AGREEMENT AND PLAN OF MERGER
AMONG
NETWORK EVENT THEATER, INC.,
NEW CW, INC.,
XXXXXXXXXX.XXX, INC.,
J. XXXXXXXXX XXXXXX
AND
XXXX X. XXXXXX
Dated August 3, 1999
AGREEMENT AND PLAN OF MERGER
Dated August 3, 1999
The parties to this agreement and plan of merger are Network Event
Theater, Inc., a Delaware corporation ("NET"), New CW, Inc., a Delaware
corporation and a wholly-owned subsidiary of NET ("New CW"), XxxxxxxXxx.xxx,
Inc., a Delaware corporation ("CW"), and the stockholders named at the end of
this agreement (collectively, the "Stockholders").
The parties agree as follows:
1. The Merger
1.1 The Merger. Upon the terms of this agreement and subject to the
provisions of the Delaware General Corporation Law (the "Law"), New CW shall be
merged with and into CW (the "Merger"). CW shall be the surviving corporation in
the Merger (the "Surviving Corporation").
1.2 Consummation of the Merger. If NET exercises the option (the "Option")
to acquire CW pursuant to the option agreement dated this date among the parties
to this agreement, then, subject to the provisions of this agreement, the
parties shall cause the Merger to be consummated by filing with the secretary of
state of the state of Delaware a duly executed and verified certificate of
merger promptly, and in any case not later than five business days after that
option is exercised and notice of such exercise is given to CW and the
Stockholders, and shall take all other action required by law to effect the
Merger. The Merger shall become effective upon the filing referred to in the
preceding sentence. At the time the Merger becomes effective (the "Effective
Time"), the separate corporate existence of New CW shall cease.
1.3 Organizational Documents. The certificate of incorporation and by-laws
of New CW, as in effect on the date of this agreement, shall be the certificate
of incorporation and by-laws, respectively, of the Surviving Corporation.
1.4 Directors and Officers and Managers. Persons to be named by NET before
the Effective Time shall be the directors and officers of the Surviving
Corporation, until their respective successors are duly elected and qualified.
1.5 Conversion
(a) At the Effective Time, (i) the shares of common stock, $.01 par
value, of CW ("CW Common Stock") issued and outstanding immediately prior to the
Effective Time (other than shares held in the treasury of CW, all of which shall
be cancelled) shall, by virtue of the Merger and without any action on the part
of any person or entity, be converted into the right to receive a number of
shares of common stock, $.01 par value, of NET ("NET Common Stock") determined
by dividing (A) the Basic Purchase Price (as defined in section 1.5(e)) by (B)
the Average Price (as defined in section 1.5(e)), and each holder of issued and
outstanding shares of CW Common Stock immediately prior to the Effective Time
(other than shares held in the treasury
of CW) shall be entitled to receive his, her or its proportionate number of
whole shares of NET Common Stock (it being understood that CW shall advise NET,
in writing, prior to the Effective Time of the number of such shares that each
such holder is entitled to receive, which advice NET may rely on, and the
Stockholders shall jointly and severally indemnify and hold NET harmless from
and against any loss, liability, damage or expense (including reasonable
attorneys' fees) in respect thereof); and (ii) each share of common stock, $.01
par value, of New CW issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of any
person or entity, be converted into and become one share of CW Common Stock.
(b) All NET Common Stock issued in the Merger will be duly
authorized, validly issued and fully paid and non-assessable, and shall be free
and clear of all liens, claims, encumbrances or restrictions ("Liens") (other
than any Liens that may arise from any action of the stockholder to whom the
shares are issued).
(c) The holders of shares of CW Common Stock immediately prior to
the Effective Time shall cease to have any rights as stockholders of CW and
their sole right shall be the right to receive the number of whole shares of NET
Common Stock into which their shares of CW Common Stock have been converted
pursuant to section 1.5(a).
(d) CW and the Stockholders shall cause each option or other right
to acquire shares of CW Common Stock that is outstanding to be cancelled prior
to the Effective Time.
(e) (i) "Average Price" means the average closing price of a share
of NET Common Stock on the Nasdaq National Market on the 30 trading days
immediately preceding the third day preceding the date on which NET exercises
the Option.
(ii) "Basic Purchase Price" means an amount equal to (A)
$2,500,000, increased by (B) the net proceeds to the Company after the date of
this agreement and before the Effective Time from the exercise of any
outstanding options referred to in the first sentence of section 3.2, and
reduced by (C) the sum of all of CW's liabilities immediately prior to the
Effective Time in excess of $300,000, based on NET's independent accountants'
estimate thereof (it being understood and agreed that, if NET's independent
accountants' estimate is incorrect for any reason, the Basic Purchase Price
shall be adjusted from time to time upward or downward, as appropriate, and, if
the adjustment is upward, the number of shares of NET Common Stock issued to the
holders of CW Common Stock before the Effective Time shall be increased by the
nearest whole number of shares (determined by dividing the amount of such
adjustment by the Average Price), as and when such adjustment occurs or as soon
thereafter as practicable).
1.6 Exchange of Certificates Representing NET Common Stock. Immediately
after the Effective Time, (i) NET shall issue to each former holder of CW Common
Stock certificates representing at least 85.7% of the number of shares of NET
Common Stock issuable in exchange for outstanding shares of CW Common Stock
pursuant to section 1.5(a) (it being understood that, as a result of NET's
inspection and examination under section 4.6 and its review of the financial
statements referred to in section 4.7, NET may, but shall not be required to,
determine, in its sole
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and absolute discretion, that it will so issue to each Stockholder more than the
number of shares of NET Common Stock referred to in this clause (i)), and (ii)
NET shall issue to an escrow agent to be designated by NET, which shall be a
commercial bank of national reputation that shall have executed and delivered an
escrow agreement in substantially the form of exhibit A (the "Escrow
Agreement"), the balance of the shares of NET Common Stock NET estimates will be
issuable in exchange for outstanding shares of CW Common Stock pursuant to
section 1.5(a) (the "Escrow Shares").
