EXECUTION COPY
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
DATED AS OF
JANUARY 31, 1997,
AMONG
iVILLAGE, INC.
HRS ACQUISITION CORPORATION
HEALTH RESPONSEABILITY SYSTEMS, INC.
THE SECURITYHOLDERS OF HEALTH RESPONSEABILITY SYSTEMS, INC.
AND
XXXXX XXXXX
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TABLE OF CONTENTS
Page
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ARTICLE I GENERAL ................................................... 1
1.1 The Merger ................................................ 1
1.2 The Effective Time of the Merger .......................... 2
1.3 Effect of Merger .......................................... 2
1.4 Charter and By-Laws of Surviving Corporation .............. 2
1.5 Taking of Necessary Action ................................ 2
1.6 Tax-Free Reorganization ................................... 2
1.7 Closing ................................................... 3
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS .............................. 3
2.1 Total Consideration ....................................... 3
2.2 Approval of Transaction; Exchange of Securities ........... 5
2.3 Escrow Deposits ........................................... 5
ARTICLE III REPRESENTATIONS AND WARRANTIES ............................ 6
3.1 Representations and Warranties of the Company, the
Shareholder and Xxxxx ..................................... 6
3.2 Several Representations and Warranties of the
Shareholder, Xxxxx and AOL ................................ 23
3.3 Representations and Warranties of Purchaser ............... 27
ARTICLE IV CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME;
ADDITIONAL AGREEMENTS ..................................... 31
4.1 Access to Records and Properties of Each Party;
Confidentiality ........................................... 31
4.2 Operation of Business of the Company ...................... 32
4.3 Negotiations With Others .................................. 32
4.4 Advice of Changes ......................................... 33
4.5 Company Financial Information Update ...................... 34
4.6 Purchaser Financial Information Update .................... 34
4.7 Legal Conditions to Merger ................................ 34
4.8 Consents .................................................. 35
4.9 Efforts to Consummate ..................................... 35
4.10 Notice of Prospective Breach .............................. 35
4.11 Public Announcements ...................................... 35
4.12 No Transfers .............................................. 36
4.13 Confidentiality ........................................... 36
ARTICLE V CONDITIONS PRECEDENT ...................................... 36
5.1 Conditions to Each Party's Obligations .................... 36
5.2 Conditions to Obligations of Purchaser and
Acquisition Sub ........................................... 37
5.3 Conditions to Obligations of the Company .................. 39
ARTICLE VI ADDITIONAL AGREEMENTS ..................................... 41
6.1 Compliance With the Code .................................. 41
6.2 Restriction on Transfer ................................... 41
6.3 Piggyback Registration .................................... 43
Page
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6.4 Disclosure of Information; Non-Competition ................ 47
6.5 Employee Options .......................................... 49
ARTICLE VII INDEMNIFICATION ........................................... 49
7.1 Definitions ............................................... 49
7.2 Indemnification Generally ................................. 50
7.3 Assertion of Claims ....................................... 50
7.4 Notice and Defense of Third Party Claims .................. 50
7.5 Survival of Representations and Warranties ................ 51
7.6 Limitation on Indemnification ............................. 52
ARTICLE VIII TERMINATION; AMENDMENT, MODIFICATION AND WAIVER ........... 53
8.1 Termination ............................................... 53
8.2 Effect of Termination ..................................... 53
ARTICLE IX MISCELLANEOUS ............................................. 54
9.1 Expenses .................................................. 54
9.2 Entire Agreement .......................................... 54
9.3 Descriptive Headings ...................................... 54
9.4 Notices ................................................... 54
9.5 Counterparts .............................................. 55
9.6 Governing Law ............................................. 56
9.7 Benefits of Agreement ..................................... 56
9.8 Pronouns .................................................. 56
9.9 Amendment, Modification and Waiver ........................ 56
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SCHEDULES
Purchaser Disclosure Schedule
Company Disclosure Schedule
Schedule 3.1(a) - Organization, Good Standing, Qualification and Power
Schedule 3.1(c) - Capital Stock, Securities
Schedule 3.1(e) - Financial Statements
Schedule 3.1(g) - Absence of Changes
Schedule 3.1(i) - Title to Assets, Properties and Rights and Related
Matters
Schedule 3.1(j) - Real Property - Owned or Leased
Schedule 3.1(k) - Intellectual Property
Schedule 3.1(l) - Company Software
Schedule 3.1(m) - Agreements
Schedule 3.1(p) - Accounts and Notes Receivable
Schedule 3.1(r) - Compliance, Governmental Authorities
Schedule 3.1(s) - Employees
Schedule 3.1(t) - Employee Benefit Plans and Contracts
Schedule 3.1(v) - Insurance
Schedule 3.1(w) - Bank Accounts; Powers of Attorney
Schedule 3.1(y) - Related Transactions
Schedule 3.1(af) - Officers and Directors
Schedule 3.1(ah) - Marketing Materials
Schedule 6.6 - Options
EXHIBITS
Exhibit A - Form of Articles of Merger
Exhibit B - [Intentionally Omitted]
Exhibit C - [Intentionally Omitted]
Exhibit D-1 - Form of Xxxxxxxx Employment Agreement
Exhibit D-2 - Form of Xxxxx Employment Agreement
Exhibit E - Form of Non-Disclosure Agreement
Exhibit F - [Intentionally Omitted]
Exhibit G-1 - Form of Xxxxxxxx Option Agreement
Exhibit G-2 - Form of Xxxxx Option Agreement
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GLOSSARY
The following terms used in this Agreement are defined in the
following Sections:
Section or
Term Other Location
---- --------------
Acquisition Sub ................................................... Caption
Acquisition Transaction ........................................... 4.3(a)
Actions ........................................................... 3.1(o)
Affiliate ......................................................... 7.1(a)
Agreement ......................................................... Preamble
Articles of Merger ................................................ Preamble
AOL ............................................................... Caption
AOL Note .......................................................... 2.2(a)
AOL Warrant ....................................................... 2.2(a)
Basket Amount ..................................................... 7.6(a)
Benefit Arrangements .............................................. 3.1(t)
Business Day ...................................................... 1.7
Charter ........................................................... 3.1(a)
Closing ........................................................... 1.7
Closing Date ...................................................... 1.7
Code .............................................................. 1.6
Commission ........................................................ 1.2
Company ........................................................... Caption
Company Balance Sheet ............................................. 3.1(e)
Company Balance Sheet Date ........................................ 3.1(e)
Company Common Stock .............................................. Preamble
Company Disclosure Schedule ....................................... 3.1
Company Expenses .................................................. 9.1
Company Financial Statements ...................................... 3.1(e)
Company Preferred Stock ........................................... 2.2(a)
Company Principals ................................................ Caption
Company Returns ................................................... 3.1(h)
Company Rights .................................................... 3.1(k)
Competitive Business .............................................. 6.4(b)
Confidential Information .......................................... 6.4(a)
Constituent Corporations .......................................... 1.1
Designated Persons ................................................ 3.1(o)
Xxxxx ............................................................. Caption
Xxxxx Employment Agreement ........................................ 5.2(o)
Effective Time .................................................... 1.2
Employee .......................................................... 3.1(t)
Employee Plans .................................................... 3.1(t)
Encumbrances ...................................................... 3.1
Equity Rights ..................................................... 2.1(a)
ERISA ............................................................. 3.1(t)
ERISA Affiliate ................................................... 3.1(t)
Escrow Agent ...................................................... 2.3(a)
Escrow Agreement .................................................. 2.3(a)
Escrow Shares ..................................................... 2.3(b)
Event of Indemnification .......................................... 7.1(b)
Executory Period .................................................. 4.1(a)
FAS No. 5 ......................................................... 3.1(f)
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Section or
Term Other Location
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Financing ......................................................... 5.1(e)
Fully Diluted Company Shares ...................................... 2.1(a)
GAAP .............................................................. 3.1(e)
Governmental Authority ............................................ 3.1(o)
Indemnified Persons ............................................... 7.1(c)
Indemnifying Persons .............................................. 7.1(d)
Intellectual Property Rights ...................................... 3.1(k)
Interested Securityholder ......................................... 3.1(ad)
Leased Real Property .............................................. 3.1(j)
Leases ............................................................ 3.1(j)
Liability ......................................................... 3.1(f)
Licensed Software ................................................. 3.1(l)
LOI Deposit ....................................................... 4.3(b)
LOI Escrow Agent .................................................. 2.3(c)
LOI Escrow Agreement .............................................. 2.3(c)
Losses ............................................................ 7.1(e)
Material Adverse Change ........................................... 3.1(g)
Material Adverse Effect ........................................... 3.1(a)
Merger ............................................................ 1.1
Merger Shares ..................................................... 2.1(b)
Non-Disclosure Agreements ......................................... 5.2(p)
Offering Memorandum ............................................... 3.3(f)
OGK ............................................................... 5.3(d)
Option Agreement .................................................. 5.3(f)
Option Agreements ................................................. 5.3(f)
Other Shares ...................................................... 6.3(a)
Owned Software .................................................... 3.1(l)
Party ............................................................. 4.7
Preferred Stock ................................................... 3.3(c)
Primary Shares .................................................... 6.3(a)
Purchaser ......................................................... Caption
Purchaser Common Stock ............................................ Preamble
Purchaser Disclosure Schedule ..................................... 3.3
Registrable Founder's Shares ...................................... 6.3(a)
Registrable Shares ................................................ 6.3(a)
Restricted Securities ............................................. 6.2(a)
Rule 144 .......................................................... 6.3(a)
Schedule of Expenses .............................................. 5.2(g)
Series A Preferred Stock .......................................... 3.3(c)
Series B Preferred Stock .......................................... 3.3(c)
Series B-1 Preferred Stock ........................................ 3.3(c)
Shareholder ....................................................... Caption
Xxxxxxxx Employment Agreement ..................................... 5.2(o)
Site .............................................................. 3.1(z)
Software .......................................................... 3.1(l)
SPPT .............................................................. 5.2(d)
Stockholders' Agreement ........................................... 5.2(n)
Subject Business .................................................. 6.4(a)
Subsidiary ........................................................ 3.1(b)
Survival Date ..................................................... 7.5
Surviving Corporation ............................................. 1.1
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Section or
Term Other Location
---- --------------
Tax ............................................................... 3.1(h)
Taxes ............................................................. 3.1(h)
Third Party Claim ................................................. 7.4
to the best knowledge of the Company .............................. 3.1(ah)
Transaction Costs ................................................. 9.1
Transfer .......................................................... 6.2(a)
transferee ........................................................ 3.1(h)
Virginia Statute .................................................. Preamble
Warrant Shares .................................................... 3.3(c)
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AGREEMENT AND PLAN OF REORGANIZATION AND
MERGER dated as of January 31, 1997, among
iVILLAGE, INC., a Delaware corporation
("Purchaser"), HEALTH RESPONSEABILITY
SYSTEMS, INC., a Virginia corporation (the
"Company"), XXXX XXXXXXXX, the sole
shareholder of the Company (the
"Shareholder"), HRS ACQUISITION
CORPORATION, a Virginia corporation and a
direct, wholly-owned subsidiary of
Purchaser ("Acquisition Sub"), AMERICA
ONLINE, INC. ("AOL"), a Delaware
corporation and the holder of the AOL
Warrant (as defined below), and XXXXX
XXXXX, the Chief Executive Officer of the
Company ("Xxxxx" and together with the
Shareholder, the "Company Principals").
The Boards of Directors of Purchaser, Acquisition Sub and the
Company have each duly approved and adopted this Agreement and Plan of
Reorganization and Merger (the "Agreement"), the Articles of Merger in
substantially the form of Exhibit A attached hereto (the "Articles of Merger")
and the proposed merger of the Company with and into Acquisition Sub in
accordance with this Agreement, the Articles of Merger and the Virginia Stock
Corporation Act (the "Virginia Statute"), whereby, among other things, the
issued and outstanding shares of common stock, $.01 par value, of the Company
(the "Company Common Stock"), will be exchanged and converted into shares of
common stock, $.0005 par value, of Purchaser (the "Purchaser Common Stock") in
the manner set forth in Article II hereof and in the Articles of Merger, upon
the terms and subject to the conditions set forth in this Agreement and the
Articles of Merger.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the Articles of Merger and the representations,
warranties, covenants, agreements, conditions and promises contained herein and
therein, the parties hereby agree as follows:
ARTICLE I
GENERAL
1.1. The Merger. In accordance with the provisions of this
Agreement, the Articles of Merger, and the Virginia Statute, the Company shall
be merged with and into Acquisition Sub (the
"Merger"), which at and after the Effective Time shall be, and is sometimes
hereinafter referred to as the "Surviving Corporation." For convenience of
reference, Acquisition Sub and the Company are sometimes collectively
hereinafter referred to as the "Constituent Corporations."
1.2. The Effective Time of the Merger. Subject to the
provisions of this Agreement, the Articles of Merger shall be executed and
delivered to and filed with the State Corporation Commission of the
Commonwealth of Virginia (the "Commission") by each of the Constituent
Corporations on the Closing Date in the manner provided under Section 13.1-720
of the Virginia Statute. The Merger shall become effective (the "Effective
Time") upon the issuance by the Commission of a Certificate of Merger (as
defined in the Virginia Statute) in accordance with Virginia Statute.
1.3. Effect of Merger. At the Effective Time, the separate
existence of the Company shall cease and the Company shall be merged with and
into the Surviving Corporation, and the Surviving Corporation shall possess all
of the rights, privileges, powers and franchises as well of a public as of a
private nature, and be subject to all the restrictions, disabilities and duties
of each of the Constituent Corporations as provided in Section 13.1-721 of the
Virginia Statute.
1.4. Charter and By-Laws of Surviving Corporation. From and
after the Effective Time and pursuant to the Articles of Merger: (i) the Charter
of Acquisition Sub shall be the Charter of the Surviving Corporation, unless
and until altered, amended or repealed as provided in the Virginia Statute,
(ii) the By-Laws of Acquisition Sub shall be the By-Laws of the Surviving
Corporation, unless and until altered, amended or repealed as provided in the
Virginia Statute, the Charter or such By-Laws, (iii) the directors of
Acquisition Sub shall be the directors of the Surviving Corporation, unless and
until removed, or until their respective terms of office shall have expired, in
accordance with the Virginia Statute, the Charter and the By-Laws of the
Surviving Corporation, as applicable and (iv) the officers of Acquisition Sub
shall be the officers of the Surviving Corporation, unless and until removed,
or until their terms of office shall have expired, in accordance with the
Virginia Statute, the Charter and the By-Laws of the Surviving Corporation, as
applicable.
1.5. Taking of Necessary Action. Prior to the Effective Time,
the parties hereto shall do or cause to be done all such acts and things as may
be necessary or appropriate in order to effectuate the Merger as expeditiously
as reasonably practicable, in accordance with this Agreement, the Articles of
Merger and the Virginia Statute.
1.6. Tax-Free Reorganization. For Federal income tax
purposes, the parties intend that the Merger be treated as a tax-free
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), by
reason of Section 368(a)(2)(D) of the Code. Each party shall not take a
position on any tax return or reports inconsistent with this Section 1.6, and
shall use their reasonable efforts to maintain such reporting in the context of
an audit. Each party shall give the other prompt notice of any challenges or
investigations undertaken by any taxing agency in connection with such
reporting, and shall keep such other party fully informed of all aspects of
such ongoing challenge or investigation.
1.7. Closing. Unless this Agreement shall have been
terminated and the transactions contemplated by this Agreement abandoned
pursuant to the provisions of Article VIII, and subject to the provisions of
Article V, the closing of the Merger (the "Closing") will take place at 10:00
a.m. (New York time) on a date (the "Closing Date") to be mutually agreed upon
by the parties, which date shall be not later than the third Business Day after
all the conditions set forth in Article V shall have been satisfied (or waived
in accordance with Section 9.9, to the extent the same may be waived), unless
another date is agreed to in writing by the parties. The Closing shall take
place at the offices of X'Xxxxxxxx Graev & Karabell, LLP, 00 Xxxxxxxxxxx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, unless another place is agreed to in writing by the
parties. As used herein, the term "Business Day" shall mean any day other than
a Saturday, Sunday or day on which banks are permitted to close in the City and
State of New York.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
2.1. Total Consideration.
(a) Payment of Consideration. The entire consideration
payable by Purchaser with respect to all outstanding shares of capital stock of
the Company and for all options, warrants, rights, calls, commitments or
agreements of any character to which the Company is a party or by which it is
bound calling for the issuance of shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for, or representing
the right to purchase or otherwise receive, directly or indirectly, any such
capital stock, or other arrangement to acquire, at any time or under any
circumstance, capital stock of the Company or any such other securities (such
options, warrants, rights, calls, commitments, agreements or arrangements being
sometimes hereinafter collectively referred to as "Equity Rights"; and the
Equity Rights, together with all such outstanding shares of capital stock of
the Company, being sometimes collectively hereinafter referred to as the "Fully
Diluted Company Shares") shall be an aggregate consideration payable as
follows:
(i) an aggregate amount of $4,600,000 in cash;
and
(ii) 1,038,000 shares of Purchaser Common Stock,
payable or issuable (as the case may be) as provided in Section 2.1(b).
