AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
XXXXXXXXX.XXX, INC.,
METAL ACQUISITION CORP.,
WW ACQUISITION CORP.,
XXXX.XXX, INC.,
WELCOME WAGON INTERNATIONAL INC.
CENDANT MEMBERSHIP SERVICES HOLDINGS, INC.
AND
CENDANT CORPORATION
DATED AS OF OCTOBER 26, 2000
TABLE OF CONTENTS
PAGE
----
ARTICLE I THE MERGERS.................................................................................................2
1.1 THE METAL MERGER....................................................................................2
1.2 THE WW MERGER.......................................................................................2
1.3 EFFECTIVE TIME......................................................................................3
1.4 EFFECT OF THE MERGERS...............................................................................3
1.5 CERTIFICATES OF INCORPORATION; BYLAWS...............................................................3
1.6 METAL DIRECTORS AND OFFICERS........................................................................4
1.7 WW DIRECTORS AND OFFICERS...........................................................................4
1.8 MERGER CONSIDERATION................................................................................5
1.9 SURRENDER OF CERTIFICATES..........................................................................10
1.10 TREATMENT OF STOCKHOLDER GUARANTY..................................................................11
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.........................................................11
2.1 ORGANIZATION OF THE COMPANY........................................................................11
2.2 COMPANY CAPITAL STRUCTURE..........................................................................12
2.3 SUBSIDIARIES.......................................................................................14
2.4 AUTHORITY..........................................................................................15
2.5 COMPANY FINANCIAL STATEMENTS.......................................................................16
2.6 NO UNDISCLOSED LIABILITIES.........................................................................17
2.7 NO CHANGES.........................................................................................17
2.8 TAX AND OTHER RETURNS AND REPORTS..................................................................20
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES................................................................22
2.10 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.............................................22
2.11 INTELLECTUAL PROPERTY..............................................................................23
2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS..............................................................27
2.13 INTERESTED PARTY TRANSACTIONS......................................................................29
2.14 GOVERNMENTAL AUTHORIZATION.........................................................................29
2.15 LITIGATION.........................................................................................29
2.16 INSURANCE..........................................................................................30
2.17 MINUTE BOOKS.......................................................................................30
2.18 ENVIRONMENTAL MATTERS..............................................................................30
2.19 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES...................................................33
2.20 EMPLOYEE MATTERS AND BENEFIT PLANS.................................................................33
2.21 COMPLIANCE WITH LAWS...............................................................................37
2.22 INVESTMENT REPRESENTATIONS.........................................................................37
2.23 BANK ACCOUNTS......................................................................................38
2.24 NO OTHER AGREEMENTS................................................................................38
2.25 LIBERTY DIGITAL STOCK..............................................................................38
2.26 REPRESENTATIONS COMPLETE...........................................................................38
-i-
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT, METAL MERGER SUB AND WW MERGER SUB............................39
3.1 ORGANIZATION, STANDING AND POWER...................................................................39
3.2 AUTHORITY..........................................................................................39
3.3 CAPITAL STRUCTURE..................................................................................40
3.4 SEC DOCUMENTS; PARENT FINANCIAL STATEMENTS.........................................................40
3.5 NO UNDISCLOSED LIABILITIES.........................................................................41
3.6 NO MATERIAL ADVERSE EFFECT.........................................................................41
3.7 TAX AND OTHER RETURNS AND REPORTS..................................................................41
3.8 AGREEMENTS, CONTRACTS, COMMITMENTS.................................................................42
3.9 INTERESTED PARTY TRANSACTIONS......................................................................42
3.10 ENVIRONMENTAL MATTERS..............................................................................42
3.11 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES...................................................43
3.12 REPRESENTATIONS COMPLETE...........................................................................43
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.......................................................................43
4.1 CONDUCT OF BUSINESS OF THE COMPANY.................................................................44
4.2 NO SOLICITATION....................................................................................47
4.3 CONDUCT OF BUSINESS OF PARENT......................................................................48
ARTICLE V ADDITIONAL AGREEMENTS......................................................................................48
5.1 STOCKHOLDER APPROVAL; PROXY STATEMENT; DELIVERY OF FINANCIALS......................................48
5.2 NASDAQ LISTING.....................................................................................50
5.3 RESTRICTIONS ON TRANSFER...........................................................................50
5.4 ACCESS TO INFORMATION..............................................................................51
5.5 EXPENSES...........................................................................................51
5.6 PUBLIC DISCLOSURE..................................................................................52
5.7 CONSENTS...........................................................................................52
5.8 FIRPTA COMPLIANCE..................................................................................52
5.9 REASONABLE EFFORTS.................................................................................52
5.10 NOTIFICATION OF CERTAIN MATTERS....................................................................53
5.11 S-8 REGISTRATION...................................................................................53
5.12 S-3 REGISTRATION STATEMENT.........................................................................53
5.13 HSR ACT............................................................................................54
5.14 TRANSFER OF ASSETS.................................................................................54
5.15 TRADE SECRET LICENSE...............................................................................54
5.16 EQUITABLE REMEDY...................................................................................55
5.17 STOCKHOLDER EMPLOYEE PLANS.........................................................................55
5.18 STAY BONUSES.......................................................................................56
5.19 ADDITIONAL OPTION GRANTS...........................................................................56
-ii-
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
5.20 CANCELLATION OF INTERCOMPANY OBLIGATIONS AND LIBERTY DIGITAL PROCEEDS..............................56
5.21 TAX MATTERS........................................................................................56
5.22 LIBERTY DIGITAL STOCK..............................................................................57
5.23 PURCHASE OF NEW GBR COLLATING MACHINE..............................................................57
5.24 EMPLOYEES..........................................................................................57
5.25 TERMINATION OF BROKER LICENSES.....................................................................58
5.26 QUALIFICATIONS TO DO BUSINESS......................................................................58
5.27 BIFURCATED CONTRACTS...............................................................................58
5.28 TRANSFER OF OWNERSHIP IN MOVE......................................................................58
ARTICLE VI CONDITIONS TO THE MERGER..................................................................................59
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGERS......................................59
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDER............................................59
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT, METAL MERGER SUB AND WW MERGER SUB.............61
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION..............................................61
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.........................................................62
7.2 INDEMNIFICATION....................................................................................62
7.3 FURTHER CONDITIONS ON ENVIRONMENTAL INDEMNITY......................................................65
TICLE VIII TERMINATION, AMENDMENT AND WAIVER.......................................................................67
8.1 TERMINATION........................................................................................67
8.2 EFFECT OF TERMINATION..............................................................................69
8.3 TERMINATION FEE....................................................................................69
8.4 AMENDMENT..........................................................................................69
8.5 EXTENSION; WAIVER..................................................................................69
ARTICLE IX TAX MATTERS...............................................................................................70
9.1 INDEMNITY..........................................................................................70
9.2 RETURNS AND PAYMENTS...............................................................................71
9.3 REFUNDS............................................................................................72
9.4 CONTESTS...........................................................................................72
9.5 CONVEYANCE TAXES...................................................................................74
9.6 MISCELLANEOUS......................................................................................74
ARTICLE X GENERAL PROVISIONS.........................................................................................76
10.1 NOTICES............................................................................................76
10.2 INTERPRETATION.....................................................................................77
10.3 COUNTERPARTS.......................................................................................79
-iii-
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
10.4 ENTIRE AGREEMENT; ASSIGNMENT.......................................................................79
10.5 SEVERABILITY.......................................................................................79
10.6 OTHER REMEDIES.....................................................................................80
10.7 GOVERNING LAW......................................................................................80
10.8 RULES OF CONSTRUCTION..............................................................................80
10.9 SPECIFIC PERFORMANCE...............................................................................80
10.10 ATTORNEY'S FEES....................................................................................80
10.11 WAIVER OF JURY TRIAL...............................................................................80
-iv-
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of October 26, 2000 by and among xxxxxxxxx.xxx, Inc., a Delaware
corporation ("Parent"), Metal Acquisition Corp., a Delaware corporation and a
wholly-owned Parent Subsidiary ("Metal Merger Sub"), WW Acquisition Corp., a New
York corporation and a wholly-owned Parent Subsidiary ("WW Merger Sub"),
Xxxx.xxx, Inc., a Delaware corporation (the "Company"), Welcome Wagon
International Inc., a New York corporation ("WW"), Cendant Membership Services
Holdings, Inc., a Delaware corporation ("CMS"), and Cendant Corporation, a
Delaware corporation (the "Stockholder").
RECITALS
A. The Company is engaged in the Business (as defined in Section 1.6(a) of
this Agreement).
B. The Boards of Directors of each of the Stockholder, the Company, Parent,
Metal Merger Sub and WW Merger Sub believe it is in the best interests of each
company and its respective stockholders that Parent acquire (i) the Company
through the statutory merger of Metal Merger Sub with and into the Company with
the Company continuing as the surviving corporation (the "Metal Merger") and
(ii) WW through the statutory merger of WW Merger Sub with and into WW with WW
continuing as the surviving corporation (the "WW Merger" and, together with the
Metal Merger, the "Mergers") and, in furtherance thereof, have approved this
Agreement, the Mergers and the other transactions contemplated hereby.
C. The Board of Directors of the Stockholder has authorized the Stockholder
to approve this Agreement, the Mergers and the other transactions contemplated
hereby and the Stockholder has approved, and all subsidiaries of the Stockholder
that have any beneficial ownership of the Company or WW have approved, the
Mergers.
D. The Board of Directors of Parent has authorized the approval of this
Agreement, the Merger, the issuance of Parent Common Stock (as defined below)
and the other transactions contemplated hereby.
E. Pursuant to the Mergers, among other things, and subject to the terms
and conditions of this Agreement (i) all of the issued and outstanding capital
stock of the Company and WW immediately prior to the Mergers will be converted
into shares of the common stock of Parent, and (ii) all issued and outstanding
options, warrants and other rights to acquire or receive shares of the capital
stock of the Company and of the Stockholder which is designed to reflect the
performance of the Company (the "Tracking Stock") and (to the extent such
options for Tracking Stock are beneficially owned by employees of the Company or
WW immediately prior to the Mergers) shall be assumed by Parent, and shall
thereafter represent options, warrants or other rights to acquire or receive
common stock of Parent.
F. Concurrently with the execution and delivery of this Agreement, the
Stockholder, Parent and the Company are entering into certain of the operating
agreements and other agreements which are attached hereto as Exhibits A-1
through A-10 (collectively, the "Commercial Agreements").
G. Concurrently with the execution and delivery of this Agreement, the
Stockholder and Parent are executing and delivering a Stockholder Agreement in
the form attached hereto as Exhibit B hereto (the "Stockholder Agreement") and a
Registration Rights Agreement in the form attached hereto as Exhibit C (the
"Registration Rights Agreement" and, together with the Stockholder Agreement and
the Commercial Agreements, the "Ancillary Agreements").
H. Concurrently with the execution of this Agreement, each of the persons
set forth on Exhibit D hereto is entering into a support agreement with the
Stockholder in the form attached hereto as Exhibit E (collectively, the "Support
Agreements").
I. The Stockholder, Parent, Metal Merger Sub and WW Merger Sub desire to
make certain representations and warranties and other agreements in connection
with the Mergers.
J. For U.S. federal income tax purposes, it is intended by the parties
hereto that each of the Mergers shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code") and that this Agreement with respect to each of the Mergers constitutes
a "plan of reorganization" within the meaning of Section 1.368-2(g) of the
income tax regulations promulgated under the Code.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements, covenants, promises and representations set forth herein, the mutual
benefits to be gained by the performance of the terms hereof, and for other good
and valuable consideration, intending to be legally bound hereby the parties
agree as follows:
ARTICLE I
THE MERGERS
1.1 The Metal Merger. At the Effective Time (as defined in Section 1.2
hereof) and subject to and upon the terms and conditions of this Agreement and
the applicable provisions of the Delaware General Corporation Law ("Delaware
Law"), Metal Merger Sub shall be merged with and into the Company, the separate
corporate existence of Metal Merger Sub shall cease and the Company shall
continue as the surviving corporation and shall become a wholly-owned subsidiary
of Parent. The surviving corporation after the Metal Merger is sometimes
referred to hereinafter as the "Metal Surviving Corporation."
1.2 The WW Merger. At the Effective Time and subject to the terms and
conditions of this Agreement and the applicable provisions of the New York
Business Corporation Law ("New York Law"), WW Merger Sub shall be merged with
and into WW, the separate corporation existence of
-2-
WW Merger Sub shall cease and WW shall continue as the surviving corporation
(the "WW Surviving Corporation") and shall become a wholly-owned subsidiary of
Parent.
1.3 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1 hereof, the closing of the Mergers and the other transactions
contemplated by this Agreement (the "Closing") will take place as promptly as
practicable following the execution and delivery of this Agreement by each of
the parties hereto, but in no event later than two (2) business days following
satisfaction or waiver of the conditions set forth in Article VI hereof, at the
offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, 000 Xxxx
Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx, unless another place and/or time is agreed to
in writing by Parent and the Stockholder. The date upon which the Closing
actually occurs is herein referred to as the "Closing Date." On the Closing
Date, the parties hereto shall cause each of the Mergers to be consummated by
filing a Certificate of Merger (or like instrument) (each, a "Certificate of
Merger" with respect to one of the Mergers, and collectively with respect to
both Mergers, the "Certificates of Merger") with the Secretaries of State of the
State of Delaware and the State of New York, respectively, in accordance with
the relevant provisions of Delaware Law and New York Law (the times at which
both Mergers have become fully effective (or such later time as may be agreed in
writing by the Company and Parent and specified in the Certificates of Merger)
is referred to herein as the "Effective Time").
1.4 Effect of the Mergers. At the Effective Time, the effect of the
Mergers shall be as provided in the applicable provisions of Delaware Law and
New York Law, as the case may be. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, except as provided
herein, (i) all the property, rights, privileges, powers and franchises of the
Company and Metal Merger Sub shall vest in the Metal Surviving Corporation, and
all debts, liabilities and duties of the Company and Metal Merger Sub shall
become the debts, liabilities and duties of the Metal Surviving Corporation and
(ii) all of the property, rights, privileges, powers and franchises of WW and WW
Merger Sub shall vest in the WW Surviving Corporation, and all debts,
liabilities and duties of WW and WW Merger Sub shall become the debts,
liabilities and duties of the WW Surviving Corporation.
1.5 Certificates of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective Time, at
the Effective Time, (i) the Certificate of Incorporation of Metal Merger Sub as
in effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Metal Surviving Corporation at and after the Effective Time
until thereafter amended in accordance with the Delaware Law and the terms of
such Certificate of Incorporation; provided, however, that at the Effective
Time, Article I of the Certificate of Incorporation of the Metal Surviving
Corporation shall be amended and restated in its entirety to read as follows:
"The name of the corporation is Xxxx.xxx, Inc." and (ii) the Certificate of
Incorporation of WW Merger Sub as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the WW Surviving Corporation
at and after the Effective Time until thereafter amended in accordance with the
New York Law and the terms of such Certificate of Incorporation; provided,
however, that at the
-3-
Effective Time, Article I of the Certificate of Incorporation of the WW
Surviving Corporation shall be amended and restated in its entirety to read as
follows: "The name of the Corporation is Welcome Wagon International Inc."
(b) Unless otherwise determined by Parent prior to the Effective Time, (i)
the Bylaws of Metal Merger Sub as in effect immediately prior to the Effective
Time shall be the Bylaws of the Metal Surviving Corporation at and after the
Effective Time, until thereafter amended in accordance with Delaware Law and the
terms of Certificate of Incorporation of the Metal Surviving Corporation and
such Bylaws and (ii) the Bylaws of WW Merger Sub as in effect immediately prior
to the Effective Time shall be the Bylaws of the WW Surviving Corporation at and
after the Effective Time, until thereafter amended in accordance with New York
Law and the terms of the Certificate of Incorporation of the WW Surviving
Corporation and such Bylaws.
1.6 Metal Directors and Officers.
(a) Unless otherwise determined by Parent prior to the Effective Time, the
directors of Metal Merger Sub immediately prior to the Effective Time shall be
the directors of the Metal Surviving Corporation at and after the Effective
Time, each to hold the office of a director of the Metal Surviving Corporation
in accordance with the provisions of Delaware Law and the Certificate of
Incorporation and Bylaws of the Metal Surviving Corporation until their
successors are duly elected and qualified.
(b) Unless otherwise determined by Parent prior to the Effective Time, the
officers of Metal Merger Sub immediately prior to the Effective Time shall be
the officers of the Metal Surviving Corporation at and after the Effective Time,
each to hold office in accordance with the provisions of the Bylaws of the Metal
Surviving Corporation.
1.7 WW Directors and Officers.
(a) Unless otherwise determined by Parent prior to the Effective Time, the
directors of WW Merger Sub immediately prior to the Effective Time shall be the
directors of the WW Surviving Corporation at and after the Effective Time, each
to hold the office of a director of the WW Surviving Corporation in accordance
with the provisions of New York Law and the Certificate of Incorporation and
Bylaws of the WW Surviving Corporation until their successors are duly elected
and qualified.
(b) Unless otherwise determined by Parent prior to the Effective Time, the
officers of WW Merger Sub immediately prior to the Effective Time shall be the
officers of the WW Surviving Corporation at and after the Effective Time, each
to hold office in accordance with the provisions of the Bylaws of the WW
Surviving Corporation.
1.8 Merger Consideration.
-4-
(a) Certain Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
"Additional Options" shall mean the number of Company Options reserved but
unissued under the 2000 Option Plan such that, immediately prior to the
Effective Time and after giving effect to any acceleration of vesting to the
Company Options that occurs as a result of the Mergers and any additional grants
of Company Options required to be granted as a result of the Mergers, the sum of
(i) the number of unvested Continuing Employee Options issued and outstanding
and (ii) such Additional Options equals no less than 10.7% of the Fully
Converted Shares (inclusive of the Additional Options).
"Business" shall mean, subject to the last paragraph of Section 4.1 of this
Agreement, the business conducted by Xxxx.xxx, Inc., RentNet, Inc., HouseNet,
Inc. and Welcome Wagon International Inc., and all of their respective
subsidiaries and business divisions, including without limitation,
SeniorHousingNet, CorporateHousingNet, SelfStorageNet and Movedotcom(U.K.) Ltd.
("Xxxx.xxx U.K."), and excluding the hosting of websites for Century 21,
Coldwell Banker and ERA.
"Company Capital Stock" shall mean shares of Company Common Stock and any
other shares of other capital stock of the Company.
"Company Common Stock" shall mean shares of the voting common stock of
Company, par value $.01 per share and the non-voting common stock of the
Company, par value $.01 per share.
"Company Convertible Securities" shall mean the Company Options together
with any other rights to acquire or receive shares of Company Capital Stock,
including all options, warrants and convertible preferred stock.
"Company Options" shall mean (i) all, if any, issued and outstanding
options to purchase or otherwise acquire Company Capital Stock (whether or not
vested), (ii) all issued and outstanding options to purchase or otherwise
acquire Tracking Stock (whether or not vested) granted under the Options Plans
and held by Continuing Employees and (iii) all reserved but unissued shares
under the 2000 Option Plan.
"Continuing Employee" shall mean those employees who are, as of the
Closing, employed by the Company or WW or any of the Subsidiaries.
"Continuing Employee Option" shall mean each Company Option issued to and
held by a Continuing Employee.
"Fully Converted Shares" shall mean the sum of (i) all issued and
outstanding shares of Tracking Stock, (ii) all shares of Tracking Stock issuable
upon the exercise of all options or other rights to acquire Tracking Stock,
(iii) the Stockholder's notional interest in Tracking Stock, (iv) all
-5-
Company Options (without double counting any options or other rights to acquire
Tracking Stock), and (v) all Additional Options.
"Knowledge" shall mean, with respect to the Stockholder, what is within the
actual knowledge of any of the directors or officers of the Stockholder, the
Company or WW, and in the case of Parent, what is within the actual knowledge of
any of the directors or officers of Parent or any of the Parent Subsidiaries.
"Metal Consideration" shall mean that number of shares of Parent Common
Stock set forth on Schedule 1.8(a).
"Metal Exchange Ratio" shall mean a number of shares of Parent Common Stock
equal to the quotient obtained by dividing (i) the Metal Consideration by (ii)
the Metal Outstanding Shares (with the result rounded to four decimal places).
"Metal Outstanding Shares" shall mean the aggregate number of shares of
Company Capital Stock outstanding immediately prior to the Effective Time,
including the aggregate number of shares of Company Capital Stock, if any,
issuable (with or without the passage of time or satisfaction of other
conditions) upon exercise or conversion of any Company Convertible Securities
outstanding or issuable (with or without the passage of time or satisfaction of
other conditions) immediately prior to the Effective Time.
"1997 Option Plan" shall mean the Cendant Corporation amended and restated
1997 Stock Incentive Plan.
"1999 Option Plan" shall mean the Cendant Corporation Xxxx.xxx Group 1999
Stock Option Plan.
"Option Exchange Ratio" shall mean a number of shares of Parent Common
Stock equal to the quotient obtained by dividing (i) the Total Consideration by
(ii) the Fully Converted Shares (with the result rounded to four decimal
places).
"Option Plans" shall mean the 1999 Option Plan, the 1997 Option Plan and
the 2000 Option Plan.
"Options Assumed" shall mean the sum of the Company Options and the
Additional Options.
"Parent Common Stock" shall mean the common stock of Parent, $0.001 par
value per share.
"Parent Closing Price" shall mean the average of the closing prices of
Parent Common Stock as quoted on the Nasdaq National Market for the ten (10)
days prior to the Closing Date.
-6-
"RentNet" shall mean RentNet, Inc., a Delaware corporation and a Metal
Subsidiary.
"SpringStreet" shall mean SpringStreet, Inc., a California corporation and
a Parent Subsidiary.
"Total Consideration" shall mean 26,275,602 shares of Parent Common Stock.
"Total Option Consideration" shall mean a number of shares of Parent Common
Stock equal to the product obtained by multiplying (i) Options Assumed by (ii)
the Option Exchange Ratio.
"Total Outstanding Shares" shall mean the sum of the Metal Outstanding
Shares and the WW Outstanding Shares.
"2000 Option Plan" shall mean the Xxxx.xxx, Inc. 2000 Stock Option Plan.
"WW Capital Stock" shall mean shares of common stock of WW, par value $.01
per share and any other shares of other capital stock of WW.
"WW Consideration" shall mean that number of shares of Parent Common Stock
equal to the Total Consideration minus the Total Option Consideration minus the
Metal Consideration.
"WW Convertible Securities" shall mean any other rights to acquire or
receive shares of WW Capital Stock, including all options, warrants and
convertible preferred stock.
"WW Exchange Ratio" shall mean a number of shares of Parent Common Stock
equal to the quotient obtained by dividing (i) the WW Consideration by (ii) the
WW Outstanding Shares (with the result rounded to four decimal places).
"WW Outstanding Shares" shall mean the aggregate number of shares of WW
Capital Stock outstanding immediately prior to the Effective Time, including the
aggregate number of shares of WW Capital Stock issuable (with or without the
passage of time or satisfaction of other conditions) upon exercise or conversion
of any WW Convertible Securities outstanding or issuable (with or without the
passage of time or satisfaction of other conditions) immediately prior to the
Effective Time.
(b) Shares to be Issued; Effect on Capital Stock. The number of shares of
Parent Common Stock issuable (including Parent Common Stock to be reserved for
issuance upon exercise of any of the Company Options to be assumed by Parent) in
exchange for the acquisition by Parent of all outstanding Company Capital Stock
and all outstanding WW Capital Stock and the assumption of all (if any)
unexpired and unexercised Company Convertible Securities shall be equal to the
Total Consideration minus the Total Option Consideration. Subject to the terms
and conditions of this Agreement, as of the Effective Time, by virtue of the
Mergers and without any action on the part of
-7-
Metal Merger Sub, WW Merger Sub, the Company, WW or the holder of any shares of
the Company Capital Stock, WW Capital Stock or Company Convertible Securities,
the following shall occur:
(i) Effect on Company Capital Stock. At the Effective Time, by virtue of
the Metal Merger and without any action on the part of Company or the
Stockholder, each share of Company Capital Stock issued and outstanding
immediately prior to the Effective Time shall be canceled and extinguished and
shall be converted automatically into the right to receive, upon the terms and
subject to conditions set forth below and throughout this Agreement, a number of
shares of Parent Common Stock equal to the Metal Exchange Ratio (the "Metal
Merger Consideration").