2. Representations and Warranties of NET. NET represents and warrants to CW as
follows:
2.1 Organization and Qualification. Each of NET and New CW is a duly
incorporated and validly existing corporation in good standing under the law of
the state of Delaware, with the corporate power and authority to own its
properties and conduct its business as now being conducted
2.2 Authority for this Agreement. Each of NET and New CW has the requisite
corporate power and authority to execute and deliver this agreement and the
other agreements to be executed and delivered by it pursuant to this agreement
(collectively, the "Agreements") and to consummate the transactions contemplated
by the Agreements. Except for approval by NET's board of directors, which
approval has not yet been obtained, no other corporate proceedings on the part
of NET or New CW are necessary to authorize the Agreements or to consummate the
transactions so contemplated. If approval by NET's board of directors is
obtained, this agreement will have been duly and validly executed and delivered
by each of NET and New CW, and, when the other Agreements are executed and
delivered by the parties to them and assuming each Agreement constitutes the
valid and binding obligation of each of the parties to them (other than NET and
New CW), each Agreement will constitute a valid and binding agreement of each of
NET and New CW that is a party to it, enforceable against each of them in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject to general principles of equity (whether considered in a proceeding
in equity or at law).
2.3 Capitalization
(a) The authorized capital stock of NET consists of 32,000,000
shares of NET Common Stock and 1,000,000 shares of preferred stock, $.01 par
value (the "Preferred Stock"). As of the close of business on July 31, 1999,
14,965,756 shares of NET Common Stock were issued and outstanding; no shares of
Preferred Stock were issued or outstanding; no shares of NET Common Stock were
held in NET's treasury; and there were outstanding options and warrants to
purchase an aggregate of 2,275,307 shares of NET Common Stock. Since July 31,
1999, the Company has not (i) issued any shares of NET Common Stock, other than
upon the exercise of options or warrants then outstanding, (ii) granted any
options, warrants or other rights to purchase shares of NET Common Stock or
(iii) split, combined or reclassified any of its shares of capital stock. All
the outstanding shares of NET Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable and are free of preemptive rights.
Except as set forth in this section 2.2, there are no outstanding (i) shares of
capital stock or other voting securities of
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NET, (ii) securities of NET convertible into or exchangeable for shares of
capital stock or voting securities of NET or (iii) except for securities
issuable in connection with the Mergers referred to in section 6.1(b) or in
connection with a proposed private placement of NET Common Stock that is
pending, options, warrants, rights or other agreements or commitments to acquire
from NET, or obligations of NET to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of NET, or obligations of NET to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable security or other
similar agreement or commitment (the items in clauses (i), (ii) and (iii),
collectively, the "NET Securities"). There are no outstanding obligations of NET
or any subsidiary of NET to repurchase, redeem or otherwise acquire any NET
Securities. Except in connection with the Mergers referred to in section 6.1(b),
there are no voting trusts or other agreements or understandings to which NET or
any of its subsidiaries is a party with respect to the voting of capital stock
of NET or any of its subsidiaries. It is understood and agreed that, when
reference is made in this agreement to a subsidiary or subsidiaries, that term
does not include Common Places, LLC.
(b) Except for the pledge of shares of certain NET's subsidiaries to
First Union National Bank to secure certain loans, NET is, directly or
indirectly, the record and beneficial owner of all the outstanding shares of
capital stock of each of its subsidiaries, free and clear of any lien, mortgage,
pledge, restriction (voting, transfer or otherwise), charge, security interest
or encumbrance (a "Lien"), and there are no irrevocable proxies with respect to
any such shares. There are no outstanding (i) securities of NET or any of its
subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any subsidiary, or (ii)
options, warrants or other rights to acquire from NET or any of its
subsidiaries, or other obligations of NET or any of its subsidiaries to issue,
any capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any of its subsidiaries, or other
obligations of NET or any of its subsidiaries to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable security or other
similar agreement or commitment (the items in clauses (i) and (ii),
collectively, the "Subsidiary Securities"). There are no outstanding obligations
of NET or any of its subsidiaries to repurchase, redeem or otherwise acquire any
outstanding Subsidiary Securities.
2.4 Absence of Certain Changes. Except as disclosed in the SEC Reports (as
defined in section 2.5), since March 31, 1999, NET and its subsidiaries taken as
a whole have not suffered any Material Adverse Effect.
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2.5 Reports
(a) NET has filed with the Securities and Exchange Commission (the
"SEC") all forms, reports and documents required to be filed by it pursuant to
applicable law, all of which have complied as of their respective filing dates
in all material respects with all applicable requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules under the Exchange Act.
None of the filings by NET with the SEC (the "SEC Reports"), including, without
limitation, any financial statements or schedules included or incorporated by
reference in the SEC Reports, at the time filed, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. NET is in compliance in all material respects with all reporting and
filing requirements of the Exchange Act.
(b) The consolidated financial statements of NET included (or
incorporated by reference) in the SEC Reports have been prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis (except to the extent set forth in those financial statements,
including the notes, if any) and present fairly in all material respects the
consolidated financial position of NET as of their respective dates, and the
consolidated results of operations and changes in financial condition and cash
flows for the periods presented, subject, in the case of the unaudited interim
financial statements, to normal, recurring, year-end adjustments. The
consolidated balance sheet of NET as of March 31, 1999 and the notes thereto
included in the SEC Reports reflect all liabilities required by generally
accepted accounting principles applied on a consistent basis to be reflected
therein.
2.6 Consents and Approvals; No Violation. Neither the execution and
delivery of the Agreements by NET or New CW nor the consummation of the
transactions contemplated by the Agreements will (a) conflict with or result in
a breach of any provision of the certificate of incorporation or by-laws of NET
or any of its subsidiaries; (b) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, except (i) pursuant to the Securities Exchange Act of 1934 or (ii)
the filing of a certificate of merger pursuant to the Delaware General
Corporation Law (the "Law"); (c) result in a material default (or give rise to
any right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any material note, license, agreement or other
instrument or obligation to which NET or any of its subsidiaries is a party or
by which any of them or any of their assets are bound; or (d) violate in any
material respect any material order, writ, injunction, decree, statute, rule or
regulation applicable to NET or any of its subsidiaries or by which any material
portion of their assets are bound.
2.7 Brokers. No broker, finder or other investment banker is entitled to
receive any brokerage, finder's or other fee or commission in connection with
this agreement or the transactions contemplated by this agreement based upon
agreements made by or on behalf of NET or any of its subsidiaries.
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3. Representations and Warranties of CW and the Stockholders. CW and the
Stockholders jointly and severally represent and warrant to NET as follows:
3.1 Organization and Qualification. CW is a duly incorporated and validly
existing corporation in good standing under the law of the state of Delaware,
with the corporate power and authority to own its properties and conduct its
business as now being conducted, and is duly qualified and in good standing as a
foreign corporation authorized to do business in each jurisdiction in which the
character of the properties owned or held under lease by it or the nature of the
business transacted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not have a Material
Adverse Effect.