(b) Effect on Capital Stock. At the Effective Time, subject
and pursuant to the terms and conditions of this Agreement and the Articles of
Merger, by virtue of the Merger and without any action on the part of the
Constituent Corporations or the holders of the capital stock of the Constituent
Corporations:
(i) The shares of Company Common Stock issued and outstanding
as of the Effective Time shall be exchanged for and converted into
the right to receive shares of Purchaser Common Stock and/or cash as
follows:
(A) all shares of Company Common Stock held by the
Shareholder shall be exchanged and converted into the right to
receive in the aggregate: (1) $2,600,000 in cash, and (2) 1,038,000
shares of Purchaser Common Stock; and
(B) all Equity Rights held by AOL shall be surrendered and
cancelled in exchange for the right to receive in the aggregate
$2,000,000 in cash.
(ii) In the event that any time during the Executory Period,
the Company shall issue any capital stock or Equity Rights, the foregoing
allocations of consideration shall be proportionately and equitably
adjusted and reallocated among all holders of Company Common Stock.
(iii) All Equity Rights not theretofore converted, exercised or
exchanged for such shares shall cease to be outstanding and shall be
canceled, terminated and extinguished effective immediately upon the
Effective Time.
(iv) Each share of Company Common Stock that is authorized but
unissued shall cease to exist and no Purchaser Common Stock or other
consideration shall be delivered in exchange therefor.
(v) For convenience of reference, the shares of Purchaser
Common Stock to be issued upon the exchange and conversion of Company
Common Stock in accordance with this Section 2.1 are sometimes
hereinafter collectively referred to as the "Merger Shares."
(c) No Liability. Neither Purchaser, Acquisition Sub nor
the Company shall be liable to any holder of shares of and/or
rights to Company Common Stock or Purchaser Common Stock, as the case may be,
for shares (or dividends or distributions with respect thereto) and/or rights
to such shares of Purchaser Common Stock to be issued in exchange for Company
Common Stock and/or rights thereto pursuant to this Section 2.1, if, on or
after the expiration of six months following the Effective Date, such shares
and/or rights thereto are delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
2.2. Approval of Transaction; Exchange of Securities.
(a) AOL Warrant and Note. Reference is made to that certain
warrant dated Xxxxx 00, 0000 (xxx "XXX Xxxxxxx") for Series A Preferred Stock
of the Company (the "Company Preferred Stock") and the note of the Company,
dated April 2, 1995 (the "AOL Note") made in connection therewith in the
original principal amount of $270,000. Immediately prior to the Effective Time
and subject to and contingent upon the effectiveness of the Merger, AOL shall
surrender, terminate and cancel the AOL Note and relinquish its security
interest in the assets of the Company pursuant to the security agreement
entered into in connection with the AOL Note (which will concurrently be
terminated) and the AOL Warrant in exchange for the right to receive $2,000,000
in cash at Closing as full consideration.
(b) Agreement to Vote Shares. Prior to the Effective Time
and subject to and contingent upon the effectiveness of the Merger, the
Shareholder shall vote all of her shares of Company Common Stock, or execute
and deliver a written consent in favor of the approval of this Agreement, the
Articles of Merger and the Merger and any matter that could reasonably be
expected to facilitate the Merger.
2.3. Escrow Deposits.
(a) Escrow Agreement. Reference is made to the Escrow
Agreement which shall be dated as of the Effective Time among the Shareholder,
the Purchaser and the escrow agent named therein (the "Escrow Agent") in a form
mutually acceptable to the parties hereto (the "Escrow Agreement"). The Escrow
Agreement is being entered into for the purpose of securing the indemnification
obligations of the Company Principals under Article VII.
(b) Escrow Deposit. At the Effective Time, Purchaser shall
cause to be deposited with the Escrow Agent to be held by the Escrow Agent and
distributed subject to the terms of the Escrow Agreement (i) $130,000 from the
Shareholder in cash and (ii) certificates representing 103,800 Merger Shares
(of which all of the cash and all of the Purchaser Common Stock shall be
deposited on behalf of the Shareholder), together with stock powers duly
endorsed in blank for transfer on behalf of the Shareholder, who by her
execution and delivery of this Agreement, hereby authorizes and directs
Purchaser to make such deposit on her behalf (collectively, the "Escrow
Shares").
(c) Letter of Intent Escrow. Reference is also made to that
certain escrow agreement dated January 31, 1997 (the "LOI Escrow Agreement")
among the Company, the Purchaser and the escrow agent named therein (the "LOI
Escrow Agent"). The monies deposited with the LOI Escrow Agent pursuant to the
terms of the LOI Escrow Agreement (minus any and all fees and expenses payable
to the LOI Escrow Agent pursuant to the LOI Escrow Agreement) will, at the
Effective Time, be released and distributed by the LOI Escrow Agent pursuant to
the terms of the LOI Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company, the
Shareholder and Xxxxx. The Company and the Company Principals hereby jointly
and severally represent and warrant to Purchaser and Acquisition Sub that,
except as disclosed in the disclosure schedule dated the date hereof, certified
as being such disclosure schedule by the President and Chief Executive officer
of the Company and delivered by the Company to Purchaser and Acquisition Sub
simultaneously herewith (which disclosure schedule shall reference with
specificity the representations and warranties to which the disclosures
contained therein relate) (the "Company Disclosure Schedule"):
(a) Organization; Good Standing; Qualification and Power.
The Company (i) is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia, (ii) has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted and as proposed to
be conducted to enter into this Agreement and the Articles of Merger, to
perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby and (iii) is duly qualified and in
good standing to do business in those jurisdictions listed in the Company
Disclosure Schedule and in all other jurisdictions in which the failure to be
so qualified and in good standing could reasonably be expected to have a
material adverse effect on the business, properties, Liabilities, assets,
operations, results of operations, condition (financial or otherwise) or
affairs (a "Material Adverse Effect") of the Company. The Company has delivered
to Purchaser true and complete copies of the Charter and By-Laws of the
Company, in each case as amended to the date hereof. As used herein, "Charter"
shall mean, with respect to any corporation, those instruments that at the time
constitute its corporate charter as filed or recorded under the general
corporation law of the jurisdiction of its incorporation, including the
articles or certificate of incorporation or organization, and any amendments
thereto, as the same may have been restated, and any amendments thereto
(including any articles or certificates of merger or consolidation or
certificates of designation or similar
instruments which effect any such amendment) which became effective after the
most recent such restatement.
(b) Equity Investments. The Company has never had, nor does
it currently have, any Subsidiaries, nor has it ever owned, nor does it
currently own, any capital stock or other proprietary interest, directly or
indirectly, in any corporation, association, trust, partnership, joint venture
or other entity. As used herein, a "Subsidiary" of any corporation means
another corporation an amount of whose voting securities sufficient to elect at
least a majority of its Board of Directors is owned directly or indirectly by
such corporation.
(c) Capital Stock; Securities. The authorized capital stock
of the Company consists of 10,000 shares of Company Common Stock, of which
1,000 shares are outstanding. The Company has not authorized nor reserved any
shares of Company Preferred Stock for issuance upon exercise of the AOL
Warrant. All outstanding shares of Company Common Stock are validly issued and
outstanding, fully paid and non-assessable and not subject to preemptive
rights. The Company Disclosure Schedule sets forth a true and complete list of
the holders of shares of Company Common Stock and the number and class or
series of such shares owned of record and beneficially by each such holder.
There are no Equity Rights (other than the AOL Warrant). Except as set forth in
the Company Disclosure Schedule, there are no voting trusts, voting agreements,
proxies, first refusal rights, first offer rights, co-sale rights, transfer
restrictions or other agreements, instruments or understandings (whether
written or oral, formal or informal) with respect to the voting, transfer or
disposition of Company Common Stock to which the Company or any Company
Principal is a party or by which it is bound, or, to the best knowledge of the
Company, among or between any persons other than the Company. All shares of
Company capital stock and all other securities previously issued by the Company
have been issued in compliance with and pursuant to an exemption from all
applicable Federal and State securities or "blue sky" laws.
(d) Authority; No Consents. The execution, delivery and
performance by the Company of this Agreement, the Articles of Merger and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of the
Company; and this Agreement and the Articles of Merger have been, and the
Articles of Merger when executed and delivered by the Company will be duly and
validly executed and delivered by the Company, and this Agreement and the
Articles of Merger are the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
subject to applicable bankruptcy, reorganization, insolvency, moratorium and
other laws affecting creditors, rights and remedies generally from time to time
in effect and to general equitable principles. Neither the execution, delivery
and performance of this Agreement or the Articles of Merger nor the
consummation by the Company of the transactions contemplated hereby or thereby
nor compliance by the
Company with any provision hereof or thereof will (A) conflict with, (B) result
in any violations of, (C) cause a default under (with or without due notice,
lapse of time or both), (D) give rise to any right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of any
material benefit under or (E) result in the creation of any Encumbrance on or
against any assets, rights or property of the Company under any term, condition
or provision of (x) any instrument or agreement to which the Company is a party,
or by which the Company or any of its properties, assets or rights may be
bound, (y) any law, statute, rule, regulation, order, writ, injunction, decree,
permit, concession, license or franchise of any Governmental Authority
applicable to the Company or any of its properties, assets or rights or (z) the
Company's Charter or By-Laws. Except as contemplated by this Agreement, no
permit, authorization, consent or approval of or by, or any notification of or
filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by the Company of this
Agreement or the Articles of Merger or the consummation of the transactions
contemplated hereby or thereby, except for (i) the filing of the Articles of
Merger with the Secretary of State of the State of Virginia and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business and (ii) such other consents, waivers, authorizations,
filings, approvals and registrations which if not obtained or made would not
have a Material Adverse Effect on the Company or impair the ability of the
Company and the Company Principals to consummate the transactions contemplated
by this Agreement or the Articles of Merger, including, without limitation, the
Merger.
(e) Financial Information.
(i) The Company has previously delivered to Purchaser the
following financial statements (collectively, the "Company Financial
Statements"), the unaudited balance sheets of the Company as at December
31, 1995 and December 31, 1996 (the "Company Balance Sheets"; and the date
of the Company 1996 balance sheet being the "Company Balance Sheet Date"),
and the related statements of income, respective years then ended
(including footnotes thereto).
(ii) The Company Financial Statements (A) are in accordance
with the books and records of the Company, (B) fairly present the
financial condition of the Company as at the respective dates indicated
and the results of operations of the Company for the respective periods
indicated and (C) except as set forth in the Company Disclosure Schedule,
have been prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP").
(f) Absence of Undisclosed Liabilities. At the Company
Balance Sheet Date, (i) the Company had no liability or obligation of any
nature (whether known or otherwise
discoverable, matured or unmatured, fixed or contingent, secured or unsecured,
accrued, absolute or otherwise ("Liability")) required to be set forth on the
Company Balance Sheet in order for the Company Balance Sheet to fairly present
the financial condition of the Company at the respective dates thereof in
accordance with GAAP, which was not provided for or disclosed thereon, and (ii)
all liability reserves established by the Company and set forth thereon were
adequate for all such Liabilities at the respective dates thereof. There were
no material loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board
in March, 1975 ("FAS No. 5")) which were not adequately provided for on the
Company Balance Sheet as required by FAS No. 5.
(g) Absence of Changes. Since the Company Balance Sheet
Date, the Company has been operated in the ordinary course, consistent with
past practice, and there has not been:
(i) any material adverse change in the business, assets, properties,
Liabilities, operations, results of operations, condition (financial or
otherwise) or affairs (a "Material Adverse Change") of the Company;
(ii) any damage, destruction or loss, whether or not covered by
insurance, having or which could reasonably be expected to have a Material
Adverse Effect;
(iii) (A) any Liability created, assumed, guaranteed or incurred,
or (B) any transaction, contract or commitment entered into, by the
Company, in the case of either clause (A) or (B) other than in the
ordinary course of business;
(iv) any payment, discharge or satisfaction of any material
Encumbrance by the Company or any cancellation by the Company of any
material debts or claims or any amendment, termination or waiver of any
rights of material value to the Company;
(v) any declaration, setting aside or payment of any dividend or
other distribution of any assets of any kind whatsoever with respect to
any shares of the capital stock of the Company, or any direct or indirect
redemption, purchase or other acquisition of any such shares of the
capital stock of the Company;
(vi) any stock split, reverse stock split, combination,
reclassification or recapitalization of any Company Common Stock, or any
issuance of any other security in respect of or in exchange for, any
shares of Company Common Stock;
(vii) any issuance by the Company of any shares of its capital stock
or any debt security or any Equity Rights;
(viii) any license, sale, transfer, pledge, mortgage or other
disposition of any material tangible or intangible asset (including any
Intellectual Property Rights) of the Company;
(ix) any termination of, or written indication of an intention to
terminate or not renew, any material contract, license, commitment or
other agreement between the Company and any other person;
(x) any material write-down or write-up of the value of any asset
of the Company, or any material write-off of any accounts receivable or
notes receivable of the Company or any portion thereof;
(xi) any increase in or modification of compensation payable or to
become payable to any director, officer, employee, consultant or agent of
the Company, or the entering into of any employment contract with any
officer or employee;
(xii) any increase in or modification or acceleration of any benefits
payable or to become payable under any bonus, pension, severance,
insurance or other benefit plan, payment or arrangement (including, but
not limited to, the granting of stock options, restricted stock awards or
stock appreciation rights) made to, for or with any director, officer,
employee, consultant or agent of the Company;
(xiii) the making of any loan, advance or capital contribution to or
investment in any person or the engagement in any transaction with any
employee, officer, director or securityholder of the Company, other than
advances to employees in the ordinary course of business for travel and
similar business expenses;
(xiv) any change in the accounting methods or practices followed by
the Company or any change in depreciation or amortization policies or
rates theretofore adopted;
(xv) any forward sales commitments at a price less than the Company's
cost of sales for such commitments;
(xvi) any termination of employment of any officer or key employee of
the Company or any expression of intention by any officer or key employee
of the Company to resign from such office or employment with the Company;
(xvii) any amendments or changes in the Company's Charter or By-Laws;
(xviii) any labor dispute or any union organizing campaign;
(xix) the commencement of any litigation or other action by the
Company or the commencement or threat of commencement of any litigation or
other action against the Company; or
(xx) any agreement, understanding, authorization or proposal, whether
in writing or otherwise, for the Company to take any of the actions
specified in items (i) through (xx) above.
(h) Tax Matters. The Company: (i) has filed in a timely and
proper manner, consistent with then applicable laws, all Federal, state, local
and foreign Tax returns and Tax reports required to be filed by them through
the Closing Date, taking into account all appropriate extensions (the "Company
Returns"), with the appropriate governmental agencies in all jurisdictions in
which Company Returns are required to be filed and has paid all amounts shown
thereon to be due; and (ii) has paid all Taxes required to have been paid on or
before the Closing Date. All Taxes attributable to all taxable periods of the
Company ending on or before the Closing Date, to the extent not required to
have been previously paid have been adequately provided for on the Company
Balance Sheet. The Company will not accrue a Tax liability from the date of the
Company Balance Sheet up to and including the Closing Date, other than a Tax
liability accrued in the ordinary course of business. No Federal, state, local
or foreign tax audits or other administrative or court proceedings are
presently pending with respect to any of the Company Returns. The Company has
not been notified by any taxing authority that any such audit or proceeding is
going to be commenced. No waivers of statutes of limitations have been given or
requested with respect to the Company. Except as contested in good faith and
disclosed in the Company Disclosure Schedule, any deficiencies asserted or
assessments (including interest and penalties) made through the date of the
Company Balance Sheet as a result of any examination by the Internal Revenue
Service or by any other taxing authorities of any Company Return have been
fully paid or are adequately provided for on the Company Balance Sheet. No
additional Taxes have been proposed or asserted since the Company Balance Sheet
Date. The Company has not made an election to be treated as a "consenting
corporation" under Section 341(f) of the Code. The Company has not and will
not, on or before the Closing Date, incur any Tax liability pursuant to Section
541 of the Code. The Company has not agreed to, nor is required to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise. The Company is not now, nor has it ever been, a member of
a consolidated or combined group for Federal, state, local or foreign tax
purposes nor has it ever been included in a consolidated or combined tax return
for Federal, state, local or foreign tax purposes. The Company is not a party
to any agreement or contract with any "disqualified individual" (as defined in
Section 280G (c) of the Code) that, individually or taking into account any
other agreements or contracts currently in effect between the Company and such
disqualified individual,
will result in the disallowance of any deduction for any payment under such
agreement or contract as an "excess parachute payment" (as defined in Section
280G(b)(1) of the Code). The Company and each of its predecessors have complied
with all applicable Laws relating to the payment and withholding of Taxes, and
has withheld and paid over all amounts required by Laws to be withheld and paid
from the wages and salaries of employees, and the Company is not liable for any
Taxes for failure to comply with such Laws. As used in this Agreement, "Tax"
means any of the Taxes and "Taxes" means, with respect to any entity, (A) all
income taxes (including any tax on or based upon net income, gross income,
income as specially defined, earnings, profits or selected items of income,
earnings or profits) and all gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, alternative or add-on
minimum taxes, customs duties and other taxes, fees, assessments or charges of
any kind whatsoever, together with all interest and penalties, additions to
tax and other additional amounts imposed by any taxing authority (domestic or
foreign) on such entity and (B) any liability for the payment of any amount of
the type described in the immediately preceding clause (A) as a result of (i)
being a "transferee" (within the meaning of Section 6901 of the Code or any
other applicable law) of another entity, (ii) a member of an affiliated or
combined group or (iii) any contractual obligation.