(ii) Effect on WW Capital Stock. At the Effective Time, by virtue of the WW
Merger and without any action on the part of WW or the Stockholder, each share
of WW Capital Stock issued and outstanding immediately prior to the Effective
Time shall be canceled and extinguished and shall be converted automatically
into the right to receive, upon the terms and subject to the conditions set
forth below and throughout this Agreement, a number of shares of Parent Common
Stock equal to the WW Exchange Ratio (the "WW Merger Consideration" and together
with the Metal Merger Consideration, the "Merger Consideration").
(iii) Assumption of Certain Company Options. Effective as of the Effective
Time, each outstanding Continuing Employee Option issued to and held by
Continuing Employees pursuant to the Option Plans (including any Company Options
required to be issued to a Continuing Employee as a result of the Mergers) and
each Additional Option, in each case whether vested or unvested and in the case
of Additional Options whether issued or unissued, will be assumed by Parent in
connection with the Mergers. Each Continuing Employee Option and Additional
Option so assumed by Parent under this Agreement shall continue to have, and be
subject to, the same terms and conditions set forth in the Option Plans and/or
as provided in the respective option or similar agreement immediately prior to
the Effective Time (including any vesting schedule or repurchase rights), except
that (i) each Continuing Employee Option and Additional Option will be
exercisable for that number of whole shares of Parent Common Stock equal to the
product of the number of shares of Tracking Stock or Company Common Stock, as
applicable, that were issuable upon exercise of such Continuing Employee Option
or Additional Option, as applicable, immediately prior to the Effective Time
multiplied by the Option Exchange Ratio, rounded down to the nearest whole
number of shares of Parent Common Stock and (ii) the per share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
Continuing Employee Option or Additional Option, as applicable, will be equal to
the quotient determined by dividing the exercise price per share of Tracking
Stock or Company Common Stock, as applicable, at which such Continuing Employee
Option or Additional Option, as applicable, was exercisable immediately prior to
the Effective Time by the Option Exchange Ratio, rounded up to the nearest whole
cent. The Stockholder shall be responsible for, and shall indemnify and hold
harmless Parent and its affiliates and their officers, directors, employees,
affiliates and agents from and against any and all claims, losses, damages,
costs and expenses (including attorneys' fees, costs and expenses) and other
liabilities and obligations relating to or arising out of Parent's assumption of
Continuing Employee
-8-
Options under this Agreement or failure of Parent to assume any options, rights
or other securities of the Stockholder, the Company or any of their respective
affiliates in connection with the transactions contemplated by this Agreement;
provided that this indemnity shall not apply to (i) Parent's failure to issue
Parent Common Stock in accordance with the Option Exchange Ratio upon the due
exercise of such Continuing Employee Options held by Continuing Employees and
assumed by Parent pursuant to this Section, (ii) Parent's other obligations
under the Option Plans with respect to the Continuing Employee Options or the
agreements governing such Continuing Employee Options by virtue of such
assumption, (iii) any actions taken by Parent after the Closing with respect to
the termination of employment of any Continuing Employee who holds a Continuing
Employee Option, or (iv) any misstatement or omission in any Registration
Statement on Form S-8 or prospectus or similar securities law document prepared
by Parent and distributed to its employees with respect to the Continuing
Employee Options.
(iv) Fractional Shares. No fractional share of Parent Common Stock shall be
issued in the Mergers. In lieu thereof, any fractional share shall be rounded to
the nearest whole share of Parent Common Stock (with.5 being rounded up).
(v) Cancellation of Company-Owned Stock. At the Effective Time, by virtue
of the Metal Merger and without any action on the part of any of the parties
hereto, each share of Company Capital Stock owned by, the Company or any Metal
Subsidiary immediately prior to the Effective Time, shall be cancelled and
extinguished without any conversion thereof.
(vi) Cancellation of WW-Owned Stock. At the Effective Time, by virtue of
the WW Merger and without any action on the part of any of the parties hereto,
each share of WW Capital Stock owned by WW or any WW Subsidiary immediately
prior to the Effective Time, shall be cancelled and extinguished without any
conversion thereof.
(vii) Capital Stock of Metal Merger Sub. At the Effective Time, by virtue
of the Metal Merger and without any action on the part of any of the parties
hereto, each share of capital stock of Metal Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock of
the Metal Surviving Corporation. Each stock certificate of Metal Merger Sub
evidencing ownership of any such shares of Metal Merger Sub shall thereafter
evidence ownership of an equivalent number of shares of capital stock of the
Metal Surviving Corporation.
(viii) Capital Stock of WW Merger Sub. At the Effective Time, by virtue of
the WW Merger and without any action on the part of any of the parties hereto,
each share of capital stock of WW Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of common stock of the WW
Surviving Corporation. Each stock certificate of WW Merger Sub evidencing
ownership of any such shares of WW Merger Sub shall thereafter evidence
ownership of an equivalent number of shares of capital stock of the WW Surviving
Corporation.
1.9 Surrender of Certificates.
-9-
(a) At the Closing, the Stockholder shall surrender all certificates
formerly representing shares of Company Capital Stock and WW Capital Stock
(collectively, the "Certificates") for cancellation to Parent.
(b) Upon proper presentation of the Certificates and in exchange therefor,
the Stockholder shall be entitled to receive, and Parent shall deliver, a
certificate representing the number of whole shares of Parent Common Stock to
which Stockholder is entitled pursuant to this Article I, and the Certificates
so surrendered shall forthwith be canceled. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented shares of
Company Capital Stock and WW Capital Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of dividends,
to evidence the ownership of the number of full shares of Parent Common Stock
into which such shares of Company Capital Stock and WW Capital Stock shall have
been so converted.
(c) No Liability. Notwithstanding anything to the contrary in this Section
1.9, neither Parent nor any party hereto shall be liable to a holder of shares
of Parent Common Stock, Company Capital Stock or WW Capital Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(d) No Further Ownership Rights in Company Capital Stock. The shares of
Parent Common Stock issued in accordance with the terms hereof shall be deemed
to be full satisfaction of all rights pertaining to shares of each of Company
Capital Stock and WW Capital Stock outstanding prior to the Effective Time, and
there shall be no further registration of transfers on the records of (i) the
Metal Surviving Corporation of shares of Company Capital Stock or (ii) the WW
Surviving Corporation of shares of WW Capital Stock that were outstanding prior
to the Effective Time. If, after the Effective Time, Certificates are presented
to Parent, Metal Surviving Corporation or the WW Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
(e) Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Metal Surviving Corporation or the WW
Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Business, then
Parent, Merger Sub and the Company, and the officers and directors of the
Company, WW, Parent, Metal Merger Sub and WW Merger Sub are fully authorized in
the name of their respective corporations or otherwise to take, and will take,
all such lawful and necessary action.
1.10 Treatment of Stockholder Guaranty. Following the Closing, Parent
shall use commercially reasonable efforts to release and cancel (or, to the
extent that it cannot be so released and cancelled, to cause Parent to be
substituted for the Stockholder with respect to) the guaranty of Stockholder in
the agreement set forth in Schedule 1.10 of the Stockholder Disclosure Letter
(the "Stockholder Guaranty") (or if not possible added as the primary obligor
with respect thereto). Parent shall indemnify and hold harmless Stockholder
against liabilities incurred by Stockholder
-10-
arising as a result of events following the Closing Date with respect to the
guaranty of Stockholder in the agreement set forth in Schedule 1.10 of the
Stockholder Disclosure Letter after the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER W
As of the date hereof, the Stockholder represents and warrants to Parent
and Metal Merger Sub and WW Merger Sub, subject to such exceptions as are
specifically disclosed in the disclosure letter supplied by the Stockholder to
Parent (the "Stockholder Disclosure Letter") and dated as of the date hereof, as
follows:
2.1 Organization of the Company.
(a) Each of the Company and each Metal Subsidiary (as defined in Section
2.3 hereof) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of the
Company and each Metal Subsidiary has the corporate power to own its respective
properties and to carry on its respective businesses as conducted. Each of the
Company and each Metal Subsidiary is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified (either individually or collectively) would have a Material
Adverse Effect on the Company. The Stockholder has delivered to Parent a true
and correct copy of the certificate of incorporation and bylaws of each of the
Company and the Metal Subsidiaries, each as amended to date and in full force
and effect on the date hereof. There are no proposed or considered amendments to
the certificate of incorporation or bylaws of any of the Company or any Metal
Subsidiary. Schedule 2.1(a) of the Stockholder Disclosure Letter lists the
directors and officers of the Company and each Metal Subsidiary and each
jurisdiction in which the Company is qualified to do business.
(b) Each of WW and each WW Subsidiary (as defined in Section 2.3 hereof) is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Each of WW and each WW Subsidiary has
the corporate power to own its respective properties and to carry on its
respective businesses as now being conducted and as proposed to be conducted.
Each of WW and each WW Subsidiary is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified (either individually or collectively) would have a Material
Adverse Effect on WW. The Stockholder has delivered to Parent a true and correct
copy of the certificate of incorporation and bylaws of each of WW and the WW
Subsidiaries, each as amended to date and in full force and effect on the date
hereof. There are no proposed or considered amendments to the certificate of
incorporation or bylaws of any of the Company or any WW Subsidiary. Schedule
2.1(b) of the Stockholder Disclosure Letter lists the directors and officers of
each WW Subsidiary and each jurisdiction in which WW is qualified to do
business.
2.2 Company Capital Structure.
-11-
(a) The authorized Company Capital Stock consists of (i) 37,500,000 shares
of common stock, par value $.01 per share, of which 22,500,000 shares are issued
and outstanding as of the date hereof, (ii) 12,500,000 shares of non-voting
common stock, par value $.01 per share, none of which are issued and outstanding
as of the date hereof; and (iii) 5,000,000 shares of Preferred Stock, par value
$.01 per share, none of which are issued and outstanding as of the date hereof.
The total number of shares of Company Capital Stock outstanding as of
immediately prior to the Effective Time (assuming the conversion, exercise or
exchange of all Company Convertible Securities) will be as set forth in Schedule
2.2(a) of the Stockholder Disclosure Letter. All outstanding shares of the
Company Capital Stock are held (and as of immediately prior to the Effective
Time will be held) of record and beneficially by CMS. All of the capital stock
of CMS is held (and as of immediately prior to the Effective Time will be held)
of record and beneficially by the Stockholder. All outstanding shares of Company
Capital Stock are duly authorized, validly issued, fully paid and non-assessable
and not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of the Company or any agreement to which the Company or
any of its Metal Subsidiaries is a party or by which it is bound, and have been
issued in compliance with federal and state securities laws. There are no
declared or accrued but unpaid dividends with respect to any shares of Company
Common Stock. The Company has no other capital stock authorized, issued or
outstanding. The Company has no obligation to redeem or repurchase any capital
stock of any corporation or other entity, and has no liability in respect of any
capital stock of any corporation or other entity.
(b) The authorized WW Capital Stock consists of (i) 1,000 shares of Common
Stock, par value $.01 per share, of which 1,000 shares are issued and
outstanding as of the date hereof, and (ii) no shares of Preferred Stock, par
value $.01 per share, none of which are issued and outstanding as of the date
hereof. The total number of shares of WW Capital Stock outstanding as of
immediately prior to the Effective Time (assuming the conversion, exercise or
exchange of all WW Convertible Securities) will be as set forth in Schedule
2.2(b) of the Stockholder Disclosure Letter. All of the outstanding shares of
the WW Capital Stock is held (and as of immediately prior to the Effective Time
will be held) of record and beneficially by CMS. All outstanding shares of WW
Capital Stock are duly authorized, validly issued, fully paid and non-assessable
and not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of WW or any agreement to which WW or any of its WW
Subsidiaries is a party or by which it is bound, and have been issued in
compliance with federal and state securities laws. There are no declared or
accrued but unpaid dividends with respect to any shares of WW Common Stock. WW
has no other capital stock authorized, issued or outstanding. WW has no
obligation to redeem or repurchase any capital stock of any corporation or other
entity, and has no liability in respect of any capital stock of any corporation
or other entity.
(c) Except for the Option Plans, neither the Company, WW nor any of their
respective Subsidiaries nor the Stockholder on behalf of the Company, WW or any
of its Subsidiaries has ever adopted or maintained any stock option plan or
other plan providing for equity compensation of any person. The Stockholder has
reserved an aggregate of 11,000,000 shares of Tracking Stock for issuance to
employees, directors and consultants upon the exercise of Company
-12-
Options pursuant to the Option Plans, of which (i) 573,250 and 5,768,946 shares
are issuable, as of the date hereof, upon the exercise of outstanding,
unexercised Company Options granted under the 1997 Option Plan and 1999 Option
Plan, respectively and (ii) 4,426,750 and 231,054 shares remain available for
future grant under the 1997 Option Plan and 1999 Option Plan, respectively. The
Stockholder has reserved an aggregate of 1,586,000 shares of Tracking Stock for
future issuance pursuant to the exercise of outstanding warrants. Schedul 2.2(c)
of the Stockholder Disclosure Letter sets forth for each outstanding Company
Convertible Security and each Fully Converted Share, the name of the holder of
such Company Convertible Security or Fully Converted Share, the number and type
of shares subject to such Convertible Security or Fully Converted Share, the
exercise price of such Convertible Security or Fully Converted Share, the
vesting schedule for such Convertible Security or Fully Converted Share,
including the extent vested to date and whether the vesting exercisability of
such Convertible Security or Fully Converted Share will be accelerated and
become exercisable by reason of the transactions contemplated by this Agreement
and whether such Convertible Security or Fully Converted Share is intended to
qualify as an incentive stock option as defined in Section 422 of the Code. All
Company Options are held by employees of the Company or its Subsidiaries and
have been issued in compliance with federal and state securities laws. Except
for the Company Convertible Securities described in Schedule 2.2(c) of the
Stockholder Disclosure Letter, there are no options, warrants, calls, rights,
commitments or agreements of any character, written or oral, to which the
Company, WW or any of their respective Subsidiaries is a party or by which any
of them is bound obligating the Company or any of its Subsidiaries to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of Company Capital Stock, WW Capital Stock
or Fully Converted Shares or the capital stock of any of the Subsidiaries or
obligating the Company, WW or any of their respective Subsidiaries to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to the Company, WW or any of
their respective Subsidiaries. Except as contemplated hereby, there are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting stock of the Company Capital Stock, WW Capital Stock or the Fully
Converted Shares. The holders of Company Convertible Securities, WW Convertible
Securities and Fully Converted Shares have been or will be given, or shall have
properly waived, any required notice prior to the Mergers, and all such rights
will be terminated at or prior to the Effective Time. Without limiting the
foregoing, neither the Company nor WW is, and nor will either of them be
obligated, to issue any Company Capital Stock or WW Capital Stock in connection
with any Tracking Stock or any obligation to issue any Tracking Stock. As a
result of the Mergers, Parent will be, upon the Effective Time, the sole record
holder and sole beneficial owner of all capital stock of the Company, WW and
their respective Subsidiaries and rights to acquire or receive such capital
stock. As a result of the Mergers and following the Mergers, other than
Continuing Employee Options, Parent shall have no liabilities or obligations to
any holders of Tracking Stock or options, warrants or other convertible
securities to acquire Tracking Stock.
(d) Under the terms of this agreement, the sum of (i) the WW Consideration
plus (ii) the Metal Consideration is equal to the sum of (x) the product
obtained by multiplying Stockholder's
-13-
notional interest in the Tracking Stock (as expressed in shares of Tracking
Stock) times the Option Exchange Ratio plus (y) the product obtained by
multiplying the aggregate number of outstanding shares of Tracking Stock held by
persons other than Stockholder plus the aggregate number of outstanding options
or other rights to purchase Tracking Stock held by persons other than
Stockholder times the Option Exchange Ratio, such that each holder of a
Continuing Employee Option would receive upon exercise of such Continuing
Employee Option an equivalent proportional amount of Parent Common Stock in
respect of such holder's interest in the Business as Stockholder is receiving in
respect of Stockholder's interest in the Company and WW in satisfaction of the
Stockholder's notional interest in the Tracking Stock.
2.3 Subsidiaries. Except for the subsidiaries of each of the Company and
WW listed in Schedule 2.3 of the Stockholder Disclosure Letter (each subsidiary
of the Company, a "Metal Subsidiary" and each subsidiary of WW, a "WW
Subsidiary" and together with Metal Subsidiaries, the "Subsidiaries"), each of
which are wholly owned by the Company or WW, as the case may be, and except as
set forth on Schedule 2.3 of the Stockholder Disclosure Letter, each of the
Company and WW does not have and has never had any subsidiaries and does not
otherwise own and has never otherwise owned any shares of capital stock or any
interest in, or control, directly or indirectly, any other corporation,
partnership, association, joint venture or other business entity. Schedule 2.3
of the Stockholder Disclosure Letter sets forth the capitalization of each
Subsidiary. The Company or WW, as the case may be, is the record and beneficial
owner of all of the outstanding capital stock of each Subsidiary. Schedule 2.3
of the Stockholder Disclosure Letter also sets forth the names of the directors
and officers of each Subsidiary. Each of the Company and WW has provided Parent
with true and correct copies of each Subsidiary's certificate of incorporation,
bylaws or other applicable charter documents. There are no options, warrants,
calls, rights, commitments or agreements of any character, written or oral, to
which either the Company, WW or any Subsidiary is a party or by which it is
bound obligating any Subsidiary to issue, deliver, sell, repurchase or redeem,
or cause to be issued, delivered, sold, repurchased or redeemed, any shares of
the capital stock of any Subsidiary or obligating any Subsidiary to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to any Subsidiary. Getko
Canada has no interest in any asset, property or right of any type or
description, real, personal, tangible and intangible.
2.4 Authority. Each of the Company, WW, CMS and the Stockholder (and each
subsidiary of the Stockholder, as appropriate) has all requisite corporate power
and authority to enter into this Agreement and the Ancillary Agreements to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Ancillary
Agreements to which it is party and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of each of the Company, WW, CMS and the Stockholder (and each
subsidiary of the Stockholder, as appropriate), as the case may be, in
accordance with applicable law and the Certificate of Incorporation of the
Company, WW, CMS and the Stockholder (and each subsidiary of the Stockholder, as
appropriate), as the case may be. The respective Boards of Directors of the
Company, WW, CMS and the Stockholder have
-14-
approved and adopted the Mergers, this Agreement and the Ancillary Agreements to
which it (and/or a subsidiary of it) is a party. This Agreement and the
Ancillary Agreements to which it is party have been duly executed and delivered
by each of the Company, WW, CMS and the Stockholder (and each subsidiary of the
Stockholder, as appropriate) and, assuming the due execution and delivery by
Parent, Metal Merger Sub and WW Merger Sub, constitute the valid and binding
obligations of the Company, WW, CMS and the Stockholder (and each subsidiary of
the Stockholder, as appropriate), as the case may be, enforceable in accordance
with their respective terms. Except as set forth in Schedule 2.4 of the
Stockholder Disclosure Letter, the execution and delivery of this Agreement and
the Ancillary Agreements to which it is a party by the Company, WW, CMS and the
Stockholder (and each subsidiary of the Stockholder, as appropriate), as the
case may be, does not, and, as of the Effective Time, the consummation of the
transactions contemplated hereby and thereby will not, conflict with, or result
in any violation of, or default under (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of any benefit under (any such event, a "Conflict")
(i) any provision of the Certificate of Incorporation or Bylaws of the Company,
WW, CMS or the Stockholder, as the case may be, or (ii) any agreement that would
be required to be disclosed pursuant to Section 2.11 or 2.12 of this Agreement
or any instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company,
WW, CMS or the Stockholder or their respective properties or assets. No consent,
waiver, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other federal,
state, county, local or foreign governmental authority, instrumentality, agency
or commission ("Governmental Entity") or any third party (so as not to trigger
any Conflict) is required by or with respect to the Company, WW, CMS or the
Stockholder in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for: (i) the
filing of the Certificates of Merger with the Secretaries of State for the State
of Delaware and the State of New York, respectively; (ii) such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws;
(iii) such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"); and (iv) such
other consents, waivers, authorizations, filings, approvals and registrations
which are set forth on Schedule 2.4 of the Stockholder Disclosure Letter. Each
of the Stockholder and CMS has approved the Mergers in its capacity as
stockholder of the Company and WW.
2.5 Company Financial Statements. Schedule 2.5 of the Stockholder
Disclosure Letter sets forth the audited combined balance sheets of the Company
(together with WW and the WW Subsidiaries as though WW and the WW Subsidiaries
were subsidiaries of the Company) as of December 31, 1999 and December 31, 1998
and the unaudited combined balance sheet of the Company (together with WW and
the WW Subsidiaries as though WW and the WW Subsidiaries were subsidiaries of
the Company) as of September 30, 2000 (the "Balance Sheet") and the related
audited combined statements of operations and cash flows for each of the two
one-year periods ended December 31, 1998 and December 31, 1999, respectively,
and the related unaudited combined statements of operations and cash flows for
the nine-month period ended September 30, 2000
-15-
(collectively, the "Company Financials"). The Company Financials, including the
related schedules and notes thereto, have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a basis consistent
throughout the periods indicated and consistent with each other (subject, in the
case of unaudited statements, to normal audit adjustments). The Company
Financials, including the related schedules and notes thereto, present fairly
the financial condition and operating results of the Company, WW, their
respective Subsidiaries and the Business as of the dates and during the periods
indicated therein. Except as disclosed on Schedule 2.5 of the Stockholder
Disclosure Letter, (i) there are no asset or revenue items that are included in
the Company Financials that would not be included in financial statements
prepared in accordance with GAAP of the Company, WW and the Subsidiaries on a
stand-alone basis for the same amounts and for the same periods, and (ii) there
are no liabilities or expenses that would be included in financial statements
prepared in accordance with GAAP of the Company, WW and their respective
Subsidiaries on a stand alone basis that are not included in the Company
Financials for the same amounts and for the same periods. At no time has the
Company, WW or any Subsidiary factored its accounts receivable or otherwise sold
or transferred the right to collect any of its accounts receivable. In addition,
at no time has the Company, WW or any Subsidiary, or any assets of the Company,
WW or any Subsidiary, been placed in receivership or otherwise been subject to
any bankruptcy, insolvency or liquidation proceeding.
2.6 No Undisclosed Liabilities. The Company, WW, the Subsidiaries and the
Business do not have any liability, indebtedness, obligation, expense, claim,
guaranty or endorsement of any type, whether accrued, absolute, contingent,
matured, unmatured or other, of a nature required to be reflected in financial
statements (including the notes thereto) in accordance with GAAP
("Liabilities"), which individually or in the aggregate (i) has not been
reflected in the Balance Sheet, or (ii) has not arisen in the ordinary course of
the Company's or WW's business since the date of the Balance Sheet, consistent
with past practices, and does not reflect a material change to the business (as
previously conducted), results of operations or financial condition of the
Company, WW or any of the Subsidiaries (taking into account any growth in
revenues and commensurate growth in expenses).