3.2 Capitalization. There are 3,529,412 shares of CW Common Stock issued
and outstanding, and there are outstanding options to purchase an aggregate of
176,471 shares of CW Common Stock. All the outstanding shares of CW Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable and are free of preemptive rights. Except as set forth in this
section 3.2 or in schedule 3.2, there are no outstanding (i) shares of capital
stock or voting securities of CW, (ii) securities of CW convertible into or
exchangeable for capital stock or voting securities of CW or (iii) options,
warrants, rights or other agreements or commitments to acquire from CW, or
obligations of CW to issue, any capital stock or voting securities or securities
convertible into or exchangeable for capital stock or voting securities of CW,
or obligations of CW to grant, extend or enter into any subscription, warrant,
right, convertible or exchangeable security or other similar agreement or
commitment (the items in clauses (i), (ii) and (iii), collectively, the "CW
Securities"). Except as set forth in schedule 3.2, there are no outstanding
obligations of CW to repurchase, redeem or otherwise acquire any CW Securities,
and there are no other outstanding equity related awards. Except as set forth in
schedule 3.2, there are no voting trusts or other agreements or understandings
to which CW is a party with respect to the voting of capital stock of CW. CW
does not own or have any liability or obligation to acquire any securities or
other interest in any other business or entity.
3.3 Authority for this Agreement. CW has the corporate power and authority
to execute and deliver this agreement and to consummate the transactions
contemplated by this agreement. The execution and delivery of this agreement by
CW and the consummation by CW of the transactions contemplated by this agreement
have been duly and validly authorized and no other proceedings on the part of CW
are necessary to authorize this agreement or to consummate the transactions so
contemplated. This agreement has been duly and validly executed and delivered by
CW and each Stockholder and, when the other Agreements are executed and
delivered by the parties to them (other than CW and the Stockholders), each
Agreement constitutes or will constitute a valid and binding agreement of each
of CW and the Stockholders that is a party to it, enforceable against each of
them in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject to general principles of equity (whether considered in a
proceeding in equity or at law).
3.4 Absence of Certain Changes. Except as set forth in schedule 3.4, since
June 30, 1999: (a) CW has not suffered any Material Adverse Effect, (b) CW has
conducted its business only in the ordinary course consistent with past practice
and (c) there has not been (i) any
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declaration, setting aside or payment of any dividend or other distribution in
respect of CW Common Stock or any repurchase, redemption or other acquisition by
CW of any outstanding CW Common Stock or other securities in, or other ownership
interests in, CW; (ii) any entry into any written employment agreement with, or
any increase in the rate or terms (including, without limitation, any
acceleration of the right to receive payment pursuant to arrangements set forth
in schedule 3.4) of compensation payable or to become payable by CW to, its
employees or officers; (iii) any increase in the rate or terms (including,
without limitation, any acceleration of the right to receive payment) of any
bonus, insurance, pension or other employee benefit plan, payment or arrangement
made to, for or with any such employees or officers, except increases occurring
in the ordinary course of business or as required by law or as necessary to
maintain tax-qualified status; or (iv) any action by CW that, if taken after the
date of this agreement, would constitute a breach of section 4.4 or 4.5.
3.5 Financial Statements and other Information. The unaudited financial
statements of CW listed in schedule 3.5, copies of which previously have been
furnished to NET, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except to the extent set
forth in those financial statements, including the notes, if any) and present
fairly in all material respects the financial position of CW as of their
respective dates, and the results of operations and changes in financial
condition and cash flows for the periods presented, subject to normal,
recurring, year-end adjustments.
3.6 Absence of Undisclosed Liabilities. As of the date of this agreement,
CW does not have any liability or obligation of any kind, whether accrued,
absolute, contingent or otherwise, other than (a) liabilities and obligations
under leases, commitments and other agreements entered into in the ordinary
course of business (which, to the extent required by this agreement, are set
forth in the schedules to this Agreement), (b) accounts payable and accrued
expenses incurred in the ordinary course of business and (c) the liabilities set
forth in schedule 3.6. CW does not know of any basis for the assertion against
it of any other liability as of the date of this agreement.
3.7 Consents and Approvals; No Violation. Neither the execution and
delivery of the Agreements by CW or any Stockholder nor the consummation of the
transactions contemplated by the Agreements will (a) conflict with or result in
a breach of any provision of the certificate of incorporation or by-laws of CW;
(b) require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except (i) pursuant
to the Securities Exchange Act of 1934 or (ii) the filing of a certificate of
merger pursuant to the Law; (c) result in a material default (or give rise to
any right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any material note, license, agreement or other
instrument or obligation to which CW or any Stockholder is a party or by which
CW or any Stockholder or any of its or their assets are bound; or (d) violate in
any material respect any material order, writ, injunction, decree, statute, rule
or regulation applicable to CW or any Stockholder or by which any material
portion of its or their assets are bound.
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3.8 Employee Benefit Matters
(a) For purposes of this agreement, the term "Plan" refers to the
following maintained on behalf of any employee of CW (whether current, former or
retired), or their beneficiaries, by CW, or any entity that would be deemed a
"single employer" with CW under section 414(b), (c), (m) or (o) of the Internal
Revenue Code (the "Code") or section 4001 of the Employee Retirement Income
Security Act of 1974 ("ERISA") (an "ERISA Affiliate"): any "employee benefit
plan" (within the meaning of section 3(3) of ERISA), or any other plan, program,
agreement or commitment, an employment, consulting or deferred compensation
agreement, or an executive compensation, incentive bonus or other bonus,
employee pension, profit-sharing, savings, retirement, stock option, stock
purchase, severance pay, life, health, disability or accident insurance plan.
Schedule 3.8(a) lists each Plan.
(b) Neither CW nor any of the ERISA Affiliates nor any of their
respective predecessors has ever contributed to or contributes to, or otherwise
participated in or participates in any "multiemployer plan" (within the meaning
of section 4001(a)(3) of ERISA or section 414(f) of the Code), any single
employer pension plan (within the meaning of section 4001(a)(15) of ERISA) that
is subject to sections 4063 and 4064 of ERISA or any plan that is subject to
Title IV of ERISA or section 412 of the Code.