(i) Title to Assets, Properties and Rights and Related
Matters. The Company has good and marketable title to all assets, properties
and interests in properties, real, personal or mixed, reflected, respectively,
on the Company Balance Sheet acquired after the Company Balance Sheet Date
(except property sold or otherwise disposed of since the Company Balance Sheet
Date, in the ordinary course of business and accounts receivable and notes
receivable paid in full subsequent to the Company Balance Sheet Date), or not
so reflected therein but used or useful in the conduct or operation of the
Company's business free and clear of all Encumbrances, of any kind or character,
except for (i) those Encumbrances set forth in the Company Disclosure Schedule
and (ii) liens for current taxes not yet due and payable and (iii) statutory
mechanics and materialmen's liens. The assets, properties and interests in
properties of the Company are in good operating condition and repair in all
material respects (ordinary wear and tear excepted). The assets, properties and
interests in properties of the Company to be owned, leased or licensed by the
Surviving Corporation at the Effective Time shall include all assets, properties
and interests in properties (real, personal and mixed, tangible and intangible)
and all rights, leases, licenses and other agreements necessary to enable the
Surviving Corporation to carry on the business of the Company as presently
conducted by the Company. As used herein, the term "Encumbrances" shall mean and
include security interests, mortgages, liens, pledges, guarantees, charges,
easements, reservations, restrictions, clouds, equities, rights of way, options,
rights of first refusal and all other
encumbrances, whether or not relating to the extension of credit or the
borrowing of money. Acquisition Sub will acquire at least 90% of the fair
market value of the net assets and at least 70% of the fair market value of the
gross assets held by the Company immediately prior to the Effective Date.
(j) Real Property-Owned or Leased. The Company does not
currently own, nor has it or any of its predecessors ever owned, any real
property. The Company Disclosure Schedule contains a list and brief description
of (i) all real property leased by the Company, together with all buildings and
other structures and material improvements located on such real property (the
"Leased Real Property"), and (ii) with respect to each lease covering the
Leased Real Property (collectively, the "Leases"), (A) the name of the lessor,
(B) any requirement of consent of the lessor to assignment (including
assignment by way of merger or change of control) and (C) the termination date
of the Lease. The Company is the owner and holder of all the leasehold estates
purported to be granted by each Lease and all Leases are in full force an d
effect and constitute valid and binding obligations of the Company. The Company
has made available to Purchaser true and complete copies of all Leases. Except
as set forth in the Company Disclosure Schedule, all improvements included in
the Leased Real Property are in good operating condition and repair in all
material respects (ordinary wear and tear excepted) and there does not exist any
condition which interferes with the economic value or use of such property and
improvements.
(k) Intellectual Property.
(i) The Company owns free and clear of all Encumbrances, has the
exclusive right to use, sell, license (or sublicense) transmit, broadcast,
deliver (electronically or otherwise) and dispose-of, and has the right to
bring actions for the infringement of, all Intellectual Property Rights
(other than the Licensed Software) necessary or required for the conduct
of its business as currently conducted and as proposed to be conducted
(collectively, the "Company Rights") (which rights are described in the
Company Disclosure Schedule);
(ii) the execution, delivery and performance of this Agreement and
the Articles of Merger and the consummation of the Merger and the
consummation of the other transactions contemplated hereby and thereby,
will not breach, violate or conflict with any instrument or agreement
governing any Company Rights, will not cause the forfeiture or termination
or give rise to a right of forfeiture or termination of any Company Right
or in any way impair the right of the Company or the Surviving Corporation
to use, sell, license (or sublicense), transmit, broadcast, deliver
(electronically or otherwise) or dispose of or to bring any action for the
infringement of, any Company Right or portion thereof;
(iii) there are no royalties, honoraria, fees or other payments
payable by the Company to any person by reason of the ownership, use,
license (or sublicense), sale, transmission, broadcast, delivery
(electronically or otherwise) or disposition of the Company Rights;
(iv) neither the manufacture, marketing, license, sale, transmission,
broadcast, distribution, delivery (electronically or otherwise) or use of
any product or service currently or currently proposed to be licensed,
sold, marketed, transmitted, broadcast, distributed, delivered
(electronically or otherwise) or used by the Company or currently under
development by the Company, violates any license or agreement of the
Company with any third party or infringes any common law or statutory
rights of any other party, including, without limitation, rights relating
to defamation, contractual rights, Intellectual Property Rights and rights
of privacy or publicity; nor, to the best knowledge of the Company, is any
third party infringing upon, or violating any license or agreement with
the Company relating to, any Company Right; and, to the best knowledge of
the Company, there is no pending or threatened claim or litigation
contesting the validity, ownership or right to use, sell, license,
transmit, broadcast, distribute, deliver (electronically or otherwise) or
dispose of any Company Right, nor to the best knowledge of the Company, is
there a basis for any such claim, nor has the Company received any notice
asserting that any Company Right or the proposed use, manufacture, sale,
license, transmission, broadcast, distribution, delivery (electronically
or otherwise) or disposition thereof conflicts or will conflict with the
rights of any other party, nor, to the best knowledge of the Company, is
there any basis for any such assertion; and
(v) The Company has made and will continue through the Effective Time
to take all reasonable steps necessary, appropriate or desirable to
safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all Company Rights.
The Company Disclosure Schedule contains a true and complete list of all (A) of
the Company's patents, patent applications, trademarks, trademark applications,
trade names, service marks, service xxxx applications, copyrights and copyright
applications and (B) other filings and formal actions made or taken pursuant to
Federal, state, local and foreign laws by the Company to perfect or protect its
interest in the Company Rights. As used herein, the term "Intellectual Property
Rights" shall mean all industrial and intellectual property rights, including,
without limitation, patents, patent applications, patent rights, trademarks,
trademark applications, trade names, service marks, service xxxx applications,
copyrights, copyright applications, franchises, licenses, databases, computer
programs and other computer software (including, but not limited to, the
Software),
user interfaces, know-how, trade secrets, customer lists, proprietary
technology, processes and formulae, source code, object code, algorithms,
architecture, structure, display screens, layouts, development tools,
instructions, templates, marketing materials, inventions, trade dress, logos
and designs and all documentation and media constituting, describing or
relating to the foregoing.
(l) Company Software.
(i) The Company Disclosure Schedule sets forth a true and complete
list and description of all software systems and applications (A) designed
or developed by employees of the Company or by consultants or independent
contractors on the Company's behalf (the "Owned Software") or (B) licensed
by the Company from any third party or constituting "off-the-shelf"
software (the "Licensed Software"), in each case that is manufactured or
used by the Company in the operation of its business or marketed, licensed
or sold or proposed to be marketed, licensed or sold by the Company to
third parties (collectively, the "Software") and, in the case of Licensed
Software, the Company Disclosure Schedule identifies each license
agreement with respect thereto.
(ii) All of the Owned Software is original and is protected by the
copyright laws of the United States. The Company owns the Owned Software
free and clear of Encumbrances (other than valid third party patent rights
of which the Company is unaware) and has not sold, assigned, licensed,
distributed or in any other way disposed of or Encumbered the Owned
Software other than licenses granted in the ordinary course of business as
disclosed on the Company Disclosure Schedule.
(iii) The Licensed Software is validly held and used by the Company
and is currently, and after giving effect to the Merger, will be, fully
utilizable by the Company pursuant to the applicable license agreement
with respect thereto without the consent of or notice to any third party.
To the best knowledge of the Company, all of the Company's computer
hardware has validly licensed software installed therein and the Company's
use thereof does not conflict with or violate any such license.
(iv) The Company has not knowingly altered its data, or any Software
or supporting software that may in turn damage the integrity of the data,
whether stored in electronic, optical or magnetic or other form. To the
best knowledge of the Company, the Software does not contain any viruses
(the Company having employed standard virus checkers to identify the
same). The Company has furnished Purchaser with all existing documentation
relating to the use, maintenance and operation of the Software.
(m) Agreements, Etc. The Company Disclosure Schedule sets
forth a true and complete list of all contracts, agreements and other
instruments to which the Company is a party which either have (i) an
ascertainable aggregate value, or involve, payments or assets, of at least
$10,000 or (ii) in the case of contracts, agreements and other instruments
which do not have reasonably ascertainable values, such contracts, agreements
and other instruments which are otherwise material to the business and/or
operations of the Company. The Company has furnished to Purchaser true and
complete copies of all such agreements listed in the Company Disclosure
Schedule and (i) each such agreement (A) is the legal, valid and binding
obligation of the Company and, to the best knowledge of the Company, the legal,
valid and binding obligation of each other party thereto, in each case
enforceable in accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights and remedies generally from time to time in effect and to general
equitable principles, (B) is in full force and effect and (ii) neither the
Company nor the other party or parties thereto is or are in material default
thereunder.
(n) No Defaults. The Company has in all material respects
performed all the obligations required to be performed by it to date and is not
in default or alleged to be in default under (i) its Charter or By-Laws or (ii)
any material agreement, lease, contract, commitment, instrument or obligation
to which the Company is a party or by which any of its properties, assets or
rights are or may be bound or affected, and there exists no event, condition or
occurrence which, with or without due notice or lapse of time, or both, would
constitute such a default by it of any of the foregoing.
(o) Litigation, Etc. There are no (i) actions, suits, claims,
investigations or legal or administrative or arbitration proceedings
(collectively, "Actions") pending, or to the best knowledge of the Company,
threatened against the Company, whether at law or in equity, or before or by
any Federal, state, local, municipal, foreign or other governmental court,
department, commission, board, bureau, agency or instrumentality ("Governmental
Authority") or (ii) judgments, decrees, injunctions or orders of any
Governmental Authority or arbitrator against the Company. There are no Actions
pending or, to the best knowledge of the Company, threatened, nor, to the best
knowledge of the Company, any basis therefor, with respect to (A) the current
employment by, or association with, the Company, or future employment by, or
association with, Purchaser or the Surviving Corporation, of any of the present
officers or employees of or consultants to the Company (collectively, the
"Designated Persons"), (B) the use, in connection with any business presently
conducted or proposed to be conducted by the Company or the Surviving
Corporation, of any information, techniques or processes presently utilized or
proposed to be utilized by the Company, Purchaser, the Surviving Corporation or
any of the Designated Persons, that the Company, Purchaser, the
Surviving Corporation or any of the Designated Persons are or would be
prohibited from using as the result of a violation or breach of, or conflict
with any agreements or arrangements between any Designated Person and any other
person, or any legal considerations applicable to unfair competition, trade
secrets or confidential or proprietary information or (C) the validity,
ownership or right to use, sell, license or dispose of, under any Company
Rights. The Company has delivered to Purchaser all material documents and
correspondence relating to such matters referred to in the Company Disclosure
Schedule.
(p) Accounts and Notes Receivable. All the accounts
receivable and notes receivable owing to the Company as of the date hereof
constitute, and as of the Effective Time will constitute, valid and enforceable
claims arising from bona fide transactions in the ordinary course of business,
and there are no known or asserted claims, refusals to pay or other rights of
set-off against any thereof. There is (a) no account debtor or note debtor
delinquent in its payment by more than 90 days, (b) no account debtor or note
debtor that has refused (or, to the best knowledge of the Company, threatened
to refuse) to pay its obligations for any reason, (c) to the best knowledge of
the Company, no account debtor or note debtor that is insolvent or bankrupt and
(d) no account receivable or note receivable which is pledged to any third
party by the Company. Except to the extent of a reserve which the Company has
established specifically for doubtful accounts receivable and notes receivable
(which reserve is set forth on the Company Balance Sheet is reasonable under
the circumstances and is consistent with past practice), all of the accounts
receivable of the Company existing at the Closing shall be paid in full by not
later than the ninetieth (90th) day after the Closing and all of the notes
receivable shall be paid in accordance with the terms thereof.
(q) Accounts and Notes Payable. All accounts payable and
notes payable by the Company to third parties as of the date hereof arose in
the ordinary course of business, and, except as set forth in the Company
Disclosure Schedule, there is no such account payable or note payable
delinquent in its payment, except those contested in good faith and already
disclosed in the Company Disclosure Schedule.
(r) Compliance; Governmental Authorizations. The Company has
complied and is presently in compliance in all material respects with all
material Federal, state, local or foreign laws, statutes, ordinances,
judgments, regulations and orders applicable to it or its business, properties,
facilities or operations (including, by way of example and not in limitation
thereof, any of the foregoing that concern the protection of the environment or
human health). The Company has all material Federal, state, local and foreign
governmental authorizations, consents, approvals, licenses and permits necessary
in the conduct of its business as presently conducted or as proposed to be
conducted, such authorizations, consents, approvals, licenses
and permits are in full force and effect, no violations are or have been
recorded in respect of any thereof and no proceeding is pending or, to the best
knowledge of the Company, threatened to revoke or limit any thereof. The
Company Disclosure Schedule contains a true and complete list of all such
governmental licenses, authorizations, consents, approvals, permits, orders,
decrees and other compliance agreements under which the Company is operating or
bound, the Company is not in default or alleged to be in default under any
thereof and the Company has furnished to Purchaser true and complete copies
thereof. None of such authorizations, consents, approvals, licenses and permits
shall be affected in any material respect by the Merger or the transactions
contemplated hereby.
(s) Employees. etc. Except as set forth in the Company
Disclosure Schedule, (i) the Company is not delinquent in payments to any of its
employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed by them to date or amounts required to
be reimbursed to such employees, (ii) upon termination of the employment of any
such employees, neither the Company, Purchaser, Acquisition Sub nor the
Surviving Corporation will by reason of anything done prior to the Closing be
liable to any of such employees for so-called "severance pay" or any other
payments, (iii) the Company is in compliance in all material respects with all
material Federal, state, local and foreign laws and regulations respecting
labor, employment and employment practices, terms and conditions of employment
and wages and hours, and (iv) no employee has notified the Company that such
employee will terminate his or her employment or engagement with the Company or
the Surviving Corporation. To the best knowledge of the Company, no employee of
the Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of
the nature of the business conducted or proposed to be conducted by the Company
or the execution and delivery of the Non-Disclosure Agreement by such employee.
(t) Employee Benefit Plans and Contracts.
(i) Except as set forth on the Company Disclosure Schedule, the
Company has no "employee benefit plan," as defined in Section 3 (3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
no other material written or formal plans or agreements involving direct
or indirect compensation (including any employment agreements entered into
between the Company and any Employee of the Company) currently or
previously maintained, contributed to or entered into by the Company or
any ERISA Affiliate thereof for the benefit of any Employee or former
Employee under which the Company or any ERISA Affiliate thereof has any
present or future obligation or liability (the "Employee Plans"). For
purposes of the preceding sentence, "ERISA Affiliate" shall mean any
entity which is a
member of (A) a "controlled group of corporations," as defined in Section
414(b) of the Code, (B) a group of entities under "common control," as
defined in Section 414(c) of the Code or (C) an "affiliated service
group," as defined in Section 414(m) of the Code or treasury regulations
promulgated under Section 414(o) of the Code, any of which includes the
Company. For purposes of this Section 3.1(t), "Employee" means any common
law employee, consultant or director of the Company.
(ii) The Company Disclosure Schedule lists each employment, severance
or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including
any self-insured arrangements), workers, benefits, vacation benefits,
retirement benefits, deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (A) is not an
Employee Plan, (B) is entered into, maintained or contributed to, as the
case may be, by the Company, (C) covers any Employee or former Employee,
and (D) under which the Company has any present or future obligation or
liability. Such contracts, plans and arrangements as are described above,
are hereinafter referred to collectively as the "Benefit Arrangements."
Each Benefit Arrangement has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all
material laws, statutes, rules, regulations, orders and judgments which
are applicable to such Benefit Arrangements.
