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AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 6, 1999
AMONG
XXXXXXXXXX.XXX, INC.
XXXXXXXXXXXX.XXX, INC.
DAEDALUS WORLD WIDE CORPORATION
AND
XXXXX XXXXX
XXXXXXX XXXXX
XXXXXXX XXXXXXX
XXXXX XXXXXXX
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TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER
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1.1 The Merger...............................................................................................1
1.2 Effective Time...........................................................................................1
1.3 Effect of the Merger.....................................................................................1
1.4 Supplementary Action.....................................................................................2
ARTICLE II
THE SURVIVING CORPORATION
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2.1 Certificate of Incorporation of the Surviving Corporation................................................2
2.2 Bylaws of the Surviving Corporation......................................................................2
2.3 Directors and Officers of the Surviving Corporation......................................................2
ARTICLE III
CONVERSION OF SHARES
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3.1 Conversion of DWWC Capital Stock.........................................................................2
3.2 Capital Stock of Acquisition Corp........................................................................5
3.3 Earn Out.................................................................................................5
3.4 Escrow Fund..............................................................................................6
3.5 Dissenters'Rights........................................................................................8
3.6 Exchange of Certificates.................................................................................8
3.7 Dividends................................................................................................9
3.8 Adjustments..............................................................................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SPORTSLINE COMPANIES
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4.1 Corporate Status........................................................................................10
4.2 Capitalization of SportsLine............................................................................10
4.3 Authorization; Enforceability...........................................................................10
4.4 No Violation............................................................................................11
4.5 Consents, etc...........................................................................................11
4.6 SEC Filings.............................................................................................11
4.7 Absence of Certain Changes or Events....................................................................12
4.8 Reorganization Qualification............................................................................12
4.9 Brokers, Finders, etc...................................................................................12
4.10 Litigation..............................................................................................12
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DWWC AND THE PRINCIPAL SHAREHOLDERS
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5.1 Organization, Authority, Qualification; Locations and Names; Corporate Records..........................13
5.2 Authorization; Enforceability...........................................................................13
5.3 Capitalization..........................................................................................14
5.4 No Violation............................................................................................15
5.5 Consents, etc...........................................................................................15
5.6 Legal Proceedings.......................................................................................16
5.7 Subsidiaries............................................................................................16
5.8 Intellectual Property...................................................................................16
5.9 Compliance with Law, Charter Documents and Agreements...................................................19
5.10 Financial Statements; Books and Records.................................................................20
5.11 Title and Related Matters...............................................................................20
5.12 Employee Benefit Matters................................................................................21
5.13 Labor Relations.........................................................................................22
5.14 Contracts and Transactions..............................................................................23
5.15 Related Party Transactions..............................................................................24
5.16 Environmental Laws......................................................................................24
5.17 Tax Returns and Payments................................................................................24
5.18 Notes and Accounts Receivable...........................................................................25
5.19 Notes and Loans Payable.................................................................................26
5.20 Insurance...............................................................................................26
5.21 Sales and Marketing; Customer Lists.....................................................................26
5.22 Trading in SportsLine Common Stock......................................................................26
5.23 Director and Shareholder Approvals......................................................................27
5.24 No Existing Discussions.................................................................................27
5.25 Absence of Certain Changes or Events....................................................................28
5.26 Absence of Certain Business Practices...................................................................28
5.27 No Commissions..........................................................................................28
5.28 Tax Status of the Merger................................................................................28
5.32 Reorganization Qualification............................................................................28
5.30 Disclosure..............................................................................................29
ARTICLE VI
CERTAIN COVENANTS OF DWWC
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6.1 Conduct of Business by DWWC Pending the Merger..........................................................29
6.2 Approval of Shareholders................................................................................31
ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
7.1 Best Efforts; Cooperation; Further Assurances...........................................................31
7.2 Access to Information...................................................................................31
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7.3 Notification of Certain Matters.........................................................................32
7.4 Publicity...............................................................................................32
7.5 Exclusive Dealings; Failure by DWWC to Consummate Merger Without Cause..................................32
7.6 Trading in SportsLine Common Stock......................................................................32
7.7 Noncompetition and Nonsolicitation......................................................................32
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SPORTSLINE COMPANIES
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8.1 Accuracy of Representations and Warranties and Compliance with Obligations..............................34
8.2 Corporate Matters.......................................................................................34
8.3 No Adverse Proceedings..................................................................................35
8.4 No Material Adverse Change..............................................................................35
8.5 Consents and Approvals..................................................................................35
8.6 Resignations............................................................................................35
8.7 Private Placement.......................................................................................35
8.8 Releases................................................................................................35
8.9 Termination of Certain Agreements and Rights............................................................35
8.10 Escrow Agreement........................................................................................36
8.11 Severance Letters.......................................................................................36
8.12 SportsLine Loan.........................................................................................36
8.13 Dissenting Shareholders.................................................................................36
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF DWWC
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9.1 Accuracy of Representations and Warranties and Compliance with Obligations..............................36
9.2 Corporate Matters.......................................................................................36
9.3 No Adverse Proceedings..................................................................................36
9.4 No Material Adverse Change..............................................................................37
9.5 Governmental Consents...................................................................................37
9.6 Escrow Agreement........................................................................................37
ARTICLE X
CLOSING
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10.1 Closing.................................................................................................37
10.2 Deliveries by DWWC......................................................................................37
10.3 Deliveries by the SportsLine Companies..................................................................38
ARTICLE XI
COMPLIANCE WITH SECURITIES LAWS
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11.1 Limitation on Disposition of Shares.....................................................................38
11.2 Legend..................................................................................................38
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ARTICLE XII
SURVIVAL; INDEMNIFICATION AND ESCROW
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12.1 Survival................................................................................................39
12.2 Indemnification.........................................................................................39
12.3 Special Damages.........................................................................................40
12.4 Escrow Period; Release of Escrow Fund...................................................................41
12.5 Claims Upon the Escrow Fund.............................................................................42
12.6 Objections to Claims....................................................................................42
12.7 Resolution of Conflicts.................................................................................42
12.8 Shareholders'Agent......................................................................................43
12.9 Third Party Claims......................................................................................44
ARTICLE XIII
DEFINITIONS
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13.1 Defined Terms...........................................................................................46
13.2 Other Definitional Provisions...........................................................................49
ARTICLE XIV
TERMINATION
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14.1 Termination.............................................................................................49
14.2 Effect of Termination...................................................................................50
ARTICLE XV
GENERAL PROVISIONS
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15.1 Notices.................................................................................................50
15.2 Entire Agreement........................................................................................51
15.3 Expenses................................................................................................51
15.4 Amendment...............................................................................................52
15.5 Waiver..................................................................................................52
15.6 Binding Effect; Assignment..............................................................................52
15.7 Interpretation..........................................................................................52
15.8 Severability............................................................................................52
15.9 Governing Law; Interpretation...........................................................................52
15.10 Arm's Length Negotiations...............................................................................53
15.11 Confidentiality.........................................................................................53
15.12 Counterparts............................................................................................53
15.13 Access to Books and Records.............................................................................53
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LIST OF SCHEDULES AND EXHIBITS
Exhibit Description
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3.4 Form of Escrow Agreement
8.8 Form of Release
8.11 Form of Severance Letter
Schedule Description
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3.3(d) Business Plan
7.8 Terms of Employment
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of December 6,
1999 (the "Agreement Date"), among XxxxxxXxxx.xxx, Inc., a Delaware corporation
("SportsLine"), Xxxxxxxxxxxx.xxx, Inc., a New York corporation and a wholly
owned subsidiary of SportsLine ("Acquisition Corp." and together with SportsLine
sometimes hereinafter referred to as the "SportsLine Companies"), Daedalus World
Wide Corporation, a New York corporation ("DWWC"), and Xxxxx Xxxxx, Xxxxxxx
Xxxxx, Xxxxxxx Xxxxxxx and Xxxxx Xxxxxxx (individually, a "Principal
Shareholder" and collectively, the "Principal Shareholders"). Certain other
capitalized terms used herein and not otherwise defined shall have the meanings
as set forth in Article XIII hereof.
WHEREAS, the parties hereto desire to effect the merger of DWWC with
and into Acquisition Corp. (the "Merger") pursuant to the applicable provisions
of the New York Business Corporation Law (the "NYBCL");
WHEREAS, the respective Boards of Directors of SportsLine, Acquisition
Corp. and DWWC have approved the Merger and the terms and conditions of this
Agreement and have determined that the Merger is in the best interests of their
respective shareholders;
WHEREAS, the Merger has been approved by the holders of at least
two-thirds of the outstanding shares of common stock, no par value, of DWWC
("DWWC Common Stock"), but is subject to satisfaction of certain other
conditions described in this Agreement; and
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
THE MERGER
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1.1 The Merger. Subject to and upon the terms and conditions of this
Agreement and in accordance with the NYBCL, at the Effective Time (as defined in
Section 1.2 hereof), DWWC shall be merged with and into Acquisition Corp., which
shall be the surviving corporation (sometimes hereinafter referred to as the
"Surviving Corporation") in the Merger, and as a result thereof the separate
corporate existence of DWWC shall cease.
1.2 Effective Time. If all the conditions to the Merger set forth in
Articles VIII and IX hereof shall have been fulfilled or waived in accordance
herewith and this Agreement has not been terminated as provided in Article XIV
hereof, on the Closing Date the parties hereto shall cause a certificate of
merger in the form required by the NYBCL (the "Merger Filing"), to be duly
prepared and executed and filed in accordance with the NYBCL. The Merger shall
become effective at the time the Merger Filing is filed with the Secretary of
State of the State of New York in accordance with the NYBCL, or at such later
time which the parties hereto have agreed upon and designated in such filing as
the effective time of the Merger (the "Effective Time").
1.3 Effect of the Merger. From and after the Effective Time, the Merger
shall have all the effects set forth in the NYBCL. Without limiting the
generality of the foregoing, at the Effective Time, by virtue of the Merger, all
properties, rights, privileges, powers and franchises of DWWC and Acquisition
Corp. shall vest in the Surviving Corporation and all debts, liabilities and
duties of DWWC and Acquisition Corp. shall become the debts, liabilities and
duties of the Surviving Corporation.
1.4 Supplementary Action. If at any time after the Effective Time, any
further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of DWWC or Acquisition Corp., or
otherwise to carry out the provisions of this Agreement, the officers and
directors of the Surviving Corporation are hereby authorized and empowered, in
the name of and on behalf of DWWC and Acquisition Corp., to execute and deliver
any and all things necessary or proper to vest or to perfect or confirm title to
such property or rights in the Surviving Corporation, and otherwise to carry out
the purposes and provisions of this Agreement.
ARTICLE II
THE SURVIVING CORPORATION
-------------------------
2.1 Certificate of Incorporation of the Surviving Corporation. The
Certificate of Incorporation of Acquisition Corp. as in effect at the Effective
Time shall be the certificate of incorporation of the Surviving Corporation
until thereafter amended in accordance with such certificate and applicable Law.
2.2 Bylaws of the Surviving Corporation. The Bylaws of Acquisition
Corp. as in effect at the Effective Time shall be the bylaws of the Surviving
Corporation until thereafter amended in accordance with such bylaws and
applicable Law.
2.3 Directors and Officers of the Surviving Corporation. The directors
and officers of Acquisition Corp. at the Effective Time shall be the directors
and officers of the Surviving Corporation until their respective successors are
duly elected and qualified in accordance with the Surviving Corporation's
certificate of incorporation, bylaws and applicable Law.
ARTICLE III
CONVERSION OF SHARES
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3.1 Conversion of DWWC Capital Stock.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of any holder thereof, each share of DWWC Common
Stock issued and outstanding immediately prior to the Effective Time, other than
shares of DWWC Common Stock held by DWWC as treasury stock or by any subsidiary
of DWWC or by any Dissenting Shareholder (as defined in Section 3.6) who, as of
the Effective Time, has not effectively withdrawn or lost such shareholder's
dissenter's rights, shall be converted into the right to receive the following
(the "Merger Consideration"):
(i) an amount in cash equal to the Cash Amount;
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(ii) a number of validly issued, fully paid and
nonassessable shares of common stock, $0.01 par value per
share, of SportsLine ("SportsLine Common Stock") equal to the
Conversion Number; and
(iii) the Per Share Earn Out Amount, if any.
(b) For purposes of this Agreement:
(i) "Cash Amount" means an amount in cash equal to
the quotient of (i) Four Million Dollars ($4,000,000), divided
by (ii) the total number of Fully Diluted DWWC Shares.
(ii) "Conversion Number" means the quotient (rounded
down to the nearest one-thousandth) obtained by dividing (i)
the SportsLine Merger Shares by (ii) the total number of Fully
Diluted DWWC Shares.
(iii) "Earn Out Shares" means, with respect to an
installment of the Earn Out (as defined in Section 3.3), the
quotient of the dollar amount of that installment divided by
the Reference Price.
(iv) "Excess Debt" means the sum of outstanding
principal balance of and accrued interest on all outstanding
Debt (as defined in Section 5.19) as of immediately prior to
the Effective Time after giving effect to the payment of the
SportsLine Loan (as defined in Section 8.12).
(v) "Fully Diluted DWWC Shares" means the number of
shares of DWWC Common Stock that is equal to the sum of: (A)
the total number of shares of DWWC Common Stock that are
issued and outstanding immediately prior to the Effective
Time; plus (B) the total number of shares of DWWC Common Stock
that are ultimately subject to, and potentially issuable
(without regard to any vesting or other conditions to
exercise) under, all options and warrants that are issued and
outstanding immediately prior to the Effective Time; plus (C)
the total number of shares of DWWC Common Stock that are
ultimately subject to, and/or are potentially issuable under
or upon the exercise, exchange or conversion of, all
promissory notes, debentures, debt instruments, evidences of
indebtedness, capital stock or other security of DWWC or any
of its subsidiaries that are issued and outstanding
immediately prior to the Effective Time and that are, directly
or indirectly, convertible or exchangeable for any shares of
DWWC Common Stock and/or any other shares of capital stock of
DWWC of any class or series ("Convertible Securities"); plus
(D) the total number of shares of DWWC Common Stock that are
ultimately subject to, and/or are potentially issuable under
or upon the exercise, exchange or conversion of, any and all
other warrants, options, rights, notes, evidences of
indebtedness, stock or other securities that are issued and
outstanding immediately prior to the Effective Time and that
entitle the holder thereof to purchase or otherwise acquire
any Convertible Securities or any other shares of the capital
stock of DWWC of any class or series.
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(vi) "Income Tax Distribution" means a distribution
of cash in an amount which does not exceed an amount equal to
the sum of (A) the product of (1) DWWC's taxable income for
federal income tax purposes for the period commencing on
January 1, 1999 and ending on the Effective Date, minus the
amount determined pursuant to clause (B), below, for such
period, times (2) the highest applicable marginal individual
federal income tax rate, plus (B) if the Shareholders are
obligated to pay any state or local income taxes on account of
DWWC's income, the product of (x) DWWC's taxable income for
federal income tax purposes for the period commencing on
January 1, 1999 and ending on the Effective Date, times (y)
the highest applicable marginal individual state or local
income tax rate, minus (C) any amounts distributed by DWWC to
the Shareholders prior to November 1, 1999 in respect of
income Taxes.
(vii) "Per Share Earn Out Amount" means (i) with
respect to an installment of the Earn Out (as defined in
Section 3.3) which is paid in cash, an amount equal to the
quotient of (A) the dollar amount of that installment divided
by (B) the total number of Fully Diluted DWWC Shares and (ii)
with respect to an installment of the Earn Out which is paid
in shares of SportsLine Common Stock, the quotient (rounded
down to the nearest one-thousandth) obtained by dividing (A)
the Earn Out Shares for that installment by (ii) the total
number of Fully Diluted DWWC Shares.
(viii) "SportsLine Merger Shares" means the quotient
of the Stock Consideration divided by the Reference Price.
(ix) "Reference Price" means (i) with respect to the
Stock Consideration, $46.30 per share which is the average of
the daily closing sales prices of the SportsLine Common Stock
as quoted on the Nasdaq National Market System and reported in
The Wall Street Journal for the 15 trading days ending on (and
inclusive of) the business day immediately preceding the
Agreement Date, (ii) with respect to the installment of the
Earn Out Amount payable on the First Payment Date or the
Second Payment Date (as such terms are defined in Section
3.3), the 20 trading days ending on (and inclusive of) the
business day immediately preceding the respective payment
date, and (iii) for the purposes of Article XII, $30.00 per
share.
(x) "Stock Consideration" means the sum of (A) Twenty
Seven Million Seven Hundred and Eighty Thousand Dollars
($27,780,000), minus (B) the sum of (x) any Excess Debt plus
(y) any Transaction Expenses (as defined in Section 15.3)
which are borne by DWWC plus (z) the amount of any cash
distributed by DWWC to the Shareholders (as defined in Section
3.4) as a dividend or other distribution since November 1,
1999, other than an Income Tax Distribution.
Each fractional share of DWWC Common Stock issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive an
amount of Merger Consideration determined by multiplying (i) the amounts of cash
and SportsLine Common Stock to which the
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holder of one whole share of DWWC is entitled, times (ii) the fraction of a
share of DWWC Common Stock (rounded to the nearest thousandth).
(c) Upon conversion of the outstanding DWWC Common Stock
in accordance with this Section 3.1, all such shares shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist; and each certificate formerly representing any such shares (a
"Certificate") shall thereafter represent only the right to receive the Merger
Consideration into which the shares represented by such Certificate have been
converted in accordance with this Section 3.1. Certificates previously
representing shares of DWWC Common Stock shall be exchanged for the Cash Amount,
certificates representing whole shares of SportsLine Common Stock and cash in
lieu of any fractional share, without interest, issued in consideration therefor
upon the surrender of such certificates in accordance with Section 3.5 hereof.
(d) At the Effective Time, each share of DWWC Common
Stock issued and held in DWWC's treasury or by any subsidiary of DWWC shall, by
virtue of the Merger and without any action on the part of DWWC, cease to be
outstanding, shall be canceled and retired without payment of any consideration
therefor and shall cease to exist.
3.2 Capital Stock of Acquisition Corp. Each share of common stock, par
value $0.01 per share, of Acquisition Corp. issued and outstanding immediately
prior to the Effective Time shall by virtue of the Merger and without any action
on the part of the Acquisition Corp. continue unchanged and remain outstanding
as a share of common stock of the Surviving Corporation.
3.3 Earn Out.
(a) If, during the calendar year commencing January 1,
2000 and ending December 31, 2000 (the "Measurement Period"), the Surviving
Corporation recognizes more than $3,000,000 ("Revenue Threshold") in Fantasy
Subscription Revenue, then SportsLine shall pay to the holders of DWWC Common
Stock, as additional Merger Consideration, an aggregate amount equal to
$1,000,000 for each $100,000 in Fantasy Subscription Revenue recognized in
excess of the Revenue Threshold during the Measurement Period, up to a maximum
of $12,000,000 in additional Merger Consideration (the "Earn Out"). For purposes
of this Agreement, "Fantasy Subscription Revenue" means the amount of net
revenue (gross subscription fees less credit card "chargebacks" and merchant
transaction fees) recognized by the Surviving Corporation (on an accrual basis,
determined in accordance with SportsLine's existing practices for determining
revenue under the July 1998 Agreement between DWWC and SportsLine, consistently
applied), from the sale of "commissioner," "challenge game" and "league" (i.e.,
products which allow a single player to participate in fantasy products using
league formats similar to the format used by the "commissioner" product)
products; provided, that with respect to revenue derived from the distribution
of such fantasy products via distribution relationships other than through the
CBS SportsLine website and which relationships are not consummated as of the
Effective Time, such revenues shall only be counted for the purposes of the Earn
Out, if the distribution agreement was originated exclusively by the Principal
Shareholders.