(c) CW, each ERISA Affiliate, each Plan and each "plan sponsor"
(within the meaning of section 3(16) of ERISA) of each "welfare benefit plan"
(within the meaning of section 3(1) of ERISA) has complied in all respects with
the requirements of section 4980B of the Code and Title I, Subtitle B, Part 6 of
ERISA, except for a failure or failures to comply that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(d) With respect to each Plan:
(i) each Plan intended to qualify under section 401(a) of the
Code has been qualified since its inception and has received a determination
letter from the Internal Revenue Service (the "IRS") to the effect that the Plan
is qualified under section 401 of the Code and any trust maintained pursuant to
the Plan is exempt from federal income taxation under section 501 of the Code
and nothing has occurred that would cause the loss of such qualification or
exemption or the imposition of any material penalty or tax liability upon of the
remedial amendment period will apply, for a determination letter from the IRS
pursuant to Revenue Procedure 93-39, for each Plan intended to qualify under
section 401(a) of the Code;
(ii) no event has occurred in connection with which CP or any
ERISA Affiliate could be subject to any material liability under ERISA, the Code
or any other law, regulation or governmental order applicable to any Plan,
including, without limitation, section 406, 409, 502(i) or 502(l) of ERISA, or
section 4975 of the Code; and
(iii) each material Plan complies in all material respects
with the applicable requirements of ERISA and the Code.
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(e) CW has furnished NET with respect to each Plan:
(i) a copy of each annual report, if required by ERISA to be
prepared, with respect to the Plan, together with a copy of all financial
statements for each Plan, if required by ERISA to be prepared;
(ii) a copy of the most recent Summary Plan Description,
together with each Summary of Material Modifications, required under ERISA with
respect to the Plan, and, unless the Plan is embodied entirely in an insurance
policy to which CW is a party, a true and complete copy of the Plan; and
(iii) if the Plan is funded through a trust or any third party
funding vehicle (other than an insurance policy), a copy of the trust or other
funding agreement and the latest related financial statements, if any.
(f) Except as set forth in schedule 3.8(f), CW has not announced any
plan or commitment to create any additional Plans or, except in the ordinary
course of business in accordance with its customary practices or as required by
law or as necessary to maintain tax-qualified status, to amend or modify any
Plan.
(g) Except as set forth in schedule 3.8(g), CW is not a party to any
collective bargaining agreement.
(h) Except as set forth in schedule 3.8(h), the consummation of the
transactions contemplated by this agreement will not give rise to any liability
for severance pay, unemployment compensation, termination pay or withdrawal
liability, or accelerate the time of payment or vesting or increase the amount
of compensation or benefits due to any current, former, or retired employee or
their beneficiaries solely by reason of such transactions. No amounts payable
under any Plan will fail to be deductible for federal income tax purposes by
virtue of section 280G of the Code.
(i) Except as set forth in schedule 3.8(i), neither CW nor any ERISA
Affiliate maintains, contributes to or in any way provides for any benefits
(other than under section 4980B of the Code, the Federal Social Security Act or
a plan qualified under section 401(a) of the Code) to any current or future
retiree or terminated employee.
3.9 Litigation, Etc. Except as set forth in schedule 3.9, there is no
claim, action, proceeding or governmental investigation pending or, to the
knowledge of CW or the Stockholders, threatened against CW before any court or
governmental or regulatory authority that, individually or in the aggregate, (a)
could reasonably be expected to have a Material Adverse Effect or (b) has had or
could reasonably be expected to have a material adverse effect on the ability of
CW to consummate the transactions contemplated by this agreement or in any
manner challenges or seeks to prevent, enjoin or delay the Merger.
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3.10 Tax Matters
(a) Except as set forth in schedule 3.10(a):
(i) all returns and reports relating to Taxes required to be
filed with respect to CW or any of its income, properties or operations have
been duly filed in a timely manner (taking into account all extensions of due
dates), and, to the knowledge of CW and the Stockholders, all information in
such returns, declarations and reports is true, correct and complete in all
material respects;
(ii) all Taxes attributable to CW that were shown to be due
and payable on such returns and reports have been paid;
(iii) there is no claim or assessment pending or, to the
knowledge of CW and the Stockholders, threatened against CW for any alleged
material deficiency in Taxes attributable to CW;
(iv) CW has satisfied in all material respects for all periods
all applicable withholding Tax requirements (including, without limitation,
income, social security and employment tax withholding for all types of
compensation); and
(v) CW has furnished NET complete and accurate copies of all
Tax returns, and all related amendments, filed by or on behalf of CW.
(b) Except as set forth in schedule 3.10(b), there are no agreements
in effect to extend the period of limitations for the assessment or collection
of any income, franchise or other Tax for which CW may be liable.
3.11 Compliance with Law. Except as set forth in schedule 3.11, to the
knowledge of CW and the Stockholders, CW is not in conflict with, or in default
or violation of, any law, rule or regulation (including, but not limited to, any
applicable law, rule or regulation respecting employment and employment
practices, terms and conditions of employment and wages and hours), or any
order, judgment or decree applicable to CW or by which any property or asset of
CW is bound or affected, except where such conflicts, defaults or violations,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
3.12 Contracts. Schedule 3.12 contains an accurate and complete list of:
(a) all of CW's commitments and other agreements for the purchase of materials,
supplies, equipment, and software, other than commitments and other agreements
that were entered into in the ordinary course of business and involve an
expenditure by CW of less than $10,000 for any one commitment or two or more
related commitments; (b) all notes and agreements relating to any indebtedness
of CW; (c) all leases or other rental agreements under which CW is either lessor
or lessee; and (d) all of CW's other agreements, commitments and understandings
(written or oral) that require payment by CW of more than $10,000 individually.
True and complete copies of all written leases,
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commitments and other agreements referred to on in schedule 3.12 have been
delivered or made available to NET. There are no material breaches or defaults
by CW under any such agreements, and, to the knowledge of CW, there are no
material breaches or defaults by the other party under any such agreements, and
all such agreements are in full force and effect and are binding obligations of
the parties to such agreements.
3.13 Title to Assets. Except as set forth in schedule 3.13 and except for
the Lien, if any, of current taxes not yet due and payable, CW has valid title,
free and clear of any Lien, to all the assets, tangible and intangible, used in
or needed to conduct CW's business, and those assets will be sufficient to
enable it to continue after the Effective Time to operate all aspects of its
business in the manner in which it has been operated.
3.14 Related Party Transactions. Except as set forth in schedule 3.14, CW
does not owe any amount to, or have any contract with or commitment to, or use
any property (real or personal) in its business owned or leased by, any of its
stockholders, or any director, officer, employee, agent or representative of CW
or any of their respective affiliates.