(iii) Except as set forth on the Company Disclosure Schedule, (A)
each Employee Plan and Benefit Arrangement has been operated and
administered in compliance with ERISA, the Code and in accordance with the
provisions of all other applicable federal and state laws; (B) all
reporting and disclosure obligations imposed under ERISA and the Code have
been satisfied with respect to each Employee Plan and Benefit Arrangement;
(C) each Employee Plan which is a "group health plan" within the meaning
of Section 5000 of the Code has been maintained in compliance with Section
4980(B) of the Code and Title I, Subtitle B, Part 6 of ERISA and no tax
payable on account of Section 4908B of the Code has been or is expected to
be incurred; (D) all contributions due and payable on or before the
Closing Date in respect of any Employee Plan or Benefit Arrangement have
been made in full and proper form, or adequate accruals have been provided
for in the financial statements for all other contributions or amounts in
respect of the Employee Plans or Benefit Arrangements for periods ending
on the Closing Date; (E) neither the Company nor any of its ERISA
Affiliates, nor to the knowledge of the Company and its ERISA Affiliates,
any other "disqualified person" or "party in interest" (as defined in
Section 4975 of the Code and Section 3(14) of ERISA, respectively) with
respect to an Employee Plan has
breached the fiduciary rules of the ERISA or engaged in a prohibited
transaction which could subject the Company or its ERISA Affiliates to any
tax or penalty imposed under Sections 4975 of the Code or Section 502(i),
(j) or (1) of ERISA; (F) neither the Company nor any of its ERISA
Affiliates currently is or has ever maintained or been obligated to
contribute to (1) a "multiple employer plan" (within the meaning of
Section 413 of the Code); (2) a "multiemployer plan" (as defined in
Section 3(37) of ERISA); (3) a "defined benefit plan" (as defined in
Section 3(35) of ERISA) or (4) any Employee Plan that provides
post-retirement health of life insurance benefits; or (G) no benefit or
amount payable or which may become payable by the Company or its ERISA
Affiliates pursuant to any Employee Plan or Benefit Arrangement, shall
constitute an "excess parachute payment," within the meaning of Section
280G of the Code, which is or may be subject to the imposition of an
excise tax under Section 4999 of the Code or which would not be deductible
by reason of Section 280G of the Code.
(u) Certain Agreements. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due
to any director or employee of the Company from the Company, under any Employee
Plan, Benefit Arrangement or otherwise, (ii) materially increase any benefits
otherwise payable under any Employee Plan or the Benefit Arrangement or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits.
(v) Insurance. The Company Disclosure Schedule contains a
list of all policies of liability, theft, fidelity, fire, product liability,
errors and omissions, workmen's compensation, indemnification of directors and
officers and other similar forms of insurance held by the Company (specifying
the insurer, the amount of coverage, the type of insurance, the policy number
and any pending claims thereunder) and a history of all claims made by the
Company thereunder and the status thereof. All such policies of insurance are
in full force and effect and all premiums with respect thereto are currently
paid and, to the best knowledge of the Company, no basis exists for termination
of any thereof on the part of the insurer. The amounts of coverage under such
policies of insurance are adequate for the assets and properties of the
Company. The Company has not, during the last three fiscal years, been denied
or had revoked or rescinded any policy of insurance.
(w) Bank Accounts; Powers of Attorney. The Company
Disclosure Schedule sets forth a true and complete list of (i) all bank accounts
and safe deposit boxes of the Company and all persons who are signatories
thereunder or who have access thereto and (ii) the names of all persons, firms,
associations, corporations or business organizations holding general or special
powers of attorney from the Company and a summary of the terms thereof.
(x) Brokers. The Company has not, nor have any of its
officers, directors, securityholders or employees, employed any broker or
finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby.
(y) Related Transactions. Except as set forth in the Company
Disclosure Schedule, no current or former director, officer or securityholder
that is an affiliate of the Company or any associate (as defined in the rules
promulgated under the Exchange Act) thereof, is now, or since the inception of
the Company has been, (i) a party to any transaction with the Company
(including, but not limited to, any contract, agreement or other arrangement
providing for the furnishing of services by, or rental of real or personal
property from, or borrowing money from, or otherwise requiring payments to, any
such director, officer or affiliated securityholder of the Company or associate
thereof), or (ii) the direct or indirect owner of an interest in any
corporation, firm, association or business organization which is a present or
potential competitor, supplier or customer of the Company (other than
non-affiliated holdings in publicly-held companies), nor does any such person
receive income from any source other than the Company which relates to the
business of, or should properly accrue to, the Company.
(z) Traffic/Usage. XxxxxxXxxxxx.xxx, the Company's site on
AOL (the "Site"), on average receives approximately 98,000 hours of usage per
month and experiences 2,000,000 entries per month, which numbers represent the
Company's good faith estimate of the monthly average of hours of usage and
entries since October 1, 1996.
(aa) Minute Books. The minute books of the Company provided
to Purchaser for review contain a complete summary of all meetings of and
actions by directors and securityholders of the Company from the time of its
incorporation to the date of such review and reflect all actions referred to in
such minutes accurately in all material respects.
(ab) Board Approval. The Board of Directors of the Company
has unanimously (i) approved this Agreement, the Articles of Merger and each of
the other documents executed and delivered in connection with the Merger
Agreements to which the Company is a party and the transactions contemplated
hereby and thereby, (ii) determined that the Merger is in the best interests of
the Shareholder and is on terms that are fair to the Shareholder and (iii)
recommended that the Shareholder approves the Merger in accordance with the
Virginia Statute.
(ac) Vote Recquired. The affirmative vote of at least 51% of
the outstanding shares of the Company Common Stock approving the Merger and
this Agreement are the only votes and/or
consents of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
(ad) Company Not an Interested Securityholder or an
Acquiring Person. As of the date of this Agreement, neither the Company nor, to
the best knowledge of the Company, any of its Affiliates (other than AOL) is an
"Interested Securityholder" of Purchaser as such term is defined in Section 203
of the Delaware Statute or Purchaser's Charter.
(ae) Company Expenses. The Schedule of Expenses being
delivered at the Closing sets forth a true, correct and complete schedule of
all Company Expenses that have been incurred or paid by or on behalf of the
Company (whether or not theretofore billed) through the Effective Time, and
there are no Company Expenses other than as set forth therein.
(af) Officers and Directors. Set forth on Schedule 3.1(af)
is a list of current officers and directors of the Company.
(ag) Disclosure. Neither Section 3.1 of this Agreement
(including the Company Disclosure Schedule) nor any written information,
written statement, certificate or exhibit furnished to Purchaser or Acquisition
Sub by or on behalf of the Company pursuant hereto, contains or will contain
any untrue statement of a material fact or, when taken together, omits or will
omit to state a material fact internal to the business of the Company necessary
in order to make the statements or facts contained herein and therein not
misleading in light of the circumstances under which they were made.
(ah) Knowledge Definition. As used herein, "to the best
knowledge of the Company" and like phrases shall mean and include (i) actual
knowledge and (ii) that knowledge which each of the Company Principals should
have obtained in the management of his or her business affairs after reasonable
inquiry. In connection therewith, the knowledge (both actual and constructive)
of any of the Company Principals and/or any other officer or director of the
Company shall be imputed to be the knowledge of the Company.
3.2. Several Representations and Warranties of the
Shareholder, Xxxxx and AOL.
(a) Representations and Warranties of the Shareholder. The
Shareholder represents and warrants to Purchaser and Acquisition Sub with
respect to herself as follows:
(i) Title; Absence of Certain Agreements. The Shareholder is the
lawful and record owner of, and has good and marketable title to all of
the shares of Company Common Stock with the full power and authority to
vote such Company Common Stock and transfer and otherwise dispose of such
Company Common Stock, free and clear of all Encumbrances. There are no
agreements or understandings between the Shareholder or any other person
with respect to the voting, sale or other disposition of Company Common
Stock or any other matter relating to Company Common Stock.
(ii) Authority - General. The Shareholder has full and absolute power
and authority to enter into this Agreement and the Escrow Agreement and
this Agreement and the Escrow Agreement are valid and binding obligations
of the Shareholder enforceable against the Shareholder in accordance with
their respective terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors' rights and
remedies generally from time to time in effect and to general equitable
principles. Neither the execution, delivery and performance of this
Agreement and the Escrow Agreement, nor the consummation of the
transactions contemplated hereby or thereby nor compliance by the
Shareholder with any of the provisions hereof or thereof will (i) (A)
conflict with, (B) result in any violations of, (C) cause a default under
(with or without due notice, lapse of time or both), (D) give rise to any
right of termination, amendment, cancellation or acceleration of any
obligation contained in or the loss of any material benefit under or (E)
result in the creation of any Encumbrance upon or against any assets,
rights or property of the Company (or against any Company Common Stock,
Purchaser capital stock or common stock of the Surviving Corporation),
under any term, condition or provision of (x) any agreement or instrument
to which the Shareholder is a party, or by which the Shareholder or her
properties, assets or rights may be bound, or (y) any law, statute, rule,
regulation, order, writ, injunction, decree, permit, concession, license
or franchise of any Governmental Authority applicable to the Shareholder
or any of her properties, assets or rights, which conflict, breach,
default or violation or other event would prevent the consummation of the
transactions contemplated by this Agreement, the Articles of Merger or the
Escrow Agreement, as the case may be. Except as specified in Section
3.1(d) hereof or otherwise contemplated by this Agreement, no permit,
authorization, consent or approval of or by, or any notification of or
filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by the Shareholder
of this Agreement or the Escrow Agreement, or the consummation by the
Shareholder of the transactions contemplated hereby or thereby.
(iii) Investment Representations.
(A) The Shareholder (i) is acquiring the shares of the
Purchaser Common Stock, being issued to her pursuant to the Merger
for investment and for her own account and not as a
nominee or agent for any other person and with no present
intention of distributing or reselling such shares or any part
thereof in any transactions that would be in violation of the
Securities Act or any state securities or "blue-sky" laws, (ii) has
had an opportunity to ask questions of and has received
satisfactory answers from the officers of Purchaser or persons
acting on Purchaser's behalf concerning Purchaser and the terms and
conditions of an investment in Purchaser Common Stock, (iii) has
sufficient knowledge and experience in financial affairs and is
capable of evaluating the risks of acquiring and holding shares of
Purchaser Common Stock, (iv) is aware of Purchaser's business
affairs and financial condition and has acquired sufficient
information about Purchaser to reach an informed and knowledgeable
decision to acquire the shares of Purchaser Common Stock to be
issued to her in the Merger, (v) can afford to suffer a complete
loss of her investment in shares of Purchaser Common Stock and (vi)
understands (1) that the shares of Purchaser Common Stock to be
issued to her in the Merger have not been registered for sale under
the Securities Act or any state securities or "blue-sky" laws in
reliance upon an exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of the investment intent
of the Shareholder as expressed hereunder, (2) that such shares of
Purchaser Common Stock must be held indefinitely and not sold until
such shares are registered under the Securities Act and any
applicable state securities or "blue-sky" laws, unless an exemption
from such registration is available, (3) that, except as provided
in Section 6.3, Purchaser is under no obligation to so register
such shares and (4) that the certificates evidencing such shares
will be imprinted with a legend in the form set forth in Section
6.2(b) that prohibits the transfer of such shares, except as
provided in Section 6.2. The Shareholder is an "accredited
investor" within the meaning of Rule 501(a) under the Securities
Act. The Shareholder has no plan or intention to sell, exchange or
dispose of any of the shares of Company Common Stock received in
connection with the transactions contemplated herein.
(b) Representation and warranties of Xxxxx. Xxxxx represents
and warrants to Purchaser and Acquisition Sub with respect to himself that he
has full and absolute power and authority to enter into this Agreement and the
Escrow Agreement and this Agreement and the Escrow Agreement are valid and
binding obligations of Xxxxx enforceable against him in accordance with their
respective terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights and remedies generally from time to time in effect and to general
equitable principles. Neither the execution, delivery and performance of this
Agreement and the Escrow Agreement, nor the consummation of the transactions
contemplated hereby or thereby nor compliance by Xxxxx with any of the
provisions hereof or thereof will (i) conflict with, (ii) result in any
violations of, (iii) cause a default under (with or without due notice, lapse
of time or both), (iv) give rise to any right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of any
material benefit under or (v) result in the creation of any Encumbrance upon or
against any assets, rights or property of the Company (or against any Company
Common Stock, Purchaser capital stock or common stock of the Surviving
Corporation), under any term, condition or provision of (x) any agreement or
instrument to which Xxxxx is a party, or by which he or any of his properties,
assets or rights may be bound, or (y) any law, statute, rule, regulation,
order, writ, injunction, decree, permit, concession, license or franchise of
any Governmental Authority applicable to him or any of his properties, assets
or rights, which conflict, breach, default or violation or other event would
prevent the consummation of the transactions contemplated by this Agreement or
the Escrow Agreement, as the case may be. Except as specified in Section 3.1(d)
hereof or otherwise contemplated by this Agreement, no permit, authorization,
consent or approval of or by, or any notification of or filing with, any
Governmental Authority or other person is required in connection with the
execution, delivery and performance by Xxxxx of this Agreement or the Escrow
Agreement or the consummation by him of the transactions contemplated hereby or
thereby.
(c) Representations and Warranties of AOL. AOL represents
and warrants to Purchaser and Acquisition Sub with respect to itself as
follows:
(i) Title; Absence of Certain Agreements. AOL is the lawful and record
owner of, and has good and marketable title to the AOL Warrant and the AOL
Note with the full power and authority to exercise the rights under and
transfer and otherwise dispose of the AOL Warrant and/or the AOL Note,
free and clear of all Encumbrances. There are no agreements or
understandings between AOL or any other person with respect to the
exercise, sale or other disposition of the AOL Warrant and the AOL Note or
any other matter relating to the AOL Warrant and the AOL Note.
(ii) Authority - General. AOL has full and absolute power and
authority to enter into this Agreement and this Agreement is a valid and
binding obligation of AOL enforceable against AOL in accordance with its
terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting creditors' rights and remedies
generally from time to time in effect and to general equitable principles.
Neither the execution,
delivery and performance of this Agreement, nor the consummation of
the transactions contemplated hereby nor compliance by AOL with any of the
provisions hereof will (i) conflict with, (ii) result in any violations
of, (iii) cause a default under (with or without due notice, lapse of
time or both), (iv) give rise to any right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of
any material benefit under or (v) result in the creation of any
Encumbrance upon or against any assets, rights or property of the Company
(or against any Company Common Stock, Purchaser capital stock or common
stock of the Surviving Corporation), under any term, condition or
provision of (x) any agreement or instrument to which AOL is a party, or by
which AOL or any of its properties, assets or rights may be bound, or (y)
any law, statute, rule, regulation, order, writ, injunction, decree,
permit, concession, license or franchise of any Governmental Authority
applicable to AOL or any of its properties, assets or rights, which
conflict, breach, default or violation or other event would prevent the
consummation of the transactions contemplated by this Agreement, or the
Articles of Merger, as the case may be. Except as specified in Section
3.1(d) hereof or otherwise contemplated by this Agreement, no permit,
authorization, consent or approval of or by, or any notification of or
filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by AOL of this
Agreement or the consummation by AOL of the transactions contemplated
hereby.
3.3. Representations and Warranties of Purchaser. Purchaser
represents and warrants to each of the Shareholder and AOL, except as disclosed
in the disclosure schedule dated the date hereof, certified as being such
disclosure schedule by the Chief Executive Officer of the Purchaser and
delivered by the Purchaser to the Company and each of the Shareholder and AOL
simultaneously herewith (which disclosure schedule shall reference with
specificity the representations and warranties to which the disclosures
contained therein relate) (the "Purchaser Disclosure Schedule"):
(a) Organization; Good Standing; Qualification and Power.
Each of Purchaser and Acquisition Sub (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of its
incorporation and (ii) has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as now
being conducted, to enter into this Agreement, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. Purchaser has delivered to the Company true and complete copies of
the Charter and By-Laws of each of Purchaser and Acquisition Sub, in each case
as amended to the date hereof.