(b) If at any time during the Measurement Period
SportsLine decides, in its sole and absolute discretion, not to charge
subscribers for their use of the "commissioner," "challenge game"
5
or "league" products, then notwithstanding the foregoing, the Earn Out shall be
determined as follows: if the Surviving Corporation receives subscriptions for
"commissioner," "challenge game" or "league" products from more than 750,000
subscribers ("Subscriber Threshold"), then SportsLine shall pay to the holders
of DWWC Common Stock, as additional Merger Consideration, an aggregate amount
equal to $1,000,000 for each 41,667 subscribers in excess of the Subscriber
Threshold during the Measurement Period, up to a maximum of $12,000,000 in
additional Merger Consideration.
(c) The Earn Out shall be paid in two equal installments,
which shall payable on (i) March 1, 2001 (the "First Payment Date"), and (ii)
December 31, 2001 (the "Second Payment Date"), respectively. At SportsLine's
option, either or both of the installments of the Earn Out shall be payable in
cash or, so long as SportsLine Common Stock is then publicly traded, SportsLine
Common Stock, or a combination thereof. For each installment of the Earn Out,
SportsLine shall pay to each Shareholder in respect of that installment the Per
Share Earn Out Amount times the number of Fully Diluted DWWC Shares owned by
that Shareholder immediately prior to the Merger.
(d) Until the expiration of the Measurement Period,
SportsLine agrees that it will operate the business of the Surviving Corporation
during calendar year 2000 substantially in accordance with the business plan
attached hereto as Schedule 3.3(d) and promote the "commissioner," "challenge"
and "league" products on the CBS SportsLine website substantially in accordance
with the level of promotion (including on the homepage of the CBS SportsLine
website) during calendar year 1999 prior to the Effective Time. If SportsLine
breaches the covenant in this Section 3.3(d) prior to the end of the Measurement
Period, then notwithstanding the foregoing, SportsLine shall pay to the
Shareholders, as additional Merger Consideration the full amount of the Earn Out
equal to $12 million.
(e) In the event SportsLine sells or otherwise disposes
of substantially all of the assets, business or properties of the Surviving
Corporation (whether by merger, consolidation, sale of stock or assets or
otherwise) prior to the end of the Measurement Period, and as a result of such
sale or disposition the acquiring party does not agree to be bound by the terms
and conditions of the Earn Out as provided hereunder, then notwithstanding the
previous determination of the Earn Out, SportsLine shall within 60 days of the
consummation of the sale or disposition pay to the Shareholders as additional
Merger Consideration the full amount of the Earn Out equal to $12 million. A
merger or consolidation of SportsLine with or into any other Person shall not
constitute a sale or disposition purposes of this Section 3.3(e).
3.4 Escrow Fund.
(a) As soon as practicable following the Effective Time
(or at such later time as may be provided in Section 3.6 hereof with respect to
shares issuable to Dissenting Shareholders who withdraw or lose their
dissenter's rights), and subject to and in accordance with Article XII hereof,
SportsLine will withhold from the Merger Consideration payable to each holder of
DWWC Common Stock (each, a "Shareholder") in accordance with this Article III,
and deliver to SunTrust Bank, South Florida, N.A., as escrow agent (the "Escrow
Agent"), (i) a certificate or certificates representing ten percent (10%) of the
number of shares of SportsLine Common Stock issuable to such Shareholder
(rounded down to the nearest whole number of shares to be issued to each
Shareholder) plus a certificate or certificates representing an additional
18,000 shares of SportsLine Common Stock (the "Escrow Shares") and (ii) ten
percent
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(10%) of the cash payable to such Shareholder plus an additional amount of cash
equal to $270,000 (the "Escrow Cash"). Such deposit and any amount of Earn Out
delivered into escrow pursuant to Section 12.5 below shall constitute the escrow
fund ("Escrow Fund") and be governed by the terms set forth herein and in the
Escrow Agreement to be entered into among SportsLine, the Surviving Corporation,
the Escrow Agent and the Shareholders' Agent (as defined in Section 12.8) in
substantially the form attached hereto as Exhibit 3.4 (the "Escrow Agreement").
The Escrow Shares shall be registered in the name of the Escrow Agent as nominee
for, and held by the Escrow Agent in escrow on behalf of, the Shareholders on a
pro rata basis (in accordance with the Shareholders' percentage ownership of
DWWC Common Stock immediately prior to the Effective Time). In the event
SportsLine issues any Additional Escrow Shares (as defined in Section 3.4(b)),
such shares will be issued in the name of the Escrow Agent and delivered to the
Escrow Agent in the same manner as set forth above, and such Additional Escrow
Shares shall constitute a part of the Escrow Fund and be deemed to be "Escrow
Shares" for all purposes hereof. The Escrow Fund shall be available to
compensate SportsLine and the Indemnified Persons (as defined in Section 12.2)
for certain damages and, to the extent not used for such purposes, shall be
released to the persons otherwise entitled thereto, all as provided in Article
XII and the Escrow Agreement.
(b) Each Shareholder will have voting rights with respect
to the Escrow Shares deposited in the Escrow Fund with respect to such
Shareholder so long as such Escrow Shares are held in escrow, and SportsLine
will take all necessary steps to allow the exercise of such rights. In addition,
while the Escrow Shares remain in the Escrow Agent's possession pursuant to this
Agreement and the Escrow Agreement, the Shareholders will retain and be able to
exercise all other incidents of ownership of said Escrow Shares consistent with
the terms and conditions of this Agreement and the Escrow Agreement. Except for
dividends paid in SportsLine Common Stock declared with respect to the Escrow
Shares ("Additional Escrow Shares"), which shall be deposited in escrow pursuant
to Section 3.6 hereof, any cash dividends, dividends payable in other securities
or other distributions of any kind made in respect of the Escrow Shares will be
delivered to the Shareholders on a pro rata basis in accordance with the number
of Escrow Shares deposited on behalf of such Shareholder.
(c) By virtue of the approval of this Agreement and the
Merger by the Shareholders, each Shareholder, without any further act, shall be
deemed to have consented to and approved (i) the use of the Escrow Fund as
collateral for the indemnification obligations set forth in Article XII in the
manner set forth in such Article and the Escrow Agreement, (ii) the appointment
of the Shareholders' Agent in accordance with Section 12.8 as the
attorney-in-fact and agent for and on behalf of each Shareholder (other than
holders of Dissenting Shares), and the taking by the Shareholders' Agent of any
and all actions and the making of any decisions required or permitted to be
taken by the Shareholders' Agent under Article XII and the Escrow Agreement,
(iii) the exercise by the Shareholders' Agent of the power to: (A) execute and
deliver the Escrow Agreement; (B) authorize delivery to SportsLine of Escrow
Shares or Escrow Cash in satisfaction of claims made by SportsLine; (C) agree
to, negotiate, enter into settlements and compromises of and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
claims; (D) resolve any claim made pursuant to Article XII; and (E) take all
actions necessary in the judgment of the Shareholders' Agent for the
accomplishment
7
of the foregoing), and (iii) all of the other terms, conditions and limitations
in Article XII and the Escrow Agreement.
3.5 Dissenters' Rights. If holders of DWWC Common Stock are entitled to
dissenters' rights in connection with the Merger under the NYBCL, any shares of
DWWC Common Stock ("Dissenting Shares") held by persons who have complied with
all requirements for perfecting dissenter's rights under the NYBCL ("Dissenting
Shareholders") shall not be converted into or represent the right to receive the
Merger Consideration but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to the NYBCL. DWWC shall give SportsLine prompt notice of any
demand received by DWWC to require DWWC to purchase shares of DWWC Common Stock,
withdrawals of such demands and any instruments served pursuant to the NYBCL and
received by DWWC with respect to Dissenting Shares, and SportsLine shall have
the right to participate in all negotiations and proceedings with respect to any
such demand. DWWC agrees that, except with the prior written consent of
SportsLine, it will not voluntarily make any payment with respect to, or settle
or offer to settle, any such demands.
Each Dissenting Shareholder who, pursuant to the provisions of the
NYBCL, becomes entitled to payment of the fair value of shares of DWWC Common
Stock shall receive payment therefor (but only after the value therefor shall
have been agreed upon or finally determined pursuant to such provisions). If,
after the Effective Time, any Dissenting Shareholder shall effectively withdraw
or lose (through failure to perfect or otherwise) his dissenter's rights under
the NYBCL, then, as of the later of the Effective Time or the occurrence of such
event, such Dissenting Shareholder's shares of DWWC Common Stock shall
automatically be converted into the right to receive the Merger Consideration;
provided, that at such time SportsLine will deposit into escrow with the Escrow
Agent certificates representing ten percent (10%) of the SportsLine Common Stock
and cash to which such Dissenting Shareholder would otherwise be entitled.
3.6 Exchange of Certificates.
(a) At the Closing, or as soon as practicable thereafter,
the Shareholders shall surrender their Certificate(s), duly endorsed, for
cancellation as of the Effective Time, together with the Release contemplated by
Section 8.8. On the Closing Date or as soon thereafter as SportsLine receives
such Certificates and such Release: (i) SportsLine will cause its transfer agent
to issue to each tendering holder of a Certificate (a "Tendering Holder") (A) a
certificate representing the number of whole shares of SportsLine Common Stock
to which such Tendering Holder is entitled pursuant to Section 3.1 less the
number of Escrow Shares of such Tendering Holder that are to be withheld and
placed in escrow pursuant to Section 3.4 and the Escrow Agreement, and (ii)
SportsLine or its transfer agent will pay by check to such Tendering Holder (or
to DWWC's counsel in escrow for the Tendering Shareholder) an amount in cash,
without interest equal to the sum of (A) the amount payable to the Tendering
Holder pursuant to Section 3.1(a)(i), plus (B) the amount payable to the
Tendering Holder with respect to a fractional share in accordance with Section
3.6(b) less the amount of cash of such Tendering Holder that is to be withheld
and placed in escrow pursuant to Section 3.4 and the Escrow Agreement. As soon
as practicable following the Effective Time, SportsLine will deliver the
certificates representing the Escrow Shares and the cash representing the Escrow
Cash to the Escrow Agent pursuant to the Escrow Agreement.
8
(b) No certificates or scrip representing fractional
shares of SportsLine Common Stock shall be issued as part of the Merger
Consideration, and such fractional interests shall not entitle the owner thereof
to vote or to any rights as a stockholder of SportsLine. All fractional shares
of SportsLine Common Stock that a Shareholder would otherwise be entitled to
receive as part of the Merger Consideration shall be aggregated and if a
fractional share results from such aggregation, such Shareholder shall be
entitled to receive, in lieu thereof, an amount in cash determined by
multiplying (i) the Reference Price, times (ii) the fraction of a share of
SportsLine Common Stock to which such Shareholder would otherwise have been
entitled. No such cash in lieu of fractional shares of SportsLine Common Stock
shall be paid to any Shareholder until Certificates are surrendered and
exchanged in accordance with Section 3.6(a).
(c) Except for the Merger Shares to be registered in the
name of the Escrow Agent, if any Merger Consideration is to be delivered to a
person other than the person in whose name the Certificates for shares of DWWC
Common Stock surrendered for exchange are registered, it shall be a condition to
the payment of such Merger Consideration that (i) the Certificate(s) so
surrendered shall be transferable, and shall be properly assigned, endorsed or
accompanied by appropriate stock powers, (ii) the person requesting such
transfer shall pay SportsLine, or its transfer agent, any transfer or other
taxes payable by reason of the foregoing or establish to the satisfaction of
SportsLine that such taxes have been paid or are not required to be paid and
(iii) such transfer shall otherwise be proper.
(d) The Merger Consideration shall be deemed to have been paid
and issued in full satisfaction of all rights pertaining to the shares of DWWC
Common Stock.
(e) Notwithstanding anything to the contrary in this
Section 3.6, none of SportsLine, the Surviving Corporation or any party hereto
shall be liable to any person for any shares or amounts properly delivered or
paid to a public official pursuant to any applicable abandoned property, escheat
or similar Law.
3.7 Dividends. No dividends or other distributions that are declared or
made after the Effective Time with respect to SportsLine Common Stock payable to
holders of record thereof after the Effective Time shall be paid to a
Shareholder entitled to receive certificates representing SportsLine Common
Stock until such Shareholder has properly surrendered such Shareholder's
Certificates. Upon such surrender, there shall be paid to the Shareholder in
whose name the certificates representing such SportsLine Common Stock shall be
issued any dividends which shall have become payable with respect to such
SportsLine Common Stock between the Effective Time and the time of such
surrender, without interest. After such surrender, there shall also be paid to
the Shareholder in whose name the certificates representing such SportsLine
Common Stock shall be issued any dividend on such SportsLine Common Stock that
shall have a record date subsequent to the Effective Time and prior to such
surrender and a payment date after such surrender; provided that such dividend
payments shall be made on such payment dates. In no event shall the Shareholders
entitled to receive such dividends be entitled to receive interest on such
dividends.
3.8 Adjustments. If, subsequent to the Agreement Date but prior to the
Effective Time, SportsLine changes the number of shares of SportsLine Common
Stock issued and outstanding as a result of a stock split, reverse stock split,
stock dividend, recapitalization or other similar change with a record date
prior to the Effective Time, the Conversion Number shall be proportionately and
9
equitably adjusted to reflect the effect of any such stock split, reverse stock
split, stock dividend, recapitalization or other similar change.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SPORTSLINE COMPANIES
----------------------------------------------------------
The SportsLine Companies hereby joint and severally represent and
warrant to DWWC and the Principal Shareholders as follows:
4.1 Corporate Status. SportsLine is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Acquisition Corp. is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York. Each of the SportsLine
Companies (i) has the corporate power and authority to own, lease and operate
its properties and assets and to conduct and carry on its business as it is now
being conducted and operated and as proposed to be conducted and operated and
(ii) is duly qualified or licensed to conduct business as a foreign corporation
and is in good standing in all jurisdictions that require such qualification or
licensing, except where the failure to be so qualified or licensed or to be in
good standing does not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on SportsLine.
4.2 Capitalization of SportsLine.
(a) The authorized capital stock of SportsLine consists
of 200,000,000 shares of SportsLine Common Stock and 1,000,000 shares of
Preferred Stock, $0.01 par value per share. As of September 30, 1999, (i)
23,590,885 shares of SportsLine Common Stock were issued and outstanding and
(ii) no shares of Preferred Stock were issued and outstanding. Upon consummation
of the Merger, the shares of SportsLine Common Stock to be issued in exchange
for the DWWC Common Stock in accordance with this Agreement will be, when so
issued, duly authorized, validly issued, fully paid and nonassessable and will
not violate any preemptive rights.
(b) Except as set forth in the SEC Filings, as of
September 30, 1999, there were no outstanding (i) securities convertible into or
exchangeable for capital stock of SportsLine; (ii) obligations, options,
warrants or other rights of any kind or character to acquire, purchase or
subscribe for capital stock of SportsLine or securities convertible into or
exchangeable for capital stock of SportsLine, other than options and warrants to
purchase SportsLine Common Stock granted in the ordinary course of business
since the date of the SEC Filings; or (iii) agreements, arrangements or
understandings of any kind relating to the authorization, issuance or sale of
capital stock of SportsLine or securities convertible into or exchangeable for
capital stock of SportsLine, except such issuances or sales as are contemplated
pursuant to acquisition agreements entered (or to be entered) into since the
date of the SEC Filings.
4.3 Authorization; Enforceability. Each of the SportsLine Companies has
the corporate power and authority to execute and deliver this Agreement and all
Transaction Documents to which it is or will be a party, to perform its
respective obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Transaction Documents has been duly
authorized by all necessary corporate action on the part of each of the
SportsLine Companies. This Agreement has been duly executed and delivered by
each of the SportsLine Companies and constitutes, and, when
10
executed by SportsLine or Acquisition Corp. (as applicable) each Transaction
Document will constitute, a valid and binding obligation of the SportsLine
Companies, enforceable against them in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity, and except to the extent that any provisions requiring
indemnification in connection with the offering, issuance or sale of securities
may violate public policy.
4.4 No Violation. The execution, delivery and performance of this
Agreement and the Transaction Documents by the SportsLine Companies does not and
will not (i) conflict with or violate any provision of the SportsLine Companies'
respective Certificate or Articles of Incorporation or Bylaws, each as amended
to date; (ii) violate or breach any provision of, or result, through the mere
passage of time, in a violation of, or result in the termination or acceleration
of, or entitle any party to terminate or accelerate (whether after the giving of
notice or lapse of time or both), any obligation under, be in conflict with or
constitute or result in a default (or an event which, with notice or lapse of
time or both, would constitute such a default) under, or result in the
imposition of any Lien upon or with respect to the stock or any assets, business
or properties of the SportsLine Companies pursuant to, any material Permit,
Contract or other instrument, commitment or obligation to which either of the
SportsLine Companies is a party or by which either of the SportsLine Companies
or any of their respective assets is bound or subject, or violate or conflict
with any other material restriction of any kind or character to which the
SportsLine Companies, or any of their respective properties or assets, is
subject or bound; (iii) violate any Order to which the SportsLine Companies is a
party or it or its respective properties or assets is subject or bound; or (iv)
violate any Law applicable to the SportsLine Companies.
4.5 Consents, etc. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
Governmental Authority or any other Person on the part of the SportsLine
Companies is required in connection with the execution, delivery and performance
by SportsLine or Acquisition Corp. of this Agreement and the Transaction
Documents, except (a) filings required to comply with applicable federal and
state securities laws, (b) the filing with the Nasdaq National Market of a
Notification Form for Listing of Additional Shares with respect to the shares of
SportsLine Common Stock issuable upon conversion of the DWWC Common Stock in the
Merger, (c) the Merger Filings, (d) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on SportsLine and would not prevent, materially
alter or delay any of the transactions contemplated by this Agreement or the
Transaction Documents.
4.6 SEC Filings. SportsLine has previously made available to the DWWC
copies of the following reports filed by SportsLine with the SEC: (i) Annual
Report on Form 10-K for the fiscal year ended December 31, 1998 (the "10-K"),
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30,
1999 and September 30, 1999 (the "10-Qs"), (iii) definitive Proxy Statement
filed with respect to SportsLine's Annual Meeting of Shareholders held on June
17, 1999 (the "Proxy Statement") and (iv) all other reports, proxy statements or
other reports filed by SportsLine with the SEC pursuant to Sections 13, 14 or
15(d) of the Exchange since January 1, 1999 (collectively, such reports and
proxy statements, together with the 10-K, the 10-Qs and the Proxy Statement are
referred to as the "SEC Filings"). As of the date of filing, each SEC Filing (i)
complied (and, with respect to SEC Filings filed after the Agreement Date, such
SEC Filings will
11
comply as of the date of filing) in all material respects with the requirements
of the Securities Act and the Exchange Act, as applicable, and the rules and
regulations of the SEC thereunder applicable to such SEC Filings and (ii) did
not contain (and, with respect to SEC Filings filed after the Agreement Date,
will not contain as of the date of filing) any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
The audited consolidated financial statements and unaudited interim
financial statements of SportsLine included in the SEC Filings (collectively,
the "Financial Statements") were prepared in accordance with GAAP (except as may
be indicated therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q) and fairly present in all
material respects the financial position of SportsLine as of the respective
dates thereof or the results of operations and cash flows for the respective
periods then ended, as the case may be, subject, in the case of unaudited
interim financial statements, to normal, recurring adjustments which are not
material in the aggregate. Since October 1, 1999 and until the date of this
Agreement, there has been no material change in SportsLine's accounting policies
which would require disclosure in the Financial Statements under GAAP.
4.7 Absence of Certain Changes or Events. Except as disclosed in the
SEC Filings, and except as expressly contemplated by this Agreement, since
December 31, 1998, there has not been: (i) any change in the business,
operations, assets, liabilities, financial condition or operating results of
SportsLine and its Subsidiaries which has had or would reasonably be expected to
have a Material Adverse Effect on SportsLine, or (ii) any damage, destruction or
loss, whether or not covered by insurance to or of the assets of SportsLine
which has had or would reasonably be expected to have a Material Adverse Effect
on SportsLine.