2.7 No Changes. (i) Since June 30, 2000 and through the date hereof, there
has not been, occurred or arisen any:
(a) transaction by the Company, WW or any Subsidiary except in the ordinary
course of business as conducted on June 30, 2000;
(b) transfer in, sale, lease, license or allocation of any assets
(including intangible assets), Liabilities or employees to the Company, WW or
any Subsidiary by the Stockholder or any of its subsidiaries (other than the
Company, WW and its Subsidiaries);
(c) amendments or changes to the certificate of incorporation or bylaws or
other applicable charter documents of the Company, WW or any Subsidiary;
-16-
(d) use by the Business of any assets owned by or licensed to the
Stockholder or any of its subsidiaries (other than the Company, WW and its
Subsidiaries);
(e) labor trouble or claim of wrongful discharge or other unlawful labor
practice or action;
(f) addition to or modification of the employee benefit plans, arrangements
or practices described in Section 2.20 of this Agreement (other than as
described in Section 5.19 hereof);
(g) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company, WW or any
Subsidiary;
(h) revaluation by the Company, WW or any Subsidiary of any of its assets;
(i) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, WW or any
Subsidiary, or any split, combination or reclassification with respect to the
capital stock of the Company, WW or any Subsidiary, or any issuance or
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of capital stock of the Company, WW or any
Subsidiary or any direct or indirect redemption, purchase or other acquisition
by the Company, WW or any Subsidiary of any of its capital stock (or options,
warrants or rights convertible into, exercisable or exchangeable therefor);
(j) increase in the salary or other compensation payable or to become
payable to any of its officers or directors of the Company, WW or any Subsidiary
other than increases made in the ordinary course of business consistent with
past practices and in no event in excess of ten percent (10%) of such officer's
or director's base salary, or the declaration, payment or commitment or
obligation of any kind for the payment of a bonus or other additional salary or
compensation to any such person, other than bonuses or additional salary or
compensation paid in the ordinary course of business consistent with past
practices;
(k) waiver or release of any right or claim of the Company, WW or any
Subsidiary in excess of $50,000 in the aggregate, including any write-off or
other compromise of any account receivable of the Company, WW or any Subsidiary;
(l) except as contemplated by this Agreement, issuance, sale, or contract
to issue or sell, by the Company, WW or any Subsidiary of any shares of Company
Capital Stock or WW Capital Stock or shares of capital stock of any Subsidiary
or securities convertible into, or exercisable or exchangeable for, shares of
Company Capital Stock or WW Capital Stock or shares of capital stock of any
Subsidiary, or any securities, warrants, options or rights to purchase any of
the foregoing;
-17-
(m) commencement or written notice or, to the Stockholder's Knowledge,
threat of any lawsuit or, to the Stockholder's Knowledge, proceeding or
investigation against the Company, WW or its affairs;
(n) agreement, understanding or commitment, or any modification to or
amendment of any such agreement, understanding or commitment, between the
Stockholder and any of its subsidiaries or affiliates on the one hand, and the
Company or WW, on the other hand;
(o) adoption of a plan of or resolutions providing for the liquidation,
dissolution, merger, consolidation or other arrangement of the Company, WW or
the Subsidiaries (except for the transactions contemplated hereby); or
(p) negotiation or agreement by the Company, WW or any Subsidiary or any
officer or employees thereof to do any of the things described in the preceding
clauses (a) through (o) (other than negotiations with Parent and its
representatives regarding the transactions contemplated by this Agreement).
(ii) Since September 30, 2000 and through the date hereof, there has not
been, occurred or arisen any:
(a) material adverse change in the Company's or WW's condition (financial
or otherwise), results of operations, assets, liabilities, working capital or
reserves, except for changes contemplated hereby or set forth in the Company
Financials;
(b) payment, discharge or satisfaction, in any amount in excess of $100,000
in any one case, or $250,000 in the aggregate, of any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise)
of the Company, WW or any Subsidiary, other than payment, discharge or
satisfaction of Liabilities in the ordinary course of business consistent with
past practices;
(c) capital expenditure or commitment by or on behalf of the Company, WW or
any Subsidiary or the Business, either individually or in the aggregate,
exceeding $100,000, other than, in the case of the Company and the Metal
Subsidiaries only, in the ordinary course of business consistent with past
practices;
(d) event or condition that has had or would be reasonably expected to have
a Material Adverse Effect (as defined in Section 10.2 hereof) on the Company, WW
or any Subsidiary;
(e) loan by the Company, WW or any Subsidiary to any person or entity,
incurring by the Company, WW of any indebtedness, guaranteeing by the Company,
WW or any Subsidiary of any indebtedness, issuance or sale of any debt
securities of the Company or any Subsidiary or guaranteeing of any debt
securities of others, except for advances to employees for travel and business
expenses in the ordinary course of business, consistent with past practices;
-18-
(f) cancellation of any material indebtedness owed to the Company, WW or
its Subsidiaries relating to any of the Company's or WW's business activities or
properties (or the business activities or properties of the Subsidiaries),
whether or not in the ordinary course of business;
(g) making or changing in any election in respect of Taxes (as defined in
Section 2.8 hereof) of the Company, WW or any Subsidiary, adoption or change in
any accounting method in respect of Taxes of the Company, WW or any Subsidiary,
agreement or settlement of any claim or assessment in respect of Taxes of the
Company, WW or any Subsidiary, or extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes of the Company, WW or
any Subsidiary; or
(h) negotiation or agreement by the Company, WW or any Subsidiary or any
officer or employees thereof to do any of the things described in the preceding
clauses (a) through (g) (other than negotiations with Parent and its
representatives regarding the transactions contemplated by this Agreement).
(iii) Since March 31, 2000 and through the date hereof, there has not been,
occurred or arisen any transfer out, sale, lease or license of any assets
(including intangible assets and URLs), Liabilities or employees of the Company,
WW or any Subsidiary to (with respect to material assets only) a third party or
to (with respect to all assets) the Stockholder or any of its subsidiaries
(other than the Company, WW and the Subsidiaries).
2.8 Tax and Other Returns and Reports
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or,
collectively, "Taxes," means (i) any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts, (ii) any liability for the payment of any amounts of the type
described in clause (i) of this Section 2.8(a) as a result of being a member of
an affiliated, consolidated, combined or unitary group for any period, and (iii)
any liability for the payment of any amounts of the type described in clauses
(i) or (ii) of this Section 2.8(a) as a result of any express or implied
obligation to indemnify any other person or as a result of any obligations under
any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8(b) of the
Stockholder Disclosure Letter:
(i) Each of the Company, WW and each Subsidiary has prepared and timely
filed all required federal, state, local and foreign returns, estimates,
information statements
-19-
and reports ("Returns") relating to any and all Taxes concerning or attributable
to it or its operations and such Returns are true and correct and have been
completed in accordance with applicable law.
(ii) Each of the Company, WW and each Subsidiary (A) has paid or accrued
all Taxes it is required to pay or accrue and (B) has reported and withheld with
respect to employees of the Company, WW and each Subsidiary all federal and
state income taxes, Federal Income Contribution Act ("FICA"), Federal
Unemployment Tax Act ("FUTA"), and other Taxes required to be reported and
withheld.
(iii) Neither the Company, WW nor any Subsidiary has been delinquent in the
payment of any Tax nor is there any Tax deficiency outstanding, proposed or
assessed against the Company, WW or any Subsidiary, nor has the Company, WW or
any Subsidiary executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of the Company, WW or any
Subsidiary is currently in progress, nor has the Company, WW or any Subsidiary
been notified of any request for such an audit or other examination.
(v) Neither the Company, WW nor any Subsidiary has any liabilities for
unpaid federal, state, local and foreign Taxes which have not been accrued or
reserved against in accordance with GAAP on the Balance Sheet, whether asserted
or unasserted, contingent or otherwise, and the Stockholder has no Knowledge of
any basis for the assertion of any such liability attributable to the Company,
WW or any Subsidiary, or any of their respective assets or operations.
(vi) The Stockholder has provided to Parent copies of all foreign, federal,
state and local income and all state and local sales and use Tax Returns
relating to any and all Taxes concerning or attributable to the Company, WW or
any Subsidiary for the past two (2) years.
(vii) There are no liens, pledges, charges, claims, security interests or
other encumbrances of any sort except for liens for Taxes not yet due and
payable ("Liens") on the assets of the Company, WW or any Subsidiary relating to
or attributable to Taxes.
(viii) The Stockholder has no Knowledge of any basis for the assertion of
any claim relating or attributable to Taxes which, if adversely determined,
would result in any Lien on the assets of the Company, WW or any Subsidiary.
(ix) None of the Company's, WW's or any Subsidiary's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(x) There is not any contract, agreement, plan or arrangement, including
but not limited to the provisions of this Agreement, covering any employee or
former employee of the Company, WW or any Subsidiary that, individually or
collectively, could give rise to the
-20-
payment of any amount that would not be deductible pursuant to Sections 280G,
404 or 162(m) of the Code.
(xi) Neither the Company, WW nor any Subsidiary has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a Subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Company, WW or any Subsidiary.
(xii) Neither the Company, WW nor any Subsidiary is a party to a tax
sharing or allocation agreement nor does the Company, WW or any Subsidiary owe
any amount under any such agreement.
(xiii) No adjustment relating to any Return filed by the Company, WW or any
Subsidiary has been proposed formally or, to the Knowledge of the Stockholder,
informally by any tax authority to the Company, WW or any Subsidiary or any
representative thereof.
(xiv) Neither the Company, WW nor any Subsidiary has ever been a party to
any joint venture, partnership or other agreement that could be treated as a
partnership for Tax purposes.
(xv) Neither the Company, WW nor any Subsidiary has constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (x) in the
two years prior to the date of this Agreement or (y) in a distribution prior to
the Mergers which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Mergers.
2.9 Restrictions on Business Activities. Except as set forth in Schedule
2.9(a) of the Stockholder Disclosure Letter, there is no agreement (noncompete
or otherwise), commitment, judgment, injunction, order or decree to which the
Company, WW or any Subsidiary is a party or otherwise binding upon the Company,
WW or any Subsidiary or the Business which has or reasonably would be expected
to have the effect of prohibiting or impairing any business practice of the
Company, WW or any Subsidiary, any acquisition of property (tangible or
intangible) by the Company, WW or any Subsidiary. Without limiting the
foregoing, except as set forth in Schedule 2.9(b) of the Stockholder Disclosure
Letter, neither the Company, WW nor any Subsidiary has entered into or is bound
by any agreement under which any of them is restricted from selling, licensing
or otherwise distributing any of its technology to any class of customers during
any period of time or in any segment of the market.
2.10 Title to Properties; Absence of Liens and Encumbrances
(a) Except as set forth in Schedule 2.10 of the Stockholder Disclosure
Letter, neither the Company, WW nor any Subsidiary owns any real property.
Schedule 2.10(a) of the Stockholder Disclosure Letter sets forth a list of all
real property currently leased by the Company, WW or any
-21-
Subsidiary. All such current leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default).
(b) Each of the Company, WW and each Subsidiary has good and valid title
to, or, in the case of leased properties and assets, valid leasehold interests
in, all of their tangible properties and assets (including accounts receivable),
real, personal and mixed, used or held for use in the Business, free and clear
of any Liens, except as reflected in the Company Financials and except for liens
for taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
(c) Other than as set forth in Schedule 2.10(c) of the Stockholder
Disclosure Letter, all material items of equipment (the "Equipment") (including
all of the Equipment contained in the San Francisco location of the Business)
used in or by the Business are owned or leased by the Company, WW or a
Subsidiary.
(d) All of the assets, properties and rights of every type and description,
real, personal, tangible and intangible, used in the conduct of the Business are
licensed by third parties to or owned by the Company or WW or the Company or WW
otherwise has the right to use such assets properties and rights. Neither the
Stockholder nor any subsidiary or affiliate of Stockholder (including NRT) has
any ownership, license or similar interest to any of the assets, properties or
rights of any type and description, real, personal, tangible and intangible,
used in the conduct of the Business. Except as provided for in Exhibit A to the
Transition Services Agreement or Schedule 2.10(d) of the Stockholder Disclosure
Letter, (i) the Stockholder and its subsidiaries (other than the Company, WW and
the Subsidiaries) do not provide any products or services used in the conduct of
the Business, and (ii) there is no other agreement or understanding between the
Stockholder or any of its affiliates and the Company, WW or any Subsidiary.
2.11 Intellectual Property
For the purposes of this Agreement, the following terms have the following
definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all proprietary inventions (whether
patentable or not), proprietary invention disclosures, proprietary improvements,
proprietary trade secrets, proprietary information (insofar as such proprietary
information relates to intellectual property), proprietary know how, proprietary
technology, proprietary technical data and proprietary customer lists, and all
documentation relating to any of the foregoing; (iii) all copyrights, copyright
registrations and applications therefor, and all other rights corresponding
thereto throughout the world; (iv) all industrial designs and any registrations
and applications therefor throughout the world; (v) all trade names, logos,
domain names, URLs, common law trademarks and service marks, trademark and
service xxxx registrations and applications therefor throughout the world
(except that trade names, common law trademarks and service marks and trademark
and
-22-
service xxxx registrations and applications therefor shall be limited to
those arising in the United States and the United Kingdom); (vi) all databases
and data compilations and collections and all rights therein throughout the
world; (vii) all software in object code and source code form and related
documentation; (viii) all moral and economic rights of authors and inventors,
however denominated, throughout the world; (ix) any similar or equivalent rights
to any of the foregoing anywhere in the world; and (x) all tangible embodiments
of any of the foregoing.
"Company Intellectual Property" shall mean any Intellectual Property that
is owned by, or exclusively licensed to, the Company, WW or any of the
Subsidiaries.
"Registered Intellectual Property" means all United States, international
and foreign: (i) patents and patent applications (including provisional
applications); (ii) registered trademarks, applications to register trademarks,
intent-to-use applications, or other registrations or applications related to
trademarks; (iii) registered copyrights and applications for copyright
registration; and (iv) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued, filed
with, or recorded by any state, government or other public legal authority.
"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company, WW or any
Subsidiary.
(a) No Company Intellectual Property or product or service of the Company,
WW or any Subsidiary is party to any proceeding or outstanding decree, order,
judgment, agreement or stipulation restricting in any manner the use, transfer,
or licensing thereof by the Company, WW or any Subsidiary, or which may affect
the validity, use or enforceability of such Company Intellectual Property.
(b) Schedule 2.11(b) of the Stockholder Disclosure Letter is a complete and
accurate list of all Company Registered Intellectual Property and specifies,
where applicable, the jurisdictions in which each such item of Company
Registered Intellectual Property has been issued or registered or in which an
application for such issuance and registration has been filed, including the
respective registration or application numbers. Each item of Company Registered
Intellectual Property is valid and subsisting, all necessary registration,
maintenance and renewal fees currently due in connection with such Registered
Intellectual Property have been made and all necessary documents, recordations
and certificates in connection with such Registered Intellectual Property have
been filed with the relevant patent, copyright, trademark or other authorities
in the United States or foreign jurisdictions, as the case may be, for the
purposes of maintaining such Registered Intellectual Property in the
jurisdictions where the Business is conducted.
(c) Each of the Company, WW and each of its Subsidiaries owns and has good
and exclusive title to, or has license (sufficient for the conduct of the
Business as conducted) to, each item of Company Intellectual Property or other
Intellectual Property used by the Company, WW or
-23-
any Subsidiary, as applicable, in the Business as conducted free
and clear of any lien or encumbrance; and the Company, WW or one of the
Subsidiaries is the exclusive owner of all URLs, domain names, trademarks and
trade names used in connection with the operation or conduct of the Business as
conducted, including the sale of any products or the provision of any services
by the Company, WW or any of the Subsidiaries.
(d) Neither Stockholder nor any of its subsidiaries (other than the
Company, WW and the Subsidiaries) owns or licenses to the Company, WW or the
Subsidiaries any Intellectual Property that is used in the Business as conducted
or otherwise permits the Company to use any Intellectual Property that is
licensed by the Stockholder or its subsidiaries (other than the Company, WW and
the Subsidiaries).
(e) The Company, WW and the Subsidiaries own exclusively, and have good
title to, all copyrighted works that are the products of the Company, WW or any
of the Subsidiaries or which the Company, WW or any of the Subsidiaries
otherwise expressly purports to own. The Company, WW and the Subsidiaries own
exclusively, and have good title to or a license to use (which license is
disclosed on Schedule 2.11(i) of the Stockholder Disclosure Letter), all
source-code and object-code used in or incorporated in the products or services
of the Company, WW or any of the Subsidiaries.
(f) The Company, WW and the Subsidiaries own, and have good title to and
all necessary rights for the use of, all Intellectual Property used in the
operation of the websites listed on Schedule 2.11(f), and no such right will
terminate or be adversely affected by virtue of the Mergers and the transactions
contemplated hereby.
(g) To the extent that any Intellectual Property has been developed or
created by a third party for the Company, WW or any Subsidiary, the Company, WW
or such Subsidiary, as the case may be, has a written agreement with such third
party (each of which agreements is in full force and effect and is binding and
enforceable against the parties thereto) with respect thereto and the Company,
WW or such Subsidiary, as the case may be, thereby either (i) has obtained
ownership of, and is the exclusive owner of or (ii) has obtained a license
(sufficient for the conduct of its business) to all such third party's
Intellectual Property in such work, material or invention by operation of law or
by valid assignment.
(h) Neither the Company, WW nor any Subsidiary has transferred ownership
of, or granted any exclusive license with respect to, any Intellectual Property
that is or was material to the Company Intellectual Property, to any third party
(including Stockholder and its subsidiaries other than the Company, WW and the
Subsidiaries).
(i) Schedule 2.11(i) lists all material contracts, licenses and agreements
to which the Company, WW or any Subsidiary is a party (i) with respect to the
Company Intellectual Property licensed or transferred to any third party,
including without limitation, any agreement pursuant to which the Company, WW or
any Subsidiary has granted or may grant in the future to any party a source-code
license or option or other rights to use or acquire source code; or (ii)
pursuant to which a
-24-
third party or the Stockholder and its subsidiaries (other than the Company, WW
and the Subsidiaries) has licensed or transferred any material Intellectual
Property to the Company, WW or any Subsidiary.
(j) The consummation of the transactions contemplated by this Agreement
will neither violate nor result in the breach, modification, cancellation,
termination or suspension of such contracts, licenses and agreements or the loss
of, or any adverse effect on, any ownership or license rights of the Company or
WW in any Company Intellectual Property. The Company, WW and the Subsidiaries
are in compliance with, and have not breached any material term of any of such
contracts, licenses and agreements and, to the Knowledge of the Stockholder, all
other parties to such contracts, licenses and agreements are in compliance with,
and have not breached any term of, such contracts, licenses and agreements.
Following the Effective Time, the Surviving Corporation will be permitted to
exercise all of the rights of the Company, WW and the Subsidiaries under such
contracts, licenses and agreements to the same extent the Company, WW or the
Subsidiaries, as the case may be, would have been able to had the transactions
contemplated by this Agreement not occurred and without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which the Company, WW or the Subsidiaries would otherwise be required
to pay.
(k) The operation of the Business as conducted in the jurisdictions
conducted, including the design, development, manufacture, marketing and sale of
the products or services of the Company, WW or any Subsidiary (including with
respect to products and services currently under development) has not, does not
and will not infringe or misappropriate the Intellectual Property of any third
party or the Stockholder or any of its subsidiaries (other than the Company, WW
and the Subsidiaries), or constitute unfair competition or trade practices under
the laws of any jurisdiction in which the Business is conducted.
(l) Neither the Company, WW nor any Subsidiary has received notice from any
third party that the operation of the Business or any act, product or service of
the Company, WW or any Subsidiary, infringes or misappropriates the Intellectual
Property of any third party or constitutes unfair competition or trade practices
under the laws of any jurisdiction.
(m) To the Knowledge of the Stockholder, no person has or is infringing or
misappropriating, any Company Intellectual Property or engaging in any unfair
competition or trade practice against the Company, WW or any Subsidiary under
the laws of any jurisdiction.
(n) Neither this Agreement nor the transactions contemplated by this
Agreement, including the assignment to Parent, Metal Merger Sub or WW Merger Sub
by operation of law or otherwise of any contracts or agreements to which the
Company or WW is a party, will result in (i) either Parent, Metal Merger Sub or
WW Merger Sub granting to any third party any right to or with respect to any
material Intellectual Property right owned by, or licensed to, either of them,
(ii) the Company, WW, Parent, Metal Merger Sub or WW Merger Sub being bound by,
or subject to, any non-compete or other material restriction on the operation or
scope of their respective businesses, or (iii) either Parent, Metal Merger Sub
or WW Merger Sub being obligated to pay any
-25-
royalties or other material amounts to any third party in
excess of those payable by Parent, Metal Merger Sub, WW Merger Sub, WW or the
Company or any of the Subsidiaries, respectively, prior to the Closing.
(o) Each of the Company and WW has taken all reasonable steps to protect
the rights of the Company, WW and the Subsidiaries in the rights of the Company,
WW and the Subsidiaries in confidential information and trade secrets that it
wishes to protect or any trade secrets or confidential information of third
parties provided to the Company, WW or any Subsidiary, and, without limiting the
foregoing, the Company has and enforces a policy requiring each employee and
contractor to execute a proprietary information/confidentiality and invention
assignment agreement with the Company, and all current and former employees and
contractors of the Company, WW an the Subsidiaries have executed such an
agreement with the Company or WW, as applicable, except where the failure to do
so is not reasonably expected to be material to the Company, WW or any of its
Subsidiaries.
(p) No (i) product, technology, service or publication of the Company, WW
or any Subsidiary, (ii) material published or distributed by the Company, WW or
any Subsidiary, or (iii) conduct or statement of the Company, WW or any
Subsidiary constitutes obscene material, a defamatory statement or material,
false advertising or otherwise violates any law or regulation in the
jurisdictions where the Business is conducted.
(q) The Company licenses all right, title and interest to the assets and
Intellectual Property related to the development by Stockholder, the Company
and/or WW of real estate transaction management platform technologies which will
provide transaction processing and support services designed to aid real estate
brokers in assisting real estate purchasers and sellers in fulfilling the
closing conditions of a real estate purchase contract as described by
Stockholder to Parent as Project Red Head ("Project Red Head").
2.12 Agreements, Contracts and Commitments
(a) Except as set forth in Schedule 2.12(a) of the Stockholder Disclosure
Letter, as of the date hereof, neither the Company, WW nor any Subsidiary has,
is a party to, is bound by, and the Business is not the beneficiary of, or
subject to, any of the following (those agreements, arrangements, contracts or
commitments to which the Business is subject, but to which the Company, WW or
the Subsidiaries is not, as between the Stockholder or its subsidiaries (other
than the Company, WW and the Subsidiaries) and the Company, WW and the
Subsidiaries, are clearly marked as such on Schedule 2.12(a)):
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance pay or
post-employment liabilities or obligations,
-26-
(iii) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements,
(iv) any employment or consulting agreement, contract or commitment with an
employee or individual consultant or salesperson or any consulting or sales
agreement, contract or commitment under which any firm or other organization
provides services to the Company, WW or any Subsidiary,
(v) any agreement or plan, including any stock option plan, stock
appreciation rights plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement,
(vi) any agreement or plan to issue, grant, deliver or sell or authorize,
or that proposes the issuance, grant, delivery or sale of, or to purchase or
that proposes the purchase of, any shares, or any rights attached to any shares,
in the Company, WW or any Subsidiary or any securities convertible into or
exchangeable for shares in the Company, WW or any Subsidiary, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any shares in the Company, WW or any
Subsidiary or other convertible securities,
(vii) any fidelity or surety bond or completion bond,
(viii) any lease of personal property requiring payments over the term of
such lease or series of related leases individually in excess of $200,000 or any
lease of real property,
(ix) any agreement of indemnification or guaranty,
(x) any agreement, contract or commitment containing any covenant limiting
the freedom of the Company, WW or any Subsidiary to engage in any line of
business or to compete with any person,
(xi) any agreement, contract or commitment relating to capital expenditures
or involving future payments or a series of related payments in excess of
$100,000,
(xii) any agreement, contract or commitment relating to the disposition or
acquisition of assets or any interest in any business enterprise outside the
ordinary course of the Company's or WW's business, as applicable,
(xiii) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit, including guaranties referred to in clause (ix) hereof,
-27-
(xiv) any purchase order or contract for the purchase of raw materials
involving $50,000 or more,
(xv) any construction contracts involving future payments or a series of
related payments in excess of $50,000,
(xvi) any sales representative, original equipment manufacturer, value
added, remarketer, reseller or independent software vendor or other agreement
for use of distribution of the Company's or WW's products, technologies or
services;
(xvii) any distribution, joint marketing or development agreement that
includes any provision granting any person a right of first refusal, right of
first negotiation or exclusive, "most favored nation" or preferential placement
or other preferential rights,
(xviii) any agreement pursuant to which the Company, WW or any Subsidiary
has developed for and/or delivered to or has received funds from any
Governmental Entity to develop and/or deliver any Intellectual Property,
(xix) any agreement, contract or commitment for the purchase of
advertising,
(xx) any other agreement, contract or commitment that involves $100,000 or
more or is not cancelable without penalty within thirty (30) days.
