hereunder shall be
registered in the name of the Depositary by the Settlement and
Clearing System and then delivered (x) in the form of American
Depositary Shares representing Terra Shares ("Terra ADSs"), and such
Terra ADSs shall be issued in accordance with the Depositary
Agreement dated as of November 15, 1999, by and between Terra,
Citibank, N.A., as depositary, and the holders of Terra ADSs (as
such agreement may be amended to deposit the Terra Shares being
issued pursuant hereto and to deliver the Terra ADSs being delivered
hereto) or a depositary agreement to be entered into after the date
of this Agreement in form and substance not reasonably objected to
by Lycos (the "Depositary Agreement") or (y) if and to the extent
elected by any holder in the manner provided in Section 3.2(b) of
the Agreement, in the form of Terra Shares, in account entry form,
rather than Terra ADSs. Following the Exchange Effective Time, each
certificate previously representing any shares of Lion Virginia
Common Stock ("Lion Virginia Common Certificate") exchanged for
Terra Shares pursuant to this Section 2.1 shall cease to represent
shares of Lion Virginia Common Stock and shall thereafter represent
only the right to receive (i) a receipt issued in accordance with
the Depositary Agreement representing the number of whole Terra ADSs
or such number of Terra Shares in account entry form and (ii) cash
in lieu of fractional shares, in each case, into which the shares of
Lion Virginia Common Stock represented by such Lion Virginia Common
Certificate have been converted pursuant to this Section 2.1 and
Section 2.3, respectively. Certificates previously representing
shares of Lion Virginia Common Stock shall be exchanged for receipts
representing whole Terra ADSs or Terra Shares in account entry form
and cash in lieu of fractional shares issued in consideration
therefor upon the surrender of such Lion Virginia Common
Certificates in accordance with Section 2.3, without any interest
thereon. If, prior to the Exchange Effective Time, the outstanding
shares of Terra Capital Stock, Lycos Common Stock or Lion Virginia
Common Stock shall have been changed into or exchanged for a
different number or kind of shares or securities as a result of a
merger, consolidation or other business combination, reorganization,
recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other similar change in capitalization, an
appropriate and proportionate adjustment shall be made to the
Exchange Ratio to provide to the stockholders of Lycos the same
economic effect, including any premiums, as contemplated by the
Agreement prior to such event.
Shares of Lion Virginia Common Stock issued and outstanding shall,
by virtue of the Share Exchange, continue to be issued and
outstanding shares held by Terra.
At the Exchange Effective Time, each option granted by Lion Virginia
to purchase shares of Lion Virginia Common Stock that is outstanding
and unexercised immediately prior thereto shall cease to represent a
right to acquire shares of Lion Virginia Common Stock and shall be
converted automatically into an option to purchase Terra ADSs in an
amount and at an exercise price determined as provided below (and
otherwise subject to the terms of the Lycos Stock Plans and the
agreements evidencing grants thereunder):
The number of Terra ADSs to be subject to the new option shall be
equal to the product of the number of shares of Lion Virginia Common
Stock subject to the
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original option and the Exchange Ratio, provided that any fractional
shares of Terra Common Stock resulting from such multiplication
shall be rounded to the nearest whole share; and
The exercise price per Terra Share under the new option shall be
equal to the exercise price per share of Lion Virginia Common Stock
under the original option divided by the Exchange Ratio, provided
that such exercise price shall be rounded to the nearest whole cent.
The adjustment provided herein with respect to any options that are
"incentive stock options" (as defined in Section 422 of the Internal
Revenue Code) shall be and is intended to be effected in a manner
that is consistent with Section 424(a) of the Internal Revenue Code.
The duration and other terms of the new option shall be the same as
the original option, except that all references to Lycos (or Lion
Virginia) shall be deemed to be references to Terra.
2.2 MANNER OF EXCHANGE
As promptly as practicable after the Exchange Effective Time, Terra
shall cause the Exchange Agent (as defined in the Agreement) to send to each
former stockholder of record of Lion Virginia immediately prior to the
Exchange Effective Time transmittal materials for use in exchanging such
stockholder's certificates of Lion Virginia Common Stock for the consideration
set forth in Section 2.1 above and Section 2.3 below. Any fractional share
checks which a Lion Virginia shareholder shall be entitled to receive in
exchange for such stockholder's shares of Lion Virginia Common Stock, and any
dividends paid on any shares of Terra Common Stock, that such stockholder
shall be entitled to receive prior to the delivery to the Exchange Agent of
such stockholder's certificates representing all of such stockholder's shares
of Lion Virginia Common Stock will be delivered to such stockholder only upon
delivery to the Exchange Agent of the certificates representing all of such
shares (or indemnity satisfactory to Terra and the Exchange Agent, in their
judgment, if any of such certificates are lost, stolen or destroyed). No
interest will be paid on any such fractional share checks or dividends to
which the holder of such shares shall be entitled to receive upon such
delivery.