4.8 Reorganization Qualification . SportsLine has no current plan or
intention to (i) reacquire any of the SportsLine Merger Shares, (ii) liquidate
the Surviving Corporation (iii) merge Surviving Corporation with and into
another corporation, (iv) sell or otherwise dispose of the stock of Surviving
Corporation, or cause Surviving Corporation to sell or otherwise dispose of any
of the assets of DWWC acquired in the Merger, except for dispositions made in
the ordinary course of business or transfers described in Section 368(a)(2)(C)
of the Code. Prior to the Closing, SportsLine will be in control of Acquisition
Corp. within the meaning of Section 368(c)(1) of the Code. It is SportsLine's
current intention that following the Merger, Surviving Corporation will continue
the historic business of DWWC or use a significant portion of the assets of DWWC
in a business and will not issue additional shares of its stock that would
result in SportsLine losing control of Surviving Corporation within the meaning
of Section 368(c) of the Code.
4.9 Brokers, Finders, etc. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this agreement and the Transaction Documents or the transactions
contemplated hereby and thereby based upon any agreements, written or oral, made
by or on behalf of the SportsLine Companies or by or on behalf of any director,
officer, employee, agent or Affiliate of the SportsLine Companies.
4.10 Litigation. Except as disclosed in the SEC Filings, there are no
legal proceedings pending or, to SportsLine's knowledge, threatened against
SportsLine or Acquisition Corp.
12
(i) challenging the merger, or seeking to restrain or prohibit the consummation
of the Merger, or (ii) which, if determined adversely to SportsLine,
individually or in the aggregate, would have or would reasonably be expected to
have a material Adverse Effect on SportsLine. There are no Orders of any
Governmental Authority or arbitrator outstanding against SportsLine which have
or would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on SportsLine.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DWWC AND THE PRINCIPAL SHAREHOLDERS
---------------------------------------------------------------------
DWWC and the Principal Shareholders, jointly and not severally, hereby
represent and warrant to the SportsLine Companies as follows:
5.1 Organization, Authority, Qualification; Locations and Names;
Corporate Records.
(a) DWWC is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of New York. DWWC (i)
has the corporate power and authority to own, lease and operate its properties
and assets and to conduct and carry on its business as it is now being conducted
and operated and as proposed to be conducted and operated and (ii) is duly
qualified or licensed to conduct business as a foreign corporation and is in
good standing in all jurisdictions that require such qualification or licensing,
except where the failure to be so qualified or licensed or to be in good
standing does not and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on DWWC.
(b) The addresses of DWWC's principal place of business
and principal executive offices are identified in Paragraph 5.1(b) of the
Disclosure Letter. As of the Agreement Date, DWWC neither owns nor leases any
real property nor has any employees, sales representatives or agents in any
state in the United States or in any other jurisdiction, other than those
identified in Paragraph 5.1(b) of the Disclosure Letter. Except as set forth in
Paragraph 5.1(b) of the Disclosure Letter, during the past three years, DWWC has
not changed its name or used any assumed or fictitious name nor has it been the
surviving entity in a merger, acquired any business or changed its principal
place of business or principal executive offices from the locations thereof as
of the Agreement Date.
(c) The copies of the Certificate of Incorporation, as
amended, and Bylaws of DWWC which have been provided to SportsLine are true,
accurate and complete and reflect all amendments made through the Agreement
Date. Except for the transactions involving Xxxxx Xxxxxx, the minute books of
DWWC provided to SportsLine contain a complete summary of all meetings of DWWC's
directors and stockholders since the time of incorporation and reflect all
transactions referred to in such minutes accurately in all material respects.
The copies of stock ledgers of DWWC which have been provided to SportsLine
contain accurate and complete records of all issuances, transfers and
cancellations of shares of the capital stock of DWWC.
5.2 Authorization; Enforceability. DWWC has the corporate power and
authority to execute and deliver this Agreement and all Transaction Documents to
which it is or will be a party, to perform its respective obligations hereunder
and thereunder and to consummate the transactions
13
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Transaction Documents has been duly authorized by all
necessary corporate action on the part of DWWC. The affirmative vote of the
holders of at least two-thirds of the shares of DWWC Common Stock outstanding on
the record date for the shareholders meeting or written consents relating to
such approval is the only vote of the holders of any of DWWC's capital stock
necessary to approve this Agreement, the Merger and the transactions
contemplated hereby under the NYBCL, DWWC's Certificate of Incorporation, Bylaws
and other charter documents, and under any Contract regarding the voting of
shares of DWWC's capital stock. This Agreement has been duly executed and
delivered by DWWC and each of the Principal Shareholders and constitutes and,
when executed by DWWC and each of the Principal Shareholders each Transaction
Document will constitute, a valid and binding obligation of DWWC and each of the
Principal Shareholders, enforceable against each of DWWC and the Principal
Shareholders in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application affecting the enforcement of creditors' rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
5.3 Capitalization.
(a) The authorized capital stock of DWWC consists of
1,000 shares of DWWC Common Stock. As of the Agreement Date, there were issued
and outstanding, and immediately prior to the Effective Time there will be
issued and outstanding, 355.555 shares of DWWC Common Stock. All of the issued
and outstanding shares of DWWC Common Stock have been duly authorized and
validly issued, are (except as provided under Section 630 of the NYBCL) fully
paid and nonassessable, are not, except for the Stockholders Agreement, dated
June 15, 1998 among the Principal Shareholders and DWWC (the "Stockholders
Agreement"), subject to any claim, Lien, preemptive right, right of first
refusal, right of first offer or right of rescission, and were offered, issued,
sold and delivered by DWWC in compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of all applicable federal and
state securities Laws. No Shareholder owes DWWC any money or other consideration
representing any part of the purchase price of any outstanding shares of DWWC
Common Stock, including without limitation any money due under a promissory note
payable to DWWC. DWWC has no liability (or potential liability) to any
shareholder for any dividends that have been declared or accrued and remain
unpaid. Paragraph 5.3(a) of the Disclosure Letter sets forth a true and correct
list of all holders of DWWC Common Stock as of the Agreement Date, including the
number of shares of DWWC Common Stock owned of record and beneficially by each
such holder.
(b) Except for the Stockholders Agreement, there are no
options, warrants, convertible securities or other securities, calls,
commitments, conversion privileges, preemptive rights, rights of first refusal,
rights of first offer or other rights or agreements outstanding to which DWWC or
any Shareholder is party to purchase or otherwise acquire (whether directly or
indirectly) any shares of DWWC's authorized but unissued capital stock or any
securities convertible into or exchangeable for any shares of DWWC's capital
stock or obligating DWWC to grant, issue, extend, or enter into any such option,
warrant, convertible security or other security, call, commitment, conversion
privilege, preemptive right, right of first refusal, right of first offer or
other right or agreement. Except for the DWWC Common Stock to be converted into
SportsLine Common Stock upon the Merger, no warrants, convertible debentures, or
any other securities of DWWC or rights to acquire shares of DWWC stock or any
warrants or other securities of DWWC will become an option, warrant, convertible
debenture, security or other right to purchase or otherwise acquire any
14
capital stock or other securities of SportsLine, or any other obligation or
liability of SportsLine by reason of the Merger or this Agreement. To DWWC's and
the Principal Shareholders' best Knowledge, no person or entity holds, or has
any option, warrant or other right to acquire, any issued and outstanding shares
of the capital stock of DWWC from any holder of shares of the capital stock of
DWWC.
(c) Except as set forth in Paragraph 5.3(c) of the
Disclosure Letter, there are no outstanding or existing proxies, voting
agreements, voting trusts, preemptive rights, rights of first refusal, rights of
first offer, rights of co-sale or tag-along rights, shareholder agreements or
other rights, understandings or arrangements regarding the voting or disposition
of the capital stock of DWWC, or any other restrictions (other than restrictions
on transfer under applicable federal and state securities laws) applicable to
any of DWWC's outstanding stock or other securities or to the conversion of any
shares of DWWC's capital stock in the Merger pursuant to any agreement or
obligation to which DWWC or, to DWWC's and the Principal Shareholders' best
Knowledge, any of its Shareholders is a party. DWWC has not granted or agreed to
grant to any person or entity any rights (including piggyback registration
rights) to have any securities of DWWC, or any securities into which the
securities of DWWC are converted or for which such securities are exchanged
(including any SportsLine Common Stock into which such DWWC Common Stock is
converted pursuant to the Merger), registered with under the Securities Act or
any other Law.
(d) From November 1, 1999 through the Agreement Date,
DWWC has not declared or paid any cash dividends, dividends payable in other
securities or other distributions of any kind in respect of the DWWC Common
Stock other than cash distributions in the aggregate amount of $200,000 made on
December 3, 1999. DWWC has not paid, and will not pay, nor will DWWC be
obligated after the Effective Time to pay, any Transaction Expenses.
5.4 No Violation. Except as set forth in Paragraph 5.4 of the
Disclosure Letter, the execution, delivery and performance of this Agreement and
the Transaction Documents by DWWC does not and will not (i) upon receipt of the
requisite approval of DWWC's Shareholders referred to in Section 6.2, conflict
with or violate any provision of DWWC's Certificate of Incorporation or Bylaws,
each as amended to date; (ii) violate or breach any provision of, or result,
through the mere passage of time, in a violation of, or result in the
termination or acceleration of, or entitle any party to terminate or accelerate
(whether after the giving of notice or lapse of time or both), any obligation
under, be in conflict with or constitute or result in a default (or an event
which, with notice or lapse of time or both, would constitute such a default)
under, or result in the imposition of any Lien upon or with respect to the stock
or any assets, business or properties of DWWC pursuant to, any Permit, Contract
or other instrument, commitment or obligation to which DWWC is a party or by
which DWWC or any of its assets is bound or subject, or violate or conflict with
any other restriction of any kind or character to which DWWC, or any of its
properties or assets, is subject or bound, with such exceptions as would not
individually or in the aggregate have a Material Adverse Effect on DWWC or the
Surviving Corporation; (iii) violate any Order to which DWWC is a party or it or
its properties or assets is subject or bound, with such exceptions as would not
individually or in the aggregate have a Material Adverse Effect on DWWC or the
Surviving Corporation; or (iv) violate any Law applicable to DWWC with such
exceptions as would not individually or in the aggregate have a Material Adverse
Effect on DWWC or the Surviving Corporation.
5.5 Consents, etc. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
Governmental Authority or any other
15
Person on the part of DWWC is required in connection with the execution,
delivery or performance by DWWC of this Agreement and the Transaction Documents,
except (a) the Merger Filings, and (b) as set forth in Paragraph 5.5 of the
Disclosure Letter.
5.6 Legal Proceedings. Except as set forth in Paragraph 5.6 of the
Disclosure Letter, there are no Legal Proceedings pending or, to DWWC's and the
Principal Shareholders' best Knowledge, threatened against DWWC (or against any
officer, director, employee, key consultant or agent of DWWC in their capacity
as such or relating to their employment, services or relationship with DWWC).
There are no Orders of any Governmental Authority or arbitrator outstanding
against DWWC or, to DWWC's and the Principal Shareholders' best Knowledge,
against any officer or director of DWWC in their capacity as such. Except as set
forth in Paragraph 5.6 of the Disclosure Letter, to DWWC's and the Principal
Shareholders' best Knowledge, there is no basis for any shareholder or former
shareholder of DWWC, or any other Person, to assert a claim against DWWC or
SportsLine based upon: (i) a disputed claim of ownership of options, warrants or
other rights to acquire ownership of, any shares of the capital stock of DWWC,
(ii) any rights as a shareholder of DWWC, including any option, warrant or
preemptive rights, right of refusal, rights of co-sale or tag along rights or
rights to notice or to vote, (iii) any rights under any agreement among DWWC and
its shareholders or among the shareholders of DWWC, or (iv) subject to the
satisfaction of the requirements of Section 6.2, DWWC entering into this
Agreement or any Transaction Document or consummating the Merger or any of the
transactions contemplated by this Agreement or any Transaction Document.
5.7 Subsidiaries. Except as set forth in Paragraph 5.7 of the
Disclosure Letter, DWWC (i) does not presently own or control, directly or
indirectly, any ownership, equity or profit interest in any other corporation,
limited liability company, association or other business entity and (ii) is not
a participant in any joint venture, partnership or similar arrangement.
5.8 Intellectual Property.
(a) DWWC IP Rights; Intellectual Property. DWWC owns, or has
the valid right or license to use, possess, sell or license, all Intellectual
Property (as defined below) necessary or required for the conduct of the
business of DWWC as presently conducted and as presently proposed to be
conducted, including without limitation, the operation of each of the DWWC
Websites (such Intellectual Property being hereinafter collectively referred to
as the "DWWC IP Rights"), and such rights to use, possess, sell or license are
sufficient for the conduct of such business. As used herein, the term
"Intellectual Property" means, collectively, all worldwide industrial and
intellectual property rights, including, without limitation, patents, patent
applications, rights to file for patent applications (including but not limited
to continuations, continuations-in-part, divisionals and reissues), trademarks,
logos, service marks, trade names and service names (in each case whether or not
registered) and applications for and the right to file applications for
registration thereof, Internet domain name or application for an Internet domain
name, Internet and World Wide Web URLs or addresses, copyrights (whether or not
registered) and applications for and the right to file applications for
registration thereof, moral rights, mask work rights, mask work registrations
and applications therefor, franchises, licenses, inventions, trade secrets,
trade dress, know-how, customer lists, supplier lists, proprietary processes and
formulae, software source code and object code, algorithms, net lists,
architectures, structures, screen displays, layouts, inventions, development
tools, designs, blueprints, specifications, technical drawings (or similar
information in electronic format), publicity and privacy rights and any other
intellectual property rights arising under the laws
16
of the United States of America, any State thereof, or any country or province,
and all documentation and media (in whatever form) constituting, describing or
relating to the foregoing, including, without limitation, manuals, programmers'
notes, memoranda and records.
(b) No Default. Neither the execution, delivery and
performance of this Agreement or the consummation of the Merger and the other
agreements and transactions contemplated hereby and/or by the Transaction
Documents will: (i) constitute a breach, violation or default of any instrument,
contract, license or other agreement governing any DWWC IP Right to which DWWC
is a party; (ii) cause the forfeiture or termination of, or give rise to a right
of forfeiture or termination of, any DWWC IP Right held or owned by DWWC; or
(iii) impair the right of DWWC or the Surviving Corporation or their
subsidiaries to use, possess, sell or license any DWWC IP Right or portion
thereof. There are no royalties, honoraria, fees or other payments payable by
DWWC or any of its subsidiaries to any third person by reason of the ownership,
use, possession, license, sale, marketing, advertising or disposition of any
DWWC IP Rights by DWWC.
(c) No Infringement by DWWC. Neither the manufacture,
marketing, license, sale, furnishing or intended use of any product or service
(including without limitation any product or service offered to users of the
DWWC Websites) currently licensed, utilized, sold, provided or furnished by DWWC
or currently under development by DWWC violates any license or agreement between
DWWC and any third party or infringes or misappropriates any Intellectual
Property right of any other party; and there is no pending or, to DWWC's and the
Principal Shareholders' best Knowledge, threatened, claim or litigation
contesting the validity, ownership or right of DWWC to use, possess, sell,
market, distribute, advertise, license, or dispose of any DWWC IP Right nor, to
DWWC's and the Principal Shareholders' best Knowledge, is there any basis for
any such claim, nor has DWWC received any notice asserting that any DWWC IP
Right or the proposed use, sale, distribution, license or disposition thereof
conflicts or will conflict with the rights of any other party, nor, to the
knowledge of DWWC, is there any basis for any such assertion. Except as set
forth in Paragraph 5.8(c) of the Disclosure Letter, DWWC possesses all rights
and interests necessary to (A) sell all products and services currently sold by
it and (B) to use the names and/or likenesses of persons used in such catalogs
or on the DWWC websites or in any other Marketing Materials for the specific
purpose and in the specific web pages or Marketing Materials in which such
likenesses appeared, in the case of both (A) and (B), without infringing the
Intellectual Property rights of any other Person.
(d) No Breach by Employees or Consultants. No employee,
consultant or independent contractor of DWWC: (i) is in material violation of
any term or covenant of any employment contract, patent disclosure agreement,
invention assignment agreement, non-disclosure agreement, non-competition
agreement or any other contract or agreement with any other party by virtue of
such employee's, consultant's, or independent contractor's being employed by, or
performing services for, DWWC or using trade secrets or proprietary information
of others, that would be likely to have a Material Adverse Effect on DWWC; or
(ii) has developed any technology, software or other copyrightable, patentable,
or otherwise proprietary work for DWWC that is subject to any agreement under
which such employee, consultant or independent contractor has assigned or
otherwise granted to any third party any rights (including without limitation
Intellectual Property) in or to such technology, software or other
copyrightable, patentable or otherwise proprietary work or any Intellectual
Property related thereto. To DWWC's and the Principal Shareholders' best
17
Knowledge, the employment of any employee of DWWC or the use by DWWC of the
services of any consultant or independent contractor does not subject DWWC to
any liability to any third party.
(e) Protection of Proprietary Information. DWWC has taken
all necessary and appropriate steps to protect, preserve and maintain the
secrecy and confidentiality of all trade secrets contained in the DWWC IP Rights
and all DWWC's ownership interests and proprietary rights therein. All officers,
employees, consultants and contractors of DWWC having access to proprietary
information of DWWC, its customers or business partners, or who have developed
any software, proprietary information or inventions for use by DWWC, have
executed and delivered to DWWC an agreement whereby they have agreed to hold
such software, proprietary information and inventions in confidence, and copies
of the form of all such agreements have been delivered to SportsLine's counsel.
DWWC has secured valid written assignments from all consultants, contractors
and, where applicable, employees who were involved in, or who contributed to,
the creation or development of any DWWC IP Rights, of the rights to such
contributions that may be owned by such persons or that DWWC does not already
own by operation of law. No current or former employee, officer, director,
consultant or independent contractor of DWWC has any right, license, claim or
interest whatsoever in or with respect to any DWWC IP Rights (except those DWWC
IP Rights that exist by reason of a license by such Person to DWWC).
(f) Registered and Unregistered Intellectual Property.
Paragraph 5.8(f) of the Disclosure Letter contains a true and correct list of
(i) all worldwide registrations of any patents, copyrights, mask works,
trademarks, service marks, Domain Names or Internet or World Wide Web URLs or
addresses with any governmental or quasi-governmental authority; (ii) all
applications, registrations, filings and other formal actions made or taken
pursuant to federal, state and foreign laws by DWWC to secure, perfect or
protect its interest in DWWC IP Rights, including, without limitation, all
patent applications, copyright applications, and applications for registration
of trademarks and service marks, (iii) all unregistered trademarks and service
marks and (iv) all 800- or 888- prefix phone numbers used by DWWC in connection
with the conduct of its business. Except as set forth in Paragraph 5.8(f) of the
Disclosure Letter, to the Knowledge of DWWC and the Principal Shareholders all
registered trademarks held by DWWC are valid and enforceable.
(g) Licenses. Paragraph 5.8(g) of the Disclosure Letter
contains a complete list of (i) all licenses, sublicenses and other agreements
as to which DWWC is a party and pursuant to which any person or entity is
authorized to use any DWWC IP Rights, and (ii) all licenses, sublicenses and
other agreements as to which DWWC is a party and pursuant to which DWWC is
authorized to use any third party patents, trademarks, Internet domain names,
Internet or World Wide Web URLs or addresses, or copyrights, including but not
limited to software ("Third Party IP Rights") which would be infringed by, or
are incorporated in, or form a part of, any product or service sold, licensed,
distributed, provided or marketed by DWWC.