(b) Except for such alleged breaches, violations and defaults, and events
that would constitute a breach, violation or default with the lapse of time,
giving of notice, or both, as are all noted in Schedule 2.12(b) of the
Stockholder Disclosure Letter, neither the Company, WW nor any Subsidiary nor
the Stockholder nor any of its subsidiaries has materially breached, violated or
defaulted under, or received written notice that it has materially breached,
violated or defaulted under, any of the terms or conditions of any agreement,
contract or commitment required to be set forth on Schedule 2.12(a) of the
Stockholder Disclosure Letter or Schedule 2.11(g) of the Stockholder Disclosure
Letter (any such agreement, contract or commitment, a "Contract"). Each Contract
is in full force and effect (assuming the Contracts have been duly authorized,
executed and delivered by the respective other parties thereto) and is not
subject to any default thereunder of which the Stockholder has Knowledge by any
party obligated to the Company, WW or any Subsidiary pursuant thereto.
2.13 Interested Party Transactions. Other than as contemplated by this
Agreement, none of the Stockholder or any trust, partnership or corporation in
which the Stockholder has an interest or is affiliated, any subsidiary of the
Stockholder or any officer or director of the Company, WW or any Subsidiary, has
directly or indirectly, (i) an economic interest in any entity which furnished
or sold, or furnishes or sells, services or products that the Company, WW or any
Subsidiary furnishes or sells, or proposes to furnish or sell, (ii) an economic
interest in any entity that purchases from or sells or furnishes to, or licenses
to or licenses from, the Company, WW or any Subsidiary, any goods or
-28-
services or Intellectual Property or (iii) a material pecuniary interest in any
contract or agreement set forth in Schedule 2.12(a) of the Stockholder
Disclosure Letter or Schedule 2.11(i) of the Stockholder Disclosure Letter;
provided, that ownership of no more than one percent (1%) of the outstanding
voting stock of a publicly traded corporation shall not be deemed an "economic
interest in any entity" for purposes of this Section 2.13.
2.14 Governmental Authorization. Schedule 2.14 of the Stockholder
Disclosure Letter accurately lists each material consent, license, permit, grant
or other authorization issued to the Company or WW relating to the Business by a
Governmental Entity (herein collectively referred to as "Company
Authorizations"), which Company Authorizations are in full force and effect and
constitute all Company Authorizations required to permit the Company and WW to
operate or conduct the Business or hold any interest in their respective
properties or assets.
2.15 Litigation. Except as set forth in Schedule 2.15 of the Stockholder
Disclosure Letter, there is no action, suit or proceeding of any nature pending
or to Knowledge of the Stockholder, threatened against the Company, WW or any of
its Subsidiaries or Stockholder or any of its subsidiaries, their respective
properties or any of their respective officers or directors, in their respective
capacities as such. To the Knowledge of the Stockholder, there is no
investigation pending or threatened against the Company, WW or any Subsidiary or
the Stockholder or any of its subsidiaries, their respective properties or any
of their respective officers or directors by or before any Governmental Entity.
Schedule 2.15 of the Stockholder Disclosure Letter sets forth, with respect to
any such pending or threatened action, suit, proceeding or investigation, the
forum, the parties thereto, the subject matter thereof and the amount of damages
claimed or other remedy requested. No Governmental Entity has at any time
challenged or questioned the legal right of the Company, WW or any Subsidiary or
the Stockholder or any of its subsidiaries to conduct the Business or offer or
sell any of its products or services.
2.16 Insurance. Schedule 2.16 of the Stockholder Disclosure Letter
contains a true and complete list of all current policies or insurance binders
of fire, property, title, business interruption, general liability, workers'
compensation and errors or omissions insurance (showing as to each policy or
binder as are applicable to the Business, the carrier, policy number, coverage
limits (including without limitation, retentions and deductibles), expiration
dates, annual premiums and a general description of the type of coverage
provided) maintained by the Company or WW on the Business, property or employees
within the last three years. All of such policies are sufficient for compliance
with all material contracts or leases to which the Company, WW or any Subsidiary
is a party and, to the Knowledge of the Stockholder, all material requirements
of applicable law. Neither the Company nor WW has not failed to give any written
notice or to present any material claim under any such policy or binder in a due
and timely fashion. There are no outstanding unpaid claims under any such
policies or binders for which adequate reserves have not been established. Such
policies and binders are in full force and effect on the date hereof and shall
be kept in full force and effect by the Company and WW through the Closing Date.
True and complete copies of the documents described above have been delivered or
made available to Parent.
-29-
2.17 Minute Books. The minute books of the Company, WW and each of the
Subsidiaries made available to counsel for Parent are the only minute books of
the Company, WW and such Subsidiaries and contain a reasonably accurate summary
of all meetings of directors (or committees thereof) and stockholders or actions
by written consent since the incorporation of the Company, WW or such
Subsidiary, as the case may be.
2.18 Environmental Matters
(a) Definitions:
(i) "Hazardous Material" is any material or substance that is prohibited or
regulated by any Environmental Law or that has been designated by any
Governmental Authority to be radioactive, toxic, hazardous or otherwise a danger
to health, reproduction or the environment.
(ii) "Governmental Authority" is any local, state, provincial, federal, or
international governmental authority or agency which has had or now has
jurisdiction over any portion of the subject matter of this Agreement, any
Business Facility, the Company, WW or any Subsidiary.
(iii) "Business Facility" is any property including the land, the
improvements thereon, the groundwater thereunder and the surface water thereon,
that is or at any time has been owned, operated, occupied, controlled or leased
by the Company, WW or any Subsidiary in connection with the operation of the
Business.
(iv) "Disposal Site" is a landfill, disposal site, disposal agent, waste
hauler or recycler of Hazardous Materials, or any real property other than a
Business Facility receiving Hazardous Materials used or generated by a Business
Facility.
(v) "Environmental Laws" are all applicable laws, directives, guidance,
rules, regulations, orders, treaties, statutes, and codes promulgated by any
Governmental Authority which prohibit, regulate or control any Hazardous
Material or any Hazardous Material Activity, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
the Resource Recovery and Conservation Act of 1976, the Federal Water Pollution
Control Act, the Clean Air Act, the Hazardous Materials Transportation Act, the
Clean Water Act, all as amended at any time.
(vi) "Hazardous Materials Activity" is the transportation, transfer,
disposal, discharge, recycling, storage, use, treatment, manufacture, removal,
remediation, release, exposure of others to, sale, or distribution of any
Hazardous Material or any product or waste containing a Hazardous Material, or
product manufactured with Ozone depleting substances.
(vii) "Environmental Permit" is any approval, permit, registration,
certification, license, clearance or consent required to be obtained from any
private person or any
-30-
Governmental Authority with respect to a Hazardous Materials Activity which is
or was conducted by the Company, WW or any Subsidiary.
(b) Condition of Property: As of the Closing, except in compliance with
Environmental Laws in a manner that could not reasonably be expected to subject
the Company, WW or any Subsidiary to liability, no Hazardous Materials are
present on any Business Facility currently owned, operated, occupied, controlled
or leased by the Company, WW or any Subsidiary or were present on any other
Business Facility at the time it ceased to be owned, operated, occupied,
controlled or leased by the Company, WW or any Subsidiary. Except as set forth
in Schedule 2.18(b) of the Stockholder Disclosure Schedule, there are no
underground storage tanks, asbestos which is friable or likely to become friable
or PCBs present on any Business Facility currently owned, operated, occupied,
controlled or leased by the Company, WW or any Subsidiary or as a consequence of
the acts of the Company, WW or any Subsidiary or their respective agents.
(c) Hazardous Materials Activities: Each of the Company, WW and each
Subsidiary has conducted all Hazardous Material Activities relating to its
business in compliance in all material respects with all applicable
Environmental Laws. The Hazardous Materials Activities of the Company, WW and
each Subsidiary prior to the Closing have not resulted in the exposure of any
person to a Hazardous Material in a manner which has caused or could reasonably
be expected to cause an adverse health effect to any such person.
(d) Permits: Schedule 2.18(d) of the Stockholder Disclosure Schedule
accurately describes all of the Environmental Permits currently held by the
Company, WW or any Subsidiary and relating to the Business and the listed
Environmental Permits are all of the Environmental Permits necessary for the
continued conduct of any Hazardous Material Activity of the Company, WW or any
Subsidiary relating to the Business as such activities are currently being
conducted. All such Environmental Permits are valid and in full force and
effect. The Company, WW or the Subsidiary, as applicable, has complied in all
material respects with all covenants and conditions of any Environmental Permit
which is or has been in force with respect to its Hazardous Materials
Activities. No circumstances exist which could cause any Environmental Permit to
be revoked, modified, or rendered non-renewable upon payment of the permit fee.
All Environmental Permits and all other consent and clearances required by any
Environmental Law or any agreement to which the Company, WW or any Subsidiary is
bound as a condition to the performance and enforcement of this Agreement, have
been obtained or will be obtained prior to the Closing at no cost to Parent.
(e) Environmental Litigation: Except as set forth in Schedule 2.18(e) of
the Stockholder Disclosure Schedule, no action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
best of the Stockholder's knowledge, threatened, concerning or relating to any
Environmental Permit or any Hazardous Materials Activity of the Company, WW or
any Subsidiary relating to the Business or any Business Facility.
(f) Offsite Hazardous Material Disposal: Each of the Company, WW and each
Subsidiary has transferred or released Hazardous Materials only to those
Disposal Sites set forth in Schedule 2.18(f) of the Stockholder Disclosure
Schedule; and no action, proceeding, liability or
-31-
claim exists or is threatened against any Disposal Site or against the Company,
WW or any Subsidiary with respect to any transfer or release of Hazardous
Materials relating to the Business to a Disposal Site which could reasonably be
expected to subject the Company, WW or any Subsidiary to liability.
(g) Environmental Liabilities: The Stockholder is not aware of any fact or
circumstance, which could result in any environmental liability which could
reasonably be expected to harm the Business or financial status of the Company,
WW or any Subsidiary.
(h) Reports and Records: Each of the Company and WW, as applicable, has
delivered to Parent or made available for inspection by Parent and its agents,
representatives and employees all records in the Stockholder's, the Company's
and WW's possession concerning the Hazardous Materials Activities of the
Company, WW or any Subsidiary relating to the Business and all environmental
audits and environmental assessments of any Business Facility conducted at the
request of, or otherwise in the possession of the Stockholder, the Company and
WW. Each of the Company, WW and each Subsidiary has complied with all
environmental disclosure obligations imposed by applicable law with respect to
this transaction.
2.19 Brokers' and Finders' Fees; Third Party Expenses. Neither the
Company, WW nor any Subsidiary has incurred, nor will any of them incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges or any other transaction expenses in
connection with this Agreement, the Commercial Agreements or any transaction
contemplated hereby and thereby.
2.20 Employee Matters and Benefit Plans
(a) Definitions. With the exception of the definition of "Affiliate" set
forth in Section 2.20(a)(i) below (which definition shall apply only to this
Section 2.20), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common control
with the Company or WW within the meaning of Section 414(b), (c), (m) or (o) of
the Code and the regulations thereunder;
(ii) "Company Employee Plan" shall refer to any plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits or remuneration of any kind, whether
formal or informal, funded or unfunded, including each "employee benefit plan",
within the meaning of Section 3(3) of ERISA, which is or has been maintained,
contributed to, or required to be contributed to, by the Stockholder or the
Company or WW or any Affiliate for the benefit of any "Employee" (as defined
below), and pursuant to which the Stockholder or the Company or WW or any
Affiliate has or is reasonably expected to have any material liability
contingent or otherwise;
-32-
(iii) "DOL" means the Department of Labor;
(iv) "Employee" shall mean any current, former, or retired employee,
officer, or director of the Company, WW or any Subsidiary;
(v) "Employee Agreement" shall refer to each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or similar agreement or contract between the Stockholder, the Company, WW
or any Subsidiary and any Employee or consultant of the Company, WW or any
Subsidiary;
(vi) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended;
(vii) "IRS" shall mean the Internal Revenue Service;
(viii) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of ERISA;
and
(ix) "Pension Plan" shall refer to each Company Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule. Schedule 2.20(b) of the Stockholder Disclosure Letter
contains an accurate and complete list of each Company Employee Plan and each
Employee Agreement. Except as set forth in Schedule 2.20(b) of the Stockholder
Disclosure Letter, none of the Stockholder, the Company, WW nor any Subsidiary
has any plan or commitment, whether legally binding or not, to establish any new
Company Employee Plan or Employee Agreement, to modify any Company Employee Plan
or Employee Agreement (except to the extent required by law or to conform any
such Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement, nor does it have any intention or commitment to do any of
the foregoing.
(c) Documents. The Stockholder has made available to Parent (i) correct and
complete copies of all documents embodying or relating to each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three (3) most recent
annual reports (Series 5500 and all schedules thereto), if any, required under
ERISA or the Code in connection with each Company Employee Plan or related
trust; (iv) if the Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (v) the most recent summary plan
description together with the most recent summary of material modifications, if
any, required under ERISA with respect to each Company Employee Plan; (vi) the
most recent IRS determination letters and rulings relating to Company Employee
Plans and copies of all applications and material correspondence to or from the
IRS or DOL with respect to any Company Employee Plan; and (vii) all
communications material to any Employee or Employees
-33-
relating to any Company Employee Plan and any proposed Company Employee Plans,
in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability to the
Company.
(d) Employee Plan Compliance. (i) Each of the Company, WW and each
Subsidiary has performed all material obligations required to be performed by it
under each Company Employee Plan, is not in material default or violation of,
and the Stockholder has no Knowledge of any material default or violation by any
party to any Company Employee Plan, and each Company Employee Plan has been
established and maintained in all material respects in accordance with its terms
and in compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) each Company
Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code has either received a
favorable determination, opinion, notification or advisory letter from the IRS
with respect to each such Company Employee Plan as to its qualified status under
the Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Company Employee Plan; (iii) no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Section 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Company Employee Plan; (iv) there are no
actions, suits or claims pending, or, to the Knowledge of the Stockholder, the
Company, WW or any Affiliates, threatened or anticipated (other than routine
claims for benefits) against any Company Employee Plan or against the assets of
any Company Employee Plan; (v) each Company Employee Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without liability to the Company, WW, Parent or any of its Affiliates
(other than ordinary administration expenses typically incurred in a termination
event); (vi) there are no audits, inquiries or proceedings pending or, to the
Knowledge of the Stockholder, the Company, WW or any Affiliates, threatened by
the IRS or DOL with respect to any Company Employee Plan; and (vii) none of the
Company, WW, the Stockholder nor any Affiliate is subject to any penalty or tax
with respect to any Company Employee Plan under Section 502(i) of ERISA or
Section 4975 through 4980 of the Code.
(e) Pension Plans. Neither the Company, WW nor any Subsidiary has, nor has
the Stockholder on behalf of the Company, WW or any Subsidiary, ever maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA
or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Stockholder (on behalf of the
Company, WW or any Subsidiary), the Company, WW or any Subsidiary contributed to
or been requested to contribute to any Multiemployer Plan.
-34-
(g) No Post-Employment Obligations. No Company Employee Plan provides, or
has any liability to provide, life insurance, medical or other employee benefits
to any Employee upon his or her retirement or termination of employment for any
reason, except as may be required by statute.
(h) COBRA. The Company and each Affiliate has, prior to the Effective Time,
complied in all material respects with the health care continuation requirements
of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(i) Effect of Transaction.
(i) Except as set forth on Schedule 2.20(i) of the Stockholder Disclosure
Letter, the execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(ii) No payment or benefit which will or may be made by the Company, WW or
any Subsidiary with respect to any Employee will be characterized as an "excess
parachute payment", within the meaning of Section 280G(b)(1) of the Code.
(j) Employment Matters. Each of the Company, WW and each Subsidiary: (i) is
in material compliance with all applicable federal, state and local laws, rules
and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld and reported all amounts required by law or by
agreement to be withheld and reported with respect to the wages, salaries and
other payments to Employees by virtue of their employment; (iii) is not liable
for any arrears of wages or any taxes or any penalty for failure to comply with
any of the foregoing; and (iv) is not liable for any payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending, or
to the Knowledge of the Stockholder, threatened claims or actions against the
Company, WW or any Subsidiary under any worker's compensation policy or
long-term disability policy.
(k) Labor. No work stoppage or labor strike against the Company or any
Subsidiary is pending or, to the Knowledge of the Stockholder or any Affiliate,
threatened. None of the Stockholder, the Company, WW nor any Subsidiary is
involved in or, to the Knowledge of the Stockholder, threatened with, any labor
dispute, grievance, or litigation relating to labor, safety or discrimination
matters involving any Employee, including charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in liability to the Company or WW. None of the
Stockholder, Company, WW nor any Subsidiary has engaged in any unfair labor
practices within the meaning of the National Labor
-35-
Relations Act which would, individually or in the aggregate, directly or
indirectly result in a liability to the Company, WW or any Subsidiary. Neither
the Stockholder, the Company nor WW is presently, nor has it been in the past, a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by the Stockholder (with respect to the Company, WW or any
Subsidiary), the Company, WW or any Subsidiary.
(l) No Interference or Conflict. No director, stockholder, manager,
officer, employee or consultant of the Company, WW or any of their respective
Subsidiaries is obligated under any Contract or subject to any judgment, decree
or order of any court or administrative agency, that would interfere with such
person's efforts to promote the interests of the Company, WW or any of the
Subsidiaries. To the Knowledge of the Stockholder, neither the execution nor
delivery of this Agreement, nor the carrying on of the Business, as presently
conducted, nor any activity of such officers, directors, employees or
consultants in connection with the carrying on of the Business as presently
conducted, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any Contract under which any of
such officers, directors, employees or consultants is now obligated.
2.21 Compliance with Laws. Each of Company, WW and each Subsidiary has
complied in all material respects with, is not in violation of, and has not
received any written notices of violation with respect to, any foreign, federal,
state or local statute, law or regulation.
2.22 Investment Representations
(a) Stockholder is aware of Parent's business affairs and financial
condition and has acquired sufficient information about Parent to reach an
informed and knowledgeable decision to acquire the shares of Parent Common Stock
constituting the Merger Consideration. Stockholder is receiving the shares of
Parent Common Stock constituting the Merger Consideration for investment for its
own account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(b) Stockholder understands that the shares of Parent Common Stock
constituting the Merger Consideration have not been registered under the
Securities Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of its investment intent
and other representations as expressed herein.
(c) Stockholder further acknowledges and understands that the shares of
Parent Common Stock constituting the Merger Consideration must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Stockholder understands that
the certificate evidencing the shares of Parent Common Stock constituting the
Merger Consideration will be imprinted with a legend which prohibits the
transfer of the securities unless they are registered or Parent receives an
opinion of counsel, reasonably acceptable to it, to the effect that such
registration is not required.
-36-
(d) Stockholder, by reason of Stockholder's business or financial
experience has the capacity to protect its own interests in connection with the
receipt of the shares of Parent Common Stock constituting the Merger
Consideration.
(e) Stockholder is aware of the adoption of Rule 144 by the Securities and
Exchange Commission (the "SEC"), promulgated under the Securities Act, which
permits limited public resale of securities acquired in a non-public offering
subject to the satisfaction of certain conditions set forth therein, including,
among other things, a one-year holding period, the availability of certain
public information about the issuer, the requirement that the sale be effected
through a "broker's transaction" or in transactions directly with a "market
maker" (as defined in Rule 144) and the number of shares being sold in any
three-month period not exceeding specific limitations.
(f) Stockholder further acknowledges that in the event all of the
requirements of Rule 144 are not met, some other registration exemption will be
required; and that although Rule 144 is not exclusive, the staff of the SEC has
expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and other than pursuant to Rule
144 will have a substantial burden of proof in establishing that an exemption
from registration is available for such offers or sales and that such persons
and the brokers who participate in the transactions do so at their own risk.
(g) Stockholder is an "accredited investor" as defined in Rule 501 of the
Rules and Regulations promulgated under the Securities Act.
2.23 Bank Accounts. Schedule 2.23 of the Stockholder Disclosure Letter
contains a true and complete listing of all bank accounts or other depositary
accounts maintained by the Company or WW and the authorized signatories thereto.
2.24 No Other Agreements. Except as contemplated hereby, each of the
Company and WW has no legal obligation, absolute or contingent, to any other
person or entity to sell any material portion of the assets of the Company or
WW, as applicable, to sell Company Capital Stock or WW Capital Stock, as
applicable, to effect any merger, consolidation or reorganization of the Company
or WW, or to enter into any agreement with respect thereto.
2.25 Liberty Digital Stock. As of the date hereof, the Company owns an
aggregate of 697,041 shares of common stock of Liberty Digital, Inc. ("Liberty
Digital Stock"), and since August 14, 2000, the Company has disposed of only
116,174 shares of Liberty Digital Stock for aggregate proceeds of $2,700,000
(the "Liberty Digital Proceeds").
2.26 Representations Complete. None of the representations or warranties
made by the Stockholder (as modified by the Stockholder Disclosure Letter)
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein, in the light of
the circumstances under which made, not misleading.
-37-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT, METAL MERGER SUB AND
WW MERGER SUB
As of the date hereof, Parent, Metal Merger Sub and WW Merger Sub
represent and warrant to the Stockholder, subject to such exceptions as are
specifically disclosed in the disclosure letter supplied by the Parent to the
Stockholder (the "Parent Disclosure Letter") and dated as of the date hereof, as
follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of Metal Merger Sub and WW Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and the State of New York, respectively. Each of Parent, Metal Merger
Sub and WW Merger Sub has the corporate power to own its respective properties
and to carry on its respective business as now being conducted. Each of Parent,
Metal Merger Sub and WW Merger Sub is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified
(either individually or collectively) would have a Material Adverse Effect on
Parent. Each of the subsidiaries required to be listed in the periodic reports
of Parent pursuant Item 601(b) of Regulation S-K of the Rules and Regulations
promulgated under the Securities Act (the "Parent Subsidiaries") is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has the corporate or other applicable power to
owns its property and carry on its business as now being conducted. Each of the
Parent Subsidiaries is duly qualified to do business and is in good standing in
each jurisdiction outside of the jurisdiction of formation in which the failure
to be so qualified (either individually or collectively) would have a Material
Adverse Effect on Parent.
3.2 Authority. Parent, Metal Merger Sub and WW Merger Sub have all
requisite corporate power and authority to enter into this Agreement and the
Ancillary Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of each of Parent, Metal Merger Sub and WW Merger
Sub, subject only to the approval of the stockholders of Parent of the issuance
of the Parent Common Stock in connection with the Mergers pursuant to the rules
of the Nasdaq Stock Market. The respective Boards of Directors of Parent, Metal
Merger Sub and WW Merger Sub have approved the Mergers, this Agreement and the
Ancillary Agreements to which Parent, Metal Merger Sub or WW Merger Sub, as
applicable, is a party. This Agreement and the Ancillary Agreements to which it
is a party have been duly executed and delivered by each of Parent, Metal Merger
Sub and WW Merger Sub and, assuming the due execution and deliver by the
Company, WW, CMS and the Stockholder, constitute the valid and binding
obligations of Parent, Metal Merger Sub and WW Merger Sub, enforceable in
accordance with their respective terms. The execution and delivery of this
Agreement and the Ancillary Agreements to which it is a party by Parent, Metal
Merger Sub and WW Merger Sub does not, and
-38-
as of the Effective Time, will not result in any Conflict with (i) any provision
of the Certificate of Incorporation or Bylaws of Parent, Metal Merger Sub or WW
Merger Sub; or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute law, ordinance, rule or regulation applicable to Parent,
Metal Merger Sub or WW Merger Sub, as applicable, or their respective properties
or assets. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any third
party (so as not to trigger any Conflict) is required by or with respect to the
Parent, Metal Merger Sub or WW Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Certificates of Merger with the
Secretaries of State for the State of Delaware and the State of New York,
respectively, (ii) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws; (iii) such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under the HSR Act; (iv) approval of the stockholders of Parent of the
issuance of the shares of Parent Common Stock in connection with the Mergers
pursuant to the rules of the Nasdaq Stock Market; and (v) such other consents,
waivers, authorizations, filings, approvals and registrations as would not have
a Material Adverse Effect on Parent. Parent has approved the Mergers in its
capacity as stockholder of Metal Merger Sub and WW Merger Sub.