2.3 NO FRACTIONAL SHARES
No certificates or scrip for fractional Terra ADSs or Terra Shares
will be issued. In lieu thereof, Terra will pay the value of such fractional
shares an amount of cash determined by multiplying (i) the Terra Average Price
by (ii) the fraction of a Terra Share (rounded to the nearest thousandth when
expressed in decimal form) to which such holder would otherwise be entitled to
receive pursuant to Section 2.1 of this Plan of Share Exchange.
2.4 DIVIDENDS
No dividend or other distribution payable to the holders of record
of Terra Common Stock at or as of any time after the Exchange Effective Time
shall be paid to the holder of any certificate representing shares of Lion
Virginia Common Stock issued and outstanding at the Exchange Effective Time
until such holder physically surrenders such certificate for exchange as
provided in Section 2.2 of this Plan of Share Exchange, promptly after which
time all such dividends or distributions shall be paid (without interest).
-3-
ARTICLE III
MODIFICATIONS -- TERMINATION
Subject to the limitations of Section 13.1-718 of the of the
Virginia Stock Corporation Act, this Plan of Share Exchange may be amended,
modified or abandoned at any time prior to the Exchange Effective Time by
action of the Board of Directors of each of the parties hereto.
IN WITNESS WHEREOF, Lion Virginia and Terra have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.
TERRA NETWORKS, S.A.
By:_________________________
Name:
Title:
LION VIRGINIA, INC.
By:_________________________
Name:
Title:
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ANNEX B
PLAN OF
MERGER BETWEEN
LYCOS AND
LION VIRGINIA, INC.
ARTICLE I
TERMS OF THE MERGER
1.1 THE REINCORPORATION MERGER
Subject to the terms and conditions of the Agreement and Plan of
Reorganization (the "Agreement"), dated as of May 16, 2000, between Terra
Networks, S.A. ("Terra") and Lycos, Inc. ("Lycos"), Lycos shall merge (the
"Reincorporation Merger") with and into Lion Virginia, Inc. ("Lion Virginia").
Lion Virginia shall be the Surviving Corporation (the "Surviving Corporation")
in the Reincorporation Merger and shall continue its corporate existence under
the laws of the Commonwealth of Virginia. Upon consummation of the
Reincorporation Merger, the separate corporate existence of Lycos shall cease.
1.2 ARTICLES OF INCORPORATION
The Articles of Incorporation of Lion Virginia immediately prior to
the Reincorporation Merger shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
1.3 BYLAWS
The Bylaws of Lion Virginia immediately prior to the Reincorporation
Merger shall be the Bylaws of the Surviving Corporation until thereafter
amended in accordance with applicable law.
ARTICLE II
MANNER OF CONVERTING SHARES
2.2 CONVERSION OF SHARES
Upon the Reincorporation Merger becoming effective pursuant to the
issuance of a certificate of merger by the Virginia State Corporation
Commission (the "Reincoporation Effective Time"), by virtue of the
Reincorporation Merger and without any action on the part of Lycos, Lion
Virginia or any holder of common stock, par value $0.01 per share, of Lycos
("Lycos Common Stock"), (i) each share of Lycos Common Stock issued and
outstanding immediately prior to the Reincorporation Effective Time shall be
converted into one share of common stock, par value $0.01 per share, of Lion
Virginia ("Lion Virginia Common Stock") and (ii) each shares of Lion Virginia
Common Stock issued and outstanding immediately prior to the Reincorporation
Merger Effective Time shall be cancelled.
All shares of Lycos Common Stock converted into shares of Lion
Virginia Common Stock pursuant to Section 2.2(a) shall no longer be
outstanding and shall automatically be canceled and shall cease to exist as of
the Reincorporation Effective Time, and each certificate previously
representing any such shares ("Lycos Common Certificate") shall thereafter
represent, without the requirement of any exchange thereof,
that number of shares of Lion Virginia Common Stock into which such shares of
Lycos Common Stock represented by such Lycos Common Certificate have been
converted pursuant to Section 2.2(a) (such certificates following the
Reincorporation Merger, the "Lion Virginia Common Certificates").
Lycos and Lion Virginia shall take all requisite action such that,
at the Reincorporation Effective Time, each option granted by Lycos to
purchase shares of Lycos Common Stock that is outstanding and unexercised
immediately prior thereto shall cease to represent a right to acquire shares
of Lycos Common Stock and shall be converted automatically into an option to
purchase a number of shares of Lion Virginia Common Stock equal to the number
of shares of Lycos Common Stock subject to such option immediately prior to
the Reincorporation Effective Time at an exercise price per share of Lion
Virginia Common Stock equal to the exercise price per share of Lycos Common
Stock in effect immediately prior to the Reincorporation Effective Time and
otherwise subject to the terms of the Lycos Stock Plans (as defined in Section
4.2 of the Agreement) under which such options were issued and the agreements
evidencing grants thereunder (including accelerated vesting provisions under
such agreements evidencing grants thereunder or under any employment
agreements between employees of Lycos and Lycos). The adjustment provided
herein with respect to any options that are "incentive stock options" (as
defined in Section 422 of the Internal Revenue Code) shall be and is intended
to be effected in a manner which is consistent with Section 424(a) of the
Internal Revenue Code. The duration and other terms of the new option shall be
the same as the original option except that all references to Lycos shall be
deemed to be references to Lion Virginia. Notwithstanding anything to the
contrary herein, each option granted by Lycos to a non-employee director prior
to the Reincorporation Effective Time shall be fully vested, to the extent not
already vested, as of the Reincorporation Effective Time.