(h) Source Code. Except as set forth in Paragraph 5.8(h)
of the Disclosure Letter, neither DWWC, nor any other party acting on its
behalf, has disclosed or delivered to any party (other than independent
contractors bound by nondisclosure agreements in favor of DWWC), or permitted
the disclosure or delivery to any escrow agent or other party, of any DWWC
Source Code (as defined below). No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or would
reasonably be expected to, result in the disclosure or delivery to any such
party of any DWWC Source Code (as defined below). Paragraph 5.8(h) of the
Disclosure Letter identifies each Contract (whether written or oral) pursuant to
which DWWC
18
has deposited, or is or may be required to deposit, with an escrow holder or any
other party, any DWWC Source Code and further describes whether the execution of
this Agreement or the consummation of the Merger or any of the other
transactions contemplated hereby, in and of itself, would reasonably be expected
to result in the release from escrow of any DWWC Source Code. As used in this
Section 5.8(h), "DWWC Source Code" means, collectively, any software source
code, or any material portion or aspect of the software source code, or any
material proprietary information or algorithm contained in or relating to any
software source code, of any DWWC IP Rights or any other product or service
marketed by DWWC but such definition does not include software normally provided
to end users in source code form, such as HTML files, scripts, and any
interpreted code sent to the user's business.
(i) No Infringement by Third Parties. To DWWC's and the
Principal Shareholders' best knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any DWWC IP Rights or any
Intellectual Property Right of DWWC by any third party, including any employee
or former employee of DWWC. DWWC has not agreed to indemnify any person for any
infringement of any Intellectual Property of any third party by any product or
service that has been sold, licensed, leased, supplied, marketed, distributed,
or provided by DWWC.
(j) Year 2000 Compliance. All internal computer systems
of DWWC which are material to its business are, both individually and in
conjunction with all other systems with which they work or interface, Year 2000
Compliant (as defined below). Without limiting the generality of the foregoing,
the DWWC Websites, and all services, products and software developed, owned,
licensed and/or marketed or distributed by DWWC or utilized by DWWC in
connection with any of the DWWC Websites or otherwise, both individually and
when operating in conjunction with all other systems and products with which
they are designed to work or interface, are Year 2000 Compliant. DWWC has made
inquiries of the manufacturers, suppliers, vendors and customers and, to DWWC's
knowledge, is not relying on any third party whose systems are not Year 2000
Compliant. DWWC has no material expenses or other material liabilities
associated with securing Year 2000 Compliance, or making contingency
arrangements to address Year 2000 Compliance issues, with respect to the DWWC
Websites, the services or products of DWWC, the internal computer systems of
DWWC or the computer systems or products or services of manufacturers,
suppliers, vendors or customers of DWWC. "Year 2000 Compliant" or "Year 2000
Compliance" means, as applied to hardware and software, that: (i) such hardware
and software will operate and correctly store, represent and process (including
sort) all dates (including single and multi-century formulas and leap year
calculations), such that errors will not occur when the date being used is in
the Year 2000, or in a year preceding or following the Year 2000; (ii) such
hardware and software has been written, developed and tested to support numeric
and date transitions from the twentieth century to the twenty-first century, and
back (including without limitation all calculations, aging, reporting, printing,
displays, reversals, disaster and vital records recoveries) without error,
corruption or impact to current and/or future operations; and (iii) such
hardware and software will function without error or interruption related to any
date information, specifically including errors or interruptions from functions
which may involve date information from more than one century.
5.9 Compliance with Law, Charter Documents and Agreements. DWWC is not
in violation or default of any provisions of its Certificate of Incorporation or
Bylaws, and (i) has all material Permits and other authorizations necessary to
own its properties and assets and carry on its business as it is presently being
conducted and proposed to be conducted, (ii) is in compliance in all material
respects with all applicable Laws of all Governmental Authorities having
jurisdiction over
19
its business or properties, and all material Permits held by it, and (iii)
except as set forth in Paragraph 5.9 of the Disclosure Letter, is in compliance
in all material respects with all of the terms and provisions of all Contracts
listed in Paragraph 5.14 of the Disclosure Letter. Paragraph 5.9 of the
Disclosure Letter sets forth a true and complete list of all Permits held by
DWWC; no other Permits are necessary for DWWC to own its properties and assets
and carry on its business as it is presently being conducted and proposed to be
conducted with such exceptions as do not individually or in the aggregate have a
Material Adverse Effect on DWWC or the Surviving Corporation. Each Permit listed
in Paragraph 5.9 of the Disclosure Letter is in full force and effect with such
exceptions as do not individually or in the aggregate have a Material Adverse
Effect on DWWC or the Surviving Corporation. DWWC has not received any notice or
other communication from any Governmental Authority (or quasi-governmental
authority) regarding (a) any actual or possible violation of Law or any Permit
or any failure to comply with any term or requirement of any Law or Permit, or
(b) any actual or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Permit with such exceptions as do not
individually or in the aggregate have a Material Adverse Effect on DWWC or the
Surviving Corporation. DWWC has not been the subject of any audit by any
Governmental Authority for the purpose of determining whether DWWC has complied
with applicable Law
5.10 Financial Statements; Books and Records.
(a) Paragraph 5.10 of the Disclosure Letter contains a
true and correct copy of (i) DWWC's unaudited financial statements (balance
sheet and profit and loss statement) as of December 31, 1998 and for the year
then ended, and as of October 31, 1999 and for the ten-month period then ended
(collectively, the "Financial Statements"). Except as set forth in Paragraph
5.10 of the Disclosure Letter, all of the Financial Statements present in all
material respects the financial condition and operating results of DWWC as of
the dates and for the periods indicated therein. Except as set forth in DWWC's
October 31, 1999 balance sheet (the "Balance Sheet"), DWWC has no debts,
liabilities or obligations of any nature, whether accrued, absolute, contingent
or otherwise, other than (A) debts or liabilities incurred in the ordinary
course of business subsequent to October 31, 1999 and (B) obligations under
contracts and commitments incurred or to be performed in the ordinary course of
business subsequent to October 31, 1999. DWWC is not a guarantor or indemnitor
of any indebtedness of any other Person.
(b) The books, records and accounts of DWWC (i) are in
all material respects true, complete and correct, (ii) have been maintained in
accordance with customary business practices, and (iii) accurately and fairly
reflect in all material respects the basis for the Financial Statements.
5.11 Title and Related Matters. DWWC owns no real property. The Balance
Sheet reflects all of the properties and assets used by DWWC in its business,
except for (i) properties or assets acquired or disposed of in the ordinary
course of business since the date(s) thereof, and (ii) properties or assets not
required under GAAP to be reflected thereon. Except as set forth in Paragraph
5.11 of the Disclosure Letter, the properties and assets DWWC owns are owned by
DWWC free and clear of all Liens, except statutory Liens for the payment of
current taxes that are not yet delinquent and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
do not detract from the value or interfere with the present use, of the property
subject thereto or affected thereby. The properties and assets of DWWC used in
the operation of its business (i) are in all material respects adequate for the
conduct of DWWC's
20
business as currently conducted and as proposed to be conducted, and (ii) are in
good condition and repair, normal wear and tear excepted. With respect to the
properties and assets it leases, DWWC holds valid leasehold interests free and
clear of all Liens and such leases are fully effective and afford DWWC peaceful
and undisturbed possession of the subject matter of the lease. DWWC is not in
violation of any material zoning, building, safety or environmental ordinance,
regulation or requirement or other Law applicable to the operation of owned or
leased properties, and has not received any notice of such violation with which
it has not complied.
5.12 Employee Benefit Matters. Paragraph 5.12 of the Disclosure Letter
contains a list of each of the following, if any, which is sponsored, maintained
or contributed to by DWWC for the benefit of its employees or agents, or under
which DWWC has any liability: (i) each "employee benefit plan", as defined in
Section 3(3) of ERISA (including, but not limited to, employee benefit plans
which are not subject to the provisions of ERISA) ("Plan"), and (ii) each
collective bargaining agreement, profit sharing, stock option, stock purchase,
pension, bonus, incentive, retirement, incentive award plan or arrangement,
vacation policy, severance pay policy or agreement, deferred compensation
agreement or arrangement, consulting agreement, employment contract, medical
reimbursement, life insurance or other material benefit plan, agreement,
arrangement, program, practice or understanding which is not described in clause
(i), above ("Benefit Program"). True, correct and complete copies or
descriptions of each Plan and each Benefit Program, and related trusts and
agreements, if applicable, including all amendments thereto, have been furnished
to SportsLine. There has also been furnished to SportsLine, with respect to each
Plan required to file such report and description, the three most recent reports
on Form 5500 and the summary plan description. Except as otherwise set forth in
Paragraph 5.12 of the Disclosure Letter, (iii) DWWC neither contributes nor has
any obligation to contribute to, and has not at any time contributed to or had
an obligation to contribute to, a multiemployer plan within the meaning of
Section 3(37) of ERISA ("Multiemployer Plan") or a multiple employer plan within
the meaning of Section 413(b) and (c) of the Code; (iv) DWWC has substantially
performed all obligations, whether arising by operation of law or by contract,
required to be performed by it before or on the Agreement Date in connection
with the Plan and Benefit Programs (including without limitation the filing of
any required Form 5500 for any of the Plans); (v) all reports and disclosures
relating to the Plans required to be filed with or furnished to Governmental
Authorities, Plan participants or Plan beneficiaries have been filed or
furnished in accordance with applicable Law in a timely manner, other than any
failure to file or furnish such documents which would not result in a material
liability to DWWC or the Surviving Corporation, and each Plan and Benefit
Program has been administered in substantial compliance with its governing
documents; (vi) each Plan intended to be qualified under Section 401 of the Code
satisfies the requirements of such section and has received a favorable
determination letter from the Internal Revenue Service regarding such qualified
status and has not, since receipt of the most recent favorable determination
letter, been amended or operated in a way which could adversely affect such
qualified status; (vii) there are no Legal Proceedings pending (other than
routine claims for benefits) or to the Knowledge of DWWC or the Principal
Shareholders threatened against, or with respect to, any Plan or Benefit
Programs or their assets which would have a Material Adverse Effect on DWWC or
the Surviving Corporation; (viii) all contributions required to be made to the
Plans by DWWC or its Affiliates pursuant to their terms and provisions and
applicable Law have, in all material respects, been made timely; (ix) as to any
Plan subject to Title IV of ERISA, there has been no event or condition which
presents the material risk of Plan termination, no accumulated funding
deficiency, whether or not waived, within the meaning of Section 302 of ERISA or
Section 412 of the Code has been incurred, no reportable event within the
21
meaning of Section 4043 of ERISA (for which the disclosure requirements of
Regulation Section 2615.3 promulgated by the Pension Benefit Guaranty
Corporation ("PBGC") have not been waived) has occurred, no notice of intent to
terminate the Plan has been given under Section 4041 of ERISA, no proceeding has
been instituted under Section 4042 of ERISA to terminate the Plan, there has
been no termination or partial termination of the Plan within the meaning of
Section 411(d)(3) of the Code, no liability to the PBGC has been incurred, and
the assets of the Plan equal or exceed the aggregate present value of the
benefit liabilities (within the meaning of Section 4001(a)(16) of ERISA) under
the Plan, computed on a "plan termination basis" based upon reasonable actuarial
assumptions and the asset valuation principles established by the PBGC; (x) to
the Knowledge of DWWC or the Principal Shareholders, none of the Plans nor any
trust created thereunder or with respect thereto has engaged in any "prohibited
transaction" or "party-in-interest transaction" as such terms are defined in
Section 4975 of the Code and Section 406 of ERISA which could subject any Plan,
either DWWC or the Surviving Corporation or any officer, director or employee
thereof to a material tax or penalty on prohibited transactions or
party-in-interest transactions pursuant to Section 4975 of the Code or Section
502(i) of ERISA; (xi) each trust funding a Plan, which trust is intended to be
exempt from federal income taxation pursuant to Section 501(c)(9) of the Code,
satisfies the requirements of such section and has received a favorable
determination letter from the Internal Revenue Service regarding such exempt
status and has not, since receipt of the most recent favorable determination
letter, been amended or operated in a way which would adversely affect such
exempt status; and (xii) DWWC has not incurred any liability or taken any
action, and no action or event has occurred that could cause DWWC to incur any
liability (A) under Section 412 of the Code or Title IV of ERISA with respect to
any "single-employer plan" within the meaning of Section 4001(a)(15) of ERISA,
or (B) to any Multiemployer Plan, including without limitation on account of a
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA.
5.13 Labor Relations. Paragraph 5.13 of the Disclosure Letter sets
forth a true and correct list of all employees employed by DWWC as of the
Agreement Date, together with their respective job titles, dates of hire,
compensation and status as a full-time or part-time employee. DWWC does not pay
or provide any material benefits (other than wages) to part-time employees in
the ordinary course of business. Except as set forth in Paragraph 5.13 of the
Disclosure Letter, DWWC is not a party to or bound by any agreements or
arrangements on behalf of any officer, director or employee providing for
severance payments, accelerated vesting or similar termination benefits
following termination of their employment with DWWC or for any payment,
accelerated vesting or other benefits to such person contingent upon the
execution of this Agreement or the Closing. There are no collective bargaining
agreements to which DWWC is a party. DWWC has not experienced any organized slow
down, work interruption, strike or work stoppage. There are no existing or, to
the best Knowledge of DWWC or the Principal Shareholder, threatened material
labor disputes. Except as set forth on Paragraph 5.13 of the Disclosure Letter,
DWWC has in all material respects paid when due all wages, bonuses, commissions,
taxes, penalties or assessments, owed to, or arising out of the employment of,
any officer, director or employee. DWWC is in compliance, in all material
respects, with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages and hours, occupational
safety and health, and is not engaged in any unfair labor or unfair employment
practices which could result in a material liability to DWWC or the Surviving
Corporation. There is no unfair labor practice charge or complaint or any other
matter against (or to DWWC's and the Principal Shareholders' best Knowledge,
involving) DWWC pending or, to DWWC's and the Principal Shareholders' best
Knowledge, threatened before any Governmental Authority. There are no
investigations, administrative proceedings or formal
22
complaints of discrimination (including discrimination based upon sex, age,
marital status, race, national origin, sexual preference, handicap or veteran
status) pending or, to DWWC's and the Principal Shareholders' best Knowledge,
threatened before the Equal Employment Opportunity Commission or any federal,
state or local agency or court against or involving DWWC. There are no
citations, investigations, administrative proceedings or formal complaints of
violations of local, state or federal occupational safety and health laws
pending or, to DWWC's and the Principal Shareholders' best Knowledge, threatened
before the Occupational Safety and Health Review Commission or any federal,
state or local agency or court against or involving DWWC. No agreement,
arbitration or court decision or governmental order to which DWWC is a party or
to the Knowledge of DWWC or Principal Shareholders to which it or any of its
properties or assets is bound or subject in any way limits or restricts DWWC
from relocating or closing any of its operations. DWWC is not aware that any
officer or Principal Shareholder, intends to terminate their employment with
DWWC, and DWWC does not have a present intention to terminate the employment of
any of the foregoing.
5.14 Contracts and Transactions. Except as set forth in Paragraph 5.14
of the Disclosure Letter: (a) there are no Contracts or proposed Contracts
involving amounts in excess of $5,000 to which DWWC is a party or by which it or
its properties or assets is subject or bound; (b) there are no Contracts,
transactions or proposed transactions to which DWWC is a party or by which it or
its properties or assets is subject or bound involving any of DWWC's directors,
officers, shareholders or other Affiliates or Associates of DWWC or any entity
in which any such director, officer, shareholder or other Affiliate or
Associate, or their respective Affiliates or Associates, has a direct or
indirect interest; (c) other than the any existing contracts with SportsLine,
DWWC is not a party to and is not bound by or subject to any Contract, or
subject to any restriction under its Certificate of Incorporation or Bylaws,
that limits or restricts DWWC from engaging in any business in any jurisdiction
or adversely affects its ability to carry on its business as now conducted or as
proposed to be conducted, its properties or its financial condition; and (d)
DWWC has not engaged since January 1, 1999 in any discussions or negotiations,
or entered into any Contract, letter of intent or other instrument (whether or
not binding), with any Person other than SportsLine regarding the consolidation
or merger of DWWC with or into any Person, the sale, conveyance or disposition
of all or substantially all of the assets of DWWC or a transaction or series of
related transactions in which more than fifty percent (50%) of the voting power
of DWWC would be disposed of, or any other form of acquisition, liquidation,
dissolution or winding up of DWWC which would in any way obligate or bind
SportsLine or the Surviving Corporation or would result in any liability to
DWWC, SportsLine or the Surviving Corporation; and DWWC has suspended or
terminated, and has the legal right without liability to any Person to suspend
or terminate, all such discussions and negotiations, Contracts, letters of
intent or other instruments.
True and complete copies of all Contracts set forth in Paragraph 5.14
of the Disclosure Letter, including all amendments thereto have been provided to
SportsLine prior to the Agreement Date. Other than any Contracts with SportsLine
or its Affiliates, the Contracts set forth in Paragraph 5.14 of the Disclosure
Letter are valid and enforceable in accordance with their respective terms with
respect to DWWC and valid and, to DWWC's and the Principal Shareholders' best
Knowledge, enforceable in accordance with their respective terms with respect to
any other party to any such Contract, in each subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies and with such exceptions as do not individually or
in the aggregate have a Material Adverse Effect on DWWC or the Surviving
Corporation. Other than any Contracts
23
with SportsLine or its Affiliates, there is not under any of the Contracts set
forth in Paragraph 5.14 of the Disclosure Letter any existing material breach,
default or event of default by DWWC or event that with notice or lapse of time
or both would constitute a breach, default or event of default by DWWC, nor has
DWWC received notice of, or made a claim with respect to, any material breach or
default by any other party to any such Contract. Other than any Contracts with
SportsLine or its Affiliates, to DWWC's and the Principal Shareholders' best
Knowledge, no party to any Contract set forth in Paragraph 5.14 of the
Disclosure Letter intends to withdraw, cancel, modify or amend such Contract.
5.15 Related Party Transactions. Except as set forth in Paragraph 5.15
of the Disclosure Letter, no director, officer or other Affiliate or Associate
of DWWC or any entity in which any such director, officer or other Affiliate or
Associate, or their respective Affiliates or Associates, has any direct or
indirect interest in, or owns any beneficial interest in any Person (other than
a publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 1% of the stock of
which is beneficially owned by any such persons) that has any direct or indirect
interest in: (i) any property (real, personal or mixed), tangible, or
intangible, used or currently intended to be used in, the business or operations
of DWWC, or (ii) any Person that competes with DWWC.
5.16 Environmental Laws. To DWWC's and the Principal Shareholders' best
Knowledge, DWWC is not in violation of any applicable Environmental Law and DWWC
is not and will not be required to make any expenditures to comply with any
Environmental Law.
5.17 Tax Returns and Payments. Except as set forth in the Paragraph
5.17 of the Disclosure Letter, DWWC has timely filed all Tax Returns required by
applicable Law and all such Tax Return are true and correct in all material
respects. The foregoing Tax Returns are not subject to penalties under Section
6662 of the Code, relating to accuracy-related penalties (or any corresponding
provision of the state, local or foreign Tax law) or any predecessor provision
of law. An extension of time within which to file any Tax Return that has not
been filed has not been requested or granted.
DWWC has paid all Taxes (including estimated Taxes) and other
assessments due on or prior to the Agreement Date, except those, if any,
currently being contested by it in good faith and which are listed in Paragraph
5.17 of the Disclosure Letter; and DWWC is not delinquent in the payment of any
Tax nor delinquent in the filing of any Tax Return. Without limiting the
generality of the foregoing, DWWC has reported and duly paid state and local
sales and use Taxes in all states (which are listed in Paragraph 5.17 of the
Disclosure Letter) in which it is required to report and pay such Taxes.
DWWC has not filed a consent pursuant to the provisions of Section
341(f) (or any corresponding provision of state, local or foreign income tax
law) or agreed to have Section 341(f)(2) of the Code (or any corresponding
provision of state, local or foreign income tax law) apply to any disposition of
any asset owned by it.