3.15 Permits and Licenses. CW has all permits, licenses, franchises and
other authorizations ("Licenses") necessary for the conduct of its business, and
all such Licenses are valid and in full force and effect, except where the
failure to have such Licenses would not have a Material Adverse Effect. All
Licenses held by CW that are material to its business are set forth in schedule
3.15. Any License of CW to use any software is valid and does not infringe the
property rights of any third party. CW has not granted to any person or entity
any interest, as licensee or otherwise, in any of its owned software or
databases or in any of its lists.
3.16 Banks; Powers of Attorney. Schedule 3.16 sets forth (a) the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which CW maintains safe deposit boxes or accounts of
any nature and the names of all persons authorized to draw thereon, make
withdrawals therefrom or have access thereto, and (b) the names of all persons
to whom CW has granted a power of attorney, together with a description thereof.
CW has provided NET with true and complete copies of all bank statements
received by it prior to the date of this agreement.
3.17 Intangible Property. Schedule 3.17 sets forth a complete list of the
trademarks, trade names, copyrights and logos used by CW. CW owns, free and
clear of any Lien, each of those trademarks, trade names, copyrights and logos
(including registrations and applications for registration of any of them), and
they constitute all the trademarks, copyrights, trade names and logos necessary
for the continued operation of CW's business in a manner consistent with past
practice. To the knowledge of CW and the Stockholders, CW is not infringing upon
any trademark, trade name, copyright or other rights of any third party; no
proceedings are pending or overtly threatened alleging any such infringement;
and no claim has been received by CW alleging any such infringement. To the
knowledge of CW and the Stockholders, there is no violation by others of any
right of CW with respect to any trademark, trade name or copyright.
3.18 Insurance. Schedule 3.18 sets forth a complete list of all the
insurance policies held
11
by CW, specifying with respect to each policy the policy limit, type of
coverage, location of the property covered, annual premium, premium payment date
and expiration date. True and complete copies of all those policies have been
made available to NET.
3.19 Website Information. The Website, xxx.xxxxxxxxxx.xxx, had monthly
page-views for April, May and June 1999 in the amount of 15,561,500, 11,198,000
and 2,995,200, respectively, with an average visit of 23:38, 22:49 and 18:05
minutes, respectively.
3.20 Brokers. No broker, finder or other investment banker is entitled to
receive any brokerage, finder's or other fee or commission in connection with
this agreement or the transactions contemplated by this agreement based upon
agreements made by or on behalf of CW.
4. Covenants
4.1 Confidentiality. In the event of termination of this agreement, NET
shall return to CW, and CW and the Stockholders shall return to NET, all
non-public documents, work papers and other material (including, to the extent
practicable, all copies) obtained pursuant to this agreement or in connection
with the transactions contemplated by this agreement. The parties shall use all
reasonable efforts to keep confidential any information obtained pursuant to
this agreement or in connection with the transactions contemplated by this
agreement, unless such information is readily ascertainable from public or
published information or trade sources or is otherwise available to a particular
party as a creditor or stockholder of another party.
4.2 Public Announcements. NET shall not make, issue or release any other
public announcement concerning the terms, conditions or status of the
transactions contemplated by this agreement, without giving CW reasonable
advance notice and making a good faith attempt to obtain the prior approval of
CW with respect to the contents of such announcement, which approval shall not
be unreasonably withheld or delayed. CW shall not make, issue or release any
public announcement concerning the terms, conditions or status of the
transactions contemplated by this agreement, without the prior approval of NET.
4.3 Employment Agreements. Immediately prior to the Effective Time, J.
Xxxxxxxxx Xxxxxx and Xxxx X. Xxxxxx shall, and NET shall cause Common Places,
LLC ("CP") to, execute and deliver employment agreements in the forms of
exhibits B and C, respectively.
4.4 Ordinary Course of Business. CW shall (a) conduct its business in the
ordinary course, consistent with past practice; (b) use its best efforts to
preserve all present relationships with persons having business dealings with
it; and (c) use its best efforts to maintain, preserve and protect its assets
and goodwill.
4.5 Restricted Activities and Transactions. CW shall not engage in any of
the following activities or transactions without the prior written approval NET:
(a) amend its certificate of incorporation or by-laws;
12
(b) except for issuances of CW Common Stock pursuant to outstanding
options, issue, sell or deliver, or agree to issue, sell or deliver, any CW
Common Stock or any securities convertible into or exchangeable for CW Common
Stock, or grant or issue, or agree to grant or issue, any options, warrants,
incentive awards or other rights to acquire any such securities;
(c) borrow or agree to borrow any funds or incur, or assume or
become subject to, whether directly or by way of guarantee or otherwise, any
obligation or liability (absolute or contingent), other than indebtedness for
money borrowed from NET and any other liability incurred in the ordinary course
of business, or issue, sell or deliver, or agree to issue, sell or deliver, any
bonds, debentures, notes or other debt securities;
(d) declare or pay any dividend or make any distribution on or in
respect of CW Common Stock, whether in cash, stock or property or, directly or
indirectly, redeem, purchase or otherwise acquire any CW Common Stock or make
any other distribution of its assets to the holders of CW Common Stock;
(e) sell, transfer or acquire, or agree to sell, transfer or
acquire, any properties or assets, tangible or intangible, other than in the
ordinary course of business and for consideration at least equal to the fair
market value of the properties or assets transferred;
(f) except as specifically permitted by this agreement, enter into
any contract, agreement, lease or understanding, other than any contract,
agreement, lease or understanding entered into in the ordinary course of
business that is not material;
(g) grant any increase in compensation, hire any additional
employees or enter into any employment agreement;
(h) become liable for or make any material change in any
profit-sharing, bonus, deferred compensation, insurance, pension, retirement or
other employee or executive benefit plan, payment or arrangement, except as
required by law;
(i) except as contemplated by this agreement, merge or consolidate
with any other entity, or acquire stock or, except in the ordinary course of
business, any business, property or assets of any other person or entity;
(j) except as required by law or by subsequently promulgated
generally accepted accounting principles, alter the manner of keeping its books,
accounts or records, or alter the accounting practices reflected in such books,
accounts or records; or
(k) take any other action that would cause any of CW's
representations and warranties in this agreement not to be true and correct in
all material respects on and as of the Effective Time with the same force and
effect as if made on and as of the Effective Time.