3.3 Capital Structure
The authorized stock of Parent consists of 500,000,000 shares of Common
Stock, $0.001 par value per share, of which 83,245,513 shares were issued and
outstanding as of October 23, 2000, and 5,000,000 shares of Preferred Stock,
$0.001 par value per share, one share of which was issued or outstanding. As of
October 23, 2000, there were unvested options to purchase 11,826,574 shares of
Parent Common Stock. The authorized capital stock of Metal Merger Sub consists
of 1,000 shares of Common Stock, 1,000 shares of which, as of the date hereof,
are issued and outstanding and are held by Parent. The authorized capital stock
of WW Merger Sub consists of 1,000 shares of Common Stock, 1,000 shares of
which, as of the date hereof, are issued and outstanding and are held by Parent.
All outstanding shares of Parent Common Stock are duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive rights
created by statute, the Certificate of Incorporation or Bylaws of the Parent or
any agreement to which Parent or any Parent Subsidiary is a party or by which it
is bound, and have been issued in compliance with federal and state securities
laws. There are no declared or accrued but unpaid dividends with respect to any
shares of Parent Common Stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or other similar rights with
respect to Parent. Except as contemplated hereby, there are no voting trusts,
proxies, or other agreements or understandings with respect to the voting stock
of Parent.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
made available to the Company true and complete copies of all reports or
registration statements filed by it with the Securities and Exchange Commission
(the "SEC") since August 7, 1999, all in the form so filed (all of the foregoing
being collectively referred to as the "SEC Documents"). As of their respective
-39-
filing dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act or the Securities Exchange Act of 1934 (the
"Exchange Act") as the case may be, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances in which they were made, not misleading, except to the
extent corrected by a document subsequently filed with the SEC. The financial
statements of Parent, including the notes thereto, included in the SEC Documents
(the "Parent Financial Statements") comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP consistently applied (except as may be indicated in the notes thereto
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
and present fairly the consolidated financial position of Parent at the dates
thereof and the consolidated results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
audit adjustments). There has been no change in Parent accounting policies
except as described in the notes to the Parent Financial Statements; provided,
however, Parent may have restated or may restate one or more of the Parent
Financial Statements to reflect acquisitions entered into subsequent to the
respective dates thereof. The SEC Documents contained an audited consolidated
balance sheet of Parent as of December 31, 1999 (the "Parent Balance Sheet") and
the related audited consolidated statements of income and cash flow for the year
then ended (collectively, the "Parent Financials").
3.5 No Undisclosed Liabilities. Parent does not have any Liabilities,
except for those that, (i) have been reflected in the Parent Balance Sheet, or
(ii) have arisen in the ordinary course of the Parent's business since the date
of the Parent Balance Sheet, or (iii) do not have a Material Adverse Effect on
Parent.
3.6 No Material Adverse Effect. Since the date of the Parent Balance Sheet
and through the date hereof, there has not occurred any event or condition of
any character that has had a Material Adverse Effect on Parent.
3.7 Tax and Other Returns and Reports
(a) Tax Returns and Audits.
(i) Except as set forth on Schedule 3.7(a)(i) of the Parent Disclosure
Letter, Parent has prepared and filed all material (as to Parent) required
federal, state, local and foreign Returns, relating to any and all Taxes
concerning or attributable to Parent or its operations and such Returns shall be
true and correct in all material respects and have been completed in all
material respects in accordance with applicable law. Notwithstanding the
foregoing, no representation or warranty is hereby made regarding the amount or
availability of the net operating losses of Parent.
(ii) Parent, (A) has paid or accrued all material (as to Parent) Taxes that
Parent is required to pay or accrue and (B) has reported and withheld with
respect to employees of
-40-
the Parent all material federal and state income taxes, FICA, FUTA, and other
Taxes required to be reported and withheld.
(iii) Parent has not been delinquent in the payment of any material Tax nor
is there any material Tax deficiency outstanding, proposed or assessed against
the Parent, nor has Parent executed any waiver of any statute of limitations on
or extending the period for the assessment or collection of any Tax. (iv) No
audit or other examination of any Return of Parent is currently in progress, nor
has Parent been notified of any request for such an audit or other examination.
(v) There are no Liens on the assets of Parent relating to or attributable to
Taxes. (vi) Parent is not a party to a tax sharing or allocation agreement nor
does Parent owe any amount under any such agreement.
(b) No material adjustment relating to any Return filed by Parent has been
proposed formally, or, to Parent's Knowledge, informally by any tax authority to
Parent or any representative thereof.
3.8 Agreements, Contracts, Commitments. Parent and each Parent Subsidiary
is in compliance in all material respects with and has not, in any material
respects, breached, violated or defaulted under or received notice that it has
breached, violated or defaulted under, any of the terms or conditions of any
agreement, contract or commitment that is included in any Securities Act or
Exchange Act filing a "Material Contract" pursuant to Item 601(b)(10) of
Regulation K of the Rules and Regulations promulgated under the Securities Act.
Except as set forth on Schedule 3.8 of the Parent Disclosure Letter, Parent has
no agreement regarding the repurchase from any person of a number of shares of
Parent Common Stock in excess of 200,000 shares.
3.9 Interested Party Transactions. To Parent's Knowledge, no executive
officer or director of Parent is a party to any transaction required to be
disclosed under Item 404 of Regulation S-K of the Rules and Regulations
promulgated under the Securities Act in the SEC Documents that has not been
disclosed in the SEC Documents.
3.10 Environmental Matters
(a) Hazardous Material. Neither Parent nor any Parent Subsidiary has
operated any underground storage tanks, and neither Parent has no Knowledge of
the existence, at any time, of any underground storage tank (or related piping
or pumps), at any property that Parent or any Parent Subsidiary has at any time
owned, operated, occupied or leased. Neither Parent nor any Parent Subsidiary
has released any amount of any Hazardous Materials. No Hazardous Materials are
present as a result of the actions or omissions of Parent, or, to the Knowledge
of Parent, as a result of any actions of any third party or otherwise, in, on or
under any property, including the land and the
-41-
improvements, ground water and surface water thereof, that Parent or any Parent
Subsidiary has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Neither Parent nor any Parent
Subsidiary has engaged in Hazardous Materials Activities in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) Permits. Parent and each Parent Subsidiary currently hold all
Environmental Permits necessary for the conduct of the Hazardous Material
Activities of Parent or any Parent Subsidiary and other businesses of Parent or
any Parent Subsidiary as such activities and businesses are currently being
conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Knowledge of Parent, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of Parent or any Parent Subsidiary.
Parent is not aware of any fact or circumstance which could involve Parent or
any Parent Subsidiary in any environmental litigation or impose upon Parent or
any Parent Subsidiary any environmental liability.
3.11 Brokers' and Finders' Fees; Third Party Expenses. Except for fees
payable to Xxxxxx Xxxxxxx & Co. Incorporated, neither Parent nor any Parent
Subsidiary has incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement, the Commercial Agreements or any
transaction contemplated hereby or thereby.
3.12 Representations Complete. None of the representations or warranties
made by Parent, Metal Merger Sub or WW Merger Sub (as modified by the Parent
Disclosure Letter) contains any untrue statement of a material fact, or omits to
state any material fact necessary in order to make the statements contained
herein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, except for those matters set forth in Schedule
4.1 of the Stockholder Disclosure Letter, each of the Company and WW agrees and
the Stockholder agrees to cause the Company and WW (except to the extent that
Parent shall otherwise consent in writing) to carry on the Business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and Taxes of the Company, WW and the
Subsidiaries when due, to pay or perform other obligations when due, and, to the
extent consistent with the Business, to use all reasonable efforts consistent
-42-
with past practice and policies to preserve intact its present business
organization, keep available the services of its present officers and key
employees and preserve their relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
all with the goal of preserving unimpaired its goodwill and ongoing businesses
as of the Effective Time. Except as expressly contemplated by this Agreement,
neither the Company, WW nor any Subsidiary will, nor will the Stockholder permit
the Company, WW or any of the Subsidiaries to, without the prior written consent
of Parent:
(a) Enter into any commitment, activity or transaction that would have been
an exception to the representations or warranties set forth in Section 2.7, had
such commitment, activity or transaction occurred on or after March 31, 2000,
June 30, 2000 or August 31, 2000, as the case may be, and prior to the date of
this Agreement;
(b) Transfer or license to the Stockholder or any of its subsidiaries
(other than the Company, WW or any of the Subsidiaries) any rights to any
Company Intellectual Property or any other asset (other than cash (except for
the Liberty Digital Proceeds) and assets as of the date hereof of National Home
Connection, MetroRent or Getko Canada) or enter into any agreement with respect
to Company Intellectual Property or any other asset (other than assets relating
to National Home Connection) with Stockholder or its subsidiaries (other than
the Company, WW and the Subsidiaries);
(c) Transfer to the Stockholder or any of its subsidiaries (other than the
Company, WW or any of the Subsidiaries) any employee engaged in the Business;
(d) Hire or terminate any employees other than for cause or encourage any
employees to resign from the Company, WW or any Subsidiary;
(e) Enter into or amend any agreement pursuant to which any party is
granted marketing, distribution, development or similar rights of any type or
scope which includes any provision granting any person a right of first refusal,
right of first negotiation or exclusive, "most favored nation" or preferential
placement or other preferential rights, except for agreements regarding
sponsorship or the sale of advertising to third parties for placement on the
Company's website with no payment or other obligations on the part of the
Company or any Subsidiary outside the ordinary course of business and that are
terminable within sixty (60) days without penalty;
(f) Adversely amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the material terms of, any agreement set
forth or described in the Stockholder Disclosure Letter;
(g) Commence or settle any litigation involving claims or payments in
excess of $100,000 or which seeks equitable relief; provided, however, that this
restriction shall not apply to the commencement of (i) any litigation regarding
accounts receivable in the ordinary course of business or other litigation
relating to the ordinary course enforcement of contractual rights generally or
(ii) any litigation regarding a breach of this Agreement;
-43-
(h) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, WW or any
Subsidiary, or repurchase, redeem or otherwise acquire, directly or indirectly,
any shares of its capital stock (or options, warrants or other rights
exercisable therefor);
(i) Issue, sell, grant, contract to issue, grant or sell, or authorize the
issuance, delivery, sale or purchase of any shares of Company Capital Stock or
securities convertible into, or exercisable or exchangeable for, shares of
Company Capital Stock, or any securities, warrants, options or rights to
purchase any of the foregoing;
(j) Cause or permit any amendments to its Certificate of Incorporation or
Bylaws;
(k) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire or
divest any assets which are material, individually or in the aggregate, to the
Business;
(l) Sell, lease, license or otherwise dispose of any of the assets or
properties of Company, WW or any Subsidiary except in the ordinary course of
business consistent with past practices or create any security interest in such
assets or properties;
(m) Grant any loan to any person or entity, incur any indebtedness or
guarantee any indebtedness, issue or sell any debt securities, guarantee any
debt securities of others, purchase any debt securities of others or amend the
terms of any outstanding agreements related to borrowed money, except for
advances to employees for travel and business expenses in the ordinary course of
business consistent with past practices;
(n) Grant any severance or termination pay (i) to any director or officer
or (ii) to any employee or consultant, except payments made pursuant to standard
written agreements outstanding as of the date hereof and disclosed on Schedule
4.1(n) of the Stockholder Disclosure Letter, or increase in the salary or other
compensation payable or to become payable by Company or any of their respective
Subsidiaries to any of their officers, directors, employees or advisors other
than increases made in the ordinary course of business consistent with past
practices and in no event in excess of ten percent (10%) of such individual's
base salary, or declare, pay or make any commitment or obligation of any kind
for the payment by the Company, WW or any of their respective Subsidiaries of a
bonus or other additional salary or compensation to any such person other than
bonuses or additional salary or compensation paid in the ordinary course of
business consistent with past practices, or adopt or amend any employee benefit
plan or enter into any employment contract;
-44-
(o) Revalue any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business and consistent with past practice;
(p) Other than the acceleration of not more than twenty-five percent (25%)
of the shares underlying Company Options (or acceleration of such greater amount
as disclosed in the Employment Agreements set forth on Schedule 4.1(p))
outstanding as of the date hereof in connection with the transactions
contemplated by this Agreement, take any action to accelerate the vesting
schedule of any of the outstanding Company Options, Company Capital Stock or WW
Capital Stock;
(q) Pay, discharge or satisfy, in an amount in excess of $100,000 (in any
one case) or $250,000 (in the aggregate) any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities;
(r) Make or change any election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, enter into any closing agreement or
settle any claim or assessment in respect of Taxes;
(s) Enter into any agreement of the type described in Section 2.12 hereof
except, with respect to 2.12(a)(xvii), for agreements regarding sponsorship or
the sale of advertising to third parties for placement on the Company's website
with no payment or other obligations on the part of the Company or any
Subsidiary outside the ordinary course of business and that are terminable
within sixty (60) days without penalty and, with respect to 2.12(a)(xix), for
agreements that are cancelable without penalty within thirty (30) days and for
which, if such agreement is in effect after the Closing, (i) Stockholder shall
be the sole obligor under such agreement after the Closing and (ii) Parent has
no liability after the Closing under the agreement, by operation of law or
otherwise;
(t) Fail to pay or otherwise satisfy its monetary obligations as they
become due, except such as are being contested in good faith;
(u) Cancel, materially amend or renew any insurance policy other than in
the ordinary course of business;
(v) Except as contemplated by this Agreement, alter, or enter into any
commitment to alter, its interest in any corporation, association, joint
venture, partnership or business entity in which the Company, WW or any
Subsidiary directly or indirectly holds any interest on the date hereof; or
(w) Take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through (v) above, or any other action that would
prevent the Company, WW or the Subsidiaries from performing or cause the
Company, WW or the Subsidiaries not to perform its covenants hereunder.
-45-
Notwithstanding the foregoing, Stockholder will cause the transfer prior to
the Closing, and shall be permitted without receiving the prior written consent
of Parent to transfer, out of the Company the business of National Home
Connections, LLC, Getko Canada and MetroRent and the employees set forth on
Schedule 4.1(x), such that neither the Company, WW nor any Subsidiary has any
Liabilities with respect to such business or employees following the Closing.
4.2 No Solicitation. Until the earlier of the Effective Time or the date
of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, the Stockholder will not permit (nor will it permit any of the
respective officers, directors, employees, stockholders, agents, representatives
or affiliates of) the Company, WW or any of the Subsidiaries to directly or
indirectly, take any of the following actions with any party other than Parent
and its designees: (a) solicit, initiate, entertain, or encourage any proposals
or offers from, or conduct discussions with or engage in negotiations with, any
person relating to any possible acquisition of the Company or WW, any of its
subsidiaries or the Business (whether by way of merger, purchase of capital
stock, purchase of assets or otherwise), any material portion of its capital
stock or assets or any equity interest in the Company, WW, any of the
Subsidiaries or the Business, (b) provide information with respect to it to any
person, other than Parent, relating to, or otherwise cooperate with, facilitate
or encourage any effort or attempt by any such person with regard to, any
possible acquisition of the Company, WW, any of the Subsidiaries or the Business
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise), any material portion of its capital stock or assets or any equity
interest in the Company, WW, any of the Subsidiaries or the Business, (c) enter
into an agreement with any person, other than Parent, providing for the
acquisition of the Company, WW, any of the Subsidiaries or the Business (whether
by way of merger, purchase of capital stock, purchase of assets or otherwise),
any material portion of its capital stock or assets or any equity interest in
the Company, WW, any of the Subsidiaries or the Business, or (d) make or
authorize any statement, recommendation or solicitation in support of any
possible acquisition of the Company, WW, any of the Subsidiaries or the Business
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise), any material portion of its capital stock or assets or any equity
interest in the Company, WW, any of the Subsidiaries or the Business by any
person, other than by Parent. The Stockholder shall immediately cease and cause
to be terminated any such contacts or negotiations with third parties relating
to any such transaction or proposed transaction. In addition to the foregoing,
if the Company, WW or the Stockholder receives prior to the Effective Time or
the termination of this Agreement any offer or proposal relating to any of the
above, the Stockholder shall immediately notify Parent thereof, including
information as to the identity of the offeror or the party making any such offer
or proposal and the specific terms of such offer or proposal, as the case may
be, and such other information related thereto as Parent may reasonably request.
Except as contemplated by this Agreement, disclosure by the Company, WW or
Stockholder of the terms hereof (other than the prohibition of this Section 4.2)
shall be deemed to be a violation of this Section 4.2. The parties hereto agree
that irreparable damage would occur in the event that the provisions of this
Section 4.2 were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed by the parties hereto that Parent
shall be entitled to seek an injunction or injunctions to prevent breaches of
the provisions of this Section 4.2 and to enforce specifically the terms and
-46-
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which Parent may be
entitled at law or in equity.
4.3 Conduct of Business of Parent. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
and the Effective Time, Parent agrees it shall not, without the prior written
consent of the Stockholder, enter into any transaction which would (i) require
the approval of the stockholders of Parent under the rules of the Nasdaq Stock
Market, or Delaware Law, or its Certificate of Incorporation, or (ii) both (A)
require a pre-merger notification filing to be made under the HSR Act (without
respect to whether the "size of the person" test pertaining to the entity to be
acquired is met) and (B) be reasonably likely to materially delay or impede
approval of the Mergers under the HSR Act. If Parent intends to enter into any
transaction which would require a pre-merger notification filing to be made
under the HSR Act (without respect to whether the "size of the person" test
pertaining to the entity to be acquired is met), then it shall, prior entering
into such transaction, consult with the Stockholder to discuss the reasonable
likely effects of such transaction on approval of the Mergers under the HSR Act.
Parent shall instruct and provide training to its sales force and the sales
force of Spring Street and Parent not to use the existence of the proposed
Mergers as a means of persuading potential customers and advertisers of RentNet
or the Company not to sign up with RentNet or the Company but to sign up with
Spring Street or Parent instead.
ARTICLE V
ADDITIONAL AGREEMENTS -
5.1 Stockholder Approval; Proxy Statement; Delivery of Financials
(a) As promptly as practicable after the execution of this Agreement,
Parent will prepare and file, with the cooperation of the Company, WW and the
Stockholder, a proxy statement (the "Proxy Statement") relating to approval of
the issuance of the shares of Parent Common Stock in connection with the Mergers
pursuant to the rules and regulations of the Nasdaq Stock Market and the SEC.
The Company, WW and Stockholder shall provide promptly to Parent such
information concerning their respective business and financial statements and
affairs, as, in the reasonably judgment of Parent or its counsel, may be
required or appropriate for inclusion in the Proxy Statement, or in any
amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with Parent's counsel and auditors in the preparation of the Proxy
Statement, including, without limitation, that each of the Company and WW
agrees, and the Stockholder agrees to cause the Company and WW, to deliver an
audited combined consolidated balance sheet of the Company (together with WW and
the WW Subsidiaries as though WW and the WW Subsidiaries were subsidiaries of
the Company) as of September 30, 2000 and the related audited combined
consolidated statements of operations and cash flows for the nine-month period
ended September 30, 2000 as soon as practicable after the date of this Agreement
and in no event later than November 15, 2000. Without limiting the generality of
the foregoing, in particular, the Stockholder, the Company and WW will cause its
management and its independent auditors to facilitate on a timely basis (and
-47-
no later than fifteen (15) business days after the date of this Agreement) (i)
the preparation and delivery to Parent for inclusion in the Proxy Statement of
financial statements (including pro forma financial statements if required) as
required by Parent to comply with applicable rules and regulations of the SEC,
(ii) the review of any Company or WW audit or review work papers for up to the
past three (3) complete fiscal years, including the examination of selected
interim financial statements and data and (iii) the delivery of such consents
and representations from the Stockholder's, the Company's and WW's independent
accountants as may be required by applicable laws or the rules or regulations
promulgated thereunder.
Parent shall use commercially reasonable efforts to respond after
consultation with the other parties hereto to any comments of the SEC as
promptly as promptly practicable after such filing. Parent shall give the
Stockholder and its counsel the opportunity to review the Proxy Statement prior
to its being filed with the SEC and shall give the Stockholder and its counsel
the opportunity to review all amendments and supplements to the Proxy Statement
and all written responses to requests for additional information and written
replies to comments prior to their being filed with, or sent to, the SEC. Parent
will cause the Proxy Statement to be mailed to all stockholders of Parent, at
the earliest practicable time after the expiration of the period of time
prescribed by Rule 14a-6(a) of the Exchange Act or if comments are received by
the SEC prior to the expiration of such period of time, upon receipt of written
notice from the SEC advising Parent of the SEC's permission to file the Proxy
Statement in definitive form. As promptly as practicable after the date of this
Agreement, Parent, the Company, WW and Stockholder will prepare and file any
other filings required under the Securities Act, Exchange Act or any other
federal, foreign, or state "Blue Sky" laws relating to the Mergers and the
transactions contemplated by this Agreement (the "Other Filings"). The Proxy
Statement will comply in all material respects with all applicable requirements
of law and the rules and regulations promulgated thereunder. Whenever any event
occurs that is required to be set forth in amendment or supplement to the Proxy
Statement or any Other Filing, as the case may be, Parent, the Company, WW or
Stockholder, as the case may be, will promptly inform the others of such
occurrence and cooperate in filing with the SEC or its staff or any other
government officers, and/or mailing to the stockholders of Parent, such
amendment or supplement as promptly as practicable. The Proxy Statement shall
include the recommendation of the Board of Directors of Parent in favor of the
issuance of shares of Parent Common Stock in connection with the Mergers;
provided, however, that such recommendation may be withdrawn or amended in the
event (i) of termination of this Agreement pursuant to Section 8.1 or (ii) that
the Stockholder, the Company or WW has engaged in fraudulent behavior with
respect to this Agreement, the Mergers or the transactions contemplated hereby.
(b) At the earliest practicable date after the expiration of the
period of time prescribed by Rule 14a-6(a) of the Exchange Act or if comments
are received by Parent from the SEC prior to the expiration of such period of
time, upon receipt of written notice from the SEC advising Parent of the SEC's
permission to file the Proxy Statement in definitive form, Parent will use its
good faith reasonable efforts to take all action necessary in accordance with
Delaware Law, the Certificate of Incorporation and Bylaws of Parent, and the
rules and regulations of the Nasdaq Stock Market to duly call, give notice of
and convene and hold a special meeting of stockholders for purposes of
-48-
voting on a proposal to approve the issuance of the shares of Parent Common
Stock in connection with the Mergers. Parent will, subject to federal and state
securities laws and the rules and regulations promulgated thereunder, solicit
from its stockholders proxies in favor of the issuance of the shares of Parent
Common Stock in connection with the Mergers.
5.2 Nasdaq Listing. Parent shall use commercially reasonable efforts to
ensure that at the Effective Time, the shares of Parent Common Stock to be
delivered to the Stockholder pursuant to this Agreement shall have been accepted
for quotation on the Nasdaq National Market.