DWWC has not made any other elections pursuant to the Code (other than
elections that relate solely to methods of accounting, depreciation or
amortization) other than in the ordinary course of business consistent with past
practices. DWWC has never had any Tax deficiency threatened, claimed, proposed
or assessed against it and has not executed any waiver of any statute
24
of limitations on or extending the period for the assessment or collection of
any Tax, assessment or other governmental charge. DWWC has not received any
notification or other communication indicating that any issues have been raised
(and are currently pending) by the Internal Revenue Service or any other
Governmental Authority regarding DWWC. None of DWWC's Tax Returns has ever been
audited by the Internal Revenue Service or any other Governmental Authority.
Except as disclosed in Paragraph 5.17 of the Disclosure Letter, DWWC has
withheld or collected from each payment made to each of its employees, whether
in cash, stock or in kind, the amount of all Taxes (including, but not limited
to, federal income taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment Tax Act taxes) required to be withheld or collected therefrom, and
has paid the same to the proper Governmental Authority or authorized
depositories. No material special charges, penalties, fines, liens or other
similar encumbrances have been asserted against DWWC with respect to the payment
or failure to pay any Taxes which have not been paid or received without further
liability to DWWC. DWWC has provided to SportsLine prior to the Agreement Date
copies of all Tax Returns for all taxable periods ending on or after the date of
DWWC's incorporation.
DWWC has never been a member of an affiliated group of corporations,
within the meaning of Section 1504 of the Code. DWWC has not agreed to make nor
is it required to make any adjustments under Section 481(a) of the Code by
reason of a change in accounting method or otherwise. DWWC has not participated
in and will not participate in an international boycott within the meaning of
Section 999 of the Code. DWWC is not a party to any joint venture, partnership
or other arrangement or contract that could be treated as a partnership for
federal income tax purposes.
DWWC is, and has been since January 1, 1999, an S corporation as
defined in Section 1361(a) of the Code and DWWC has delivered to SportsLine a
copy of its IRS Form 2553 which was timely filed with the Internal Revenue
Service. The Internal Revenue Service has not sent any correspondence to DWWC
questioning DWWC's status as an S corporation nor is DWWC aware of any facts
that would make DWWC ineligible to be an S corporation.
5.18 Notes and Accounts Receivable. Paragraph 5.18 of the Disclosure
Letter sets forth a true and complete list as of the Agreement Date of all notes
receivable of DWWC owing by any Person, including any director, officer,
stockholder or employee of DWWC or any Affiliate or Associate of any such person
(including those notes receivable reflected on the Balance Sheet and those
incurred since the date of the Balance Sheet). Except as set forth in Paragraph
5.18 of the Disclosure Letter, all such notes receivable have been paid in full
prior to the Agreement Date or will be paid in full prior to the Closing Date.
Other than any accounts receivable from SportsLine or its Affiliates, all
accounts receivable of DWWC which are reflected on the Balance Sheet and those
arising since the date thereof (i) are valid, existing and collectible in a
manner consistent with DWWC's past practice without (to DWWC's and the Principal
Shareholders' best Knowledge) resort to Legal Proceedings or collection
agencies, (ii) arose from bona fide transactions in the ordinary course of
business and represent amounts due for goods sold and delivered or services
rendered in the ordinary course of business and (iii) are payable in full in
cash and are not subject to any refunds or adjustments or any defenses, rights
of set-off, assignment, restrictions or any Liens. Except as set forth in
Paragraph 5.18 of the Disclosure Letter and other than any accounts receivable
from SportsLine or its Affiliates, all such accounts receivable are current, and
there are no disputes regarding the collectibility of any such accounts
receivable. Other than any accounts receivable from SportsLine or its
Affiliates, the allowance for doubtful accounts set forth in the Balance Sheet
is
25
adequate from a historical perspective for the nonpayment of claims previously
submitted and for which revenues have been accrued in the Financial Statements.
5.19 Notes and Loans Payable. Paragraph 5.19 of the Disclosure Letter
sets forth a true and complete list of all notes and loans payable and other
indebtedness for borrowed money other than the SportsLine Loan, excluding trade
payables arising in the ordinary course of business ("Debt") owing by DWWC as of
the Agreement Date, including, the Person to whom such note, loan or other
indebtedness is payable, the amount thereof, the interest rate and other payment
terms, the maturity date and a description of any collateral therefor. All Debt
constituting Excess Debt (as defined in Section 3.1(b)) shall be deducted from
the Stock Consideration in accordance with Section 3.1(b)(vii)(x); provided,
that, if, for any reason, any such Excess Debt is not deducted in the
calculation of the Stock Consideration in accordance with Section
3.1(b)(vii)(x), the full amount of such Excess Debt shall be recoverable by
SportsLine from the Escrow Fund as Damages.
5.20 Insurance. Paragraph 5.20 of the Disclosure Letter sets forth a
true and complete list of all insurance policies in force naming DWWC or
employees thereof as an insured or beneficiary or as a loss payable payee or for
which DWWC has paid or is obligated to pay all or part of the premiums. DWWC has
not received notice of any pending or threatened cancellation or premium
increase (retroactive or otherwise) with respect thereto, and DWWC is in
compliance with all conditions contained therein. There are no pending claims
against such insurance by DWWC as to which insurers are defending under
reservation of rights or have denied liability, and there exists no material
claim under such insurance that has not been properly filed by DWWC. Except for
the self-insurance retentions or deductibles set forth in the policies listed on
Paragraph 5.20 of the Disclosure Letter, DWWC believes the policies maintained
by DWWC are adequate in scope and amount to cover all prudent and reasonably
foreseeable risks which may arise in the conduct of DWWC's business as currently
conducted and as proposed to be conducted.
5.21 Sales and Marketing; Customer Lists.
(a) Each of the DWWC Websites and all other Marketing
Materials distributed by DWWC have at all times made all material disclosures to
users or customers other than SportsLine or its Affiliates required by
applicable Law and none of such disclosures made or contained in any DWWC
Websites or in any such Marketing Materials have been inaccurate, misleading or
deceptive or in violation of applicable Law. DWWC has at all times been in
compliance with applicable Laws relating to the privacy of users of each of the
DWWC Websites.
(b) Except as set forth in Paragraph 5.21(b) of the Disclosure
Letter, DWWC maintains a true and complete lists of all customers who have
purchased products or service from DWWC during the past three years other than
SportsLine or its Affiliates (the "Customer Lists"). The use of the Customer
Lists by DWWC does not violate the Intellectual Property rights or rights of
publicity or privacy of any Person, and is not in violation of any applicable
Law or Order. Except as set forth in Paragraph 5.21(b) of the Disclosure Letter,
DWWC has not granted to any Person any rights to use the Customer Lists or any
information therein or derived therefrom.
5.22 Trading in SportsLine Common Stock. Except as set forth in
Paragraph 5.22 of the Disclosure Letter, during the six month period prior to
the Agreement Date, neither DWWC nor any officer, director, Affiliate or
Associate of DWWC has directly or indirectly purchased or sold (including short
sales) any shares of SportsLine Common Stock (or any put, call, option or
derivative
26
security or the like relating thereto) in any transactions effected on the
Nasdaq National Market or otherwise.
5.23 Director and Shareholder Approvals. The Agreement, the Transaction
Documents and the Merger have been approved by the Board of Directors and
shareholders of DWWC in accordance with its Certificate of Incorporation and
Bylaws and the NYBCL. True and correct copy of the resolutions approving the
Transaction Documents and the Merger have been furnished to SportsLine on or
prior to the Agreement Date. No other approval of the directors or shareholders
of DWWC is necessary under applicable Law for the execution, delivery or
performance by DWWC of this Agreement and the Transaction Documents or the
consummation by DWWC of the Merger and the other transactions contemplated
hereby and thereby.
5.24 No Existing Discussions. Neither DWWC nor any director, officer,
shareholder, employee or agent of DWWC is engaged, directly or indirectly, in
any discussions or negotiations with any third party other than SportsLine and
its Affiliates relating to any Acquisition Proposal (as defined in Section 7.5).
5.25 Absence of Certain Changes or Events.
(a) Except as set forth in Paragraph 5.25(a) of the Disclosure
Letter and, since September 30, 1999, DWWC has not: (i) amended or otherwise
changed its Certificate of Incorporation or Bylaws; (ii) issued, sold, pledged,
disposed of or encumbered, or authorized the issuance, sale, pledge, disposition
or encumbrance of, any shares of its capital stock of any class or any options,
warrants, convertible or exchangeable securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest, of
it; (iii) reclassified, combined, split, subdivided or redeemed, purchased or
otherwise acquired, directly or indirectly, any of its capital stock; (iv)
declared, set aside, made or paid any dividend or other distribution, whether
payable in cash, stock, property or otherwise, with respect to any of its
capital stock; (v) acquired (including, without limitation, for cash or shares
of stock, by merger, consolidation or acquisition of stock or assets) any
interest in any corporation, partnership or other business organization or
division thereof or any assets, or made any investment either by purchase of
stock or securities, contributions of capital or property transfer, or purchased
any property or assets of any other Person; (vi) created, incurred or assumed
any material indebtedness for borrowed money, whether or not in the ordinary
course of business, issued any debt securities, or assumed, guaranteed, endorsed
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for, any material obligations of any other Person; (vii) made any
loans or advances to any other Person other than in the ordinary course of
business consistent with past practice; (viii) made any capital expenditures in
excess of $10,000; (ix) sold, pledged, disposed of or encumbered, or authorized
the sale, pledge, disposition or encumbrance of properties or assets, tangible
or intangible, having a value in any single transaction in excess of $5,000, or
sold, licensed, assigned or transferred any DWWC IP Rights, except sales of
inventory in the ordinary course of business; (x) except in the ordinary course
of business, consistent with past practices or pursuant to the terms of a Plan
or Benefit Program increased the compensation payable or to become payable to
its officers or salaried employees, granted any severance or termination pay to,
or entered into any employment or severance agreement with, any of its
directors, officers or salaried personnel, or established, adopted, entered into
or amended any bonus, profit sharing, trust, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers, personnel or
27
employees, or taken any action to accelerate any rights or benefits thereunder;
(xi) changed any accounting policies or procedures or made any change in any
accounting methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in GAAP; (xii) made any Tax election, other
than in the ordinary course of business consistent with past practice; or (xiii)
agreed, in writing or otherwise, to take or authorize any of the foregoing.
(b) Except as set forth in Paragraph 5.25(b) of the
Disclosure Letter, since January 1, 1999, there has not been with respect to
DWWC: (i) any material change in the business, operations, financial condition
or operating results of DWWC, whether or not arising in the ordinary course of
business, which change by itself or in conjunction with all other such changes
has had or would reasonably be expected to have a Material Adverse Effect on
DWWC; (ii) any damage, destruction or loss, whether or not covered by insurance
to or of the assets of DWWC which has had or would reasonably be expected to
have a Material Adverse Effect on DWWC; or (iii) any other event or condition of
any character that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on DWWC.
5.26 Absence of Certain Business Practices. Neither DWWC nor any
employee, agent or other Person acting on DWWC's behalf, acting alone or
together, has: (a) received, directly or indirectly, any rebates, payments,
commissions, promotional allowances or any other economic benefits, regardless
of their nature or type, from any customer, supplier, employee or agent of any
customer or supplier, official or employee of any Governmental Authority
(domestic or foreign), or any political party or candidate for office (domestic
or foreign) or other Person; or (b) directly or indirectly, given or agreed to
give any money, gift or similar benefit to any customer, supplier, employee or
agent of any customer or supplier, official or employee of any Governmental
Authority (domestic or foreign), or any political party or candidate for office
(domestic or foreign), or other Person who was, is or may be in a position to
help or hinder DWWC's business (or assist DWWC in connection with any actual or
proposed transaction) which (i) may subject DWWC to any damage or penalty in any
Legal Proceeding, (ii) if not given in the past, may have had a Material Adverse
Effect on DWWC or the Surviving Corporation, or (iii) if not continued in the
future, may have a Material Adverse Effect on DWWC or the Surviving Corporation.
5.27 No Commissions. Other than commissions and/or fees owing Broadview
Int'l LLC which will be paid by the Shareholders, neither the Principal
Shareholders, DWWC, nor any of DWWC's officers, directors or employees, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for DWWC, in connection with this
Agreement, the Merger or any of the transactions contemplated hereby.
5.28 Tax Status of the Merger. Except as set forth in Section 4.8,
neither SportsLine nor Acquisition Corp. has made or shall be deemed to have
made any representations or warranty to DWWC or its shareholders regarding the
tax treatment of the Merger, or any of the tax consequences to any such
shareholder of this Agreement, the Merger or any of the other transactions or
agreements contemplated hereby. DWWC represents and warrants that it and its
shareholders are relying solely on their own tax advisors in connection with
this Agreement, the Merger and the other transactions contemplated by this
Agreement.
5.29 Reorganization Qualification. The aggregate cash consideration
paid to the Shareholders, including any cash distributions made to the
shareholders as part of the transaction,
28
will be less than 50 percent of the fair market value of the DWWC Common Stock
outstanding as of the Effective Time. Acquisition Corp. will acquire at least 90
percent of the fair market value of the net assets and at least 70 percent of
the fair market value of the gross assets held by DWWC immediately prior to the
Merger. For purposes of this representation, (i) amounts paid by DWWC to
shareholders who received cash, (ii) amounts paid by DWWC to holders of stock
options, (iii) assets used to pay DWWC's reorganization expenses, and (iv) all
redemptions and distributions (except for regular, normal dividends) made by
DWWC immediately preceding the transfer, will be considered as assets of DWWC
held immediately prior to the Merger.
5.30 Disclosure. Neither this Agreement nor any representation,
warranty or statement made in this Agreement or in the Transaction Documents
contain (or will contain) any untrue statement of a material fact or omits to
state (or will omit to state) a material fact necessary to make the statements
herein or therein not misleading.
ARTICLE VI
CERTAIN COVENANTS OF DWWC
-------------------------
6.1 Conduct of Business by DWWC Pending the Merger. DWWC hereby
covenants and agrees that, between the Agreement Date and the Effective Time,
DWWC shall operate its business only in the ordinary course consistent with past
practice and will not engage in any new line of business or enter into any new
Contract, transaction or activity or make any commitment except in the ordinary
course of business consistent with past practice. DWWC shall use its
commercially reasonable efforts to preserve intact its business organization, to
keep available the services of its current officers, employees and consultants,
and to preserve its present relationships with customers, suppliers and other
persons with which it has business relations. By way of amplification and not
limitation, except as contemplated by this Agreement, DWWC shall not, between
the Agreement Date and the Effective Time, directly or indirectly, do or propose
or agree to do any of the following absent prior consultation with SportsLine
and receipt of SportsLine's prior written consent:
(a) (i) amend or otherwise change its Certificate of
Incorporation or Bylaws; (ii) issue, sell, pledge, dispose of, or encumber, or,
authorize the issuance, sale, pledge, disposition, or encumbrance of any shares
of its capital stock of any class or any options, warrants, convertible or
exchangeable securities or other rights of any kind to acquire any shares of
such capital stock, or any other ownership interest, of it; (iii) reclassify,
combine, split, subdivide or redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock; or (iv) declare, set aside, make or pay
any dividend or other distribution, whether payable in cash, stock, property or
otherwise, with respect to any of its capital stock;
(b) acquire (including, without limitation, for cash or shares
of stock, by merger, consolidation or acquisition of stock or assets) any
interest in any corporation, partnership or other business organization or
division thereof or any assets, or make any investment either by purchase of
stock or securities, contributions of capital or property transfer, or purchase
any property or assets of any other Person;
(c) (i) create, incur or assume any indebtedness for
borrowed money, whether or not in the ordinary course of business, or issue any
debt securities; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for, the obligations
of any Person; (iii) make any loans or advances to any other Person other than
to
29
employees in the ordinary course of business consistent with past practice;
or (iv) make any capital expenditures, other than those proposed to be made in
any financial budgets delivered to SportsLine prior to the Agreement Date;
(d) (i) sell, pledge, dispose of or encumber, or
authorize the sale, pledge, disposition or encumbrance of any of its properties
or assets, tangible or intangible, or sell, license, assign or transfer any DWWC
IP Rights, except in each case in the ordinary course of business pursuant to
Contracts set forth in Paragraph 5.14 of the Disclosure Letter; (ii) enter into
any new Contract other than in the ordinary course of business, consistent with
past practice; or (iii) amend, terminate or cancel any Contract identified in
Paragraph 5.14 of the Disclosure Letter, or fail to perform in any material
respect any of its obligations thereunder;
(e) except in the ordinary course of business, consistent
with past practice or pursuant to the terms of a Plan or Benefit Program, (i)
increase the compensation payable or to become payable to its officers or
salaried employees; (ii) grant any severance or termination pay to, or enter
into any employment or severance agreement with, any of its directors, officers
or salaried personnel; (iii) establish, adopt, enter into or amend any bonus,
profit sharing, trust, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
directors, officers, personnel or employees, or take any action to accelerate
any rights or benefits thereunder; or (iv) accelerate, amend or change the
period of exercisability or the vesting schedule of options granted under any
employee stock plan or agreements or authorize cash payments in exchange for any
options granted under any of such plans;
(f)(i) change any accounting policies or procedures,
change any annual accounting period or make any change in any accounting methods
or systems of internal accounting controls, except as may be appropriate to
conform to changes in GAAP; (ii) revalue any of its assets, including writing
down the value of any assets or writing off any notes or accounts receivable;
(iii) make or change any Tax election, file any amended Tax Return (except as
disclosed in Paragraph 5.17 of the Disclosure Letter), enter into any closing
agreement, settle any Tax claim or assessment, surrender any right to claim
refund of Taxes, consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment, or take any other action or omit to
take any action, if any such action or omission would have the effect of
increasing the Tax liability of DWWC or SportsLine;
(g) pay, discharge or satisfy any Liens, claims, debts,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business and consistent with past practice of due and
payable liabilities reflected or reserved against in the Financial Statements,
as appropriate, or liabilities incurred after the date of the Balance Sheet in
the ordinary course of business and consistent with past practice;
(h) increase or decrease prices charged to its customers,
other than in the ordinary course of business consistent with past practice, or
fail to use all commercially reasonable efforts to enforce any Contract or other
agreement with any customer or supplier, collect its accounts receivable, or pay
its accounts payable, in each case in the ordinary course of business consistent
with past practice;
30
(i) enter into any Contract or transaction with or for
the benefit of any of its directors, officers, shareholders, Affiliates or
Associates or any entity in which any such director, officer, shareholder,
Affiliate or Associate, or their respective Affiliates or Associates, has a
direct or indirect interest, whether or not in the ordinary course of business;
or
(j) agree, in writing or otherwise, to take or authorize
any of the foregoing actions or any action which would make any representation
or warranty in Article V hereof untrue or incorrect in any respect.
6.2 Approval of Shareholders. Prior to the Agreement Date, DWWC has
received approval from its shareholders of this Agreement, the Merger and
related matters in accordance with the NYBCL. Prior to the Closing, DWWC shall
distribute to its shareholders and shall obtain from each shareholder to execute
such offeree questionnaires and/or representation letters ("Shareholder
Representations") as may be requested by SportsLine so as to permit compliance
by SportsLine with the applicable securities Laws.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Best Efforts; Cooperation; Further Assurances. Each of the parties
hereto shall use its commercially reasonable efforts to take, or cause to be
taken, all appropriate actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws to consummate and make
effective the transactions contemplated herein, including, without limitation,
(i) cooperating with the other in the preparation and filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to any Law or the rules of the Nasdaq National Market or any
other exchange on which the SportsLine Common Stock is listed, in connection
with the transactions contemplated by this Agreement; (ii) using its reasonable
best efforts to obtain all licenses, Permits, consents, approvals,
authorizations, qualifications and orders of any Governmental Authority or other
Persons (including parties to Contracts with DWWC) as are necessary for the
consummation of the transactions contemplated hereby; (iii) making on a prompt
and timely basis all governmental or regulatory notifications and filings
required to be made by it for the consummation of the transactions contemplated
hereby; (iv) defending all Legal Proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby and to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby; and (v)
executing and delivering such additional instruments and other documents and
taking such further actions as may be necessary or appropriate to effectuate,
carry out and comply with all of the terms of this Agreement and the
transactions contemplated hereby.