(b) Authority. The execution, delivery and performance by
Purchaser of this Agreement and the Escrow Agreement and the execution,
delivery and performance of this Agreement and the Articles of Merger by
Acquisition Sub, and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Purchaser and Acquisition Sub, respectively. This Agreement and the
Escrow Agreement are valid and binding obligations of Purchaser, enforceable
against Purchaser in accordance with their respective terms; and this Agreement
and the Articles of Merger are the valid and binding obligations of Acquisition
Sub, subject to applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting creditors' rights and remedies generally from time to
time in effect and to general equitable principles. Neither the execution,
delivery and performance by Purchaser of this Agreement and the Escrow
Agreement, the execution, delivery and performance of this Agreement and the
Articles of Merger by Acquisition Sub, nor the consummation of the transactions
contemplated hereby or thereby, will (A) conflict with, (B) result in any
violations of, (C) cause a default under (with or without due notice, lapse of
time or both), (D) give rise to any right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of any
material benefit under, (E) result in the creation of any Encumbrance on or
against any assets, rights or property of Purchaser or Acquisition Sub, as the
case may be, under any term, condition or provision of (x) any instrument or
agreement to which Purchaser or Acquisition Sub is a party, or by which
Purchaser or Acquisition Sub any of its respective properties, assets or rights
may be bound, (y) any law, statute, rule, regulation, order, writ, injunction,
decree, permit, concession, license or franchise of any Governmental Authority
applicable to Purchaser or Acquisition Sub any of its respective properties,
assets or rights or (z) Purchaser's Charter or By-Laws, as amended through the
date hereof, respectively, which conflict, breach, default, violation or other
event would prevent the consummation of the transactions contemplated by this
Agreement, the Escrow Agreement. Except as contemplated by this Agreement, no
permit, authorization, consent or approval of or by, or any notification of or
filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by Purchaser of this
Agreement or the Escrow Agreement or the execution, delivery and performance by
Acquisition Sub of this Agreement and the Articles of Merger or the
consummation of the transactions contemplated hereby or thereby, except for (i)
the filing with the SEC of such reports and information under the Securities
Act, and the rules and regulations promulgated by the SEC thereunder, as may be
required in connection with this Agreement and the transactions contemplated
hereby, (ii) the filing of such documents with, and the obtaining of such
orders from, various state securities and blue-sky authorities as are required
in connection with the transactions contemplated hereby, (iii) the filing of
the Articles of Merger with the Commissioner and (iv) such other
consents, waivers, authorizations, filings, approvals and registrations which
if not obtained or made would not have a Material Adverse Effect on Purchaser
or materially impair the ability of Purchaser to consummate the transactions
contemplated by this Agreement, including, without limitation, the Merger.
(C) Capital Stock.
(i) The authorized capital stock of Purchaser consists of 25,000,000
shares of Purchaser Common Stock and 15,000,000 shares of Preferred Xxxxx,
x.0000 par value (the "Preferred Stock"), of which 1,000,000 shares have
been designated as Series A Preferred Stock, $.0005 par value (the "Series
A Preferred Stock"), 5,669,846 shares have been designated as Series B
Preferred Stock, $.0005 par value (the "Series B Preferred Stock") and
300,000 shares have been designated as Series B-1 Preferred Stock, $.0005
par value (the "Series B-1 Preferred Stock"). On the date hereof, (i)
3,475,005 shares of Common Stock are issued and outstanding, (ii)
1,000,000 shares of Series A Preferred Stock are issued and outstanding,
(iii) 4,477,746 shares of Series B Preferred Stock are issued and
outstanding, (iv) 300,000 shares of Series B-1 Preferred Stock are issued
and outstanding, (v) 300,000 shares of Series B Preferred Stock are
reserved for issuance upon conversion of shares of Series B-1 Preferred
Stock, (vi) 120,000 shares of Series B Preferred Stock are reserved for
issuance in accordance with a Series B Preferred Stock Purchase Agreement
dated as of May 6, 1996, among Purchaser and the other parties thereto,
(vii) 852,100 shares (the "Warrant Shares") of Series B Preferred Stock
are reserved for issuance upon exercise or exchange of (A) the stock
subscription warrants dated September 19, 1995 issued to and held by AOL
and (B) the stock subscription warrants dated May 6, 1996 issued to and
held by AOL, (viii) 1,000,000 shares of Common Stock are reserved for
conversion of shares of Series A Preferred Stock, (ix) 4,897,746 shares of
Common Stock are reserved for conversion of Series B Preferred Stock and
Series B-1 Preferred Stock, (ix) 852,100 shares of Common Stock are
reserved for conversion of the Warrant Shares and (x) 1,550,000 shares of
Common Stock are reserved for future issuance upon exercise of options or
as restricted stock granted to employees of Purchaser. All outstanding
shares of Purchaser Common Stock are validly issued, fully paid and
non-assessable and not subject to preemptive rights. Purchaser has duly
authorized and reserved for issuance the Merger Shares, and, when issued
in accordance with the terms of Article II, the Merger Shares will be
validly issued, fully paid and nonassessable and free of preemptive
rights. Purchaser directly owns all the outstanding shares of capital
stock of Acquisition Sub, and all of such shares are validly issued, fully
paid and nonassessable and not subject to preemptive rights.
(ii) Except as set forth in paragraph (i) above and on the Purchaser
Disclosure Schedule, immediately after the Closing, there are no
outstanding (A) securities convertible into or exchangeable for shares of
capital stock or other securities of the Company, (B) options, warrants,
or other rights to purchase or otherwise acquire from the Company shares
of such capital stock, or securities convertible into or exchangeable for
shares of such capital stock, or (iii) contracts, agreements or
commitments relating to the issuance by the Company of any shares of such
capital stock, any such convertible or exchangeable securities, or any
such options, warrants or other rights. on the date hereof and in
accordance with the Certificate of Incorporation of Purchaser, as amended
and in effect on the date hereof, each one share of Preferred Stock is
convertible into one share of Common Stock.
(d) Litigation, Except as set forth in the Purchaser
Disclosure Schedule, there are no (i) Actions pending, or to the best knowledge
of the Purchaser, threatened against the Purchaser, whether at law or in
equity, or before or by any Governmental Authority or (ii) judgments, decrees,
injunctions or orders of any Governmental Authority or arbitrator against the
Purchaser. There are no Actions pending or, to the best knowledge of the
Purchaser, threatened, nor, to the best knowledge of the Purchaser, any basis
therefor, with respect to (A) the current employment by, or association with,
the Purchaser, of any of the present officers or employees of or consultants to
the Purchaser (collectively, the "Purchaser Designated Persons"), or (B) the
use, in connection with any business presently conducted or proposed to be
conducted by the Purchaser, of any information, techniques or processes
presently utilized or proposed to be utilized by the Purchaser or any of the
Purchaser Designated Persons, that the Purchaser, the Purchaser Designated
Persons are or would be prohibited from using as the result of a violation or
breach of, or conflict with any agreements or arrangements between any
Purchaser Designated Person and any other person, or any legal considerations
applicable to unfair competition, trade secrets or confidential or proprietary
information or (C) the validity, ownership or right to use, sell, license or
dispose of, under any material Purchaser intellectual property. The Purchaser
has delivered to the Company all material documents and correspondence relating
to such matters referred to in the Purchaser Disclosure Schedule.
(e) Brokers. Neither Purchaser nor any of its officers,
directors or employees have employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders fees in connection
with the transactions contemplated hereby.
(f) Offering Memorandum. To the knowledge of the Purchaser,
the factual statements (exclusive of any opinions, projections or expectations
expressed therein) in the business description set forth in the Purchaser's
offering Memorandum (a
copy which was provided to the Company), dated as of January 10, 1997
("Offering Memorandum"), and which was prepared in connection with the
Financing, did not contain any misrepresentation of a material fact at the date
thereof and did not omit to make any statement, the omission of which would
otherwise make the factual statements made therein misleading at the date
thereof in light of the circumstances in which they were made. Notwithstanding
anything herein to the contrary, the Purchaser makes no representation or
warranty whatsoever as to any information in the offering Memorandum with
respect to the Company, the Company Principals and/or AOL.
ARTICLE IV
CONDUCT AND TRANSACTIONS PRIOR
TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS
4.1. Access to Records and Properties of Each Party;
Confidentiality.
(a) Access to the Company. From and after the date hereof
until the Effective Time or the earlier termination of this Agreement pursuant
to Section 8.1 hereof (the "Executory Period"), the Company shall afford: (i) to
the officers, independent certified public accountants, counsel and other
representatives of the Purchaser, free and full access at all reasonable times
to all properties, books and records (including tax returns filed and those in
preparation) of the Company, in order that the Purchaser and such other persons
may have full opportunity to make such investigations as they shall reasonably
desire to make of the business and affairs of the Company; and (ii) to the
independent certified public accountants of the Company, free and full access
at all reasonable times to the work papers of the independent certified public
accountants for the Company. Additionally, the Company will permit the
Purchaser to make such reasonable inspections of the Company and its operations
during normal business hours as the Purchaser may reasonably require and the
Company will cause its officers to furnish to the Purchaser and such other
persons, such additional financial and operating data and other information as
to the business and properties of the Company as the Purchaser or such other
persons shall from time to time reasonably request. No investigation pursuant
to this Section 4.1(a), or made prior to the date hereof, shall affect or
otherwise diminish or obviate in any respect any of the representations and
warranties of the Company.
(b) Access to the Purchaser. The Purchaser will make
available to the Company on a confidential basis (i) the Offering Memorandum and
(ii) access to its senior personnel and pertinent books and records so long as
such access is reasonable in light of the due diligence the Purchaser will be
preparing in connection with the Financing. No investigation pursuant to this
Section 4.1(b),or made prior to the date hereof, shall affect or
otherwise diminish or obviate in any respect any of the representations and
warranties of the Purchaser.
4.2. Operation of Business of the Company. During the
Executory Period, the Company will operate its business as now operated and
only in the normal and ordinary course and, consistent with such operation,
will use its best efforts to preserve intact its present business organization,
to keep available the services of its officers and employees and to maintain
satisfactory relationships with licensors, franchisees, licensees, suppliers,
contractors, distributors, customers and other persons having business dealings
with it. Without limiting the generality of the foregoing, during the Executory
Period, the Company shall not, without the prior written consent of Purchaser,
(a) take any action that would result in any of the representations and
warranties of the Company herein becoming untrue or in any of the conditions to
the Merger not being satisfied, or (b) take or cause to occur any of the
actions or transactions described in Section 3.1(g) hereof. The parties hereto
will, during the Executory Period, jointly consider the extent to which the
Information Provider Agreement dated as of March 31, 1995 (the "Company IPA")
between the Company and AOL should be amended, modified or otherwise revised,
as appropriate in order to reflect the transactions contemplated herein and
the mutual intent of the parties.
4.3. Negotiations With Others.
(a) Company Negotiations. During the Executory Period
neither the Company, any Company Principal or AOL shall, nor shall the Company
authorize any of its employees, officers, directors, shareholders or agents to,
directly or indirectly, solicit, initiate or engage in discussions or
negotiations with, or provide any information to, or take any other action to
facilitate the efforts of, any third party with respect to a financing of or
investment in the Company (including by way of the purchase of any capital
stock or other securities from the Company or any securityholder of the
Company) or the acquisition of the Company (including by way of merger, purchase
of capital stock or purchase of assets), or that would otherwise be inconsistent
with the terms of this Agreement, or that would prohibit the performance of the
Company's obligations hereunder or that could be expected to diminish the
likelihood of or render impracticable the consummation of the transactions
contemplated hereby (each as described above) (other than the Merger and the
hereby (each as described above (other than the Merger and the transactions
contemplated herein), an "Acquisition Transaction")), or enter into any
agreement or arrangement with respect to, or authorize or consummate, an
Acquisition Transaction. If the Company or any of its Subsidiaries or any
Company Principal, or AOL or any employee, officer, director, shareholder or
agent of the Company receives an unsolicited offer or proposal to enter
negotiations relating to any of the above, such party shall immediately notify
the Purchaser of such offer or proposal and shall not entertain any such offer
and shall communicate its unwillingness to entertain such offer to such
offering party. Upon the execution and delivery of this Agreement, the Company,
the Company Principals and AOL, shall terminate any and all discussions, if any,
it or they may be having with respect to an Acquisition Transaction. Neither the
Company, any of the Company Principals or AOL shall, nor shall the Company
authorize any of its employees, officers, directors, shareholders or agents to,
directly or indirectly, negotiate or discuss with any person or entity that
provides or proposes to provide online services, the provision of financing to
the Company by such person or entity or any merger, consolidation, business
combination or similar transaction with any such person or entity, directly or
indirectly.
(b) Purchaser Negotiations. During the Executory Period,
the Purchaser will not, without the prior consent of the Company (such consent
not to be unreasonably withheld), actively solicit or negotiate with any third
party whose business includes the provision of health specific content on the
Internet with a view to the acquisition thereof unless such business is a niche
component of the Purchaser's "Vices and Virtues" product. In the event the
Purchaser enters into serious and detailed negotiations with any unaffiliated
third party with respect to a proposed transaction involving the acquisition of
the Purchaser (by way of merger, sale of all outstanding capital stock or sale
of all or substantially all of the assets of the Purchase) the Purchaser will,
to the extent it is permitted to do so (provided that the Purchaser will use
best efforts to attain such permission), notify the Company Principals of the
fact of such negotiations (all information with respect to which shall be
maintained by the Company Principals and by the Company as strictly
confidential) and will give the Company a reasonable opportunity (but in no
event in excess of 10 days from the date of such notice) to terminate this
Agreement in its entirety, provided that in the event of any such termination
by the Company, the Company will not, pursuant to the terms of the LOI Escrow
Agreement, be entitled to retain any part of the monies deposited with the LOI
Escrow Agent (the "LOI Deposit"). Furthermore, in the event of any such
negotiations, the Purchaser will similarly have the right to terminate this
Agreement in its entirety, provided that in the event of any such termination
by the Purchaser, the Company will be entitled to retain the LOI Deposit.
4.4 Advice of Changes. The Company shall confer on a regular
and frequent basis with Purchaser, report on operational matters and promptly
advise Purchaser orally and in writing of any change, event or circumstance
having, or which could have, a Material Adverse Effect on the Company or which
could impair (negatively or positively) its financial projections, forecasts
or prospects.
4.5. Company Financial Information Update. During the
Executory Period, the Company shall:
(a) prepare and deliver to the Purchaser, within ten (10)
business days after the end of each calendar month during the Executory Period,
(i) its unaudited balance sheet as at the end of such calendar month and the
related statements of income, cash flow and shareholders' equity for the period
then ended, which shall be (A) in accordance with the books and records of the
Company and (B) fairly present the financial condition of the Company as at the
respective dates indicated and the results of operations of the Company for the
respective periods indicated, and (ii) updated financial projections and
forecasts for the Company;
(b) prepare and deliver on a weekly basis, a summary of the
material developments (if any) in the business or prospects of the Company
occurring during such period; and
(c) furnish upon request of the Purchaser, such other
financial information as is available to management of the Company.
4.6. Purchaser Financial Information Update. During the
Executory Period, the Purchaser shall prepare and deliver to the Company,
within ten (10) business days after the end of each calendar month during the
Executory Period, its unaudited balance sheet as at the end of such calendar
month and the related statements of income, cash flow and shareholders' equity
for the period then ended, which shall be (A) in accordance with the books and
records of the Purchaser, (B) fairly present the financial condition of the
Purchaser as at the respective dates indicated and the results of operations of
the Purchaser for the respective periods indicated, and (C) have been prepared
in accordance with GAAP, except for the absence of complete footnote disclosure
as required by GAAP and subject to changes resulting from normal year-end audit
adjustments, which adjustments shall not in any event result in a material
adverse change to any item of revenue or expense.
4.7. Legal Conditions to Merger. Each Party hereto shall take
all reasonable actions necessary to comply promptly with all legal requirements
that may be imposed on such Party with respect to the Merger and will take all
reasonable action necessary to cooperate with and furnish information to the
other Party in connection with any such requirements imposed upon such other
Party in connection with the Merger. Each Party hereto shall take all
reasonable actions necessary (a) to obtain (and will take all reasonable
actions necessary to promptly cooperate with the other Party (in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Authority, or other third Party, required to be obtained or made
by such Party (or by the other Parties) in connection with the Merger or the
taking of any action contemplated by this Agreement, (b) to defend, lift,
rescind or mitigate the effect of
any lawsuit, order, injunction or other action adversely affecting the ability
of such Party to consummate the transactions contemplated hereby and (b) to
fulfill all conditions precedent applicable to such Party pursuant to this
Agreement. As used herein, the term "Party" shall mean and refer to the
Company, on the one hand, and Purchaser and Acquisition Sub, on the other hand.
4.8. Consents. Each Party hereto shall use its best efforts,
and the other Parties shall cooperate with such efforts, to obtain any consents
and approvals of, or effect the notification of or filing with, each person or
authority, whether private or governmental, whose consent or approval is
required in order to permit the consummation of the Merger and the transactions
contemplated hereby and to enable the Surviving Corporation to conduct and
operate the business of the Company substantially as presently conducted and as
proposed to be conducted.
4.9. Efforts to Consummate. Subject to the terms and
conditions herein provided, the parties hereto shall use their best efforts to
do or cause to be done all such acts and things as may be necessary, proper or
advisable, consistent with all applicable laws and regulations, to consummate
and make effective the transactions contemplated hereby and to satisfy or cause
to be satisfied all conditions precedent that are set forth in Article V as
soon as reasonably practicable.
4.10. Notice of Prospective Breach. Each Party hereto shall
immediately notify the other parties in writing upon the occurrence of any act,
event, circumstance or thing that is reasonably likely to cause or result in a
representation or warranty hereunder to be untrue at the Closing, the failure
of a closing condition to be achieved at the Closing, or any other breach or
violation hereof or default hereunder.