4.6 Access to Records and Properties; Opportunity to Ask Questions. CW
shall make available for inspection
13
by NET or its representatives, and NET shall make available for inspection by CW
or its representatives, during normal business hours, the premises, corporate
records, books of account, contracts and all other documents of reasonably
requested by NET and its authorized employees, counsel and auditors in order to
permit them to make a reasonable inspection and examination of the business and
affairs of CW or NET, as the case may be. Each of CW and NET shall cause its
managerial employees, counsel and independent accountants to be available upon
reasonable notice to answer questions of NET's or CW's representatives, as the
case may be, concerning its business and affairs, and shall cause them to make
available all relevant books and records in connection with such inspection and
examination, provided that these activities are conducted in a manner that does
not unreasonably interfere with the other's business.
4.7 Supplements to Written Disclosures and Financial Statements. CW shall
promptly deliver to NET any information concerning events subsequent to the date
of this agreement necessary to supplement the representations and warranties of
CW in this agreement in order that the information be kept current, complete and
accurate in all material respects, it being understood and agreed that the
delivery of such information shall not constitute a waiver by NET of any rights
as a result of a misrepresentation or breach of warranty in section 3. In
addition, not later than 30 days after the date of this agreement, CW shall
deliver to NET financial statements for CW for the year ended December 31, 1998,
which shall be audited and reported upon by Ernst & Young LLP at NET's expense,
and unaudited financial statements for CW for each of the three months ended
March 31, 1999 and June 30, 1999, at CW's expense, in each case prepared in
accordance with generally accepted accounting principles consistently applied.
4.8 Further Assurances. Each party shall (a) execute and deliver such
instruments and take such other action as the others may reasonably request to
carry out this agreement, and (b) use all reasonable efforts to obtain the
consents of all parties to all agreements and other documents necessary for the
consummation of the transactions contemplated by this agreement.
5. Indemnification and Related Matters
5.1 Indemnification
(a) Subject to the provisions of this section 5, the Stockholders
shall jointly and severally indemnify and hold NET harmless from and against all
losses, liabilities, damages and expenses (including reasonable attorneys' fees)
resulting from any breach of warranty, covenant or agreement, or any
misrepresentation, by CW or the Stockholders under this agreement.
(b) Subject to the provisions of this section 5, NET shall indemnify
and hold the Stockholders harmless from and against all losses, liabilities
damages and expenses (including reasonable attorneys' fees) resulting from any
breach of warranty covenant or agreement, or any misrepresentation, by NET under
this agreement.
5.2 Related Matters. Except as specifically set forth in this agreement,
no party has made or shall have liability for any representation or warranty,
express or implied, in connection with the transactions contemplated by this
agreement. The parties agree that the remedies provided in this section 5 are
the exclusive remedies for breach of warranty, covenant and agreement, and
14
misrepresentation, under this agreement.
5.3 Time and Manner of Certain Claims. The representations, warranties,
covenants and agreements in this agreement shall survive the Effective Time. The
party seeking indemnification (the "Indemnified Party") shall give the party
from whom Indemnification (the "Indemnifying Party") is sought a written notice
("Notice of Claim") within 90 days of the discovery of any matter in respect of
which the right to indemnification contained in this section 5 may be claimed;
provided, that the failure to give such notice within such 90-day period shall
not result in a waiver or loss of any right to bring such claim hereunder after
such period. Notwithstanding the foregoing, failure to give such notice will
terminate any obligation of the Indemnifying Party with respect to such claim to
the extent such failure actually prejudiced the Indemnifying Party. In the event
a claim is pending or threatened or the Indemnified Party has a reasonable
belief as to the validity of the basis for such claim, the Indemnified Party may
give written notice (a "Notice of Possible Claim") of such claim to the
Indemnifying Party, regardless of whether any loss has yet arisen from such
claim. However, a party shall have no liability under this agreement for breach
of warranty, covenant or agreement, or misrepresentation, unless a Notice of
Claim or Notice of Possible Claim therefor is delivered by the party seeking to
be indemnified prior to [March 31, 2001]. Any Notice of Claim or Notice of
Possible Claim shall set forth the representations, warranties, covenants and
agreements with respect to which the claim is made, the facts giving rise to and
alleged basis for the claim and the amount of liability, if known, asserted by
reason of the claim.
5.4 Defense of Claims by Third Parties. If any claim is made against a
party that, if sustained, would give rise to a liability of the other party
under this agreement, the party against whom the claim is made shall promptly
cause notice of the claim to be delivered to the other party and shall afford
the other party and its counsel, at the other party's sole expense, the
opportunity to defend or settle the claim. The failure to provide the notice
referred to above shall not relieve the indemnifying party of liability under
this agreement, except to the extent the Indemnifying Party has actually been
prejudiced by such failure. If any claim is compromised or settled without the
consent of the indemnifying party, no liability shall be imposed on the
indemnifying Party by reason of the claim.
5.5 Method of Payment. Upon consummation of the Merger, NET shall be
entitled to satisfy claims for indemnification pursuant to this section 5 from
the Escrow Shares. To the extent that NET is entitled to indemnification under
this section 5, the Escrow Shares shall be valued in accordance with the
provisions of section 1.5(e)(i), mutatis mutandis. NET may not receive any
Escrow Shares from the Escrow Fund, unless and until Notices of Claims
identifying actual damages and aggregating at least $25,000 has been delivered
to the Escrow Agent as provided in the Escrow Agreement, and such amount is
determined pursuant to this section 5 and the Escrow Agreement to be payable, in
which case NET shall be entitled to receive Escrow Shares equal in value to the
full amount of the damages (including the first $25,000 of such damages.)
5.6 Maximum Liability and Remedies. The rights of NET to make claims upon
the Escrow Shares in accordance with this section 5 shall be the sole and
exclusive remedy of NET after the Effective Time with respect to any
representation, warranty, covenant or agreement made
15
by CW or the Stockholders under this agreement (other than those set forth in
sections 3.1, 3.2, 3.3, 3.14, 3.16, 3.20, 4.8, 6.1(b), 6.1(c) and 8.2 (the
"Exception Provisions")) and no former stockholder, optionholder, warrantholder,
director, officer, employee or agent of CW shall have any personal liability to
NET under this agreement after the Effective Time (other than for a
misrepresentation or breach of warranty or agreement under the Exception
Provisions). To the extent NET is entitled to indemnification under this
agreement and the actual damages exceed the value of the Escrow Shares, the
Stockholders shall have no liability or obligation, except to the extent of any
actual damages resulting from a misrepresentation or breach of warranty or
agreement under the Exception Provisions.