7.2 Access to Information. From the Agreement Date to the Effective
Time, DWWC shall (and shall cause its directors, officers, employees, auditors,
counsel and agents to) afford SportsLine and SportsLine's officers, employees,
auditors, counsel and agents full and complete access during business hours to
all assets, properties, books, records, accounts, contracts and documents of or
relating to DWWC and such other information as SportsLine may reasonably request
concerning the businesses, finances and properties of DWWC and its operations.
No information provided to or obtained by SportsLine either before or after the
Agreement Date shall limit or otherwise affect any representation or warranty in
this Agreement. Until the Effective Time,
31
all confidential information provided pursuant to this Section 7.2 will be
subject to the confidentiality agreement previously executed by SportsLine and
DWWC (the "Confidentiality Agreement").
7.3 Notification of Certain Matters. DWWC shall give prompt written
notice to SportsLine of (i) any material change in the normal course of its
business; (ii) the receipt by it of notice of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) or the receipt by it of a notice of the institution or the threat
of litigation or other legal proceedings involving it; and (iii) the occurrence
or non-occurrence of any other event which causes, or would be reasonably likely
to cause, any representation or warranty of DWWC contained herein to be untrue
or inaccurate in any respect, or any covenant, condition or agreement of DWWC
contained herein not to be complied with or satisfied in any respect.
7.4 Publicity. No press release or other public announcement related to
this Agreement or the transactions contemplated hereby shall be issued by any
party without the prior approval of the other parties hereto, except that
SportsLine may make such public disclosure which it believes in good faith to be
required by applicable Law or the rules of the Nasdaq National Market (in which
case SportsLine will consult with an officer of DWWC prior to making such
disclosure).
7.5 Exclusive Dealings; Failure by DWWC to Consummate Merger Without
Cause. From the Agreement Date until the Effective Time, or earlier termination
of this Agreement as provided in Article XIV hereof, DWWC and its Affiliates and
Associates shall not, nor shall DWWC authorize or permit any of its officers,
directors, employees, agents or representatives to, directly or indirectly: (i)
solicit, initiate, encourage the initiation or submission by others of any
Acquisition Proposal (as hereinafter defined); (ii) enter into or participate in
discussions or negotiations with, respond to solicitations relating to, furnish
to any Person any information with respect to, or take any other action to
encourage or facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal;
or (iii) enter into any Contract, agreement or commitment (whether or not
binding) with respect to any Acquisition Proposal. For purposes of this
Agreement, the term "Acquisition Proposal" means any proposal with respect to a
sale or other disposition of all or any part of the assets, business or
properties of DWWC (whether by merger, consolidation, sale of stock or assets or
otherwise), or a purchase or other acquisition by DWWC of all or any part of the
assets, business or properties of any other Person (whether by merger,
consolidation, sale of stock or assets or otherwise). DWWC will immediately
notify SportsLine if any third party initiates any solicitation, discussion or
negotiation with respect to any Acquisition Proposal.
7.6 Trading in SportsLine Common Stock. From the Agreement Date until
the Effective Time, neither DWWC nor any officer, director, Affiliate or
Associate thereof will directly or indirectly purchase or sell (including short
sales) any shares of SportsLine Common Stock (or any put, call, option or
derivative security or the like relating thereto) in any transactions effected
on the Nasdaq National Market or otherwise.
7.7 Noncompetition and Nonsolicitation
(a) Noncompetition. For a period of five years after the
Closing Date, each of the Principal Shareholders agrees that he shall not,
directly or indirectly, (A) acquire or own in any manner any interest or
investment in (whether as a security holder, creditor or otherwise) any Person
32
that directly or indirectly owns, operates, manages or distributes a business
that markets, sells or otherwise distributes or participates in the distribution
of fantasy products, including software, services, statistical information or
other content ("fantasy products"), whether such fantasy business is conducted
by mail, telephone, an online service accessed through the Internet or
commercial on-line service, other communication devices or otherwise (a "Fantasy
Business") or otherwise engages, directly or indirectly, in a Fantasy Business,
(B) be employed by or serve as an employee, agent, officer, director of, or
consultant to, any Person that engages, directly or indirectly, in any Fantasy
Business unless such employment or service is related solely to non-Fantasy
Business and such Shareholder provides no direct or indirect assistance to such
Fantasy Business, (C) offer or sell fantasy products through or to the customers
of any of Person that owns, operates, manages or distributes fantasy products or
otherwise engages, directly or indirectly, in any Fantasy Business, regardless
of whether such business is conducted by mail, telephone, an online service
accessed through the Internet or commercial on-line service, other communication
devices or otherwise, other than a business owned, operated or managed by
SportsLine or its Affiliates, (D) provide fantasy products for sale to customers
of, or fulfillment services for such products to the owner or operator of, any
Fantasy Business, other than to SportsLine or to an Fantasy Business owned,
operated, managed or distributed by SportsLine or its Affiliates, or (E)
advertise or promote in any manner any Fantasy Business, other than a Fantasy
Business owned, operated, managed or distributed by SportsLine or its
Affiliates; provided, however, that nothing herein shall be construed to prevent
each of the Principal Shareholders from owning as an investment up to 1% of a
class of securities issued by any competitor of SportsLine or its Affiliates
that is publicly traded and registered under Section 12 of the Securities and
Exchange Act of 1934.
(b) Nonsolicitation of Employees. For a period of five
years after the Closing Date, each of the Principal Shareholders agrees that he
shall not, directly or indirectly, for himself or for any other Person, attempt
to employ or enter into any employment, consulting or similar relationship or
arrangement, directly or indirectly, with any employee or former employee of
DWWC or the SportsLine Companies, unless such employee or former employee has
not been employed by DWWC or the SportsLine Companies, as the case may be, for a
period of more than twelve (12) months.
(c) Injunction. It is recognized and hereby acknowledged
by the parties hereto that a breach by the Principal Shareholders of any of the
covenants contained in Sections 7.7(a) and (b) of this Agreement will cause
irreparable harm and damage to SportsLine, the monetary amount of which may be
virtually impossible to ascertain. As a result, the Principal Shareholders
recognize and hereby acknowledge and agree that SportsLine shall be entitled to
an injunction from any court of competent jurisdiction enjoining and restraining
any violation of any or all of the covenants contained in Section 7.7 by the
Principal Shareholders or any of their Affiliates, Associates, partners or
agents, either directly or indirectly, and that such right to injunction shall
be cumulative and in addition to whatever other remedies SportsLine may possess.
7.8 Employment of Certain DWWC Employees Following the Effective Time,
Xxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxxx, Xxxxxx Xxxxx, Xxxxx
Xxxxx (the "Key Employees") shall continue to be employed by the Surviving
Corporation, on the terms and conditions outlined in Schedule 7.8 hereto. Such
employment shall be at will, subject to the terms, as applicable, of the
Severance Letters (as defined in Section 8.11 hereof).
33
7.9 Termination of Existing Agreement The parties hereto agree that as
of the Effective Time, the July 1998 Agreement between DWWC and SportsLine and
all agreements entered into in connection therewith (the "1998 Agreements")
shall be terminated and each party thereto hereby absolutely and forever
remises, releases, acquits, satisfies and discharges the other party and any and
all of their respective directors, officers, employees, shareholders, parent and
subsidiary corporations, predecessors, successors and affiliates, of and from
any and all rights, claims, demands, damages, debts, liabilities, accounts,
covenants, rights to indemnification, liens, attorneys' fees, costs, expenses,
actions and causes of action of every kind and nature whatsoever, now known or
unknown, suspected or unsuspected, in law or in equity, which such party owns or
holds, or at any time heretofore has ever had, owned or held, or may hereafter
have, own or hold, based upon, related to or arising out of such 1998
Agreements. The parties hereto further covenant and agree that they shall never
institute or participate in any suit or action, at law or in equity, against any
other party, by reason of, or based upon, the 1998 Agreements.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SPORTSLINE COMPANIES
---------------------------------------------------------
The obligations of the SportsLine Companies to effect the Merger and
the other transactions contemplated hereunder shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
or all of which may be waived in whole or in part by SportsLine:
8.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of DWWC and the Principal
Shareholders contained in this Agreement shall be true and correct in all
material respects (except for such representations and warranties that are
qualified by their terms by a reference to materiality or knowledge, which
representations and warranties shall be true and correct in all respects) at and
as of the Effective Time with the same force and effect as though made at and as
of that time except that those representations and warranties which address
matters only as of a particular date shall have been true and correct as of such
date. DWWC shall have performed and complied in all material respects with all
of its obligations required by this Agreement to be performed or complied with
at or prior to the Effective Time. DWWC shall have delivered to the SportsLine
Companies a certificate, dated as of the Closing Date and signed by its
President, certifying that such representations and warranties are true and
correct in all material respects and that all such obligations have been
performed and complied with in all material respects. In addition, each
Principal Shareholder shall have delivered to SportsLine a certificate, dated as
of the Effective Time, certifying that such Principal Shareholder's
representations and warranties are true and correct in all material respects.
8.2 Corporate Matters. DWWC shall have delivered to the SportsLine
Companies: (a) copies of the Certificate of Incorporation and Bylaws of DWWC as
in effect immediately prior to the Effective Time; (b) copies of resolutions
adopted by the Board of Directors and shareholders of DWWC authorizing this
Agreement and the consummation of the transactions contemplated hereby; and (c)
a certificate of good standing of DWWC issued by the Secretary of State of the
State of New York and each other state in which DWWC is qualified to do business
as of a date not more than five (5) days prior to the Closing Date, certified in
the case of subsections (a) and (b) of this Section 8.2 as of the Closing Date
by the President of DWWC as being true, correct and complete.
34
8.3 No Adverse Proceedings. No court or Governmental Authority or other
regulatory body shall have enacted, issued, promulgated, enforced or entered any
Law or Order (whether temporary, preliminary or permanent) which is then in
effect and has the effect of making illegal, materially restricting or
preventing or prohibiting the Merger or the transactions contemplated by this
Agreement. No Legal Proceeding shall be overtly threatened or pending against
the SportsLine Companies or DWWC before any court or Governmental Authority
which seeks to restrain, prohibit, invalidate or collect damages arising out of
the Merger or any other transaction contemplated hereby or obtain damages or
other relief from any such party, in connection with this Agreement or the
consummation of the transactions contemplated hereby.
8.4 No Material Adverse Change. Between the Agreement Date and the
Effective Time, there shall have not been any Material Adverse Change with
respect to DWWC.
8.5 Consents and Approvals. In addition, DWWC shall have delivered to
SportsLine copies of (a) all consents, approvals, orders and authorizations of,
and all registrations, qualifications, designations, declarations or filings
with, any Governmental Authority or other Persons required in connection with
the execution and delivery by DWWC of this Agreement or the consummation by DWWC
of the transactions contemplated hereby and (b) all consents to the transactions
contemplated hereby and waivers of rights to terminate or modify any Contracts,
rights or obligations of DWWC from any Person from whom such consent or waiver
is required under any Contract or instrument, or who, as a result of the
transactions contemplated hereby, would have such rights to terminate or modify
such Contracts or instruments, either by the terms thereof or as a matter of
Law.
8.6 Resignations. SportsLine shall have received from each of the
directors and officers of DWWC a written resignation letter thereby resigning
from their corporate offices with DWWC, in form and substance satisfactory to
SportsLine, such resignations to be effective at the Effective Time.
8.7 Private Placement. The offering and issuance of shares of
SportsLine Common Stock in the Merger shall be in compliance with applicable
federal and state securities Laws to the satisfaction of SportsLine and its
counsel, and DWWC shall have taken all steps reasonably required by SportsLine
to ensure such compliance. Without limiting the generality of the foregoing,
each Principal Shareholder shall have executed and delivered to SportsLine such
offeree questionnaires and/or representation letters as may have been requested
by SportsLine.
8.8 Releases. Each Principal Shareholder shall have delivered to
SportsLine a release in the form of Exhibit 8.8.
8.9 Termination of Certain Agreements and Rights. DWWC shall have
caused all registration rights agreements, all preemptive rights to purchase
shares of DWWC capital stock, all rights of first refusal, co-sale, tag-along
and similar rights to purchase or sell shares of DWWC capital stock, and all
voting agreements and proxies applicable to or affecting any outstanding shares
or other securities of DWWC to be terminated and canceled by no later than
immediately prior to the Effective Time; and SportsLine shall have received
evidence, in form and substance acceptable to SportsLine, to the effect that all
such agreements and rights have been terminated and that neither SportsLine nor
the Surviving Corporation shall have any obligations thereunder.
35
8.10 Escrow Agreement DWWC, the Escrow Agent and the Shareholders'
Agent shall have entered into the Escrow Agreement in substantially the form
attached hereto as Exhibit 3.4.
8.11 Severance Letters. Each of the Key Employees shall have
acknowledged and agreed to the terms of a Severance Letter in substantially the
form attached to this Agreement as Exhibit 8.11 and on terms acceptable to
SportsLine (the "Severance Letters").
8.12 SportsLine Loan. DWWC shall have repaid in full all principal,
accrued interest and other charges, fees or expenses owing SportsLine by DWWC
under the loan from SportsLine to the DWWC in the amount of $185,000 (the
"SportsLine Loan").
8.13 Dissenting Shareholders. The number of Dissenting Shares (as
defined in Section 3.5) shall not exceed one percent of the shares of DWWC
Common Stock outstanding immediately prior to the Effective Time.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF DWWC
-------------------------------------
The obligations of DWWC to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
or all of which may be waived in whole or in part by DWWC:
9.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the SportsLine Companies
contained in this Agreement shall be true and correct in all material respects
(except for such representations and warranties that are qualified by their
terms by a reference to materiality or knowledge, which representations and
warranties shall be true and correct in all respects) at and as of the Effective
Time with the same force and effect as though made at and as of that time except
that those representations and warranties which address matters only as of a
particular date shall have been true and correct as of such date. Each of the
SportsLine Companies shall have performed and complied in all material respects
with all of its obligations required by this Agreement to be performed or
complied with at or prior to the Effective Time. Each of the SportsLine
Companies shall have delivered to DWWC a certificate, dated as of the Closing
Date and signed by an executive officer, certifying that such representations
and warranties are true and correct and that all such obligations have been
performed and complied with.
9.2 Corporate Matters. SportsLine shall have delivered to DWWC: (a)
copies of the Certificate or Articles of Incorporation and Bylaws of each of
SportsLine and Acquisition Corp. as in effect immediately prior to the Effective
Time; (b) copies of resolutions adopted by the Board of Directors of SportsLine
and the Board of Directors and shareholder of Acquisition Corp. authorizing this
Agreement and the consummation of the transactions contemplated hereby; and (c)
a certificate of good standing of SportsLine issued by the Secretary of State of
the State of Delaware as of a date not more than five (5) days prior to the
Closing Date, certified in the case of subsections (a) and (b) of this Section
9.2 as of the Closing Date by an executive officer of SportsLine as being true,
correct and complete.
9.3 No Adverse Proceedings. No court or Governmental Authority or other
regulatory body shall have enacted, issued, promulgated, enforced or entered any
Law or Order
36
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making illegal, or preventing or prohibiting the Merger or the
transactions contemplated by this Agreement.
9.4 No Material Adverse Change. Between the Agreement Date and the
Effective Time, there shall not have been any Material Adverse Change with
respect to SportsLine, and SportsLine shall have delivered to DWWC a certificate
to such effect, dated as of the Closing Date and signed by an executive officer.
9.5 Governmental Consents. SportsLine shall have delivered to DWWC
copies of all consents, approvals, orders and authorizations of, and all
registrations, qualifications, designations, declarations or filings with, any
Governmental Authority required in connection with the execution and delivery by
SportsLine of this Agreement or the consummation by SportsLine of the
transactions contemplated hereby.
9.6 Escrow Agreement. SportsLine and the Escrow Agent shall have
entered into the Escrow Agreement in substantially the form attached hereto as
Exhibit 3.4.
9.7 Severance Letters. The Acquisition Corp. shall have delivered the
Severance Letters to the Key Employees.
ARTICLE X
CLOSING
-------
10.1 Closing. Unless this Agreement shall have been terminated pursuant
to the provision of Article XIV hereof, the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxx Xxxxxxx & Xxxx LLP, 0 Xxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx,
at 10:00 am., local time, on December 6, 1999 or, if the conditions set forth in
Article VIII and IX have not been satisfied or waived on such date, no later
than five (5) business days after the day on which all such conditions have been
satisfied or waived. The date on which the Closing occurs is referred to as the
"Closing Date." The Closing shall be deemed completed as of 12:01 a.m. on the
morning of the Closing Date.
10.2 Deliveries by DWWC. At or prior to the Closing, DWWC shall deliver
(or cause to be delivered) to SportsLine:
(a) each certificate or other letter, agreement and other
document or instruments required to be delivered by DWWC to SportsLine in
accordance with Article VIII hereof;
(b) the stock book, stock ledger and minute book of DWWC;
(c) constructive possession of all originals and copies
of agreements, instruments, documents, deeds, books, records, files, tax returns
and other data and information within the possession of DWWC;
(d) evidence satisfactory to SportsLine that with respect
to each of DWWC's accounts, credit lines, safe deposits boxes or vaults the
authority of all individuals with respect thereto has been terminated, other
than those individuals designated by SportsLine in writing;
37
(e) the Merger Filing, duly executed by DWWC; and
(f) such other documents, instruments, agreements and all
certificates and other evidence as SportsLine or its counsel may reasonably
request as to the satisfaction of the conditions to SportsLine's obligations set
forth herein.
10.3 Deliveries by the SportsLine Companies. At or prior to the
Closing, the SportsLine Companies shall deliver (or cause to be delivered) to
DWWC:
(a) each certificate or other letter, agreement and other
document or instruments required to be delivered by SportsLine to DWWC in
accordance with Article IX hereof;
(b) the Merger Filing, duly executed by Acquisition Corp.; and
(c) such other documents, instruments, agreements and all
certificates and other evidence as DWWC or its counsel may reasonably request as
to the satisfaction of the conditions to DWWC's obligations set forth in Article
IX hereof.
ARTICLE XI
COMPLIANCE WITH SECURITIES LAWS
-------------------------------
11.1 Limitation on Disposition of Shares. The shares of SportsLine
Common Stock to be issued to the shareholders of DWWC pursuant to the Merger
have not been registered under the Securities Act, and may not be sold,
transferred or otherwise disposed of, except pursuant to an exemption from the
registration requirements under the Securities Act or an effective registration
statement filed by SportsLine with the SEC under the Securities Act. In
addition, without the prior written consent of SportsLine, the Shareholders
shall not, directly or indirectly, offer, sell, solicit an offer to buy, make
any short sale, pledge, grant any option to purchase, contract to sell, or
otherwise dispose of or transfer any such shares of SportsLine Common Stock or,
in any manner, transfer all or a portion of the economic consequences associated
with the ownership of such SportsLine Common Stock (including, without
limitation, by way of equity swap, hedging, or any other form of derivative
transaction) (any of the foregoing, a "Transfer"), in each case for a period of
one year from the Effective Time; provided, however, that the Shareholders may
Transfer any of such shares of SportsLine Common Stock as a bona fide gift or to
any person who, at or prior to the time of such Transfer, has executed and
delivered to SportsLine an agreement to the foregoing effect. SportsLine may,
with respect to any such shares, cause its transfer agent to note, during the
above period, stop transfer instructions with respect to such shares.
11.2 Legend. All certificates representing shares of SportsLine Common
Stock issued pursuant to the Merger shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE ACT, AND IN COMPLIANCE WITH
APPLICABLE SECURITIES LAWS OF
38
ANY STATE WITH RESPECT THERETO, OR IN ACCORDANCE WITH AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE."