4.11. Public Announcements. The parties hereto agree that,
except with respect to any Purchaser disclosure in connection with the
Financing, they shall obtain each others' consent prior to the issuance (and
provide copies to the other party prior to issuance) of any public
announcements, reports, statements or releases pertaining to the Merger, this
Agreement or any of the transactions contemplated herein, provided that the
parties shall not disclose (other than any Purchaser disclosure in connection
with the Financing) the consideration payable in connection with the Merger in
any such public announcements.
4.12. No Transfers. During the Executory Period, the Company,
any of the Company Principals and AOL shall not sell, transfer (except in the
case of AOL, any transfer necessary to effect the transactions contemplated by
Section 2.2(a) hereof), assign, pledge, encumber or otherwise dispose of any of
the Company Common Stock or any other Equity Security (including in the case of
AOL, the AOL Warrant, the AOL Note and the Company
Preferred Stock) other than in connection with and pursuant to the transactions
contemplated by this Agreement and the Merger.
4.13. Confidentiality. The parties understand and agree that
to the extent not otherwise provided herein, Section 5(e) of that certain
Letter of Intent dated December 5, 1996, among the Purchaser, the Company and
Xxxxxxxx shall survive the execution of this Agreement and shall govern during
the Executory Period.
ARTICLE V
CONDITIONS PRECEDENT
5.1. Conditions to Each Party's Obligations. The obligations
of each Party to perform this Agreement and to effect the Merger are subject to
the satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by all parties hereto:
(a) Shareholder Approval; Articles of Merger. This Agreement
and the Merger shall have been duly and validly approved and adopted by
Shareholder and AOL in accordance with the Virginia Statute and the Company's
Charter and By-Laws, and the Articles of Merger shall have been executed and
delivered by Acquisition Sub and the Company and filed with and accepted by the
Secretary of State of the State of Virginia.
(b) Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with or expiration of waiting periods
imposed by any Governmental Authority necessary for the consummation of the
transactions contemplated hereby shall have been obtained or made or shall have
occurred.
(c) Legal Action. No temporary restraining order,
preliminary injunction or permanent injunction or other order preventing the
consummation of the Merger shall have been issued by any Federal or state court
or other Governmental Authority and remain in effect.
(d) Legislation. No Federal, state, local or foreign statute,
rule or regulation shall have been enacted which prohibits, restricts or delays
the consummation of the transactions contemplated by this Agreement or any of
the conditions to the consummation of such transactions.
(e) Consummation of the Financing. On or before the Closing,
the Purchaser will have successfully completed a private placement of at least
$12,000,000 aggregate amount of its equity securities (the "Financing").
5.2. Conditions to Obligations of Purchaser and Acquisition
Sub. The obligations of Purchaser to perform this Agreement and of Acquisition
Sub to perform this Agreement and the Articles of Merger are subject to the
satisfaction of the
following conditions unless waived (to the extent such conditions can be
waived) by Purchaser and Acquisition Sub:
(a) Representations and Warranties of the Company, the
Shareholder, Xxxxx and AOL. The representations and warranties of the Company,
the Shareholder, Xxxxx and AOL shall be true and correct in all material
respects (except for any representation or warranty that by its terms is
qualified by materiality, in which case it shall be true and correct in all
respects) as of the date of this Agreement and as of the Closing Date, as
though made at and as of such dates, respectively, and Purchaser and
Acquisition Sub shall have received a certificate signed by the Chairman, Chief
Executive Officer and the President of the Company to that effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects the obligations required to be
performed by it under this Agreement prior to or as of the Closing Date, and
Purchaser and Acquisition Sub shall have received a certificate signed by the
Chief Executive Officer of the Company to that effect.
(c) Authorization of Merger. All action necessary to
authorize the execution, delivery and performance of this Agreement, the
Articles of Merger and the other documents to be executed and delivered by the
Company in connection with the Merger and the consummation of the Merger and the
other transactions contemplated hereby and thereby shall have been duly and
validly taken by the Board of Directors of the Company, and the Company and the
Shareholder shall have full power and right to effect the Merger on the terms
provided herein.
(d) Opinion of the Company's Counsel. Purchaser and
Acquisition Sub shall have received an opinion dated as of the Closing Date of
Xxxx Xxxxxxx Xxxxx & Xxxxxxxxxx ("SPPT") in a form reasonably acceptable to
the Purchaser and its counsel.
(e) Consents and Approvals. Purchaser and Acquisition Sub
shall have received duly executed copies of all consents and approvals
contemplated by this Agreement or the Company Disclosure Schedule, in form and
substance satisfactory to Purchaser and Acquisition Sub, which such consents
shall include, but not be limited to, the consent of (i) the National Library
of Medicine pursuant to its agreement with the Company dated March 10, 1995 and
(ii) the Company's current commercial landlord pursuant to the Company's office
lease dated June 30, 1995. Furthermore, the Company shall have provided the
Purchaser written evidence satisfactory to the Purchaser of the termination of
the Company's services contract with Hill and Xxxxxxxx.
(f) Government Consents, Authorizations, Etc. All consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority which are required for or in connection with the
execution and delivery by the Company of this Agreement and the consummation by
the Company of
the transactions contemplated hereby shall have been obtained or made.
(g) Payment of Company Expenses. The Company shall have
delivered to Purchaser and Acquisition Sub a true, correct and complete
schedule (the "Schedule of Expenses") of all Company Expenses paid or
incurred by or on behalf of the Company, the Shareholder or AOL through the
Closing Date, and Purchaser and Acquisition Sub shall have received a
certificate signed by the Chief Executive Officer of the Company certifying
the accuracy and completeness thereof.
(h) Company Expenses Release. Purchaser, Acquisition Sub
and the Surviving Corporation shall have received from each third Party
identified on the Schedule of Expenses a written instrument in form and
substance reasonably satisfactory to Purchaser, Acquisition Sub and the
Surviving Corporation, (i) acknowledging receipt by each such Party of full
payment of all fees and expenses of such Party constituting Company Expenses
and (ii) releasing Purchaser, Acquisition Sub, the Surviving Corporation and
their Affiliates from any liabilities or obligations in respect of the
payment of any fees and expenses.
(i) Absence of Material Adverse Change. There shall not
have been any Material Adverse Change as to the Company since the date
hereof.
(j) Resignation of Directors. The directors of the Company
immediately prior to the Effective Time shall have resigned as directors of
the Surviving Corporation effective as of the Effective Time.
(k) Escrow Agreement. The Shareholder and the Escrow Agent
shall have executed and delivered an Escrow Agreement in a form mutually
acceptable to the Purchaser, the Shareholder and the Escrow Agent, securing
the indemnification obligations of the Shareholder pursuant to Article VII
hereof.
(l) AOL Instruments. AOL and the Company shall have
effectuated the transactions contemplated in Section 2.2(a). The Purchaser
shall have received evidence satisfactory to the Purchaser of the termination,
cancellation and/or surrender of each of (i) the Note and Warrant Purchase
Agreement dated March 31, 1995, among AOL, the Company, the Shareholder and
Xxxxx, (ii) the Note dated April 3, 1995, of the Company to AOL in the
principal amount of $270,000, (iii) the Stock Purchase Warrant dated March 31,
1995 issued by the Company to AOL, (iv) the Security Agreement dated March 31,
1995 (the "AOL Security Agreement") by and between the Company and AOL. The
Purchaser shall also have received evidence satisfactory to it of the
termination of the employee agreement among the Company, the Shareholder and
AOL and the termination of the employee agreement among the Company, Xxxxx and
AOL. Furthermore, the Purchaser shall have received evidence satisfactory to it
that any and all security interests filed against the Company and/or any of its
assets in connection with or pursuant to the AOL Security Agreement shall have
been fully released and terminated.
(m) Board Election. The Shareholder shall have been elected
to the Board of Directors of the Purchaser.
(n) Stockholders' Agreement. The Shareholder and the
Purchaser shall have, pursuant to an amendment in a form mutually acceptable to
the Purchaser and the Shareholder, become parties to the Amended and Restated
Stockholders' Agreement among the Purchaser and the investors named therein
(the "Stockholders' Agreement"), as the same may be amended, restated or
modified in connection with the Financing.
(o) Employment Agreements. Each of the Purchaser and the
Shareholder shall have executed and delivered the employment agreement
substantially in the form of Exhibit D-1 hereto (the "Xxxxxxxx Employment
Agreement") and each of the Purchaser and Xxxxx shall have executed and
delivered the employment agreement substantially in the form of Exhibit D-2
hereto (the "Xxxxx Employment Agreement").
(p) Non-Disclosure Agreements. Each of the employees of the
Company (other than the Shareholder and Xxxxx) in their prospective capacity as
an employee of Purchaser effective immediately upon the Closing, shall have
executed and delivered an agreement with Purchaser, effective as of the
Effective Time, in the form of Exhibit Z attached hereto (the "Non-Disclosure
Agreements," each a "Non-Disclosure Agreement"), providing for, among other
things, non-disclosure of confidential information, assignment of proprietary
rights and restrictions upon such person from competing with the Surviving
Corporation and Purchaser as provided therein.
5.3. Conditions to obligations of the Company. The
obligations of the Company, the Shareholder and AOL to perform this Agreement
and the Articles of Merger are subject to the satisfaction of the following
conditions unless waived (to the extent such conditions can be waived) by the
Company:
(a) Representations and Warranties of Purchaser. The
representations and warranties of Purchaser and Acquisition Sub set forth in
Section 3.3 hereof shall be true and correct in all material respects (except
for any representation or warranty that by its terms is qualified by
materiality, in which case it shall be true and correct in all respects) as of
the date of this Agreement and as of the Closing Date as though made at and as
of such dates, respectively, and the Company shall have received a certificate
signed by the Chief Financial Officer of each of Purchaser and Acquisition Sub
to that effect.
(b) Performance of Obligations of Purchaser and Acquisition
Sub. Purchaser and Acquisition Sub shall have performed in all material
respects their respective obligations required to be performed by them under
this Agreement and the
Articles of Merger prior to or as of the Closing Date and the Company shall have
received a certificate signed by the Chief Financial Officer of each of
Purchaser and Acquisition Sub to that effect.
(c) Authorization of Merger. All action necessary to
authorize the execution, delivery and performance of this Agreement by
Purchaser, the execution, delivery and performance of this Agreement and the
Articles of Merger by Acquisition Sub, and the consummation of the transactions
contemplated hereby and by the Articles of Merger shall have been duly and
validly taken by Purchaser and Acquisition Sub and by Purchaser as the sole
shareholder of Acquisition Sub.
(d) Opinions of Counsel to Purchaser and Acquisition Sub.
The Company shall have received an opinion dated as of the Closing Date of
X'Xxxxxxxx Graev & Karabell, LLP ("OGK"), in a form reasonably acceptable to
the Company and its counsel.
(e) Government Consents, Authorizations, Etc. All consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority which are required for or in connection with the
execution and delivery by Purchaser and Acquisition Sub of this Agreement and
the Articles of Merger and the consummation by Purchaser and Acquisition Sub of
the transactions contemplated hereby or thereby shall have been obtained or
made.
(f) Option Agreements. Purchaser shall have executed and
delivered an option agreement with each of the Shareholder and Xxxxx (each, an
"Option Agreement" and collectively, the "Option Agreements"), substantially
in the form of Exhibit G-1 and Exhibit G-2 hereto, effective as of the
Effective Time, providing for the grant of options for Purchaser Common Stock
to each of the Shareholder and Xxxxx.
(g) Stockholders' Agreement. The Purchaser shall have
executed and delivered the amendment to the Stockholders' Agreement in a form
mutually acceptable to the Purchaser and the Shareholder.
(h) Employment Agreements. The Purchaser shall have executed
and delivered the Xxxxxxxx Employment Agreement and the Xxxxx Employment
Agreement to the respective Company Principals.
(i) The Company Principals shall have received a letter
reasonably satisfactory to them from the then Chief Executive Officer of the
Purchaser with respect to the matters set forth in Paragraphs 3(a)(v), (vi) and
(vii) of the LOI.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1. Compliance With the Code. The parties shall comply with
Section 1060(e) of the Code and any regulations promulgated thereunder, as
applicable.
6.2. Restriction on Transfer.
(a) The Merger Shares to be issued at the Effective Time
pursuant to the Merger and any shares of capital stock or other securities
received with respect thereto (collectively, the "Restricted Securities") shall
not be sold, transferred, assigned, pledged, encumbered or otherwise disposed
of (each, a "Transfer") except upon the conditions specified in this Section
6.2, which conditions are intended to insure compliance with the provisions of
the Securities Act. Each of the Shareholder and AOL shall observe and comply
with the Securities Act and the rules and regulations promulgated by the SEC
thereunder as now in effect or hereafter enacted or promulgated, and as from
time to time amended, in connection with any Transfer of Restricted Securities
beneficially owned by them.
(b) Each certificate representing Restricted Securities
issued to the Shareholder and each certificate for such securities issued to
subsequent transferees of any such certificate shall (unless otherwise
permitted by the provisions of Sections 6.2(c) and 6.2(d) hereof) be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES OR "BLUE-SKY"
LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM. ADDITIONALLY, THE TRANSFER OF
THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN SECTION 6.2
OF TEE AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF JANUARY 31,
1997 AMONG iVILLAGE, INC., HRS ACQUISITION CORPORATION, HEALTH
RESPONSEABILITY SYSTEMS, INC. AND THE OTHER SIGNATORIES THERETO AND NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF
SUCH CONDITIONS, iVILLAGE, INC. HAS AGREED TO DELIVER TO THE HOLDER
HEREOF A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES
REPRESENTED HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF iVILLAGE,
INC."
(c) The Shareholder agrees, prior to any Transfer of
Restricted Securities, to give written notice to Purchaser of her intention to
effect such Transfer and to comply in all other respects with the provisions of
this Section 6.2. Each such notice shall describe the manner and circumstances
of the proposed Transfer and shall be accompanied by the written opinion,
addressed to Purchaser, of counsel for the holder of such Restricted
Securities, stating that in the opinion of such counsel (which opinion and
counsel shall be reasonably satisfactory to Purchaser) such proposed transfer
does not involve a transaction requiring registration or qualification of such
Restricted Securities under the Securities Act or the securities or "blue-sky"
laws of any relevant state of the United States; provided, however, that no
such opinion of counsel shall be necessary for a Transfer pursuant to Rule 144.
The holder thereof shall thereupon, with the written consent of Purchaser, be
entitled to Transfer such Restricted Securities in accordance with the terms of
the notice delivered by it to Purchaser. Each certificate or other instrument
evidencing the securities issued upon the Transfer of any such Restricted
Securities (and each certificate or other instrument evidencing any
untransferred balance of such Restricted Securities) shall bear the legend set
forth in Section 6.2(b) unless (x) in such opinion of counsel of Purchaser
registration of any future Transfer is not required by the applicable
provisions of the Securities Act or (y) Purchaser shall have waived the
requirement of such legends. The Shareholder shall not Transfer any Restricted
Securities until such opinion of counsel has been given (unless waived by
Purchaser or unless such opinion is not required in accordance with the
provisions of this Section 6.2(c)).
(d) Notwithstanding the foregoing provisions of this Section
6.2, the restrictions imposed by this Section 6.2 upon the transferability of
Restricted Securities shall cease and terminate when (i) any such shares are
sold or otherwise disposed of pursuant to an effective registration statement
under the Securities Act or as otherwise contemplated by Section 6.2(c) and,
pursuant to Section 6.2(c), the securities so transferred are not required to
bear the legend set forth in Section 6.2(c) or (ii) the holder of such
Restricted Securities has met the requirements for Transfer of such Restricted
Securities pursuant to subparagraph (k) of Rule 144. Whenever the restrictions
imposed by this Section 6.2 shall terminate, as herein provided, the holder of
Restricted Securities as to which such restrictions have terminated shall be
entitled to receive from Purchaser, without expense, a new certificate not
bearing the restrictive legend set forth in Section 6.2(b) and not containing
any other reference to the restrictions imposed by this Section 6.2.
(e) The Shareholder understands and agrees that Purchaser,
at its discretion, may cause stop transfer orders to be placed with its
transfer agent with respect to certificates
for Restricted Securities owned by such Securityholder but not as to
certificates for such shares of Purchaser Common Stock as to which the legend
set forth in paragraph (b) of this Section 6.2 is no longer required because one
or more of the conditions set forth in Section 6.2(d) shall have been satisfied.
6.3. Piggyback Registration.
(a) As used in this Section 6.3, the following terms shall
have the following meanings:
(i) "Other Shares" shall mean at any time those
shares of Purchaser Common Stock that do not constitute Primary
Shares, Registrable Shares or Registrable Founders Shares.
(ii) "Primary Shares" shall mean at any time the
authorized but unissued shares of Purchaser Common Stock or shares of
Purchaser Common Stock held in treasury.
(iii) "Registrable Founder's Shares" shall have the
meaning as set forth in that certain Amended and Restated
Registration Rights Agreement dated as of May 6, 1996 among the
Purchaser and the stockholders identified therein.