6. Other Agreements
6.1 Agreements of Stockholders
(a) Neither CW nor any Stockholder shall, directly or indirectly,
engage in any discussions with any other person or entity (other than NET and
its affiliates) relating to the transactions contemplated by this agreement or
relating to any other acquisition, merger, financing or similar transaction
involving CW or its business. If a third party seeks to engage in any such
discussion with CW or any Stockholder, CW and the Stockholders shall as promptly
as practicable so advise NET.
(b) Each Stockholder shall vote all the shares of NET Common Stock
issued to him or her under this agreement in favor of the Mergers (as defined in
the agreement and plan of merger dated June 28, 1999 among NET, Common Places,
LLC, YouthStream Media Networks, Inc., Nunet, Inc., Nucommon, Inc., Xxxxxx X.
Xxxxx, Xxxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx and Xxxx Xxxxxx at the stockholders
meeting referred to in section 4.8 of that agreement and against any other
transaction or proposal that might conflict with the consummation of such
Mergers.
(c) (i) No Stockholder may at any time after the Effective Time
disclose to anyone (except in connection with the performance of services for,
or otherwise on behalf of, NET or any of its subsidiaries) or use in competition
with NET or any of its subsidiaries any confidential information or trade
secrets with respect to the business of NET or any of its subsidiaries;
provided, however, any such individual may disclose confidential information or
trade secrets to the extent required by applicable law.
(ii) No Stockholder may, as long as he is an employee of NET
or any of its subsidiaries and for a period of 30 months thereafter, directly or
indirectly, solicit for employment or hire any person who, during the 12-month
period preceding the date of solicitation or hiring, was an employee of NET or
any of its subsidiaries.
(iii) No Stockholder may, as long as he is an employee of NET
or any of its subsidiaries and for a period of 30 months thereafter, except
through NET or any of its subsidiaries, directly or indirectly, engage or be
interested in (A) the business of developing and operating an Internet portal or
hub targeted primarily to individuals between the ages of 16 and 25, (B) any
business directly competitive with any business NET or any of its subsidiaries
is engaged
16
in at the time of his termination of employment or (C) any business directly
competitive with a business developed from a project in which he was involved
during his employment (any such business, a "Restricted Business"); provided,
however, that nothing in this paragraph shall limit the right of any such
individual to be employed by a media or Internet company whose businesses
include a Restricted Business, as long as he does not provide any services to
that Restricted Business. For this purpose, a person shall be deemed to be
directly or indirectly engaged or interested in a business or entity, if he is
engaged or interested in that business or entity as a stockholder, member,
partner, individual proprietor, director, officer, employee, agent, lender,
consultant or otherwise, but not if his interest is limited solely to the
ownership of 5% or less of any class of the equity or debt securities of a
corporation as to which he has only a passive role.
(iv) Each Stockholder acknowledges that the remedy at law for
breach of the provisions of this section 6.1(c) will be inadequate and that, in
addition to any other remedy NET or any of its subsidiaries may have, it will be
entitled to an injunction restraining any such breach or threatened breach,
without any bond or other security being required and without the necessity of
showing actual damages or economic loss.
6.2 Pigggyback Registration. If the transactions contemplated by the
agreement and plan of merger referred to in section 6.1(b) are not consummated
by November 30, 1999 and NET at any time thereafter proposes for any reason to
register shares of NET Common Stock under the Act (other than on Form S-4 or S-8
promulgated under the Act or any successor forms), and at such time any
Stockholder is not permitted to sell all the shares of NET Common Stock issued
to him or her under section 1 pursuant to Rule 144(k) under the Act, then NET
shall promptly give written notice to the Stockholders of its intention so to
register such shares and, upon the written request, delivered to NET within 10
days after delivery of any such notice by NET, of the Stockholders to include in
such registration shares of NET Common Stock issued pursuant to section 1 (which
request shall specify the number of shares proposed to be included in such
registration), NET shall use its best efforts to cause all such shares to be
included in such registration on the same terms and conditions as the securities
otherwise being sold in such registration; provided, however, that, if the
managing underwriter advises NET that the inclusion of all shares requested to
be included in such registration would interfere with the successful marketing
(including pricing) of any other shares proposed to be registered by NET, then
the number of shares proposed to be included in such registration shall be
included in the following order of priority:
(i) first, the shares to be issued by NET;
(ii) second, the other shares requested to be included in
such registration (or, if necessary, pro rata among the
holders thereof, based upon the number of shares
requested to be registered by each such holder).
The Stockholders may include shares of NET Common Stock in a registration
pursuant to this section 6.2 on one occasion only; provided, however, that, if
the Stockholders wish to include shares of NET Common Stock in a registration
pursuant to this section 6.2 and the number of shares sought to be included
pursuant to this section 6.2 is reduced as set forth above, the Stockholders may
include the shares sought to be, but that were not, included in one or more
17
additional registrations in accordance with this section 6.2, until all such
shares shall have been so included. In connection with any such registration,
the parties shall cooperate with each other and execute and deliver such
documents and agreements as are customary in the circumstances.
6.3 Employment Agreements. Immediately before the Effective Time, the
Stockholders shall execute and deliver the respective employment agreements in
substantially the forms attached as exhibits 6.3(a) and 6.3(b), and NET shall
cause Common Places, LLC to execute and deliver such agreements.
7. Termination, Amendment and Waiver
7.1 Termination. This agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the stockholders of NET:
(a) by mutual consent of the boards of directors of NET and CW;
(b) by CW, if the option granted pursuant to the agreement dated
August __, 1999 among NET, CW and the Stockholders (as defined therein)
terminates without having been exercised; or
(c) by NET, at any time or for any reason.
In the event of termination or abandonment of the Merger pursuant to
this section 7.1, written notice of termination shall promptly be given to each
other party to this agreement.
7.2 Effect of Termination. The termination of this agreement under section
7.1 shall not relieve any party of any liability for breach of warranty of this
agreement or misrepresentation prior to the date of termination.
7.3 Amendment. This agreement may not be amended, except by an instrument
in writing signed on behalf of each of the parties.
7.4 Waiver. Any term or provision of this agreement may be waived in
writing at any time by the party that is entitled to the benefits of that term
or provision.
8. Miscellaneous
8.1 Enforcement of the Agreement. The parties agree that irreparable
damage would occur in the event any of the provisions of this agreement were not
performed in accordance with their specific terms or were otherwise breached.