SportsLine may place stop transfer orders with its transfer agent with respect
to such certificates in accordance with federal securities laws.
ARTICLE XII
SURVIVAL; INDEMNIFICATION AND ESCROW
------------------------------------
12.1 Survival. All representations, warranties and covenants of DWWC
and the Principal Shareholders and the SportsLine Companies contained in this
Agreement will survive the Effective Time and remain operative and in full force
and effect, regardless of any investigation made by or on behalf of SportsLine
or DWWC and/or Principal Shareholders, for one year after the Closing Date (the
"Release Date"); provided, that (i) if Escrow Shares and/or the Escrow Cash are
retained in the Escrow Fund after the Release Date as provided in this Article
XII, then (notwithstanding the expiration of such time period) the
representation, warranty, covenant or agreement applicable to such claim shall
survive until, but only for purposes of, the resolution of the claim to which
such retained Escrow Shares or Escrow Cash relate, (ii) notwithstanding the
foregoing, SportsLine may seek recovery of Special Damages (as defined below) as
provided in this Article XII at any time prior to the expiration of the
applicable statute of limitations for such claim, and (iii) the representations
and warranties contained in Section 5.17 and 4.2 shall survive the Release Date
until the expiration of the applicable statute of limitations.
12.2 Indemnification.
(a) Agreement to Indemnify. Subject to the terms and
conditions of Article XII, the Principal Shareholders agree, and each other
Shareholder will (to the extent of the Escrow Fund deposited in escrow pursuant
to Section 3.4 and the Escrow Agreement), jointly and severally indemnify and
hold harmless SportsLine and the Surviving Corporation and their respective
officers, directors, agents, stockholders and employees, and each person, if
any, who controls or may control SportsLine or the Surviving Corporation within
the meaning of the 1933 Act or the 1934 Act (each hereinafter referred to
individually as an "Indemnified Person" and collectively as "Indemnified
Persons") from and against (i) the full amount of all Excess Debt and/or
Transaction Expenses that are not deducted in the calculation of the Merger
Consideration in accordance with Section 3.1; (ii) any and all claims, demands,
suits, actions, proceedings, investigations, audits, causes of actions, losses,
damages, liabilities, costs and expenses including, without limitation,
reasonable attorneys' fees, other professionals' and experts' fees and court or
arbitration costs (hereinafter collectively referred to as "Damages") (excluding
any Damages to the extent recovered by SportsLine or the Surviving Corporation
from any third party under any contract with such party or under any applicable
insurance policy) that are directly or indirectly incurred, result from or arise
out of any inaccuracy, misrepresentation, breach of, or default in, any of the
representations, warranties or covenants given or made by DWWC or the Principal
Shareholders in this Agreement or in the Disclosure Letter or in any certificate
delivered by or on behalf of DWWC or the Principal Shareholders pursuant hereto;
and (iii) any Special Damages. In determining the amount of any
39
Damage attributable to a breach, any materiality standard or knowledge
qualification contained in a representation, warranty or covenant of DWWC shall
be disregarded.
Subject to the terms and conditions of Article XII, SportsLine
agrees to indemnify and hold harmless the Shareholders from and against any
Damages (excluding any Damages to the extent recovered by a Shareholder from any
third party under any contract with such party or under any applicable insurance
policy) that are directly or indirectly incurred, result from or arise out of
any inaccuracy, misrepresentation, breach of, or default in, any of the
representations, warranties or covenants given or made by the SportsLine
Companies in the Agreement or in any certificate delivered by or on behalf of
the SportsLine Companies pursuant hereto. In determining the amount of any
Damage attributable to a breach, any materiality standard or knowledge
qualification contained in a representation, warranty or covenant of the
SportsLine Companies shall be disregarded.
(b) Time to Bring Escrow Claims. Any claim for
indemnification made by SportsLine or any other Indemnified Person under this
Section 12.2 must be raised in a writing delivered to the Escrow Agent prior to
the Release Date, and, if raised by such date, such claim shall survive the
Release Date until final resolution thereof; provided, that the foregoing
provisions will not impose any time limitation on when SportsLine and/or any
other Indemnified Person may raise a claim for indemnification (or any other
cause of action) to recover any Special Damages against any person or entity who
is a Special Damages Obligor (as defined below).
(c) Limitations on Indemnity Obligations. For purposes of
this Agreement: (i) other than respect to Title Special Damages, Fraud Special
Damages or Tax Special Damages applicable to a specific shareholder, in seeking
indemnification from such Shareholder (other than the Principal Shareholders),
SportsLine and the other Indemnified Persons will exercise their remedies solely
with respect to the Escrow Fund and any other assets deposited in escrow
pursuant to the Escrow Agreement and no Shareholder other than the Principal
Shareholders will have any liability to an Indemnified Person under this Section
12.2 except to the extent of such Shareholder's pro rata portion of the Escrow
Fund and any other assets deposited under the Escrow Agreement; (ii) the rights
and remedies set forth in this Section 12.2 and in the Escrow Agreement will be
the exclusive rights and remedies of SportsLine and the other Indemnified
Persons against any Shareholder other than the Principal Shareholders under
Section 12.2 of this Agreement; (iii) all claims made for indemnification by
SportsLine or any Indemnified Person against any Principal Shareholders, shall
be first made against, and to the extent of, the Escrow Fund, (iv) other than
with respect to Special Damages, no Principal Shareholder shall have any
liability to an Indemnified Person in excess of the aggregate amount of Merger
Consideration (including any Earn Out received by or payable to such Principal
Shareholder) for which such Principal Shareholder is entitled hereunder ("CAP")
and (v) other than Special Damages, no Shareholder shall have any obligation to
indemnify SportsLine or any other Indemnified Person unless and until the
aggregate amount of all Damages for which SportsLine or any Indemnified Person
is otherwise entitled to receive exceeds $100,000 ("Basket Amount").
12.3 Special Damages. As used herein, "Special Damages" means Damages
(as defined in Section 12.2) that are directly or indirectly suffered or
incurred by SportsLine and/or any other Indemnified Person and result from or
arise out of: (i) any fraudulent conduct, fraudulent misrepresentation or other
intentional misconduct on the part of DWWC, any officer, director, employee,
consultant, or agent of DWWC or on the part of any Shareholder, that occurs on
or before
40
the Effective Time ("Fraud Special Damages"); (ii) any failure of any
Shareholder to have (A) good, valid and marketable title to the DWWC Common
Stock he purports to own immediately prior to the Effective Time, free and clear
of all Liens, or (B) the full right, capacity and authority to vote such shares
of DWWC Common Stock in favor of this Agreement, the Merger and/or any other
transaction or agreement contemplated by this Agreement ("Title Special
Damages"); (iii) any Taxes of DWWC or any Shareholder arising out of DWWC's
failure to withhold Taxes from, or properly report, compensation paid to any
employee of DWWC ("Tax Special Damages"); and (iv) any claim by or on behalf of
Xxxxx Xxxxxx, whether in respect of his purported ownership of shares of DWWC
Common Stock or otherwise ("Other Special Damages"). Notwithstanding anything to
the contrary in Section 12.1, SportsLine and/or any Indemnified Person will be
entitled to recover Special Damages at any time after the Effective Time and
prior to the expiration of the applicable statute of limitations on such claim
for such Special Damages from: (x) the respective Shareholder, in the case of
(1) Fraud Special Damages arising from any fraudulent conduct, fraudulent
misrepresentation or other intentional misconduct on the part of such
Shareholder, (2) Tax Special Damages arising from failure to withhold Taxes
from, or properly report, compensation paid to such Shareholder; and/or (3)
Title Special Damages arising from such Shareholder failing to have (1) good,
valid and marketable title to any DWWC Shares he purports to own immediately
prior to the Effective Time, free and clear of all Liens, or (2) the full right,
capacity and authority to vote such DWWC Shares stock in favor of this
Agreement, the Merger and/or any other transaction or agreement contemplated by
this Agreement,; and/or (y) any Principal Shareholder, in the case of (1) Fraud
Special Damages, (2) Title Special Damages, (3) Tax Special Damages, and/or (4)
Other Special Damages.
12.4 Escrow Period; Release of Escrow Fund.
(a) The Escrow Shares and Escrow Cash shall be held in
escrow for the period commencing on the Effective Time and terminating on the
Release Date (the "Escrow Period"), provided, that a portion of the Escrow Fund
that, in the reasonable judgment of SportsLine, subject to the objection of the
Shareholders' Agent and the subsequent resolution of the matter in the manner
provided in Section 12.7, is necessary to satisfy any unsatisfied claims
specified in any Officer's Certificate theretofore delivered to the Escrow Agent
and the Shareholders' Agent prior to termination of the Escrow Period with
respect to Damages incurred or claims made prior to expiration of the Escrow
Period, shall remain in the Escrow Fund until such claims have been finally
resolved.
(b) Within three (3) business days after the Release Date, the Escrow
Agent shall release from escrow to each Shareholder his pro-rata portion of the
Escrow Fund including interest thereon, less with respect to each such
Shareholder an aggregate amount of Escrow Cash and Escrow Shares with a value
(as determined pursuant to Section 12.5) equal to (i) such shareholder's pro
rata portion of any disbursement from the Escrow Fund delivered to SportsLine in
satisfaction of claims and (ii) such shareholder's pro rata portion of any
liability subject to delivery to SportsLine in accordance with Section 12.3(a)
with respect to any pending but unresolved claims. Any Escrow Cash or Escrow
Shares held as a result of clause (ii) shall be released to the Shareholders or
released to SportsLine (as appropriate) promptly upon resolution of each
specific claim involved, in proportion to their contribution of the foregoing to
the Escrow Fund. No fractional shares shall be released and delivered from the
Escrow Fund to the Shareholders, and in lieu of any fraction of an Escrow Share
to which a Shareholder would otherwise be entitled, such holder will receive
from SportsLine an amount of cash determined in accordance with Section 3.6(b)
hereof.
41
(c) No Escrow Shares or any beneficial interest therein may be pledged,
sold, assigned or transferred, including by operation of law, by any Shareholder
or be taken or reached by any legal or equitable process in satisfaction of any
debt or other liability of any such shareholder, prior to the delivery to such
shareholder of the portion of the Escrow Fund contributed on such shareholder's
behalf by the Escrow Agent as provided herein.
(d) The Escrow Agent is hereby granted the power to effect any transfer
of Escrow Shares contemplated by this Agreement. SportsLine will cooperate with
the Escrow Agent in promptly issuing stock certificates to effect such
transfers.
12.5 Claims Upon the Escrow Fund. Upon receipt by the Escrow Agent on
or before the last day of the Escrow Period of a certificate signed by an
executive officer of SportsLine (an "Officer's Certificate"): (i) stating that
SportsLine or another Indemnified Person is entitled to Damages and (ii)
specifying in reasonable detail the amount of such Damages (or an estimate
thereof, in each case to the extent known or determinable at such time), the
individual items of such Damages included in the amount so stated, the date each
such item was paid or properly accrued or arose, and the nature of the
misrepresentation, breach or claim to which such item is related, the Escrow
Agent shall, subject to the provisions of this Article XII, deliver to
SportsLine out of the Escrow Fund, as promptly as practicable, Escrow Shares
and/or Escrow Cash (at SportsLine's election) having a value equal to such
Damages. For the purpose of compensating SportsLine or an Indemnified Person for
its Damages pursuant to this Agreement, the Escrow Shares shall be valued at the
Reference Price (in accordance with clause (i) of the definition thereof). To
the extent the Escrow Fund is insufficient to satisfy any indemnification
claims, the amount of the claim shall be deducted from any unpaid installment of
the Earn Out to be paid to the Shareholders pursuant to Section 3.3 and shall be
delivered to the Escrow Agent and held in escrow under the provisions of this
Agreement and the Escrow Agreement (or under a similar arrangement with another
escrow agent) and SportsLine shall have no obligation to pay such amount to the
Shareholders as Merger Consideration pending resolution of such claim under the
provisions hereof and the Escrow Agreement (or such other arrangement).
12.6 Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such Officer's Certificate
shall be delivered to the Shareholders' Agent and, except with respect to
Damages related to Excess Debt or Transaction Expenses, for a period of twenty
(20) days after such delivery, the Escrow Agent shall make no delivery of Escrow
Shares and/or Escrow Cash pursuant to Section 12.5 unless the Escrow Agent shall
have received written authorization from the Shareholders' Agent to make such
delivery. Promptly after the receipt of an Officer's Certificate with respect to
Excess Debt or Transaction Expenses, which shall be conspicuously noted on the
Officers' Certificate, and, in all other cases, immediately after the expiration
of such twenty (20) day period, the Escrow Agent shall make delivery of Escrow
Shares and/or Escrow Cash in accordance with Section 12.5; provided, that no
such delivery may be made if the Shareholders' Agent has objected to the claim
made in the Officer's Certificate in a written statement delivered to the Escrow
Agent and to SportsLine prior to the expiration of such twenty (20) day period.
12.7 Resolution of Conflicts.
(a) If the Shareholders' Agent timely objects in writing
to any claim or claims by SportsLine made in an Officer's Certificate,
SportsLine shall have twenty (20) days to respond in a
42
written statement to the objection of the Shareholders' Agent. If after such
twenty (20) day period there remains a dispute as to any claims, the
Shareholders' Agent and SportsLine shall attempt in good faith for sixty (60)
days to agree upon the rights of the respective parties with respect to each of
such claims (the "Negotiation Period"). If the Shareholders' Agent and
SportsLine should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the Escrow Agent.
The Escrow Agent shall be entitled to rely on any such memorandum and shall
distribute the Escrow Shares and/or Escrow Cash from the Escrow Fund in
accordance with the terms of the memorandum.
(b) If after the Negotiation Period there remains a
dispute as to any claim, then either party may seek appropriate remedies in a
court of law. During such time, the Escrow Agent shall continue to hold the
Escrow Fund until one party produces a final nonappealable Order from a
Governmental Authority of competent jurisdiction stating to whom the Escrow Fund
should be released and delivered. The Order shall be binding and conclusive upon
the parties to this Agreement, and the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Fund in accordance therewith.
12.8 Shareholders' Agent.
(a) Xx. Xxxxx Xxxxxxx shall be constituted and appointed
as agent (the "Shareholders' Agent") for and on behalf of the Shareholders to
give and receive notices and communications, to authorize delivery to SportsLine
of Escrow Shares, Escrow Cash or other property from the Escrow Fund in
satisfaction of indemnification claims, to object to such deliveries, to agree
to, negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Shareholders' Agent for the accomplishment of the foregoing. Such agency may be
changed by the holders of a majority in the Escrow Shares upon not less than ten
(10) days' prior written notice to SportsLine and the Escrow Agent. No bond
shall be required of the Shareholders' Agent. Notices or communications to or
from the Shareholders' Agent shall constitute notice to or from each of the
Shareholders.
(b) The Shareholders' Agent shall not be liable for any
act done or omitted hereunder as Shareholders' Agent while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted pursuant
to the advice of counsel shall be conclusive evidence of such good faith. The
Shareholders shall severally indemnify the Shareholders' Agent and hold him
harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Shareholders' Agent and arising out
of or in connection with the acceptance or administration of his duties
hereunder.
(c) The Shareholders' Agent shall have reasonable access
to information about SportsLine and the reasonable assistance of SportsLine's
and the Surviving Corporation's officers and employees for purposes of
performing his duties and exercising his rights hereunder; provided, that the
Shareholders' Agent shall treat confidentially and not disclose any nonpublic
information from or about SportsLine or the Surviving Corporation to anyone
(except in accordance with Section 15.11).
(d) A decision, act, consent or instruction of the
Shareholders' Agent shall constitute a decision of all of the Shareholders for
whom the Escrow Fund is held and shall be final,
43
binding and conclusive upon each such Shareholder, and the Escrow Agent,
SportsLine and the Surviving Corporation may rely upon any decision, act,
consent or instruction of the Shareholders' Agent as being the decision, act,
consent or instruction of each and every such Shareholder. The Escrow Agent,
SportsLine and the Surviving Corporation are hereby relieved from any liability
to any person for any acts done by them in accordance with such decision, act,
consent or instruction of the Shareholders' Agent.
(e) The Shareholders' Agent shall receive no compensation for
his services; provided, that all reasonable out-of-pocket expenses of the
Shareholders' Agent ("Agent Expenses") shall be paid by the Shareholders.
12.9 Third Party Claims.
(a) In the event SportsLine or any of the Shareholders become
aware of a third-party claim which it believes may result in a claim for
indemnification, such party shall then promptly notify the indemnifying party of
such claim, and the indemnifying party (acting through the Shareholders' Agent
in the case of the Shareholders) shall notify the other party of such claim, and
the indemnifying party shall have the right to assume control of the defense of,
settle, or otherwise dispose of such third-party action on such terms as they
deem appropriate; provided, however, that:
(i) the respective Shareholder or the Indemnified
Person, as applicable, shall be entitled, at its own expense, to
participate in the defense of such third-party action;
(ii) SportsLine or the indemnifying Shareholder(s),
as applicable, shall obtain the prior written approval of the other
party, not to be unreasonably withheld, before entering into or making
any settlement, compromise, admission, or acknowledgment of the
validity of such third-party action or any liability in respect thereof
if, pursuant to or as a result of such settlement, compromise,
admission, or acknowledgment, injunctive or other equitable relief
would be imposed against any Indemnified Person or the indemnifying
Shareholder(s), as applicable;
(iii) SportsLine or the indemnifying Shareholder(s),
as applicable, shall not consent to the entry of any judgment or enter
into any settlement that does not include as an unconditional term
thereof the giving by each claimant or plaintiff to each Indemnified
Person or each indemnified Shareholder(s), as applicable, of a release
from all liability in respect of such third-party action; and
(iv) SportsLine or the indemnifying Shareholder(s),
as applicable, shall not be entitled to control (but shall be entitled
to participate at its own expense in the defense of), and the
respective indemnified party shall be entitled to have sole control
over, the defense or settlement, compromise, admission, or
acknowledgment of any third-party action (vv) as to which the
indemnifying party fails to assume the defense within a reasonable
length of time or (vivi) to the extent the third-party action seeks an
Order against an indemnified party which, if successful, could provide
for injunctive or other equitable judgments against such indemnified
party; provided, however, that no indemnified person shall make a
settlement, compromise, admission, or acknowledgment which would give
rise to liability on
44
the part of any indemnifying party without the prior written consent
of such indemnifying party, not to be unreasonable withheld.
(b) SportsLine or the indemnifying Shareholder(s), as
applicable, shall make payments of all amounts required to be made pursuant to
the foregoing provisions of this Section to or for the account of the
indemnified party from time to time promptly upon receipt of bills or invoices
relating thereto or when otherwise due and payable, provided that the
indemnified party has agreed in writing to reimburse the indemnifying party for
the full amount of payments if such indemnified party is ultimately determined
not to be entitled to indemnification.
(c) The parties hereto shall extend reasonable
cooperation in connection with the defense of any third-party action pursuant to
this Article and, in connection therewith, shall furnish such records,
information, and testimony and attend such conferences, discovery proceedings,
hearings, trials, and appeals as may be reasonably requested.
(d) In the event that the Shareholders have consented to
any settlement, the Shareholders shall not have the right to object to the
amount of any claim by SportsLine against the Escrow Fund for indemnity with
respect to such settlement, unless such claim is in an amount in excess of any
amount consented to by the Shareholders.
(e) If at any time subsequent to the receipt by an
indemnified party of an indemnity payment hereunder, such indemnified party (or
an Affiliate thereof) receives any recovery, settlement or other similar payment
with respect to the Damages for which it received such indemnity payment (the
"Recovery"), such indemnified party shall promptly pay to the indemnifying party
(or its Affiliates) in connection with such Recovery, but in no event shall any
such payment exceed the amount of such indemnity payment and the indemnifying
party shall not be entitled to receive any amount paid to the Indemnified Person
as payment for the Basket Amount or losses above the Cap.