(iv) "Registrable Shares" shall mean the shares of
Purchaser Common Stock that constitute Restricted Securities that are
held by the Shareholder and that have not theretofore been sold to
the public pursuant to a registration statement under the Securities
Act or pursuant to Rule 144.
(v) "Rule 144" shall mean Rule 144 promulgated under
the Securities Act, as amended from time to time, or any successor or
complementary provision thereto.
(b) Subject to the provisions set forth below and to the
last sentence of this Section 6.3(b),.if Purchaser at any time or times
following six months after an initial underwritten public offering of shares of
Purchaser Common Stock proposes for any reason to register Primary Shares under
the Securities Act (other than on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto), it shall promptly give written
notice to the Shareholder of its intention so to register such shares and, upon
the written request, given within 30 days after delivery of such notice by
Purchaser, of any Securityholder to include in such registration Registrable
Shares (which request shall specify the number of Registrable Shares proposed
to be included in such registration by the Shareholder), Purchaser shall use
its best efforts to cause all such Registrable Shares to be included in such
registration on the same terms and conditions as the securities otherwise being
sold in such registration; provided, however, that the rights granted to the
Shareholder hereunder shall be subject at all times to the contractual rights
of any third parties now or hereafter granted;
further provided, however, that if the managing underwriter in the good faith
exercise of its reasonable judgment advises Purchaser in writing that the
inclusion of all Registrable Shares proposed to be included in such
registration would interfere with the successful marketing (including pricing)
of Primary Shares or Other Shares proposed to be registered by Purchaser, then
the number of Primary Shares, Registrable Shares and Other Shares proposed to
be included in such registration shall be included in the following order:
(i) first, the Primary Shares and Other Shares; and
(ii) second, the Registrable Shares and the
Registrable Founders Shares requested to be included in such
registration, pro rata based upon the number of Registrable Shares
and Registrable Founders Shares proposed to be included in such
registration; provided that it is agreed that for purpose of this
subsection 6.3 and the rights granted herein, the Registrable Shares
shall be treated on a pari passu basis with and with respect to the
Registrable Founders' Shares.
If any registration hereunder is to be underwritten, Purchaser and each holder
of Registrable Shares to be registered by such registration statement shall, as
a condition to participating in such registration, enter into an underwriting
agreement in customary form with a managing underwriter selected for such
underwriting by Purchaser. If any such holder elects not to include any or all
of its, his or her Registrable Shares in any registration statement filed by
the Purchaser, such holder shall nevertheless continue to have the right to
include any of its, his or her Registrable Shares in any subsequent
registration statement or registration statements as may be filed by the
Purchaser with respect to offerings of its securities, subject to the terms and
conditions set forth in this Section 6. Anything to the contrary contained
herein notwithstanding, Purchaser shall not be required to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 6.3 after Purchaser has effected four (4) such requested registrations
pursuant to this Section 6.3 in which any such requesting holder has been given
the opportunity to "participate"; provide that for the purposes of this
sentence "participate" shall mean the registration of at least 50% of the
amount of Registrable Shares originally requested to be registered in each such
election pursuant to this subsection 6.3.
(c) In consideration for Purchaser agreeing to its
obligations under this Section 6.3, if Purchaser shall include Registrable
Shares in a registration pursuant to Section 6.3(b)) for the sale thereof to
the public, the Shareholder agrees, upon the request of the managing
underwriter of such registration, to enter into an agreement not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of, any Registrable Shares, other than those Registrable Shares
actually included in such registration pursuant to Section 6.3(b) and sold to
the public thereunder, without the prior written consent of the underwriters
which period shall not begin more than 10 days prior to the effectiveness of
the registration statement pursuant to which such public offering shall be made
and shall not last more than 180 days after the effective date of such
registration statement; provided, that the Shareholder shall be bound by this
provision only if, and to the extent, the executive officers of Purchaser
owning Purchaser Common Stock shall be bound by such a provision.
(d) In connection with any registration pursuant to this
Section 6.3, Purchaser shall in its sole discretion determine the terms and
conditions of such registration, including, without limitation, the timing
thereof; the scope of the offering contemplated thereby (i.e., whether the
offering shall be a combined primary offering and a secondary offering or
limited only to a secondary offering); the manner of distribution of
Registrable Shares; the period of effectiveness of registration for permissible
sales of Registrable Securities thereunder consistent with the plan of
distribution agreed upon by Purchaser and the Shareholder; and all other
material aspects of the registration and the registration process. In
connection therewith, Purchaser may require that any such registration be
underwritten, in which event the managing underwriter shall be selected by
Purchaser.
(e) In connection with any registration of any Registrable
Shares under the Securities Act pursuant to this Agreement, Purchaser shall
indemnify and hold harmless the Shareholder against any losses, claims, damages
or liabilities, joint or several (or actions in respect thereof), to which the
Shareholder may become subject under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in the registration statement under which such
Registrable Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Shares, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading or, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, or any violation by Purchaser of the Securities Act or state
securities or "blue-sky" laws applicable to Purchaser and relating to action or
inaction required of Purchaser in connection with such registration or
qualification under state securities or "blue-sky" laws; provided, however,
that Purchaser shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in said registration statement, preliminary prospectus, final
prospectus, amendment, supplement or document incident to registration or
qualification of any Registrable Shares in reliance upon and in conformity with
written information furnished to Purchaser by the Shareholder with respect to
information regarding the Shareholder for use in the preparation thereof.
(ii) In connection with any registration of
Registrable Shares under the Securities Act pursuant to this
Agreement, the Shareholder shall indemnify and hold harmless (in the
same manner and to the same extent as set forth in the preceding
paragraph of this Section 6.3(d)) Purchaser, each director of
Purchaser, each officer of Purchaser who shall sign such registration
statement, each underwriter, broker or other person acting on behalf
of Purchaser and each person who controls any of the foregoing
persons within the meaning of the Securities Act with respect to any
statement or omission from such registration statement, any
preliminary prospectus or final prospectus contained therein or
otherwise filed with the Commission, any amendment or supplement
thereto or any document incident to registration or qualification of
any Registrable Share, if such statement or omission was made in
reliance upon and in conformity with written information furnished to
Purchaser or such underwriter by the Shareholder for use in
connection with the preparation of such registration statement,
preliminary prospectus, final prospectus, amendment, supplement or
document; provided that the maximum liability in respect of such
indemnification shall be limited, in the case of the Shareholder, to
an amount equal to the net proceeds received by the Shareholder from
the sale of such Registrable Shares effected pursuant to such
registration statement.
(f) The Shareholder shall furnish to Purchaser such written
information regarding the Shareholder as Purchaser shall reasonably deem
necessary in connection with any registration, qualification or compliance
contemplated by this Section 6.3.
(g) Anything to the contrary contained herein
notwithstanding, the rights of the holders of Registrable Shares and the
obligations of Purchaser under Section 6.3(b) hereof shall terminate and be of
no further force or effect (i) as to any holder of Registrable Shares, at such
time as all Registrable Shares held by such holder may be sold under Rule 144
during any three-month period and (ii) as to all holders of Registrable Shares,
on the third anniversary of the Effective Date.
(h) The Shareholder may not assign her rights under this
Section 6.3 to any purchaser or transferee of Restricted Securities without the
prior written consent of Purchaser; pr vided, however, that any such purchaser
or transferee shall, as a condition to the effectiveness of such assignment if
consented to by Purchaser, be required to execute a counterpart to this
Agreement agreeing to be treated as the Shareholder is
treated hereunder solely for purposes of this Section 6.3, whereupon such
purchaser or transferee shall have the benefits of, and shall be subject to the
restrictions contained in, this Section 6.3.
(i) All expenses incurred by Purchaser in complying with
this Section 6.3, including, without limitation, all registration and filing
fees (including all expenses incident to filing with the NASD), fees and
expenses of complying with securities and "blue-sky" laws, printing expenses
and fees and expenses of Purchaser's counsel and accountants, shall be borne by
Purchaser; provided, however, that all fees and expenses of counsel for the
holders of Registrable Shares or any of them and all underwriting discounts,
taxes and selling commissions applicable to the Registrable Shares, and any
expenses and fees that would not have been incurred by Purchaser but for
inclusion of Registrable Shares in such registration, shall not be borne by
Purchaser but shall be borne by the holders of Registrable Shares pro rata
based on the number of Registrable Shares so registered.
6.4. Disclosure of Information; Non-Competition. Each of the
Company Principals acknowledges and recognizes that the Subject Business has
been conducted or is currently planned to be conducted by the Company
throughout the world, and further acknowledges and recognizes the highly
competitive nature of the industry in which the Subject Business is involved
and that, accordingly, in consideration of the premises contained herein, the
consideration to be received hereunder and the direct and indirect benefits to
each of the Company Principals of the transactions contemplated hereby, and in
consideration of and as an inducement to Purchaser and Acquisition Sub to enter
into to this Agreement and to consummate the transactions contemplated hereby:
(a) From and after the Effective Time, neither of the
Company Principals shall use or disclose to any Person, except as required by
law or judicial process, any Confidential Information, for any reason or
purpose whatsoever, nor shall he or she make use of any of the Confidential
Information for his or her own purposes or for the benefit of any Person except
Purchaser and the Surviving Corporation. For purposes of this Agreement,
"Confidential Information" shall mean Intellectual Property Rights of the
Company, the Surviving Corporation or Purchaser or its Affiliates and all
information of a proprietary nature relating to the Company and/or its business
or operations, the Surviving Corporation or Purchaser or its Affiliates or the
Subject Business (other than information that is in the public domain at the
time of receipt thereof by the Company Principals, or otherwise becomes public
other than as a result of the breach by either of the Company Principals of his
or her agreement hereunder or is rightfully received from a third party without
any obligation of confidentiality to Purchaser or the Company or is
independently developed by either of the Company Principals). As used herein,
the term "Subject Business" means and includes any business located anywhere in
the world that develops or
produces any internet channel the content Of which is similar to any internet
channel produced or under active development by the Company.
(b) Neither of the Company Principals shall, during the
two-year period beginning at the Effective Time, (i) directly or indirectly
engage, whether such engagement shall be as an officer, director, partner,
shareholder, Affiliate or other participant, in any business that competes with
the Subject Business (a "Competitive Business") or represent in any way any
Competitive Business, whether such engagement or representation shall be for
profit or not (provided, that nothing contained herein shall prevent either of
the Company Principals from holding up to 2% of the outstanding voting capital
stock of any company), (ii) interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between Purchaser and the Company and
the Surviving Corporation, on the one hand, and any third party, on the other
hand, including, without limitation, any licensee, licensor, customer,
supplier, consultant or employee of Purchaser or any Affiliate thereof, the
Company or the Surviving Corporation, or (iii) affirmatively assist or induce
others to engage in any Competitive Business in any manner described in the
foregoing clauses (i) and (ii); provided, however, that at such time and in the
event that the employment of either of the Company Principals, with the
Purchaser or the Company is involuntary terminated without "cause" by Purchaser
("cause" being as defined in the applicable employment agreement for each of
the Company Principals) and Purchaser is not compensating the Shareholder or
Xxxxx, as the case may be, with salary, severance, bonuses or similar payments
in an amount commensurate with their respective salaries on the date of such
termination, such agreement not to compete shall thereupon be limited, as to
the Shareholder or Xxxxx, as the case may be, to the conduct of a Competitive
Business with respect to any healthcare or health-related products, services or
content on Internet/online and narrowband and broadband delivery systems.
6.5. Employee Options. Within a reasonable time following the
Closing, the Purchaser will grant (i) 69,000 non-transferable, incentive stock
options to the employees listed on Schedule 6.6 hereto in the amounts set forth
opposite the name of each such employee and (ii) 21,000 non-transferable, non-
qualified stock options to the persons named on Schedule 6.6 hereto in the
amounts set forth opposite the name of each such person. Any options granted
pursuant to this subsection 6.6 will be granted in accordance with and subject
to the Purchaser's then effective stock option plan and the Code. The incentive
stock options granted pursuant to the terms hereof will also be granted in
accordance with and be subject to the requirements of the Code. The
non-qualified stock options will be granted on substantially the same terms as
non-qualified stock options granted by the Purchaser to other non-employee
consultants.
ARTICLE VII
INDEMNIFICATION
7.1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(a) "Affiliate" as to any person means any entity,
directly or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such person.
(b) "Event of Indemnification" shall mean and include (i) the
untruth, inaccuracy or breach of any representation or warranty of the Company,
any of the Company Principals or AOL (including the underlying facts and
circumstances related thereto) contained in Section 3.1, or 3.2, any Exhibit
hereto or any document delivered in connection herewith, (ii) the breach of
covenants and agreements by the Company, any of the Company Principals or AOL
and (iii) any claim by any person or entity heretofore providing content or
services to the Company for use by the Company in its XxxxxxXxxxxx.xxx service
with respect to consideration for, or authority to use any such content or
services.
(c) "Indemnified Persons" shall mean and include Purchaser,
Acquisition Sub and the Surviving Corporation and their respective Affiliates
(but shall not include the Shareholder or AOL), successors and assigns, and the
respective officers and directors of each of the foregoing.
(d) "Indemnifying Persons" shall mean and include each of
the Company Principals (but shall not include the Company) and their respective
successors and assigns, heirs or personal representatives.
(e) "Losses" shall mean any and all losses, claims, damages,
liabilities, expenses, assessments and Taxes sustained, suffered or incurred by
any Indemnified Person arising from or in connection with any such matter which
is the subject of indemnification under Section 7.2 hereof.
7.2. Indemnification Generally. Subject to Section 7.6
hereof, the Indemnifying Persons shall indemnify the Indemnified Persons for,
and hold each of them harmless from and against, any and all Losses arising
from or in connection with any Event of Indemnification; provided that each of
the Company Principals' liability under this Section 7.2 shall be on a joint
and several basis with each other.
The indemnifications set forth herein of the Shareholder
shall be secured pursuant to and in accordance with the Escrow Agreement. Any
claims for Losses hereunder may be satisfied pursuant to and in accordance with
the terms of the
Escrow Agreement, notwithstanding the foregoing allocations of
responsibilities.
7.3. Assertion of Claims. No claim shall be brought under
Section 7.2 hereof unless the Indemnified Persons, or any of them, at any time
prior to the applicable Survival Date, if any, give the Indemnifying Persons
(a) written notice of the existence of any such claim, specifying the nature
and basis of such claim and the amount thereof, to the extent known or (b)
written notice pursuant to Section 7.4 of any third party claim, the existence
of which might give rise to such a claim. Upon the giving of such written
notice as aforesaid prior to the applicable Survival Date, the Indemnified
Persons, or any of them, shall have the right to commence legal proceedings
subsequent to the Survival Date for the enforcement of their rights under
Section 7.2 hereof.
7.4. Notice and Defense of Third Party Claims. The
obligations and liabilities of the Indemnifying Persons with respect to Losses
resulting from the assertion of liability by third parties (each, a "Third
Party Claim") shall be subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly (and, in any
event, within five Business Days) give written notice to the Indemnifying
Persons of any Third Party Claim which might give rise to any Loss by the
Indemnified Persons, stating the nature and basis of such Third Party Claim,
and the amount thereof to the extent known. Such notice shall be accompanied by
copies of all relevant documentation with respect to such Third Party Claim,
including, without limitation, any summons, complaint or other pleading which
may have been served, any written demand or any other document or instrument.
(b) The Indemnified Persons shall assume the defense of any
Third Party Claims with counsel of their own choosing, which counsel shall be
reasonably satisfactory to the Indemnifying Persons, and shall act reasonably
and in with their good faith business judgment in handling such Third Party
Claims and shall not effect any settlement without the written consent of the
Indemnifying Persons, which consent shall not unreasonably be withheld or
delayed. The Indemnifying Persons shall have the right to participate at their
own expense in the defense of any Third Party Claims. The Indemnifying Persons
and the Indemnified Persons shall make available to each other and their
counsel and accountants all books and records and information relating to any
Third Party Claims, keep each other fully apprised as to the details and
progress of all proceedings relating thereto and render to each other such
assistance as may be reasonably required to ensure the proper and adequate
defense of any and all Third Party Claims.
7.5. Survival of Representations and Warranties. Subject to
the further provisions of this Section 7.5, the respective representations and
warranties of (a) each of the Company Principals, AOL and the Purchaser set
forth in Sections 3.1, 3.2 and 3.3, respectively, shall survive the Effective
Time until eighteen (18) months following the Closing Date, except that the
representations and warranties contained in (i) Sections 3.1(h), 3.2(a), and
3.2(c) shall not so terminate but shall survive the Closing indefinitely and
(ii) Section 3.1(o) shall not so terminate but shall survive the Closing until
the applicable statute of limitations shall have expired with respect to all
matters referenced therein and (b) the Company shall be deemed to be conditions
to the Closing and shall not survive the Closing and shall cease and terminate
upon the Closing and shall be of no further force or effect thereafter. For
convenience of reference, the date upon which any representation or warranty
contained herein shall terminate is referred to herein as the "Survival Date."