5.3 Restrictions on Transfer. Except for certificates representing those
shares of Parent Common Stock which are subject to an effective registration
statement on Form S-3 filed by Parent pursuant to Section 5.12, all certificates
representing Parent Common Stock deliverable to the Stockholder or any of its
Subsidiaries pursuant to this Agreement in connection with the Mergers and any
certificates subsequently issued with respect thereto or in substitution
therefor (including any shares issued or issuable in respect of any such shares
upon any stock split stock dividend, recapitalization, or similar event) shall
bear the following legends:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE
ISSUER IN FORM AND SUBSTANCE, THAT SUCH TRANSFER IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND VOTING CONTAINED IN STOCKHOLDER AGREEMENT
WHICH MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST OF THE HOLDER OR RECORD
OF THIS SECURITY TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
OFFICES OF THE CORPORATION.
If, and to the extent shares of Parent Common Stock held by the Stockholder
are no longer subject to the restrictions described in the legends set forth
above, upon the request of the Stockholder, Parent shall cause its transfer
agent to remove the appropriate legend set forth above from the certificates
evidencing the shares of Parent Common Stock or issue to the Stockholder new
certificates therefor free of such legend.
Such certificate shall also bear any legend required by any federal, state,
local or foreign law governing such securities.
5.4 Access to Information. The Company and WW shall afford Parent and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period
-49-
prior to the Effective Time to (a) all properties, books, contracts,
commitments, records and auditors of the Company, WW and the Subsidiaries, and
(b) all other information concerning the Business and the properties and
personnel of the Company, WW and the Subsidiaries (subject to restrictions
imposed by applicable law) as Parent may reasonably request; provided that any
photocopying or similar costs of such access shall be incurred at Parent's
expense and that such access will conducted at a reasonable time, under the
supervision of the Stockholder's, the Company's or WW's personnel and in such a
manner as to maintain the confidentiality of this Agreement and the transactions
contemplated hereby and not to interfere unreasonably with the normal operation
of the business of the Company or WW. Parent shall afford Stockholder, the
Company and WW, and their respective accountants, counsel and other
representatives, access during normal business hours during the period prior to
the Effective Time to the senior executive management team of Parent to the same
extent as such access was provided prior to the date of this Agreement; provided
that any photocopying or similar costs of such access shall be incurred at
Stockholder's expense and that such access will conducted at a reasonable time,
under the supervision of Parent's personnel and in such a manner as to maintain
the confidentiality of this Agreement and the transactions contemplated hereby
and not to interfere unreasonably with the normal operation of the business of
Parent. Parent and the Stockholder acknowledge and agree that all information
received from or on behalf of the Parent, Company, WW or any Subsidiary in
connection with the transactions contemplated hereby prior to the Closing shall
be deemed to be received pursuant to the Confidentiality Agreement dated as of
May 19, 2000 and Parent, Metal Merger Sub, WW Merger Sub, the Stockholder, the
Company and WW shall, and shall cause their respective affiliates and
representatives, to comply with the provisions of such Confidentiality Agreement
with respect to such information. No information or knowledge obtained in any
investigation pursuant to this Section 5.4 shall affect or be deemed to modify
any representation or warranty contained herein.
5.5 Expenses. Except as set forth in Section 5.13 hereof, whether or not
the Mergers are consummated, all fees and expenses incurred in connection with
the Mergers including all legal, accounting, financial advisory, consulting and
all other fees and expenses of third parties ("Third Party Expenses") incurred
by a party in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby, shall be
the obligation of the respective party incurring such fees and expenses;
provided, however, all Third Party Expenses incurred by the Company, WW or any
Subsidiary in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby shall be
the sole obligation of the Stockholder.
5.6 Public Disclosure. Parent and the Stockholder shall consult with and
provide each other the reasonable opportunity to review and comment upon any
public disclosure prior to the public disclosure relating to this Agreement or
the transactions contemplated hereby, provided, that neither Parent nor the
Stockholder shall issue any such public disclosure prior to such consultation
and mutual agreement by the other party except as may be otherwise required by
law (including federal and state securities laws) or, as to Parent, by the rules
and regulations of the National Association of Securities Dealers, Inc. or the
Nasdaq Marketplace Rules. Parent and Stockholder further agree that
-50-
for the first twelve (12) months the key messaging to the public will be that of
the initial public disclosures made by and agreed to by the parties.
5.7 Consents. The Stockholder shall use all commercially reasonable
efforts and shall cause the Company and WW to use all commercially reasonable
efforts to obtain the consents, waivers and approvals and to give the notices
under any of the Contracts as may be required in connection with the Mergers
(all of such consents, waivers and approvals are set forth in Stockholder
Disclosure Letter) so as to preserve all rights of and benefits to the Company,
WW and Parent thereunder.
5.8 FIRPTA Compliance. On or prior to the Closing Date, the Stockholder
shall deliver to Parent an affidavit in a form reasonably satisfactory to Parent
stating under penalties of perjury Stockholder's taxpayer identification number
and that Stockholder is not a foreign person within the meaning of Section 1445
of the Code.
5.9 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its reasonable good faith
efforts (subject to, and in accordance with, applicable law) to take promptly,
or cause to be taken, all actions, and to do promptly, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents and approvals, to effect all necessary
registrations and filings, and to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement, subject to the
limitations on divestiture set forth in Section 5.13 hereof.
5.10 Notification of Certain Matters. The Stockholder shall give prompt
notice to Parent, and Parent shall give prompt notice to the Stockholder, of (i)
the occurrence or non-occurrence of any event of which such party has Knowledge,
the occurrence or non-occurrence of which causes any representation or warranty
of the Company, WW and the Stockholder, on the one hand, and Parent, on the
other hand, contained in this Agreement to be untrue or inaccurate such that the
conditions set forth in Section 6.3(a) hereof or Section 6.2(a) hereof, as the
case may be, would not be satisfied, and (ii) any failure of the Company, WW and
the Stockholder, on the one hand, or Parent, on the other hand, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder in any material respect; provided,
however, that the delivery of any notice pursuant to this Section 5.10 shall not
limit or otherwise affect any remedies available to the party receiving such
notice.
5.11 S-8 Registration. At the Closing Date, if possible, and subject to
obtaining any necessary consents or approvals, which consents and approvals
Parent will use commercially reasonable efforts to obtain, Parent agrees to
file, if available for use by Parent, with the SEC a registration statement on
Form S-8 registering a number of shares of Parent Common Stock equal to the
number of shares of Parent Common Stock issuable upon the exercise of all
Company Options assumed by Parent pursuant to Section 1.6(b) hereof.
-51-
5.12 S-3 Registration Statement. As promptly as practicable after the
Closing, but in any event not later than the later of (i) May 31, 2001 or (ii)
ninety (90) days following the Closing, Parent agrees to prepare and file with
the SEC a registration statement on Form S-3, or any successor form, registering
for distribution to holders of Tracking Stock (other than in respect of the
Stockholder's notional interest therein) and holders of options to acquire
Tracking Stock (other than Continuing Employee Options) (such holders
collectively, the "Distributees") such number of shares of Parent Common Stock
equal to the product obtained by multiplying (x) the Option Exchange Ratio times
(y) the number of Fully Converted Shares held by such holders and issuable upon
exercise of such options, provided that in no event shall such number of shares
of Parent Common Stock so registered exceed 5,316,930 (the "Distributable
Shares").
5.13 HSR Act. Each party agrees to provide the other party with copies of
any documentation or written materials provided to or by governmental
authorities with respect to the HSR approval process. Notwithstanding anything
to the contrary in this Agreement, Parent shall not be required to agree to any
divestiture by Parent, the Company or WW or any of their respective subsidiaries
or affiliates (i) of shares of capital stock, (ii) of any of their respective
businesses, assets or properties or (iii) the imposition of any material
limitation on the ability of any of them to conduct their respective businesses
(including the Business) or to own or exercise control of such assets,
properties and stock. All expenses incurred by the Company, WW, Parent and the
Stockholder (including expenses of counsel) in connection with obtaining
termination of the waiting period under the HSR Act shall be borne solely by the
party incurring such expense.
5.14 Transfer of Assets.
(a) Subject to the provisions of the last paragraph of Section 4.1 of this
Agreement, prior to the Closing, the Stockholder shall transfer, assign or
license (on a worldwide, perpetual, royalty-free and non-exclusive basis to
conduct the Business) to the Company and WW, as applicable, all tangible,
intangible, real and personal property assets used in the Business, including
all Intellectual Property, owned by or licensed to Stockholder or any of its
subsidiaries that are used in the conduct of the Business, including any assets
which are necessary to the continued realization of any revenues of the Business
as conducted; provided, however, that to the extent that the transfer,
assignment or license of any such assets is provided for in any of the
Commercial Agreements, then the terms of such Commercial Agreement shall govern
such transfer, assignment or license.
(b) Following the Closing, the Stockholder shall assist Parent, the Company
and WW with perfecting the Company's and WW's title in any such assets. Such
assistance shall include the following: (i) executing all documents prepared by
the Company, WW or Parent necessary to perfect the Company's or WW's title in
any such assets; (ii) making available to Parent, the Company, WW or their
counsel, inventors and other persons employed by Stockholder for interviews
and/or testimony to assist in good faith in further prosecution, maintenance or
litigation of any registrations or applications involving any such assets,
including Registered Intellectual Property; (iii) forwarding copies of all
correspondence sent and received concerning such assets
-52-
within a reasonable time after receipt by Stockholder; and (iv) making all
relevant documents in the possession or control of Stockholder and relating to
such assets, available to Parent or its counsel.
5.15 Trade Secret License. Without limiting anything set forth herein,
including Company's and WW's ownership of its trade secrets, effective as of the
Closing, the Stockholder hereby grants to Parent, and to the Company and WW
after the Closing, a non-exclusive license to use all trade secrets and know-how
owned by the Stockholder used in the conduct of the Business. Subject to the
terms of this Agreement and the Commercial Agreements and the Ancillary
Agreements, Parent, the Stockholder, the Company and WW shall treat such trade
secrets in the same manner that they treat comparable other trade secrets owned
by each of them.
5.16 Equitable Remedy. The Stockholder agrees that it would be impossible
or inadequate to measure and calculate Parent's damages from any breach of the
covenants set forth in Sections 5.14 and 5.15. Accordingly, the Stockholder
agrees that if it breaches any provision of Sections 5.14 or 5.15, Parent will
have available, in addition to any right or remedy otherwise available, the
right to obtain an injunction from a court of competent jurisdiction restraining
such breach or threatened breach and to specific performance of any such
provision of this Agreement. The Stockholder further agrees that no bond or
other security shall be required in obtaining such equitable relief, nor will
proof of actual damages be required for such equitable relief. The Stockholder
hereby expressly consents to the issuance of such injunctive relief, whether in
the form of a temporary restraining order or otherwise, and to the ordering of
such specific performance.
5.17 Stockholder Employee Plans.
(a) Liabilities Under Plans. From and after the Effective Time, except as
otherwise specifically set forth in this Agreement, the Stockholder shall (a)
sponsor and (b) assume or retain, as the case may be, and be solely responsible
for all Benefits Liabilities (as defined herein) arising under, resulting from
or relating to the Company Employee Plans of the Stockholder or any of its
subsidiaries, whether incurred before, on or after the Effective Time; provided,
however, that the Stockholder shall be under no obligation (except with respect
to any obligation specifically described in this Agreement or one of the Company
Employee Plans) to permit Continuing Employees to continue to participate in the
Company Employee Plans of Stockholder after the Effective Time. "Benefits
Liabilities" shall mean with respect to any Company Employee Plan of
Stockholder, the Company or WW (if applicable) any and all claims, debts,
liabilities, commitment and obligations, whether fixed, contingent or absolute,
matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or
unknown, whenever or however arising, including all costs and expenses relating
thereto (except with respect to any obligations of Parent specifically described
in this Agreement), and including those debts, liabilities and obligations
arising under law, rule, regulation, permits, action or proceeding before any
court or regulatory agency or administrative agency, order or consent decree or
any award of any arbitrator of any kind, and those arising under contract,
commitment or undertaking; provided, however, that "Benefits Liabilities" shall
exclude any such liabilities arising under the plans listed on Schedule 5.17(a).
-53-
(b) COBRA. The Stockholder assumes any and all Benefits Liabilities
relating to, arising out of, or resulting from noncompliance with or violation
of COBRA to the extent incurred prior to the Closing.
5.18 Stay Bonuses. In the event that the Closing has occurred prior to
June 1, 2001, Parent shall pay within ninety (90) days after the Closing bonuses
to the employees of the Company and WW in the amounts set forth on Schedule
5.18, provided that such bonuses shall be paid to only those employees who
remain employees of the Company or WW, as applicable, on the date of such bonus
payments; provided, further, that Parent shall notify Stockholder at least six
(6) business days prior to the date of such bonus payments and Stockholder shall
pay to Parent in cash any aggregate amount of such bonuses in excess of
$4,000,000, such payment being due to Parent no fewer than three (3) business
days prior to the date of such bonus payments. In the event that the Closing has
not occurred prior to the June 1, 2001 (the "Bonus Payment Date"), Stockholder
shall pay on the Bonus Payment Date bonuses to the employees of the Company and
WW in the amounts set forth on Schedule 5.18, provided that such bonuses shall
be paid to only those employees who remain employees of the Company or WW, as
applicable, on the Bonus Payment Date; provided, further, that Stockholder shall
notify Parent at least six (6) business days prior to the Bonus Payment Date and
Parent shall pay Stockholder all of such bonuses if the bonuses aggregate to
less than $4,000,000, but only a portion of such bonuses up to a maximum of
$4,000,000 if the bonuses aggregate to more than $4,000,000, such payment being
due to Stockholder no later than May 31, 2001; provided, that Parent shall not
be obligated in any manner under this Section 5.18 if this Agreement is
terminated by Parent pursuant to Section 8.1(d) or 8.1(f) hereof.
5.19 Additional Option Grants. Immediately prior to and subject to the
consummation of the Closing, the Company shall, and the Stockholder shall cause
the Company to, adopt the 2000 Option Plan in form and substance as directed by
Parent (which form and substance shall be substantially similar to Parent's
option plan) and shall reserve under such 2000 Option Plan the Additional
Options. The Additional Options shall not be subject to accelerated vesting upon
the Mergers, and the Company shall not, and the Stockholder shall cause the
Company not to, issue any Additional Options without Parent's prior written
consent.
5.20 Cancellation of Intercompany Obligations and Liberty Digital Proceeds.
Prior to the Closing, the Stockholder, the Company and WW shall take all
necessary actions so that (i) all liabilities (contingent or other) and all
ongoing obligations (other than pursuant to the Ancillary Agreements) of (x) the
Company, WW or any Subsidiary to the Stockholder or any of its subsidiaries and
(y) the Stockholder or any of its subsidiaries to the Company, WW or any
Subsidiary (but in the case of clause (y), only to the extent that the Company,
WW or any Subsidiary does not have a corresponding liability or obligation to
any third party), in each case are cancelled as of the Closing and (ii) an
amount equal to the Liberty Digital Proceeds is paid in cash by Stockholder to
the Company.
5.21 Tax Matters.
-54-
(a) None of the Stockholder, the Company, WW, Parent, Metal Merger Sub, WW
Merger Sub or their respective affiliates shall take any action that would
reasonably be expected to cause the Metal Merger or the WW Merger to fail to
qualify as a reorganization within the meaning of Section 368(a) of the Code. In
addition, none of Parent, Metal Merger Sub or WW Merger Sub, or following the
Effective Time, the Company or WW, shall breach any of the covenants included in
the respective certificates delivered pursuant to Section 5.21(b) hereof to the
extent that such breach causes the Metal Merger or the WW Merger to fail to
qualify as a reorganization within the meaning of Section 368(a) of the Code (b)
Officers of the Stockholder, on the one hand, and, Parent, Metal Merger Sub, WW
Merger Sub, on the other hand, shall execute and deliver to Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP ("Skadden") certificates substantially in the form
attached hereto as Exhibits F-1(a) and (b) and F-2(a) and (b), respectively,
contemporaneously with the execution of this Agreement and at the Closing,
respectively, in connection with the delivery by Skadden of its opinion pursuant
to Section 6.2(f).
5.22 Liberty Digital Stock. After the date hereof, the Company shall not,
and the Stockholder shall cause the Company not to, sell, transfer or otherwise
dispose of any Liberty Digital Stock. Prior to the Closing, Stockholder shall
transfer an amount equal to the Liberty Digital Proceeds in cash to the Company,
and such amount shall be held in the Company's accounts as of the Effective
Time.
5.23 Purchase of New GBR Collating Machine. Prior to the Closing,
Stockholder shall order and pay for in WW's name (or, if full payment is not due
until after Closing, then Stockholder shall transfer sufficient cash to make
full payment to WW as of the Closing) one (1) new GBR custom-built collating
machine according to the description set forth in Schedule 5.23, with such
additional satisfactory specifications as are set forth in the purchase order
for such machine, and, if delivered before Closing, shall take all necessary
efforts to install and enable such collating machine in the WW facility located
at 000 X. Xxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx, including without limitation paying
for (or reimbursing Parent if delivered after Closing) all associated labor
costs and any capital improvements required to such facility in order to
accommodate the ordinary use of such collating machine upon delivery.
5.24 Employees. Parent agrees not to reduce the base salary of any
Continuing Employee during the period beginning immediately after the Effective
Time and ending on the six-month anniversary of the Effective Time; provided
that Parent shall not be restricted from terminating the employment of any
Continuing Employee.
5.25 Termination of Broker Licenses. Prior to the Closing, (i) the Company
shall, and Stockholder shall cause the Company and WW to, terminate all mortgage
broker licenses and related surety bonds held by the Company or any Subsidiary;
provided that Parent shall reimburse Stockholder for its documented
out-of-pocket expenses in connection with such terminations up to a maximum of
$25,000, and (ii) neither the Company nor any Subsidiary will perform any
functions that would require it to be licensed as a mortgage broker in any
jurisdiction. From and after the
-55-
Effective Time, neither the Company, WW or Parent will have any liability
related to mortgage broker operations conducted by the Company, WW or any
Subsidiary prior to the Closing ("Broker Liabilities"), and Stockholder agrees
to indemnify Parent for any such Broker Liabilities.
5.26 Qualifications to Do Business. Until the Effective Time, the Company
and WW, as applicable, shall, and the Stockholder shall cause the Company and WW
to, cause the Company, WW and the Subsidiaries to be qualified to do business in
all jurisdictions where such entities are required to be so qualified.
5.27 Bifurcated Contracts. From and after the Effective Time, Parent and
the Company, on the one hand, and Stockholder, on the other hand, shall
cooperate to perform, or, in the case of Stockholder to cause its subsidiaries
to cooperate with Parent and the Company to perform, the obligations of the
Company or the subsidiaries of Parent, as the case may be, with respect to
contracts numbers 52, 113, 138, 173, 199 and 217 on Exhibit 2.12(a) of the
Stockholder Disclosure Letter (the "Bifurcated Contracts"). Parent shall collect
all funds under the Bifurcated Contracts and shall cause a portion of the net
proceeds derived from the Bifurcated Contracts which corresponds to the relative
proportion and value of the services to be performed by the Stockholder and its
subsidiaries under the Bifurcated Contracts to be remitted to Stockholder as
soon as reasonably practicable after receipt of the funds representing such
revenues by the Company or Parent. Neither Parent nor the Company nor any of
their affiliates shall enter into any amendments, renewals, extensions, or in
any way extend the Bifurcated Contracts in a manner that would extend the
obligations of Stockholder and its subsidiaries under the Bifurcated Contracts
past their respective current terms.
5.28 Transfer of Ownership in Move. com U.K. Prior to the Closing,
Stockholder shall cause all shares of Xxxx.xxx U.K. not owned by the Company to
be transferred to the Company (without payment or additional consideration on
the part of Parent, the Company, WW or any Subsidiary other than the entering
into of this Agreement and the transactions contemplated hereby) such that, as
of the Effective Time, the Company is the sole and exclusive owner of all shares
or interest in Xxxx.xxx U.K. and there are no options or other preemptive rights
to purchase any shares or interests of Xxxx.xxx U.K. outstanding; provided,
however, that so long as all agreements effecting such transfer are executed by
all parties thereto and delivered to Parent at the Closing and the only
remaining action required to be taken to effect such transfer is the filing by
the Company of such executed agreements with the relevant Governmental Entity,
this covenant shall be deemed satisfied as of the Closing. Parent agrees that,
after the Effective Time, it will transfer one percent (1%) of the outstanding
shares of Xxxx.xxx U.K. to a trust or similar entity established and controlled
by Parent in its discretion, the beneficiaries of which trust or similar entity
shall be those estate agents of the HomeSale Network in the United Kingdom, from
time to time, who have uploaded all of their respective real estate listings to
xxx.xxxx.xxx.xx.
-56-
ARTICLE VI
CONDITIONS TO THE MERGER -
6.1 Conditions to Obligations of Each Party to Effect the Mergers. The
respective obligations of each party to this Agreement to effect the Mergers
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Stockholder Approval. The stockholders of Parent shall have approved
the issuance of Parent Common Stock in connection with the Mergers in accordance
with the rules and regulations of the Nasdaq Stock Market.
(b) No Injunctions or Restraints; Illegality; HSR Act. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of either of the Mergers shall be in
effect. All waiting periods, if any, under the HSR Act relating to the
transactions contemplated hereby will have expired or terminated early and all
material foreign antitrust approvals required to be obtained prior to the
Mergers in connection with the transactions contemplated hereby shall have been
obtained.
6.2 Additional Conditions to Obligations of the Stockholder. The
obligations of the Stockholder to consummate the Mergers and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, by the Stockholder:
(a) Representations and Warranties. The representations and warranties of
Parent, Metal Merger Sub and WW Merger Sub contained in this Agreement shall
have been true and correct in all material respects on and as of the date
hereof, except for those representations and warranties which address matters
only as of a particular date (which shall be true and correct in all material
respects as of such date), and notwithstanding the failure of the
representations and warranties set forth in Sections 3.4, 3.5, 3.7, 3.10 and
3.12 of this Agreement to be true and correct in all material respects, this
condition shall be deemed satisfied unless the failure of such representations
and warranties to be true and correct in all material respects constitutes a
Material Adverse Effect on Parent, as defined in Section 10.2 hereof). The
Stockholder shall have received a certificate to such effect signed by an
officer of Parent, on behalf of Parent.
(b) Agreements and Covenants. Parent, Metal Merger Sub and WW Merger Sub
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and the Stockholder shall have received
a certificate to such effect signed by an officer of Parent on behalf of Parent.
-57-
(c) Material Adverse Effect. Since the date hereof and until the expiration
or termination of any applicable waiting periods under the HSR Act for the
transactions contemplated hereby, there has not been any Material Adverse Effect
(as defined in Section 10.2 hereof) on Parent.
(d) Stockholder Agreement. Parent shall have executed and delivered the
Stockholder Agreement in the form attached hereto as Exhibit B.
(e) Registration Rights Agreement. Parent shall have executed and delivered
the Registration Rights Agreement in the form attached hereto as Exhibit C.
(f) Tax Opinion of Skadden. The Stockholder shall have received the opinion
of Skadden, in form and substance reasonably satisfactory to it, dated as of the
Closing Date, on the basis of the facts, representations and assumptions set
forth in such opinion and certificates obtained from officers of Parent, Metal
Merger Sub or WW Merger Sub, as applicable, and the Stockholder, all of which
are consistent with the state of facts existing as of the Effective Time, to the
effect that, for U.S. federal income tax purposes, the Metal Merger and the WW
Merger, in each case, will qualify as a reorganization within the meaning of
Section 368(a) of the Code; provided, however, under all circumstances it is
agreed that the condition set forth in this Section 6.2(g) shall be deemed to be
satisfied even if such tax opinion of Skadden shall not have been delivered
unless the sole reason that such opinion has not been delivered is because of a
Change in Law (as defined below) that precludes the delivery of such an opinion.
In rendering the opinion described above, Skadden shall rely upon the
certificates and representations referred to in Section 6.2(h) hereof. For
purposes of this Section 6.2(h), "Change in Law" shall mean a change after the
execution of this Agreement in a statute, regulation, judicial authority,
administrative interpretation or other authority that would prevent Skadden from
issuing the opinion set forth in this Section 6.2(g).