(f) The rights and remedies of SportsLine and the
Shareholders under this Section 12.2 are exclusive and in lieu of any and all
other rights and remedies which SportsLine or the Shareholders, as the case may
be, may have against the other under this Agreement or otherwise, (i) with
respect to (x) the inaccuracy of any representation, warranty, certification or
other statement made (or deemed made) by SportsLine or DWWC and the Principal
Shareholders in or pursuant to this Agreement or the Disclosure Letter or (y)
any breach of or failure to perform or comply with, any covenant or agreement
set forth in this Agreement or (ii) otherwise with respect to the transaction
contemplated by this Agreement. All claims for indemnification must be asserted,
if at all, in good faith and in accordance with the provisions of this Section
12.2.
(g) Notwithstanding the foregoing, with respect to any
third-party claim for Tax, the Shareholders shall have the sole right to control
the defense of, settle, or otherwise dispose of such third-party action on such
terms as they deem appropriate; provided, however, that if such claim involves
Taxes the determination of which could reasonably be expected to affect the
Indemnified Persons' liability for non-indemnified Taxes, the Indemnified
Persons shall be entitled, at their expense, to participate in the defense of
such third-party action.
45
ARTICLE XIII
DEFINITIONS
-----------
13.1 Defined Terms. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on
the Agreement Date.
"Associate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on
the Agreement Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Contract" means any contract, agreement, lease, note, mortgage, bond,
indenture, loan or credit agreement, deed, franchise, covenant,
license, commitment, undertaking, obligation or understanding, whether
written or oral, express or implied. The term Contract shall not
include a Plan or Benefit Program or any Agreement with SportsLine or
its Affiliates.
"Disclosure Letter" means the letter dated the Agreement Date from DWWC
and the Principal Shareholders to SportsLine setting forth, among other
things, items the disclosure of which is necessary or appropriate
either in response to an express disclosure requirement contained in
this Agreement or as an exception to one or more of DWWC's or the
Principal Shareholders' representations, warranties or covenants
contained in this Agreement.
"DWWC Websites" means all websites or other sites accessed via the
Internet or any other electronic network, including without limitation
any cable-based network or private network, that are owned or operated
by DWWC (either alone or jointly with others), either as of the
Agreement Date or in the past, including without limitation the
website(s) currently accessible at the following URL addresses:
xxxx://xxx.xxxxxxxxxxxx.xxx; xxxxxxxxxxx.xxx; xxxxxxxxxxx.xxx;
xxxxxxxxxxxxxxx.xxx; xxxxxxxxxxxxx.xxx; xxxxxxxx.xxx;
xxxxxxxxxxxxxxxxxx.xxx; xxxxxxx.xxx; 0xxxxxx.xxx; xxxxxxxxxxxx.xxx;
xxxxxxxxxx.xxx; xxxxxxxx.xxx (pending transfer to new owner); xxxx.xxx;
xxxxxxxxxxxxxx.xxx; mycommisioner; mycomissioner; xxxxxxxxxxxxxxxx.xxx;
and xxxxxxxxxxxxxxxxx.xxx.
"Environmental Law" shall mean any Law, Order, consent decree,
settlement agreement or governmental requirement, which relates to or
otherwise imposes liability or standards of conduct concerning mining
or reclamation of mined land, discharges, emissions, releases or
threatened releases of noises, odors or any pollutants, contaminants or
hazardous or toxic wastes, substances or materials, whether as matter
or energy, into ambient air, water, or land, or otherwise relating to
the manufacture, processing, generation, distribution, use, treatment,
storage, disposal, cleanup, transport or handling of pollutants,
contaminants, or hazardous wastes, substances or materials, including
(but not limited to) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and
46
Recovery Act of 1976, as amended, the Toxic Substances Control Act of
1976, as amended, the Federal Water Pollution Control Act Amendments of
1972, the Clean Water Act of 1977, as amended, any so called
"Superlien" law, and any other similar Federal, state or local
statutes.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Governmental Authority" means any governmental, regulatory or
administrative body, agency, commission, board, arbitrator or
authority, any court or judicial authority, any public, private or
industry regulatory authority, whether international, national,
federal, state or local, and any entity or official exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any Laws.
"Knowledge" means the actual knowledge of a person or its executive
officers and directors.
"Law" means and includes (i) any statute, decree, constitution, rule,
regulation, ordinance, code, requirement, announcement, order,
judgment, directive or other binding action of or by a any Governmental
Authority; (ii) any treaty, pact, compact or other agreement to which
any Governmental Authority is a signatory or party; (iii) any judicial
or administrative interpretation of application of any Law described in
(i) or (ii) above; and (iv) any amendment or revision of any Law
described in (i), (ii) or (iii) above.
"Legal Proceeding" means any action, claim, lawsuit, litigation,
demand, suit, inquiry, hearing, investigation, indictment, information,
notice of a violation, arbitration, appeal or other dispute or legal
proceeding, whether civil, criminal, administrative or otherwise.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including, but not limited to, any conditional
sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement
under the Uniform Commercial Code or comparable Law of any jurisdiction
in connection with such mortgage, pledge, security interest,
encumbrance, lien or charge).
"Marketing Materials" means all catalogs, brochures, specifications
sheets, sales literature, and other sales and promotional materials,
including any advertisements in any media.
"Material Adverse Effect", when used with reference to any entity or
group of entities, means any event, change or effect that is (or will
with the passage of time be), individually or in the aggregate, with
other events, changes or effects, materially adverse to the financial
condition, operations or business of such entity and its subsidiaries,
taken as a whole, other than: (a) a change arising or resulting,
directly or indirectly, from conditions affecting the Internet or
electronic commerce industry as a whole or the U.S. economy as a whole;
or (b) a change that is proximately caused by the public announcement
of, and the response or reaction of customers, vendors, licensors,
investors or employees of such entity or group of entities to, this
Agreement, the Merger or any of the transactions contemplated by this
Agreement to the extent so attributable, or (c) a change arising from
an act or omission of
47
another party to this Agreement (or an affiliate of such party) and not
from an act or omission of such entity or group of entities undergoing
the change; provided, that with respect to SportsLine, neither (x) a
reduction in the market price or trading volume of the SportsLine
Common Stock, (y) a failure by SportsLine to meet the revenue or
earnings predictions of analysts, any other revenue or earnings
predictions or expectations, for any period ending (or for which
earnings are released) on or after the Agreement Date and prior to the
Closing Date, nor (z) any seasonal reduction in SportsLine's revenues
or earnings that is consistent with SportsLine's past operating history
shall, in and of itself, or taken together, constitute a Material
Adverse Effect with respect to SportsLine.
"Material Adverse Change" when used with reference to any entity or
group of entities, a material adverse change in or to the financial
condition, operations or business of such entity and its subsidiaries,
taken as a whole, other than: (a) a change arising or resulting,
directly or indirectly, from conditions affecting the Internet or
electronic commerce industry as a whole or the U.S. economy as a whole;
or (b) a change that is proximately caused by the public announcement
of, and the response or reaction of customers, vendors, licensors,
investors or employees of such entity or group of entities to, this
Agreement, the Merger or any of the transactions contemplated by this
Agreement to the extent so attributable, or (c) a change arising from
an act or omission of another party to this Agreement (or an affiliate
of such party) and not from an act or omission of such entity or group
of entities undergoing the change; provided, that with respect to
SportsLine, neither (x) a reduction in the market price or trading
volume of the SportsLine Common Stock, (y) a failure by SportsLine to
meet the revenue or earnings predictions of analysts, any other revenue
or earnings predictions or expectations, for any period ending (or for
which earnings are released) on or after the Agreement Date and prior
to the Closing Date, nor (z) any seasonal reduction in SportsLine's
revenues or earnings that is consistent with SportsLine's past
operating history shall, in and of itself, or taken together,
constitute a Material Adverse Change with respect to SportsLine.
"Order" means any order, writ, judgment, injunction, decree or ruling
of or by a Governmental Authority.
"Permit" means any permit, license, registration, authorization,
certificate, order or approval of or from any Governmental Authority or
other Person (including without limitation those relating to the
occupancy or use of owned or leased real property).
"Person" means an individual, partnership, corporation, business trust,
joint stock company, estate, trust, unincorporated association, joint
venture, Governmental Authority or other entity, of whatever nature.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Taxes" means all taxes, fees or other assessments, including, but not
limited to, income, excise, property, sales, franchise, intangible,
withholding, social security and unemployment taxes imposed by any
federal, state, local or foreign governmental agency, and any interest
or penalties related thereto.
48
"Tax Returns" means federal, state, foreign and local tax reports,
returns, information returns and other Tax filings.
"Transaction Documents" means all documents, certificates and
agreements required to be delivered by any party under this Agreement,
including the Merger Filing, the Escrow Agreement and the Severance
Letterss.
13.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the
defined meanings when used in any certificates, reports or other documents made
or delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) Unless otherwise expressly indicated herein and
except with respect to DWWC Financial Statements, all matters of an accounting
nature in connection with this Agreement and the transactions contemplated
hereby shall be determined in accordance with GAAP applied on a basis consistent
with prior periods, where applicable.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
ARTICLE XIV
TERMINATION
-----------
14.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual written consent of SportsLine and DWWC at any
time prior to the Closing; or
(b) by either SportsLine or DWWC, if the Closing does not
occur by December 31, 1999; or
(c) by either SportsLine or DWWC, in the event of (i) a
material breach by the other party of any representation or warranty contained
this Agreement, which breach cannot be or has not been cured within five (5)
days after the giving of written notice to the breaching party of such breach
and which breach or breaches would result in a failure to satisfy any condition
to SportsLine's or DWWC's obligations set forth in Article VIII or IX,
respectively; or (ii) a material breach by the other party of any of the
covenants or agreements contained in this Agreement, which breach cannot be or
has not been cured within five (5) days after the giving of written notice to
the breaching party of such breach; provided that the non-breaching party
provides the breaching party with a written notice of termination within five
(5) days after the earlier of the expiration of such 5-
49
day period or the date it receives a written notice from the breaching party
stating that it is unable or unwilling to cure such breach;
(d) by either SportsLine or DWWC, if (i) there shall be a
final nonappealable Order of a federal or state court restraining or prohibiting
the consummation of the Merger, or (ii) there shall be any action taken, or any
statute, rule regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any governmental authority, which would make the
consummation of the Merger illegal; or
(e) by SportsLine immediately following a breach by DWWC of
the provisions of Section 7.5.
14.2 Effect of Termination. In the event of termination of this
Agreement pursuant to Section 14.1, written notice thereof shall promptly be
given to the other party hereto, and upon such notice this Agreement shall
terminate. Except as provided below or elsewhere in this Agreement, in the event
of the termination of this Agreement pursuant to Section 14.1, this Agreement
shall forthwith become void and of no further force and effect, there shall be
no liability on the part of the SportsLine Companies or DWWC or any of their
respective officers or directors to the other, all rights and obligations of any
party hereto shall cease and the parties shall be released from any and all
obligations. Notwithstanding the foregoing, (i) if (A) SportsLine or DWWC
terminates this Agreement in accordance with Section 14.1(b) and at the time of
such termination DWWC has not satisfied all of the conditions precedent to
SportsLine's obligations set forth in Article VIII hereof, or (B) SportsLine
terminates this Agreement in accordance with Section 14.1(c) or (e), then, in
either such case, DWWC shall pay to SportsLine an amount equal to SportsLine's
documented costs and expenses incurred prior to or after the Agreement Date in
connection with the execution, delivery and performance of this Agreement and
any investigation, negotiation and structuring of the transactions contemplated
hereby (including, without limitation, legal, accounting, consulting and
financial advisory fees; or (ii) if (A) SportsLine or DWWC terminates this
Agreement in accordance with Section 14.1(b) and at the time of such termination
SportsLine has not satisfied all of the conditions precedent to DWWC's
obligations set forth in Article IX hereof, or (B) DWWC terminates this
Agreement in accordance with Section 14.1(c), then, in either such case,
SportsLine shall pay to DWWC an amount equal to the DWWC's documented costs and
expenses incurred prior to or after the Agreement Date in connection with the
execution, delivery and performance of this Agreement and any investigation,
negotiation and structuring of the transactions contemplated hereby (including,
without limitation, legal, accounting, consulting and financial advisory fees).
Nothing herein shall relieve any party from liability for damages resulting from
the breach of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
ARTICLE XV
GENERAL PROVISIONS
------------------
15.1 Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and will be either hand
delivered in person, sent by telecopier, sent by certified or registered first
class mail, postage pre-paid, or sent by nationally recognized express courier
service. Such notices and other communications will be effective upon receipt if
hand delivered or sent by telecopier, five (5) days after mailing if sent by
mail, and one (l) day after
50
dispatch if sent by express courier, to the following addresses, or such other
addresses as any party may notify the other parties in accordance with this
Section:
(a) if to either of the SportsLine XxxxxxXxxx.xxx, Inc.
Companies, to: 0000 X.X. 0xx Xxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxx, President
Telecopy: (000) 000-0000
with a copy to: Xxxxxxxxx Traurig, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
(b) if to DWWC or the Principal Daedalus World Wide Corporation
Shareholders, to: 00 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxx
Telecopy: (000) 000-0000
with a copy to: Xxxxxx Xxxxxxx & Xxxx LLP
0 Xxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxxxx
Telecopy: (000) 000-0000
15.2 Entire Agreement. This Agreement (including the Exhibits and
Schedules attached hereto and the Disclosure Letter) and other documents
delivered at the Closing pursuant hereto, contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings (oral or written) between or among the parties with respect
to such subject matter. The Exhibits and Schedules attached hereto and the
Disclosure Letter constitute a part hereof as though set forth in full above.
15.3 Expenses. Except as set forth in this Section 15.3 or as otherwise
provided in this Agreement, the parties hereto shall pay their own fees and
expenses, including their own legal, accounting, consulting and financial
advisory fees, incurred in connection with this Agreement or any transaction
contemplated hereby, whether or not the Merger is consummated. If the Merger is
consummated, the aggregate amount of all legal, accounting, consulting,
financial advisory, investment banking, broker's or finder's fees, filing fees
and other fees and expenses incurred by DWWC in connection with the Merger
("Transaction Expenses") shall be deemed expenses of the Shareholders, shall be
borne by the Shareholders and will not become obligations of the Surviving
Corporation. If, on or prior to the Closing Date, DWWC has not made arrangements
acceptable to SportsLine for the payment by the Shareholders of the full amount
of Transaction Expenses, all such Transaction Expenses shall be deducted from
the Merger Consideration; and any such Transaction Expenses that are not
deducted in the calculation of the Merger Consideration in accordance with
51
Section 3.1 shall be recoverable by SportsLine from the Escrow Fund as Damages.
If after recovery of any Transaction Expenses or Excess Debt by SportsLine from
the Escrow Fund it is determined upon a final nonappealable Order from a
Governmental Authority of competent jurisdiction that SportsLine was not
entitled to such recovery or a part of such recovery, then SportsLine shall
return such unrecoverable Transactions Expenses or Excess Debt to the Escrow
Fund or, if after the Release Date, to the Shareholders in amounts to which they
are individually entitled.
15.4 Amendment. This Agreement (including the Schedules and Exhibits
attached hereto and the Disclosure Letter) may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. The Agreement may be amended by the parties hereto at any time
before or after approval of the shareholders of DWWC; but, after such approval,
no amendment will be made which by applicable Law requires the further approval
of the shareholders of DWWC without obtaining such further approval.
15.5 Waiver. No failure to exercise, and no delay in exercising, any
right, power or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be
implied from any course of dealing between the parties. No extension of time for
performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts. The rights and remedies of the parties
under this Agreement are in addition to all other rights and remedies, at law or
equity, that they may have against each other.
15.6 Binding Effect; Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by DWWC or the Shareholders. SportsLine may assign
all or any portion of its rights hereunder to any Affiliate thereof provided
that SportsLine remains liable.
15.7 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference and convenience purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement or the schedules. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Time shall be of the essence in this Agreement.
15.8 Severability. Any term or provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction
only, be ineffective only to the extent of such prohibition or unenforceability,
and shall not invalidate the remaining provisions hereof or affect the validity
or enforceability of such provision in any other jurisdiction.
15.9 Governing Law; Interpretation. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of
Florida applicable to contracts
52
executed and to be wholly performed within such State except merger related
provisions governed by NYBCL.
15.10 Arm's Length Negotiations. Each party herein expressly represents
and warrants to all other parties hereto that: (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
15.11 Confidentiality. SportsLine and DWWC each recognize that they
have received and will receive confidential information concerning the other
during the course of the Merger negotiations and preparations. Accordingly,
SportsLine and DWWC each agree (a) to use its respective commercially reasonable
efforts to prevent the unauthorized disclosure of any confidential information
concerning the other that was or is disclosed during the course of such
negotiations and preparations, and is clearly designated in writing as
confidential at the time of disclosure, (b) to not make use of or permit to be
used any such confidential information other than for the purpose of
effectuating the Merger and related transactions, and (c) comply fully with the
terms of the Confidentiality Agreement. The obligations of this section will not
apply to information that (i) is or becomes part of the public domain, (ii) is
disclosed by the disclosing party to third parties without restrictions on
disclosure, (iii) is received by the receiving party from a third party without
breach of a nondisclosure obligation to the other party, (iv) is necessary or
desirable in connection with a Legal Proceeding or to enforce one parties rights
under this Agreement and the Transaction Documents or (v) is required to be
disclosed by Law. If this Agreement is terminated, all copies of documents
containing confidential information shall be returned by the receiving party to
the disclosing party.
15.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
15.13 Access to Books and Records. (a) After the Closing, SportsLine
shall, upon the reasonable request of a Shareholder from time to time, and upon
reasonable notice, in connection with the preparation by such Shareholder or its
authorized representatives of Tax Returns with respect to Tax periods ending on
or prior to the Effective Time or other reasonable request, (i)(A) provide to
such Shareholder and its authorized representatives timely access, during normal
business hours, to the files, books, records, documents and other information of
the Surviving Corporation and (B) cause the officers of the Surviving
Corporation to furnish to such Shareholder and its authorized representatives
copies of all financial, technical and operating data and other information
pertaining to the Surviving Corporation and (ii) make available for inspection
and copying by such Shareholder at such Shareholder's expense true and complete
copies of any documents relating to the foregoing; provided however, the
foregoing does not obligate SportsLine or the Surviving Corporation to provide
access or make available to any Shareholder any files, books and records,
information or other documents relating to periods commencing on or after the
Effective Time. In exercising their rights under the foregoing provisions of
this Section, no Shareholder or its representatives shall interfere with
SportsLine's or the Surviving Corporation's
53
normal operations, and as applicable, shall enter into any such confidentiality
agreement as the party providing the information shall reasonably require (which
shall permit such disclosure as allowed by Section 5.11).
(Continued on Signature Page)
54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
XXXXXXXXXX.XXX, INC.
By:/s/ Xxxxxxx Xxxx
-------------------
Name: Xxxxxxx Xxxx
Title: President
XXXXXXXXXXXX.XXX, INC.
By:/s/ Xxxxxxx Xxxx
-------------------
Name: Xxxxxxx Xxxx
Title: President
DAEDALUS WORLDWIDE
CORPORATION
By:/s/ Xxxxxxx Xxxxx
--------------------
Name: Xxxxxxx Xxxxx
Title: President
/s/ Xxxxx Xxxxx
---------------
Xxxxx Xxxxx
/s/ Xxxxxxx Xxxxx
-----------------
Xxxxxxx Xxxxx
/s/ Xxxxxxx Xxxxxxx
-------------------
Xxxxxxx Xxxxxxx
/s/ Xxxxx Xxxxxxx
-----------------
Xxxxx Xxxxxxx
55
The following signatures personally as set forth below are only to
evidence agreement to the terms and conditions set forth in Article XII.
/s/ Xxxxxx Xxxxx
----------------
Xxxxxx Xxxxx
/s/ Xxxxx Xxxxx
---------------
Xxxxx Xxxxx
56