Accordingly, the parties agree that they shall be entitled to an injunction to
prevent breaches of this agreement and to enforce specifically the terms and
provisions of this agreement in any federal or state court located in the
Borough of Manhattan in the city of New York (as to which the parties agree to
submit to jurisdiction for the purposes of such action), this being in addition
to any other remedy to which they are entitled at law or in equity.
18
8.2 Expenses. Each of the parties shall bear its own expenses in
connection with the transactions contemplated by this agreement, and no party
shall have any liability to the others with respect to those expenses.
8.3 Validity. The invalidity or unenforceability of any provision of this
agreement shall not affect the validity or enforceability of any other provision
of this agreement, which shall remain in full force and effect, unless the
invalidity or unenforceability of such provision would (a) result in such a
material change to this agreement as to be unreasonable, or (b) materially or
adversely frustrate the obligations of the parties in this agreement as
originally written.
8.4 Notices. All notices, requests, claims, demands and other
communications under this agreement shall be in writing and shall be deemed to
have been duly given when delivered in person, by facsimile transmission with
confirmation of receipt, or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
if to NET or New CW,
to it at:
c/o Network Event Theater, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Executive Vice President and Chief
Financial Officer
Fax No.: (000) 000-0000
if to CW or a Stockholder, to it or him at:
000 Xxxx Xxxxxxxx Xxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: J. Xxxxxxxxx Xxxxxx,
President and Chief Executive Officer
Fax No.: 000-000-0000
or to such other address as the person or entity to whom notice is given may
have previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt of notice of the change).
8.5 Governing Law. This agreement shall be governed by and construed in
accordance with the law of the state of New York, regardless of the law that
might otherwise govern under principles of conflicts of laws applicable to this
agreement, except that the provisions of this agreement subject to the Law shall
be governed by and construed in accordance with the Law.
19
8.6 Headings. The headings in this agreement are for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this agreement.
8.7 Parties in Interest. This agreement shall be binding upon and inure
solely to the benefit of each party to this agreement, and nothing in this
agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature under or by reason of this agreement.
8.8 Counterparts. This agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.
8.9 Certain Definitions
(a) "Material Adverse Effect" means any adverse change in the
business or financial condition of a company or its subsidiaries that is
material to that company and its subsidiaries taken as a whole.
(b) A "subsidiary" of any entity is another entity a majority of the
outstanding voting securities of which are beneficially owned by the first
entity.
(c) "Tax" means all taxes or similar governmental charges, duties,
imposts or levies (including, without limitation, income taxes, franchise taxes,
gross receipt taxes, occupation taxes, real and personal property taxes,
transfer taxes or fees, stamp taxes, sales taxes, use taxes, excise taxes, ad
valorem taxes, withholding taxes, employee withholding taxes, worker's
compensation, payroll taxes, unemployment insurance, social security, minimum
taxes, customs duties or windfall profits taxes), together with any related
liabilities, penalties, fines, additions to tax or interest, imposed by any
country, any state, county, provincial or local government or any subdivision or
agency of any of the foregoing.
20
8.10 Entire Agreement. This agreement and the schedule and exhibits to
this agreement constitute the entire agreement among the parties with respect to
their subject matter and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to that subject matter.
NETWORK EVENT THEATER, INC.
By:________________________________
NEW CW, INC.
By:________________________________
XXXXXXXXXX.XXX, INC.
By:________________________________
___________________________________
J. Xxxxxxxxx Xxxxxx, Individually
___________________________________
Xxxx X. Xxxxxx, Individually
21
TABLE OF CONTENTS
PAGE
----
1. The Merger..................................................................1
1.1 The Merger.........................................................1
1.2 Consummation of the Merger.........................................1
1.3 Organizational Documents...........................................1
1.4 Directors and Officers and Managers................................1
1.5 Conversion.........................................................1
1.6 Exchange of Certificates Representing NET Common Stock.............2
2. Representations and Warranties of NET.......................................3
2.1 Organization and Qualification.....................................3
2.2 Authority for this Agreement.......................................3
2.3 Capitalization.....................................................3
2.4 Absence of Certain Changes.........................................4
2.5 Reports............................................................5
2.6 Consents and Approvals; No Violation...............................5
2.7 Brokers............................................................5
3. Representations and Warranties of CW and the Stockholders...................6
3.1 Organization and Qualification.....................................6
3.2 Capitalization.....................................................6
3.3 Authority for this Agreement.......................................6
3.4 Absence of Certain Changes.........................................6
3.5 Financial Statements and other Information.........................7
3.6 Absence of Undisclosed Liabilities.................................7
3.7 Consents and Approvals; No Violation...............................7
3.8 Employee Benefit Matters...........................................8
3.9 Litigation, Etc....................................................9
3.10 Tax Matters.......................................................10
3.11 Compliance with Law...............................................10
3.12 Contracts.........................................................10
3.13 Title to Assets...................................................11
3.14 Related Party Transactions........................................11
3.15 Permits and Licenses..............................................11
3.16 Banks; Powers of Attorney.........................................11
3.17 Intangible Property...............................................11
3.18 Insurance.........................................................12
3.19 Website Information...............................................12
3.20 Brokers...........................................................12
4. Covenants..................................................................12
4.1 Confidentiality...................................................12
4.2 Public Announcements..............................................12
4.3 Employment Agreements.............................................12
4.4 Ordinary Course of Business.......................................12
i
4.5 Restricted Activities and Transactions............................12
4.6 Access to Records and Properties; Opportunity to Ask Questions....14
4.7 Supplements to Written Disclosures and Financial Statements.......14
4.8 Further Assurances................................................14
5. Indemnification and Related Matters........................................14
5.1 Indemnification...................................................14
5.2 Related Matters...................................................15
5.3 Time and Manner of Certain Claims.................................15
5.4 Defense of Claims by Third Parties................................15
6. Other Agreements...........................................................16
6.1 Agreements of Stockholders........................................16
6.2 Pigggyback Registration...........................................17
6.3 Employment Agreements.............................................18
7. Termination, Amendment and Waiver..........................................18
7.1 Termination.......................................................18
7.2 Effect of Termination.............................................18
7.3 Amendment.........................................................18
7.4 Waiver............................................................18
8. Miscellaneous..............................................................18
8.1 Enforcement of the Agreement......................................18
8.2 Expenses..........................................................19
8.3 Validity..........................................................19
8.4 Notices...........................................................19
8.5 Governing Law.....................................................20
8.6 Headings..........................................................20
8.7 Parties in Interest...............................................20
8.8 Counterparts......................................................20
8.9 Certain Definitions...............................................20
8.10 Entire Agreement..................................................21
ii