(g) Tax Certificates. Officers of Parent, Metal Merger Sub and WW Merger
Sub shall have executed and delivered to Skadden certificates substantially in
the forms attached hereto as Exhibit F-2(a) and (b) contemporaneously with the
execution of this Agreement and at the Effective Time.
(h) Commercial Agreements. Parent shall have executed and delivered each of
the Commercial Agreements in the forms attached hereto as Exhibits A-1 through
A-10, each of which agreements shall be in full force and effect.
6.3 Additional Conditions to the Obligations of Parent, Metal Merger Sub
and WW Merger Sub. The obligations of Parent, Metal Merger Sub and WW Merger
Sub to consummate the Mergers and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by Parent:
(a) Representations and Warranties. The representations and warranties of
the Company, WW and the Stockholder contained in this Agreement shall have been
true and correct in all material respects on and as of the date hereof, except
for those representations and warranties
-58-
which address matters only as of a particular date (which shall be true and
correct in all material respects as of such date), and notwithstanding the
failure of the representations and warranties set forth in Sections 2.6,
2.10(a), (b), (c), 2.14, 2.16, 2.18, 2.21 and 2.25 of this Agreement to be true
and correct in all material respects, this condition shall be deemed satisfied
unless the failure of such representations and warranties to be true and correct
in all material respects constitutes a Business Adverse Effect, as defined in
Section 10.2 hereof. Parent, Metal Merger Sub and WW Merger Sub shall have
received a certificate to such effect signed by the chief executive officer and
chief financial officer of the Stockholder.
(b) Agreements and Covenants. The Company, WW and the Stockholder shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by each of
them on or prior to the Effective Time, and Parent, Metal Merger Sub and WW
Merger Sub shall have received a certificate to such effect signed by the chief
executive officer and chief financial officer of the Company, WW and the
Stockholder, on behalf of the Company, WW and the Stockholder, respectively.
(c) Material Adverse Effect. Since June 30, 2000 and until the expiration
or termination of any applicable waiting periods under the HSR Act for the
transactions contemplated hereby, there shall not have been any Material Adverse
Effect (as defined in Section 10.2 hereof) on the Company, WW or any of their
respective Subsidiaries or the Business (taken as a whole).
(d) Stockholder Agreement. The Stockholder shall have executed and
delivered the Stockholder Agreement in the form attached hereto as Exhibit B,
which agreement shall be in full force and effect.
(e) Commercial Agreements. All parties to the Commercial Agreements other
than Parent shall have executed and delivered to Parent each of the Commercial
Agreements in the forms attached hereto as Exhibits A-1 through A-10, each of
which agreements shall be in full force and effect.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION -
7.1 Survival of Representations and Warranties. Except as otherwise
provided in Section 9.6(c) of this Agreement, all of the representations and
warranties of the Stockholder and Parent, in this Agreement or in any
certificate, instrument or other document delivered pursuant to this Agreement
(each as modified by the Stockholder Disclosure Letter or the Parent Disclosure
Letter, as the case may be) shall survive the Mergers and continue until 5:00
p.m., Pacific Time, on the date which is twelve (12) months following the
Closing Date; provided, however, that the representations and warranties of the
Stockholder contained in Sections 2.2 and 2.18 hereof shall survive indefinitely
(subject to any applicable statute of limitations); provided, further, that the
representations and warranties of the Stockholder contained in Section 2.11(d)
and the second and third sentences of Section 2.10(d) hereof shall survive until
5:00 p.m., Pacific Time, on the date
-59-
which is thirty-six (36) months following the Closing Date (the end date of such
survival, as applicable, (or an indefinite period in the case of Sections 2.2
and 2.18) is hereinafter referred to as the "Expiration Date").
7.2 Indemnification
(a) In addition to the matters set forth in Article IX hereof, until the
Expiration Date, the Stockholder agrees to indemnify and hold Parent and its
officers, directors and affiliates harmless against all claims, losses,
liabilities, damages, costs and expenses, including reasonable attorneys' fees
(hereinafter individually a "Loss" and collectively "Losses"), incurred by
Parent or its officers, directors, or affiliates: (i) as a result of any
inaccuracy or breach of a representation or warranty of the Stockholder
contained in this Agreement or any certificate, instrument or other document
delivered pursuant to this Agreement; (ii) except as set forth in Section 7.3
below, relating to any liability, obligation, judgment, penalty, fine, cost or
expense, of any kind or nature, or the duty to indemnify, defend or reimburse
any Person with respect to: (1) the presence on or before the Closing Date of
any Hazardous Materials in the soil, groundwater, surface water, air or building
materials of any Business Facility ("Pre-Existing Contamination"); (2) the
migration at any time prior to or after the Closing Date of Pre-Existing
Contamination to any other real property, or the soil, groundwater, surface
water, air or building materials thereof; (3) any Hazardous Materials Activity
conducted on any Business Facility prior to the Closing Date or otherwise
occurring prior to the Closing Date in connection with or to benefit the
Business ("Pre-Closing Hazardous Materials Activities"); (4) the exposure of any
person to Pre-Existing Contamination or to Hazardous Materials in the course of
or as a consequence of any Pre-Closing Hazardous Materials Activities, without
regard to whether any health effect of the exposure has been manifested as of
the Closing Date; (5) the violation of any Environmental Laws by the Company, WW
or any Subsidiary or its agents, employees, predecessors in interest,
contractors, invitees or licensees prior to the Closing Date or in connection
with any Pre-Closing Hazardous Materials Activities prior to the Closing Date;
(6) any actions or proceedings brought or threatened by any third party with
respect to any of the foregoing; and (7) any of the foregoing to the extent they
continue after the Closing Date (collectively, "Seller's Retained Environmental
Liabilities"); (iii) relating to or arising out of Parent's assumption of
Continuing Employee Options and Additional Options under this Agreement or
failure of Parent to assume any options, rights or other securities of the
Stockholder, the Company or any of their respective affiliates in connection
with the transactions contemplated by this Agreement, provided that this
indemnity in clause (iii) shall not apply to: (w) Parent's failure to issue
Parent Common Stock in accordance with the Option Exchange Ratio upon the due
exercise of such Continuing Employee Options and Additional Options held by
Continuing Employees and assumed by Parent pursuant to Section 1.6(b)(iii)of
this Agreement, (x) Parent s other obligations under the Option Plans with
respect to the Continuing Employee Options or the agreements governing such
Continuing Employee Options by virtue of such assumption, (y) any actions taken
by Parent after the Closing with respect to the termination of employment of any
Continuing Employee who holds a Continuing Employee Option, or (z) any
misstatement or omission in any Registration Statement on Form S-8 or prospectus
or similar securities law document prepared by Parent and distributed to its
employees with respect to the Continuing Employee Options; or (iv) Broker
Liabilities. Notwithstanding the
-60-
foregoing, there shall be no right to indemnification pursuant to this Article
VII unless and until an Indemnification Certificate (as defined below)
identifying aggregate Losses in excess of $5,000,000 (the "Threshold Amount")
has been delivered to Stockholder, in which event Parent shall be entitled to
recover all such amounts in excess of the Threshold Amount; provided, however,
that such Threshold Amount shall not apply to any indemnification pursuant to
Section 7.2(a)(i) above with respect to any inaccuracy or breach of a
representation or warranty contained in Section 2.2, 2.4, the second and third
sentences of 2.10(d), 2.11(d) or 2.18 or pursuant to Section 7.2(a)(ii), (iii)
or (iv) above. In no event shall the Stockholder's aggregate obligation to
indemnify Parent under this Section 7.2(a) exceed an amount of cash or Parent
Common Stock equal to the value of fifty percent (50%) of the Total
Consideration (based on the valuation of the Parent Common Stock at the Parent
Closing Price) (the "Limit") ; provided, however, that such Limit shall not
apply to any indemnification pursuant to Section 7.2(a)(i) above with respect to
any inaccuracy or breach of a representation or warranty contained in Section
2.2, the second and third sentences of 2.10(d), 2.11(d) or 2.18 or pursuant to
Section 7.2(a)(ii), (iii) or (iv) above. The amount of any Losses shall be
reduced by the amount of any Tax Benefit Actually Realized by Parent, WW, the
Company or their respective subsidiaries or affiliates relating thereto and any
amount received by Parent with respect thereto under any insurance coverage (net
of any reasonably expected premium adjustments). If Parent actually receives an
amount under insurance coverage with respect to Losses at any time subsequent to
any indemnification provided by the Stockholder pursuant to this Section 7.2,
then Parent shall promptly reimburse the Stockholder for any payment made by the
Stockholder to Parent in connection with providing the indemnification for a
particular matter up to such amount received by Parent with respect to that
matter, provided, however, that Parent may retain an amount from proceeds
received under insurance coverage or from such other party with respect to
Losses to the extent that the Stockholder has not indemnified Parent for the
full amount of its claim. Stockholder shall not have any right of contribution
from the Company or WW or any of their respective Subsidiaries with respect to
any Loss claimed by an Indemnified Party after the Effective Time.
(b) Claims. Upon receipt by the Stockholder at any time on or before
the last day of the Indemnification Period of a certificate signed by any
officer of Parent (an "Officer's Certificate"): (A) stating that Parent has paid
or properly accrued or reasonably anticipates that it will have to pay or accrue
Losses, and (B) specifying in reasonable detail the individual items of Losses
included in the amount so stated, the date each such item was paid or properly
accrued, or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant to which such item is related,
the Stockholder shall, subject to the provisions of Section 7.2(c) hereof,
deliver to Parent, as promptly as practicable, funds in an amount equal to such
Losses. The Stockholder shall, at its sole discretion, pay all claims for
indemnification hereunder in (i) cash or (ii) shares of Parent Common Stock;
provided, however that all claims for indemnification pursuant to Section
7.2(a)(i) (with respect to breaches or inaccuracies of the representations and
warranties set forth in Section 2.18) or Section 7.2(a)(ii) above shall be paid
in cash only. In the event the Stockholder determines to pay any claim, in whole
or in part, in shares of Parent Common Stock, the Stockholder shall transfer to
Parent the number of shares of Parent Common Stock having an aggregate value
(based on the valuation of each share at 97% of the Parent
-61-
Closing Price (adjusted for splits, combinations and the like)) equal to the
Losses with respect to such claim.
(c) Objections to Claims. No such payment or delivery may be required
pursuant to Section 7.2(b) above if the Stockholder shall object in a written
statement to the claim made in the Officer's Certificate with thirty (30) days
of delivery of such Officer's Certificate, and such statement shall have been
delivered to Parent prior to the expiration of such thirty (30)-day period.
(d) Resolution of Conflicts.
(i) In case the Stockholder shall so object in writing to any claim or
claims made in any Officer's Certificate, the Stockholder and Parent shall
attempt in good faith to agree upon the rights of the respective Parties with
respect to each of such claims. If the Stockholder and Parent should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties and Stockholder shall deliver to Parent, as promptly as practicable, an
amount equal to such Losses in cash or shares of Parent Common Stock.
(ii) If no such agreement can be reached after good faith negotiation and
prior to sixty (60) days after delivery of an Officer's Certificate, either of
Parent or the Stockholder may demand arbitration of the matter unless the amount
of the Loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration, and in either such event the matter shall be
settled by arbitration conducted by one arbitrator mutually agreeable to Parent
and the Stockholder. In the event that, within thirty (30) days after submission
of any dispute to arbitration, Parent and the Stockholder cannot mutually agree
on one arbitrator, then, within fifteen (15) days after the end of such thirty
(30) day period, Parent and the Stockholder shall each select one arbitrator
within ten (10) additional days. The two arbitrators so selected shall select a
third arbitrator. If the Stockholder does not select an arbitrator during this
fifteen (15) day period, then the parties agree that the arbitration will be
conducted by one arbitrator selected by Parent.
(iii) Any such arbitration shall be held under the expedited rules then in
effect of the American Arbitration Association. The arbitrator(s) shall
determine how all expenses relating to the arbitration shall be paid, including
without limitation, the respective expenses of each party, the fees of each
arbitrator and the administrative fee of the American Arbitration Association.
The arbitrator or arbitrators, as the case may be, shall set a limited time
period and establish procedures designed to reduce the cost and time for
discovery while allowing the parties an opportunity, adequate in the sole
judgment of the arbitrator or majority of the three arbitrators, as the case may
be, to discover relevant information from the opposing parties about the subject
matter of the dispute. The arbitrator or a majority of the three arbitrators, as
the case may be, shall rule upon motions to compel or limit discovery and shall
have the authority to impose sanctions, including attorneys' fees and costs, to
the extent as a competent court of law or equity, should the arbitrators or a
majority of the three arbitrators, as the case may be, determine that discovery
was sought without substantial justification or that discovery was refused or
objected to without substantial justification. The decision of the arbitrator or
a majority of the three arbitrators, as the case may be, as to the
-62-
validity and amount of any claim in such Officer's Certificate shall be final,
binding, and conclusive upon the parties to this Agreement. Such decision shall
be written and shall be supported by written findings of fact and conclusions
which shall set forth the award, judgment, decree or order awarded by the
arbitrator(s). Within five (5) days of a decision of the arbitrator(s) requiring
payment by one party to another, such party shall make the payment to such other
party.
(iv) Judgment upon any award rendered by the arbitrator(s) may be entered
in any court having jurisdiction.
(e) Third-Party Claims. In the event Parent becomes aware of a third-party
claim which Parent believes may result in a demand for indemnification, Parent
shall notify the Stockholder of such claim, and the Stockholder, shall be
entitled, at its expense, to participate in any defense of such claim. Parent
shall have the right in its sole discretion to settle any such claim; provided,
however, that except with the consent of the Stockholder, no settlement of any
such claim with third-party claimants shall alone be determinative of the amount
of any claim for indemnification if the settlement is unreasonable. Any dispute
as to the reasonableness of such settlement shall be resolved pursuant to the
terms of Section 7.2(d) above. To the extent that such settlement is determined
after such dispute resolution to be unreasonable, then the arbitrator(s) shall
determine the amount, if any, that Stockholder shall be required to indemnify
Parent in respect of such settled claim. In the event that the Stockholder has
consented to any such settlement, the Stockholder shall have no power or
authority to object under any provision of this Article VII to the amount of any
claim by Parent for indemnification with respect to such settlement.
(f) Sole Remedy. Parent's rights to indemnification as provided for in
Section 7.2 for a breach of representations or warranties contained in this
Agreement shall constitute Parent's sole remedy for such a breach and the
Stockholder shall have no other liability or damages to the other party
resulting from the breach; provided, however, that nothing contained herein
shall prevent Parent from pursuing remedies, including equitable remedies, as
may be available to it under applicable law or equitable principles in the event
of the Stockholder's failure to comply with its indemnification obligations
hereunder or in the event of a claim of fraud by Parent against the Stockholder.
7.3 Further Conditions on Environmental Indemnity.
(a) Stockholder's indemnification obligations under Section 7.2(a)(i) with
respect to a breach of the representations and warranties contained in Section
2.18, and Stockholder's indemnification obligations set forth in Section
7.2(a)(ii) (collectively "Stockholder's Environmental Indemnity") shall be
subject to the following limitations: (i) Stockholder's Environmental Indemnity
for violations of Environmental Laws occurring in the course of ongoing
operation of the Business, which violations continue after the Closing Date,
shall not apply to any such violations to the extent they arise either from a
change in operations of the Business after the Closing Date or from the
continuation of the operations as they existed prior to the Closing Date for a
period continuing beyond that date which is one year following the Closing Date;
(ii) Stockholder shall not be liable for any diminution in property value of any
real property owned by the Company as of the Closing
-63-
Date; (iii) to the extent Stockholder's Environmental Indemnity applies to
Cleanup, Stockholder's Environmental Indemnity shall only apply to Cleanup to
the extent such Cleanup is required by a Governmental Entity under applicable
Environmental Laws in effect and enforceable as of the Closing Date or is
required to be undertaken under any applicable Environmental Laws in effect and
enforceable as of the Closing Date; (iv) Stockholder's Environmental Indemnity
shall not apply to that portion of the cost of a Cleanup to the extent (but only
to the extent) that the Cleanup is not conducted using Cost-Effective Methods;
(v) Stockholder's Environmental Indemnity shall not apply to costs to the extent
such costs result from the application of more stringent Environmental Laws as a
result of the change in use of a Business Facility to a use other than
industrial, commercial or retail where such change in use results from the
voluntary actions of Parent or its subsidiaries; and (vi) Stockholder's
Environmental Indemnity shall not apply to any Cleanup costs to the extent
caused by the exacerbation or worsening (excluding the mere discovery of
contamination) of Pre-Existing Contamination as a result of the acts of Parent,
its subsidiaries, employees or agents or the acts of any third parties on any
property owned by Parent or its affiliates.
(b) Parent or its affiliate shall promptly notify Stockholder in writing in
the event of the discovery of Pre-Existing Contamination subject to
Stockholder's Environmental Indemnity ("Contamination Notice"); provided,
however, that a failure to so notify Stockholder shall not limit Stockholder's
indemnification obligations hereunder except to the extent that Stockholder is
prejudiced thereby. Such notice shall reasonably identify the location and
information on the impacted media and the basis upon which the claimant seeks
indemnification. For claims relating to Cleanup within the scope of this Section
7.3, the Stockholder shall have the right to assume responsibility for managing
the Cleanup and related matters thereto, by providing notice to the Parent
within sixty (60) days following receipt of the Contamination Notice. If the
Stockholder assumes responsibility for management of a Cleanup under this
subsection, the Stockholder shall perform such Cleanup using Cost-Effective
Methods in compliance with all applicable legal requirements and in accordance
with plans approved by Parent or its affiliate, and utilizing a consultant
approved by Parent or its affiliate, which approvals shall not be unreasonably
withheld. Where the Stockholder has assumed responsibility for management of a
Cleanup under this subparagraph (b), the Parent or its affiliate shall have the
right, at its sole cost and expense, to: (i) review and approve (which approval
shall not be unreasonably withheld) all draft plans and reports, as well as
correspondence to any Governmental Entity regarding the Cleanup, and (ii)
participate in activities related to the Cleanup, including, but not limited to,
participation in meetings with respect to the determination of applicable
Remediation Standards or methods for conducting the Cleanup.
(c) As used in this Section 7.3, the following terms have the meanings set
forth below.
(i) "Business Facility" means any property that is or at any time has been
owned, operated, occupied, controlled or leased by the Company, WW or any
Subsidiary in connection with the operation of the Business.
-64-
(ii) "Remediation Standard" means a numerical standard that defines the
concentrations of Hazardous Materials that may be permitted to remain in any
environmental media after an investigation, remediation or containment of a
release of Hazardous Materials.
(iii) "Cleanup" means any Loss related to investigation, feasibility study,
remediation, treatment, removal, transport, disposal, characterization,
sampling, health assessment, risk assessment, encapsulation, monitoring, study,
report, assessment or analysis with respect to any Pre-Existing Contamination.
(iv) "Cost-Effective Methods" means the most cost-effective approach to
remediation that is consistent with applicable Environmental Laws or the
requirements of a Governmental Entity; provided, however, that Cost-Effective
Methods shall not include those that (1) result in the interruption of Parent or
its affiliates' business operations on a Business Facility periodically or for a
period of more than twenty-four hours; (2) result in the imposition of a deed
restriction or other restriction or limitation on the use or development of any
property other than a Business Facility, or result in the imposition of a deed
restriction or other restriction or limitation on the development of a Business
Facility (or any portion thereof) for industrial, retail or commercial purposes;
or (3) result in the diminution of the value of a Business Facility or any other
property.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Mergers abandoned at any time prior to the Effective
Time:
(a) by mutual consent of the Stockholder and Parent;
(b) by Parent or the Stockholder if: (i) the Effective Time has not
occurred prior to 5:00 p.m. Pacific Standard Time on April 2, 2001 (the "End
Date"); provided that the End Date may be extended by any party for a period of
thirty (30) days if such party reasonably believes that the expiration or
termination of the waiting period under the HSR Act is likely to be obtained
during such 30-day extension; (ii) there shall be a final nonappealable order of
a federal or state court in effect preventing consummation of the Mergers; or
(iii) there shall be any statute, rule, regulation or order enacted, promulgated
or issued or deemed applicable to the Mergers by any governmental entity that
would make consummation of the Mergers illegal;
(c) by Parent if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Mergers, by any Governmental Entity, which would: (i) prohibit Parent's, the
Company's or WW's ownership or operation of all or any portion of the Business
or (ii) compel Parent, the Company or WW to dispose of or hold separate all or a
portion of the business or assets of the Company, WW or Parent as a result of
the Mergers;
-65-
(d) by Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of the Company or the Stockholder set forth in this
Agreement, such that the conditions set forth in Section 6.2(a) or Section
6.2(b) hereof would not be satisfied as of the time of such breach or as of the
date hereof, as applicable, provided, that if such inaccuracy in the Stockholder
representations and warranties or breach by the Company or the Stockholder is
curable by the Stockholder through the exercise of its commercially reasonable
efforts, then Parent may not terminate this Agreement under this Section 8.1(d)
prior to 30 days following the date of the notice to the Stockholder of the
breach, provided the Stockholder continues to exercise commercially reasonable
efforts to cure such breach (it being understood that Parent may not terminate
this Agreement pursuant to this Section 8.1(d) if it shall have be in material
breach of this Agreement or if such breach by the Company or the Stockholder is
cured prior to 30 days following notice to Parent or the Stockholder of the
breach, provided, however, no cure period shall be required for a breach which
by its nature cannot be cured);
(e) by the Stockholder, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, such
that the conditions set forth in Section 6.3(a) or Section 6.3(b) hereof would
not be satisfied as of the time of such breach or as of the date hereof, as
applicable, provided, that if such inaccuracy in Parent's representations and
warranties or breach by Parent is curable by Parent through the exercise of its
commercially reasonable efforts, then the Stockholder may not terminate this
Agreement under this Section 8.1(e) prior to 30 days following the date of the
notice to Parent of the breach, provided Parent continues to exercise
commercially reasonable efforts to cure such breach (it being understood that
the Stockholder may not terminate this Agreement pursuant to this Section 8.1(e)
if it shall be in material breach of this Agreement or if such breach by Parent
is cured prior to 30 days following notice to Parent of the breach, provided,
however, no cure period shall be required for a breach which by its nature
cannot be cured);
(f) by Parent, if prior to the expiration or termination of any applicable
waiting periods under the HSR Act, there has been any Material Adverse Effect on
the Company, any of its Subsidiaries or the Business (taken as a whole).
(g) by the Stockholder, if prior to the expiration or termination of any
applicable waiting periods under the HSR Act, there has been any Material
Adverse Effect on Parent.
(h) by either the Stockholder or Parent if the required approval of the
stockholders of Parent contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting of
the stockholders of Parent duly convened therefor or at any adjournment thereof.
Where action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
-66-
8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Metal Merger Sub, WW
Merger Sub, the Company, WW, CMS or the Stockholder, or their respective
officers, directors or stockholders, provided that each party shall remain
liable for any knowing or willful breaches of this Agreement prior to its
termination; and provided further that, the provisions of Section 5.5, Section
5.6, Section 5.18 and Article VIII of this Agreement shall remain in full force
and effect and survive any termination of this Agreement.
8.3 Termination Fee. In the event that this Agreement is terminated
pursuant to Section 8.1(h), then Parent shall promptly remit to the Stockholder
payment in the amount of $50,000,000 (the "Termination Fee"); provided, however,
that the Termination Fee shall not be paid to the Stockholder if the Stockholder
(a) fails to vote all of the shares of Parent Common Stock it holds either
beneficially or has the right to vote by proxy in favor of approval of the
issuance of Parent Common Stock pursuant to this Agreement (the "Proposal") at
the meeting of stockholders, or (b) otherwise takes action to cause stockholder
approval of the Proposal not to be obtained.
8.4 Amendment. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of the
parties hereto.