ARTICLE III
MODIFICATIONS - TERMINATION
Subject to the limitations of Section 13.1-718 of the Virginia State
Corporation Act, this Plan of Merger may be amended, modified or abandoned at
any time prior to the Reincorporation Effective Time by action of the Board of
Directors of each of the parties hereto.
IN WITNESS WHEREOF, Lion Virginia and Lycos have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.
LION VIRGINIA, INC.
By:_________________________
Name:
Title:
LYCOS, INC.
-2-
By:_________________________
Name:
Title:
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EXHIBIT 6.4
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be
an "affiliate" of Lycos, a Delaware corporation ("Lycos"), and I may in the
future be deemed to be an "affili ate" of Lion Virginia, Inc., a Virginia
corporation ("Lion Virginia"), as the term "affiliate" is de fined for
purposes of paragraphs (c) and (d) of Rule 145 of the Rules and Regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"). I have
been further advised that pursuant to the terms of the Agreement and Plan of
Reorganization dated as of May 16, 2000 (the "Agreement"), between Terra
Networks, S.A., a company organized under the laws of the Kingdom of Spain
("Terra"), and Lycos, Inc. ("Lycos"), Lycos will merge with and into Lion
Virginia, with Lion Virginia surviving the merger, and thereafter, pursuant to
a statutory share exchange under the Virginia Stock Corporation Act, Lion
Virginia will become a wholly owned subsidiary of Terra. I have been further
advised that as a result of the Agreement, I will receive shares of common
stock of Lion Virginia ("Lion Virginia Common Stock") in the merger in
exchange for shares of common stock of Lycos ("Lycos Common Stock") owned by
me, and I will receive ordinary shares of Terra (or American Depositary
Receipts representing such shares, "Terra Stock") in the statutory share
exchange in exchange for shares of Lion Virginia Common Stock owned by me. All
terms used in this letter but not defined herein shall have the meanings
ascribed thereto in the Agreement.
I represent, warrant and covenant to Terra that in the event that I
receive any Terra Stock:
a. I shall not make any sale, transfer or other disposition of the
Terra Stock in violation of the Act or the Rules and Regulations.
b. I have carefully read this letter and the Agreement and
discussed its requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of Terra Stock to the extent I believed
necessary with my counsel or counsel for Lycos
c. I have been advised that the issuance of Terra Stock to me
pursuant to the Agreement will be registered with the Commission under the Act
on a Registration Statement on Form F-4. However, I have also been advised
that, since at the time the Agreement will be submitted for a vote of the
stockholders of Lycos I may be deemed to have been an affiliate of Lycos and
the distribution by me of the Terra Stock has not been registered under the
Act, I may not sell, transfer or otherwise dispose of Terra Stock issued to me
in the Agreement unless (i) such sale, transfer or other disposition has been
registered under the Act, (ii) such sale, transfer or other disposition is
made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, or (iii) in the opinion of
counsel reasonably acceptable to Terra, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
d. I understand that Terra is under no obligation to register the
sale, transfer or other disposition of the Terra Stock by me or on my behalf
under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
I recognize and agree that the foregoing provisions also apply to
(i) my spouse, (ii) any relative of mine or my spouse occupying my home, (iii)
any trust or estate in which I, my spouse or any such relative owns at least
10% beneficial interest or of which any of us serves as trustee, executor or
in any similar capacity and (iv) any corporate or other organization in which
I, my spouse or any such relative owns at least 10% of any class of equity
securities or of
the equity interest.
It is understood and agreed that this Letter Agreement shall
terminate and be of no further force and effect if the Agreement is terminated
in accordance with its terms. It is also understood and agreed that this
Letter Agreement shall terminate and be of no further force and effect upon
the later of delivery by the undersigned to Terra of a copy of a letter from
the staff of the SEC, an opinion of counsel in form and substance reasonably
satisfactory to Terra, or other evidence reasonably satisfactory to Terra, to
the effect that a transfer of my shares of Terra Stock will not violate the
Act or any of the rules and regulations of the SEC thereunder.
Execution of this letter should not be construed as an admission on
my part that I am an "affiliate" of Lycos as described in the first paragraph
of this letter or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