8.5 Extension; Waiver. At any time prior to the Effective Time, Parent,
Metal Merger Sub and WW Merger Sub, on the one hand, and the Stockholder, WW and
the Company, on the other, may, to the extent legally allowed, (i) extend the
time for the performance of any of the obligations of the other party hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE IX
TAX MATTERS
9.1 Indemnity
(a) The Stockholder agrees to indemnify and hold harmless Parent, WW, the
Company and each Subsidiary against the following Taxes (net of any Tax Benefit
Actually Realized, as hereinafter defined, by Parent, WW, the Company or their
respective Subsidiaries and affiliates as a result of the payment or accrual of
any of the following) and against any loss, damage, liability or expense,
including reasonable fees for attorneys and other outside consultants with
respect to matters not controlled by the Stockholder, incurred in contesting or
otherwise in connection with any such Taxes: (i) Taxes imposed on the Company,
WW or any Subsidiary with respect to taxable periods ending on or before the
Closing Date; (ii) with respect to taxable periods beginning before the Closing
Date and ending after the Closing Date, Taxes imposed on the Company, WW or any
Subsidiary which are allocable, pursuant to Section 9.1(b) hereof, to the
-67-
portion of such period ending on the Closing Date; (iii) Taxes imposed on any
member of any affiliated group with which any of the Company, WW and any
Subsidiary file or have filed a Return on a consolidated or combined basis for a
taxable period ending on or before the Closing Date; and (iv) Taxes imposed on
Parent or the Company, WW or any Subsidiary as a result of any breach of
warranty or misrepresentation under Section 2.8 hereof; provided, however, that
the Stockholder shall not be liable for and shall not indemnify the Parent, the
Company, WW or any Subsidiary for (I) any Taxes resulting from transactions or
actions taken by the Company, WW or any Subsidiary on the Closing Date (other
than transactions contemplated by this Agreement) that are properly allocable to
the portion of the Closing Date after the Closing except for transactions or
actions undertaken in the ordinary course of business; or (II) any Transfer
Taxes for which Parent is liable pursuant to Section 9.5 (Taxes referred to in
this proviso are referred to hereinafter as "Excluded Taxes"). Parent shall
indemnify and hold harmless the Stockholder (net of any Tax Benefit Actually
Realized by the Stockholder or its affiliates as a result of the payment or
accrual thereof) for (i) Taxes (including Excluded Taxes) and any loss, damage,
liability or expense, including reasonable fees for attorneys and other outside
consultants ("Tax Related Losses") of Parent, the Company, WW or any Subsidiary
not allocated to the Stockholder pursuant to the first sentence of this Section
9.1(a) and (ii) any Taxes or Tax Related Losses attributable to any breach by
Parent, Metal Merger Sub or WW Merger Sub, or following the Effective Time, the
Company or WW, of Section 5.21(a) hereof.
(b) In the case of Taxes that are payable with respect to a taxable period
that begins before the Closing Date and ends after the Closing Date, the portion
of any such Tax that is allocable to the portion of the period ending on the
Closing Date shall be:
(i) in the case of Taxes that are either (x) based upon or related to
income or receipts, or (y) imposed in connection with any sale or other transfer
or assignment of property (real or personal, tangible or intangible) (other than
Transfer Taxes covered by Section 9.5 hereof), deemed equal to the amount which
would be payable if the taxable year ended with the Closing Date; and
(ii) in the case of Taxes imposed on a periodic basis with respect to the
assets of the Company, WW or any Subsidiary, or otherwise measured by the level
of any item, deemed to be the amount of such Taxes for the entire period (or, in
the case of such Taxes determined on an arrears basis, the amount of such Taxes
for the immediately preceding period), multiplied by a fraction the numerator of
which is the number of calendar days in the period ending on the Closing Date
and the denominator of which is the number of calendar days in the entire
period.
(c) To the extent permitted or required by law or administrative practice,
(A) the taxable year of the Company, WW and any Subsidiary which includes the
Closing Date shall be treated as closing on (and including) the Closing Date
and, notwithstanding the foregoing, (B) all transactions not in the ordinary
course of business occurring after the Closing (other than transactions
contemplated by this Agreement) shall be reported on Parent's consolidated
United States federal income Tax Return to the extent permitted by Treasury
Regulation Section 1.1502-
-68-
76(b)(1)(ii)(B) and shall be similarly reported on other Tax Returns of the
Parent or its affiliates to the extent permitted by law.
9.2 Returns and Payments
(a) From the date of this Agreement through and after the Closing Date, the
Stockholder shall prepare and file or otherwise furnish in proper form to the
appropriate Governmental Authority (or cause to be prepared and filed or so
furnished) in a timely manner all Returns relating to the Company, WW and the
Subsidiaries that are due on or before or relate to any taxable period ending on
or before the Closing Date (and Parent shall do the same with respect to any
taxable period ending after the Closing Date); provided, however, that to the
extent the Stockholder cannot file such Returns under applicable law, the
Stockholder shall deliver (or cause to be delivered), within 20 days before the
due date (including extensions) for the filing of such Returns, to Parent all
such Returns, and Parent shall sign and file or cause to be signed and filed
such Returns no later than such due date. Any such Return that is prepared by
the Stockholder shall be prepared in accordance with past practice to the extent
permitted by applicable law. Any Return required to be filed by Parent relating
to any taxable year or period beginning on or before and ending after the
Closing Date (the "Straddle Period") shall be submitted (with copies of any
relevant schedules, work papers and other documentation then available) to the
Stockholder for the Stockholder's approval not less than 30 days prior to the
due date for the filing of such Return, which approval shall not be unreasonably
withheld. Such Returns shall be prepared in accordance with past practice of the
Company or WW (or the Subsidiaries), if any, to the extent permissible under
applicable law.
(b) The Stockholder shall pay or cause to be paid when due and payable all
Taxes with respect to the Company, WW and the Subsidiaries for any taxable
period ending on or before the Closing Date or otherwise described in Section
9.1(a)(i) through (iv) (except for Excluded Taxes) and Parent shall so pay or
cause to be paid (i) Taxes for any taxable period ending after the Closing Date
(subject to its right of indemnification from the Stockholder for Taxes
attributable to the pre-closing portion of any Straddle Period pursuant to
Section 9.1(a)(ii) and Section 9.1(b) hereof) and (ii) Excluded Taxes.
(c) The Stockholder may amend any Return of the Company, WW or any
Subsidiary filed or required to be filed for any taxable years or periods ending
on or before the Closing Date, provided that any such amendment shall not
adversely affect any of Parent, the Company, WW or their respective
subsidiaries.
(d) Neither Parent nor any affiliate of Parent shall (or shall cause or
permit the Company, WW or any of their respective Subsidiaries to) amend, refile
or otherwise modify any Return relating in whole or in part to the Company, WW
or any Subsidiary with respect to any taxable year or period ending on or before
the Closing Date (or with respect to any Straddle Period) without the prior
written consent of the Stockholder, which consent may be withheld by Stockholder
in its sole discretion, subject to and in compliance with applicable law.
-69-
9.3 Refunds. Any Tax refund (including any interest with respect thereto)
relating to the Company, WW or any Subsidiary for any taxable period prior to
the Closing Date shall be the property of the Stockholder, and if received by
Parent or the Company, WW or any of their respective Subsidiaries shall be paid
over promptly to the Stockholder. Notwithstanding the foregoing sentence, any
Tax refund (or equivalent benefit to the Stockholder through a reduction in Tax
liability) for a period before the Closing Date arising out of the carryback of
a loss or credit incurred by the Company, WW or any Subsidiary in a taxable year
beginning after the Closing Date shall be the property of Parent and, if
received by the Stockholder, shall be paid over promptly to Parent. For purposes
of this Section 9.3, where it is necessary to apportion a refund or credit
between Parent and the Stockholder for a Straddle Period, such refund or credit
shall be apportioned between the period deemed to end at the close of the
Closing Date, and the period deemed to begin at the beginning of the day
following the Closing Date on the basis of an interim closing of the books,
except that refunds or credits of Taxes imposed on a periodic basis (e.g., real
property Taxes) shall be allocated on a daily basis. In addition, Parent shall
cooperate, and cause the Company, WW and any Subsidiary to cooperate, in
obtaining any refund that the Stockholder reasonably believes should be
available, including through the filing of appropriate forms with the applicable
taxing authorities.
9.4 Contests
(a) After the Closing, Parent shall promptly notify the Stockholder in
writing of any written notice of any pending or threatened audits, notice of
deficiency, proposed adjustment, assessment, examination or other administrative
or court proceeding, suit, dispute or other claim (a "Tax Claim") of Parent or
of any of the Company, WW and the Subsidiaries which, if determined adversely to
the taxpayer, would be grounds for indemnification under this Article IX;
provided, however, that a failure to give such notice will not affect Parent's
right to indemnification under this Article IX except to the extent, if any,
that, but for such failure, the Stockholder could have avoided all or a portion
of the Tax liability in question.
(b) In the case of an audit or administrative or judicial proceeding that
relates to periods ending on or before the Closing Date, the Stockholder shall
have the right at its expense to participate in and control the conduct of such
audit or proceeding; Parent also may participate in any such audit or proceeding
and, if the Stockholder does not assume the defense of any such audit or
proceeding, Parent may defend the same in such manner as it may deem
appropriate, including, but not limited to, settling such audit or proceeding
after giving ten days' prior written notice to the Stockholder setting forth the
terms and conditions of settlement. In the event that issues relating to a
potential adjustment for which the Stockholder would be liable are required to
be dealt with in the same proceeding as separate issues relating to a potential
adjustment for which Parent would be liable, Parent shall have the right, at its
expense, to control the audit or proceeding with respect to the latter issues.
(c) With respect to any Tax Claim related to a Straddle Period for which
both the Stockholder and Parent or the Company, WW or any Subsidiary could be
liable, each party may participate in the audit or proceeding, and (ii) the
audit or proceeding shall be controlled by that
-70-
party which would bear the burden of the greater portion of the sum of the
adjustment based on the principles set forth in Section 9.1(b) hereof.
(d) If as a result of any Tax Claim or amended Tax Return, there is any
change after the Closing Date in an item of income, gain, loss, deduction or
credit that results in an increase in a Tax liability for which the Stockholder
would otherwise be liable pursuant to Section 9.1(a), and such change results in
a decrease in the Tax liability of Parent or any affiliate or successor thereof
for any taxable year or period beginning after the Closing Date or for the
portion of any Straddle Period beginning after the Closing Date, the Stockholder
shall not be liable pursuant to Section 9.1(a) with respect to such increase to
the extent of such decrease. If as a result of any Tax Claim or amended Tax
Return, there is any change after the Closing Date in an item of income, gain,
loss, deduction or credit that results in an increase in a Tax liability for
which Parent would otherwise be liable pursuant to Section 9.1(a), and such
change results in a decrease in the Tax liability of the Stockholder or any
affiliate or successor thereof for any taxable year or period ending on or
before the Closing Date or for the portion of any Straddle Period ending on the
Closing Date (other than by reason of a carryback of losses or deductions),
Parent shall not be liable pursuant to Section 9.1(a) with respect to such
increase to the extent of such decrease.
(e) Neither Parent nor the Stockholder shall enter into any compromise or
agree to settle any Tax Claim which would adversely affect the other party for
such year or a subsequent year without the written consent of the other party,
which consent may not be unreasonably withheld. Parent and the Stockholder agree
to cooperate, and Parent agrees to cause the Company, WW and any Subsidiary to
cooperate, in the defense against or compromise of any Tax Claim.
9.5 Conveyance Taxes. The Stockholder and Parent shall each pay one-half
of any real property transfer or gains, sales, use, transfer, value added, stock
transfer, and stamp taxes, any transfer, recording, registration, and other
fees, and any similar Taxes which become payable in connection with the
transactions contemplated by this Agreement, other than transfers of assets
contemplated by Section 5.14 hereof ("Transfer Taxes"). Notwithstanding Section
9.2, which shall not apply to Returns relating to Transfer Taxes, any Returns
that must be filed in connection with Transfer Taxes shall be prepared and filed
when due by the party primarily or customarily responsible under the applicable
local law for filing such Returns, and such party will use its reasonable
efforts to provide such Returns to the other party at least 10 days prior to the
due date of such Returns.
9.6 Miscellaneous
(a) Except as otherwise required by applicable law, the Stockholder and
Parent agree to treat all payments made by either of them to or for the benefit
of the other (including any payments to the Company, WW or any Subsidiary) under
this Article IX and under other indemnity provisions of this Agreement as
adjustments to the Purchase Price for Tax purposes.
-71-
(b) Any tax sharing agreement, arrangement or policy (whether written or
oral) between the Stockholder and the Company, WW or any Subsidiary shall be
terminated immediately prior to the Closing.
(c) Notwithstanding any provision in this Agreement to the contrary, the
obligations of the Stockholder to indemnify and hold harmless Parent, the
Company, WW and any Subsidiary pursuant to this Article IX, and the
representations and warranties contained in Section 2.8 hereof shall terminate
at the close of business on the 30th day following the expiration of the
applicable statute of limitations with respect to the Tax liabilities in
question (giving effect to any waiver, mitigation or extension thereof). The
obligations of Parent to indemnify and hold harmless the Stockholder pursuant to
this Article IX shall terminate at the close of business on the 30th day
following the expiration of the applicable statute of limitations with respect
to the Tax liabilities in question (giving effect to any waiver, mitigation or
extension thereof).
(d) Resolution of All Tax-Related Disputes. In the event that the
Stockholder and Parent cannot agree on the calculation of any amount relating to
Taxes or the interpretation or application of any provision of this Agreement
relating to Taxes, such dispute shall be resolved by a nationally recognized
accounting firm mutually agreeable to each of the Stockholder and Parent, whose
decision shall be final and binding upon all persons involved and whose expenses
shall be shared equally by the Stockholder and Parent.
(e) Notwithstanding anything to the contrary contained in this Agreement,
all matters relating to Taxes shall be governed by this Article IX. In the event
of a conflict between the provisions of this Article IX and the any other
section of this Agreement, this Article IX shall govern and control.
(f) "Tax Benefits" shall mean the sum of the amount by which the actual Tax
liability (after giving effect to any alternative minimum or similar Tax) of a
corporation to the appropriate taxing authority is reduced (including, without
limitation, by or as a result of a deduction, increase in basis, entitlement to
refund, credit or otherwise, whether available in the current taxable year, as
an adjustment to the taxable income in any other taxable year or as a
carryforward or carryback, as applicable) plus any interest (on an after-Tax
basis) from such government or jurisdiction relating to such Tax liability. For
purposes of this Agreement, a Tax Benefit shall be deemed to have been "Actually
Realized" at the time any refund of Taxes is actually received or applied
against other Taxes due, or at the time of the filing of a Tax Return (including
any Tax Return relating to estimated Taxes) on which a loss, deduction or credit
or increase in basis is applied to reduce the amount of Taxes which would
otherwise be payable. In accordance with the provisions of this paragraph (f),
Parent and the Stockholder agree that for purposes of this Agreement, where a
Tax Benefit may be realized that may result in the payment to, or reduce a
payment by, the other party hereto, each party will as promptly as practicable
take or cause its affiliates to take such reasonable or appropriate steps
(including, without limitation, the filing of an amended Tax Return or claim for
refund) to obtain at the earliest possible time any such reasonable available
Tax Benefit.
-72-
(g) For purposes of any Tax Benefit Actually Realized determined under
Section 9.6(f) of this Agreement, no later than 90 days after the filing of a
Tax Return for any taxable period that includes a date upon which any amount was
paid or accrued by Parent, the Company, WW or their respective Subsidiaries or
affiliates, on the one hand, or the Stockholder or its affiliates, on the other
hand (each an "Indemnified Party"), in respect of a claim for which the
Stockholder is required to indemnify Parent or Parent is required to indemnify
Stockholder, as the case may be, pursuant to this Agreement (the "Indemnifying
Party"), Parent shall provide Stockholder or Stockholder shall provide Parent,
as appropriate, a detailed statement (the "Tax Benefit Statement") specifying
the amount, if any, of any Tax Benefit that was Actually Realized by the
Indemnified Parties for such Tax period. To the extent that any deductions or
other Tax items (including basis) that could give rise to a Tax reduction or
savings do not result in the actual realization of such a Tax reduction or
savings in the year described in the previous sentence, this Section 9.6(g)
shall apply to each subsequent taxable period of the Indemnified Parties until
either such Tax savings are Actually Realized (resulting in a Tax Benefit) or
the losses or other carryforwards to which such deductions or other Tax items
(including basis) gave rise expire unused, if applicable. For each relevant
taxable period, the Indemnifying Party shall be provided with full access to the
non-proprietary work papers and other materials and information of the
Indemnified Parties' accountants in connection with the review of the Tax
Benefit Statement. If the Indemnifying Party disagrees in any respect with the
computation of the amount of the Tax Benefit Actually Realized set forth in the
Tax Benefit Statement, the Indemnifying Party may, on or prior to 45 days after
the receipt of the Tax Benefit Statement, deliver a notice to the Indemnified
Parties setting forth in reasonable detail the basis for the Indemnifying
Party's disagreement therewith ("Tax Benefit Dispute Notice"). If no Tax Benefit
Dispute Notice is received by the Indemnified Parties on or prior to the 45th
day after the Indemnifying Party's receipt of the Tax Benefit Statement from
Parent, the Tax Benefit Statement shall be deemed accepted by the Indemnifying
Party.
(h) Payments. Parent shall pay all amounts for indemnification for which it
is liable pursuant to this Agreement in cash; provided, however, that, if and to
the extent any such cash payment (the "Excess Cash Payment") would, in the
opinion of Skadden, cause Skadden to no longer be able to issue an opinion that
each of the Mergers will qualify as a reorganization pursuant to Section 368(a)
of the Code, Parent shall use commercially reasonable efforts to pay such Excess
Cash Payment in Parent Common Stock (valued in accordance with Section 7.2(b));
provided, further, that in no event will Parent be obligated to pay such Excess
Cash Payment in Parent Common Stock unless, in the opinion of counsel to Parent,
such payment in Parent Common Stock would be exempt from registration under the
Securities Act.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of
-73-
complete transmission) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(i) if to Parent, Metal Merger Sub or WW Merger Sub, to:
Xxxxxxxxx.xxx, Inc.
000 X. Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx,
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
and a copy to:
Fenwick & Xxxx
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
C. Xxxxx Xxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(ii) if to the Company, WW or Stockholder, to:
Cendant Corporation
0 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
-74-
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
10.2 Interpretation.
(a) The words "include," "includes" and "including" when used herein shall
be deemed in each case to be followed by the words "without limitation."
(b) As used herein, the term "Material Adverse Effect" shall mean any
change, event or effect that is materially adverse to the business, assets
(including intangible assets), financial condition, capitalization or results of
operations of an entity.
For purposes of Articles VI and VIII hereof with respect to a Material
Adverse Effect on the Company, WW or any Subsidiary (taken as a whole):
(i) if there shall be any shortfall in revenue of the Company or WW, such
shortfall shall not be deemed in and of itself, a Material Adverse Effect on the
Company.
(ii) adverse changes in the economy generally, or in the real estate,
Internet or advertising industries shall not be taken into account in
determining a Material Adverse Effect on the Company, WW and any Subsidiary
(taken as a whole) (provided that such adverse changes do not affect the Company
or WW or any of the Subsidiaries, as applicable, in a materially
disproportionate manner);
(iii) adverse changes in stock market conditions shall not be taken into
account in determining a Material Adverse Effect on the Company, WW and any
Subsidiary (taken as a whole); or
(iv) the Company's or WW's loss of suppliers, customers or employees shall
not be taken into account in determining a Material Adverse Effect on the
Company, WW and any Subsidiary (taken as a whole) (provided that this exception
shall not apply (A) to the loss of customers or suppliers caused by the
Stockholder or its affiliates, including NRT Incorporated ("NRT") or its
controlled affiliates and, in the case of customers only, subject to the
exception same provision as set forth in clause (b)(i) above, or (B) in the case
of the Company's or WW's employees, those employees hired by the Stockholder or
its affiliates without the prior written consent of Parent).
-75-
For purposes of Articles VI and VIII hereof with respect to a Material
Adverse Effect on Parent:
(i) if there shall be any shortfall in revenue of Parent, such shortfall
shall not be deemed in and of itself a Material Adverse Effect on the Company;
(ii) adverse changes in the economy generally, or in the real estate,
Internet or advertising industries shall not be taken into account in
determining a Material Adverse Effect on Parent (provided that such adverse
changes do not affect Parent in a materially disproportionate manner);
(iii) adverse changes in stock market conditions or price of Parent Common
Stock shall not be taken into account in determining a Material Adverse Effect
on Parent; or
(iv) Parent's loss of suppliers, customers or employees shall not be taken
into account in determining a Material Adverse Effect on Parent.
(c) As used herein, the term "Business Adverse Effect" shall mean (i) a
material impairment of Parent's ability to continue operating the Business
substantially as it was operated prior to the Closing; (ii) a material
impairment in Parent's ability to use the Intellectual Property substantially as
used by the Company or WW or any of the Subsidiaries prior to the Closing; or
(iii) any material liability that would be reasonably likely to have a material
adverse effect on the Company, WW or any of the Subsidiaries taken as a whole.
(d) The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 Entire Agreement; Assignment. This Agreement, the Stockholder
Disclosure Letter and Exhibits hereto, the Mutual Disclosure Agreement and the
documents and instruments and other agreements among the parties hereto
referenced herein: (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
Mergers; (b) are not intended to confer upon any other person any rights or
remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically permitted, except that Parent, Metal
Merger Sub and WW Merger Sub may assign their respective rights and delegate
their respective obligations hereunder to their respective affiliates (except
that with respect to the indemnification obligations of Stockholder set forth in
Section 7.2(a)(ii), Parent or its affiliate, as
-76-
applicable, shall have the right to assign such indemnities in whole or in part
to any third party without the consent of Stockholder).
10.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
10.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.9 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached, including Section 5.13 and Section 5.14 hereof. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.10 Attorney's Fees. If any action or other proceeding relating to the
enforcement of any provision of this Agreement is brought by any party hereto,
the prevailing party shall be entitled to recover reasonable attorney's fees,
costs and disbursements (in addition to any other relief to which the prevailing
party may be entitled).
10.11 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY FOR ANY ACTION,
-77-
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO
IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
(Remainder of page intentionally left blank.)
-78-
IN WITNESS WHEREOF, Parent, Metal Merger Sub, WW Merger Sub, the Company,
WW, CMS and Stockholder, and have caused this Agreement to be signed by their
duly authorized respective officers, all as of the date first written above.
XXXXXXXXX.XXX, INC. CENDANT CORPORATION
By: By:
------------------------------- ----------------------------
Name: Name:
------------------------------- ----------------------------
Title: Title:
------------------------------- ----------------------------
XXXX.XXX, INC. METAL ACQUISITION CORP.
By: By:
------------------------------- ----------------------------
Name: Name:
------------------------------- ----------------------------
Title: Title:
------------------------------- ----------------------------
WELCOME WAGON INTERNATIONAL INC. WW ACQUISITION CORP.
By: By:
------------------------------- ----------------------------
Name: Name:
------------------------------- ----------------------------
Title: Title:
------------------------------- ----------------------------
CENDANT MEMBERSHIP SERVICES, INC.
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
***REORGANIZATION AGREEMENT***
EXHIBIT INDEX
Exhibit A-1 Form of Master Operating Agreement
Exhibit A-2 Form of NRT Listing Agreement
Exhibit A-3 Form of iLead Agent Services Agreement
Exhibit A-4 Form of Software License Agreement (Top Producer)
Exhibit A-5 Form of Marketplace Agreement (Cendant, Century21, Coldwell Banker, ERA)
Exhibit A-6 Form of Mortgage Marketing Agreement
Exhibit A-7 Form of Purchase Agreement
Exhibit A-8 Form of Corporate Services Transition Agreement
Exhibit A-9 Form of Transaction Platform Marketing Agreement
Exhibit A-10 Form of Leased Employee Agreement
Exhibit B Form of Stockholder Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D List of Signatories to Support Agreement
Exhibit E Form of Support Agreement
Exhibit F-1(a) and (b) Forms of Tax Certificate (Stockholder)
Exhibit F-2(a) and (b) Forms of Tax Certificate (Parent, Metal Merger Sub and WW Merger Sub)