All covenants and agreements of Purchaser or the Shareholder contained herein
shall survive the Closing in accordance with their respective terms. Anything
contained herein to the contrary notwithstanding, the representations and
warranties of the Company contained in this Agreement (including, without
limitation, the Company Disclosure Schedule) (i) are being given by the Company
on behalf of the Shareholder and for the purpose of binding the Shareholder to
the terms and provisions of this Article VII and the Escrow Agreement, and as an
inducement to Purchaser and Acquisition Sub to enter into this Agreement and to
approve the Merger (and the Company acknowledges that Purchaser and Acquisition
Sub have expressly relied thereon) and (ii) are solely for the benefit of the
Indemnified Persons and each of them. Accordingly, no third party (including,
without limitation, the Shareholder) or any other holder of Company Common Stock
or anyone acting on behalf of any thereof) other than the Indemnified Persons,
and each of them, shall be a third party or other beneficiary of such
representations and warranties and no such third party shall have any rights of
contribution against the Company or the Surviving Corporation with respect to
such representations or warranties or any matter subject to or resulting in
indemnification under this Article Vil or otherwise.
7.6. Limitation on Indemnification.
(a) Anything to the contrary contained in Article VII
notwithstanding, the Indemnifying Persons shall not be obligated to indemnify
the Indemnified Persons pursuant to this Article VII with respect to any Losses
pursuant to Section 7.1(b)(i) until the aggregate amount of such Losses exceeds
seventy-five thousand dollars ($75,000) (the "Basket Amount"), whereupon the
Shareholder shall be obligated to indemnify the Indemnified Persons for all
Losses in excess of the Basket Amount; provided, however, that the Shareholder
shall be obligated to indemnify the Indemnified Persons for the first dollar of
all Losses arising out of or related to a breach of the representation and
warranty contained in Sections 3.1(c), 3.1(e), 3.1(x), 3.1(ah), 3.1(af) and
3.2(a); provided further, however, that the aggregate maximum indemnification
liability of the Indemnifying Persons pursuant to this Article VII with respect
to any Losses pursuant to an Event
of Indemnification under subsection 7.2 (except with respect to the
indemnification by the Shareholder set forth in Section 6.3(e)(ii) which shall
not be subject to the limitation set forth herein) shall be the total fair
market value of the aggregate consideration received by the Shareholder
pursuant to subsection 2.1(a). Notwithstanding anything stated herein to the
contrary, the Indemnifying Persons will not be liable to the Indemnified
Persons pursuant to this Article VII for any consequential or incidental
damages.
(b) For purposes of satisfying an indemnification obligation
of the Shareholder under this Article VII, each share of Purchaser Common Stock
tendered by or on behalf of the Shareholder in satisfaction of any
indemnification of the Shareholder under this Article VII shall have a value
determined as set forth in the Escrow Agreement.
ARTICLE VIII
TERMINATION; AMENDMENT, MODIFICATION AND WAIVER
8.1. Termination. This Agreement may be terminated, and the
Merger abandoned, notwithstanding the approval by Purchaser, Acquisition Sub
and the Company of this Agreement, at any time prior to the Effective Time, by:
(a) the mutual consent of Purchaser, Acquisition Sub and the
Company; or
(b) any Party, if the conditions set forth in Section 5.1
hereof shall not have been met by March 31, 1997, except if such conditions
have not been met solely as a result of the action or inaction of the party
seeking to terminate; or
(c) Purchaser and Acquisition Sub if the conditions set forth
in Section 5.2 hereof shall not have been met, and the Company if the
conditions set forth in Section 5.3 hereof shall not have been met, in either
case by March 31, 1997, except if such conditions have not been met solely as a
result of the action or inaction of the party seeking to terminate; or
(d) either Party, if such party shall have determined in its
sole discretion, exercised in good faith, that the Merger contemplated by this
Agreement has become impracticable by reason of the institution of any
litigation, proceeding or investigation to restrain or prohibit the
consummation of the Merger, or which questions the validity or legality of the
transactions contemplated by this Agreement.
Any termination pursuant to this Section 8.1 (other than a termination pursuant
to Section 8.1(a) hereof) shall be effected by written notice from the party or
parties so terminating to the other parties hereto.
8.2. Effect of Termination. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect, except for Section 6.4(a), Section 4.13, Article VII, this
Section 8.2, and Article IX, each of which shall survive the termination of this
Agreement; provided, however, that the liability of any party for any breach by
such party of the representations, warranties, covenants or agreements of such
party set forth in this Agreement occurring prior to the termination of this
Agreement shall survive the termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1. Expenses. As used in this Agreement, "Transaction Costs"
shall mean, with respect to any party, all actual, out-of-pocket expenses
incurred by such party to third parties, in connection with this Agreement, the
Merger and all other transactions provided for herein and therein; but shall
not in any event include general overhead; the time spent by employees of such
party internally; postage, telephone, telecopy, photocopy and delivery expenses
of such party; permit and filing fees; and other non-material expenses that are
incidental to the ordinary course of business. Each party hereto shall bear its
own fees and expenses in connection with the transactions contemplated hereby;
provided, however, that in the event the Merger shall be consummated, Purchaser
and Acquisition Sub shall bear all Transaction Costs of Purchaser and
Acquisition Sub and the Shareholder shall bear all Transaction Costs of the
Company (to be effected by either direct payment of such Transaction Costs or a
contribution of cash to the Company by the Shareholder immediately prior to the
Effective Time in an amount equal to all such Transaction Costs of the
Company), that have not been paid by the Company before the Closing Date and
whether or not such fees and expenses are reflected in the Company Disclosure
Schedule or the Schedule of Expenses (such Transaction Costs of the Company
being herein collectively referred to as the "Company Expenses").
9.2. Entire Agreement. This Agreement (including the Company
Disclosure Schedule and the Exhibits attached hereto) and the other writings
referred to herein contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby and supersede all prior
agreements or understandings, written or oral, among the parties with respect
thereto.
9.3. Descriptive Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
9.4. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and
sufficient if delivered personally or sent by nationally-recognized overnight
courier or by registered or certified mail, postage prepaid, return receipt
requested or by telecopier, with confirmation as provided above addressed as
follows:
if to Purchaser or Acquisition Sub, to:
iVillage, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxx,
Chairman and Chief Executive
Officer
Telecopier: (000) 000-0000;
with copies to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Telecopier: (000) 000-0000;
if to the Company, to:
Health ResponseAbility Systems, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention:
Telecopier: (000) 000-0000
with a copy to:
Xxxx Xxxxxxx Xxxxx & Xxxxxxxxxx
0000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000; and
if to the Shareholder, Xxxxx or AOL, at their respective addresses
set forth on the signature pages attached hereto;
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such
notices or communications shall be deemed to be received (a) in the case of
personal delivery or telecopy, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the
date when sent and (c) in the case of mailing, on the third business day
following the date on which the piece of mail containing such communication was
posted.
9.5. Counterparts. This Agreement may be executed in any
number of counterparts by original or facsimile signature,
each such counterpart shall be an original instrument, and all such
counterparts together shall constitute one and the same agreement.
9.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the Virginia Statute and with the laws of the
State of New York applicable to contracts made and to be performed wholly
therein (without regard to principles of conflicts of laws).
9.7. Benefits of Agreement. All the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Except as
expressly provided herein, no person other than the parties hereto shall be or
shall be deemed to be third party beneficiaries of any provision or term of
this Agreement.
9.8. Pronouns. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural thereof whenever the context
and facts require such construction.
9.9. Amendment, Modification and Waiver. This Agreement shall
not be altered or otherwise amended except pursuant to (a) an instrument in
writing signed by all of the parties hereto and (b) in the case of a waiver or
consent, an instrument in writing signed by the party against whom enforcement
is sought; provided, however, that after the approval and adoption of this
Agreement and the Merger by the Shareholder and AOL, no amendment of this
Agreement shall be made which pursuant to the Virginia Statute or other law
requires the further approval of the Shareholder or AOL; provided further,
however, that any party to this Agreement may waive any obligation owed to it
by any other party under this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement and Plan of Reorganization to be executed on its behalf as of
the day and year first above written.
iVILLAGE, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
-------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: CEO
HRS ACQUISITION CORPORATION
By: /s/ Xxxxxxx Xxxxxxxxx
-------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: President
HEALTH RESPONSEABILITY SYSTEMS, INC.
By:
-------------------------
Name:
Title:
-------------------------
Xxxx Xxxxxxxx
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
-------------------------
Xxxxx Xxxxx
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement and Plan of Reorganization to be executed on its behalf as of the day
and year first above written.
iVILLAGE, INC.
By:
---------------------------------
Name:
Title:
HRS ACQUISITION CORPORATION
By:
---------------------------------
Name:
Title:
HEALTH RESPONSEABILITY SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxxxx
---------------------------------
Name: Xxxx X. xxxxxxxx
Title: President
/s/ Xxxx Xxxxxxxx
-------------------------------
Xxxx Xxxxxxxx
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
/s/ Xxxxx Xxxxx
-------------------------------
Xxxxx Xxxxx
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
AMERICA ONLINE, INC.
By: /s/ Lennert J. Leader
-------------------------------
Name: Lennert J. Leader
Title: Senior Vice President,
Chief Financial Officer
and Treasurer
00000 XXX Xxx
Xxxxxx, Xxxxxxxx 00000
Attention:
Telecopier:
AMENDMENT NO. 1 dated as of March 31,
1997, to the AGREEMENT AND PLAN OR
REORGANIZATION AND MERGER dated as of
January 31, 1997 (the "Agreement"), among
iVILLAGE, INC., a Delaware corporation,
HEALTH RESPONSEABILITY SYSTEMS, INC., a
Virginia corporation ("Better Health"),
XXXX XXXXXXXX, the sole shareholder of
Better Health, and the other signatories
thereto.
The parties desire to amend the Agreement to extend the
termination date thereof to May 15, 1997. All capitalized terms used but not
otherwise defined herein shall have the meanings ascribed thereto in the
Agreement.
NOW, THEREFORE, pursuant to Section 9.10 of the Agreement,
the undersigned hereby amend the Agreement as follows:
Section 8.1(b) of the Agreement is hereby amended by deleting
any reference to the date "March 31, 1997" and inserting in
place thereof the reference to the date "May 15, 1997."
EXCEPT AS EXPRESSLY AMENDED HEREBY, THE AGREEMENT SHALL
REMAIN IN FULL FORCE AND EFFECT.
This Amendment shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly therein.
This Amendment may be executed in any number of counterparts,
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts shall constitute one agreement.
* * * * *
IN WITNESS WHEREOF, the undersigned have duly executed this
Amendment No. 1 as of the date first written above.
SHAREHOLDER: iVILLAGE, INC.
/s/ Xxxx Xxxxxxxx By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------- -------------------------
Xxxx Xxxxxxxx Name: Xxxxxxx Xxxxxxxxx
Title: CEO
HEALTH RESPONSEABILITY
SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxxxx
-----------------------
Name: Xxxx X. Xxxxxxxx
Title: President
AMERICA ONLINE, INC.
By:
-----------------------
Name:
Title
-2-
IN WITNESS WHEREOF, the undersigned have duly executed this
Amendment No. 1 as of the date first written above.
SHAREHOLDER: iVILLAGE, INC.
By:
--------------------------- -------------------------
Xxxx Xxxxxxxx Name:
Title:
HEALTH RESPONSEABILITY
SYSTEMS, INC.
By:
-------------------------
Name:
Title:
AMERICA ONLINE, INC.
By: /s/ Miles Gilburne
-----------------------
Name: Miles Gilburne
Title
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AMENDMENT NO. 2 dated as of May 15,
1997, to the AGREEMENT AND PLAN OR
REORGANIZATION AND MERGER dated as of
January 31, 1997 (the "Agreement") (as
amended by that certain Amendment No. 1
dated as of March 31, 1997), among
iVILLAGE, INC., a Delaware corporation,
HEALTH RESPONSEABILITY SYSTEMS, INC., a
Virginia corporation, XXXX XXXXXXXX, the
sole shareholder of Better Health, and the
other signatories thereto.
The parties desire to amend the Agreement to, among other
things, extend the termination date thereof to May 23, 1997 and to modify
certain terms of the Agreement in order to reflect the conversion of certain
cash consideration payable to AOL into rights to receive Purchaser Common
Stock. All capitalized terms used but not otherwise defined herein shall have
the meanings ascribed thereto in the Agreement.
NOW, THEREFOR, pursuant to Section 9.10 of the Agreement, the
undersigned hereby amend the Agreement as follows:
1. Subsection 2.1(b)(i)(B) is hereby amended by deleting in line 3 of
such subsection after the word "receive" the words "in the aggregate
$2,000,000 in cash" and inserting in lieu thereof the words "609,000
shares of Purchaser Common stock";
2. Subsection 2.2(a) is hereby amended by deleting in line 12 of such
subsection after the word "receive" the words "$2,000,000 in cash"
and inserting in lieu thereof the words "609,000 shares of Purchaser
Common Stock";
3. Subsection 3.2(c) is hereby amended by inserting the following clause
(iii) after clause (ii) thereof:
"(iii) Investment Representations.
AOL (a) is acquiring the shares of the Purchaser Common
Stock, being issued to it pursuant to the Merger for investment and for
its own account and not as a nominee or agent for any other person and
with no present intention of distributing or reselling such shares or
any part thereof in any transactions that would be in violation of the
Securities Act or any state securities or "blue-sky" laws, (b) has had
an opportunity to ask questions of and has received satisfactory
answers from the officers of Purchaser or persons acting on Purchaser's
behalf concerning Purchaser
and the terms and conditions of an investment in Purchaser Common
Stock, (c) has sufficient knowledge and experience in financial
affairs and is capable of evaluating the risks of acquiring and
holding shares of Purchaser Common Stock, (d) is aware of Purchaser's
business affairs and financial condition and has acquired sufficient
information about Purchaser to reach an informed and knowledgeable
decision to acquire the shares of Purchaser Common Stock to be issued
to it in the Merger, (e) can afford to suffer a complete loss of its
investment in shares of Purchaser Common Stock and (f) understands (i)
that the shares of Purchaser Common Stock to be issued to it in the
Merger have not been registered for sale under the Securities Act or
any state securities or "blue-sky" laws in reliance upon an exemption
therefrom, which exemption depends upon, among other things, the bona
fide nature of the investment intent of AOL as expressed hereunder,
(ii) that such shares of Purchaser Common Stock must be held
indefinitely and not sold until such shares are registered under the
Securities Act and any applicable state securities or "blue-sky" laws,
unless an exemption from such registration is available, (iii) that,
except as provided in Section 6.3, Purchaser is under no obligation to
so register such shares and (iv) that the certificates evidencing such
shares will be imprinted with a legend in the form set forth in Section
6.2(b) that prohibits the transfer of such shares, except as provided
in Section 6.2. AOL is an "accredited investor" within the meaning of
Rule 501(a) under the Securities Act. AOL has no plan or intention to
sell, exchange or dispose of any of the shares of Company Common Stock
received in connection with the transactions contemplated herein.";
4. Subsection 6.2(c) is hereby amended by deleting such subsection in
its entirety and inserting the following in lieu thereof:
"(c) The Shareholder and AOL agree, prior to any Transfer of
Restricted Securities, to give written notice to Purchaser of their
intention to effect such Transfer and to comply in all other respects
with the provisions of this Section 6.2. Each such notice shall
describe the manner and circumstances of the proposed Transfer and
shall be accompanied by the written opinion, addressed to Purchaser,
of counsel for the holder of such Restricted Securities, stating that
in the opinion of such counsel (which opinion and counsel shall be
reasonably satisfactory to Purchaser) such proposed transfer does not
involve a transaction requiring registration or qualification of such
Restricted Securities under the Securities Act or the securities or
"blue-sky" laws of any relevant state of the Untied States; provided,
however, that no such opinion of counsel shall be necessary for a
Transfer pursuant to Rule 144. The holder thereof shall thereupon,
with the written consent of
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Purchaser, be entitled to Transfer such Restricted Securities in
accordance with the terms of the notice delivered by it to Purchaser.
Each certificate or other instrument evidencing the securities issued
upon the Transfer of any such Restricted Securities (and each
certificate or other instrument evidencing any untransferred balance
of such Restricted Securities) shall bear the legend set forth in
Section 6.2(b) unless (x) in such opinion of counsel of Purchaser
registration of any future Transfer is not required by the applicable
provisions of the Securities Act or (y) Purchaser shall have waived
the requirement of such legends. Neither the Shareholder nor AOL shall
Transfer any Restricted Securities until such opinion of counsel has
been given (unless waived by Purchaser or unless such opinion is not
required in accordance with the provisions of this Section 6.2(c)).";
5. Subsection 6.2(e) is hereby amended by deleting such subsection in its
entirety and inserting the following in lieu thereof:
"(e) Each of the Shareholder and AOL understand and agree that
Purchaser, at its discretion, may cause stop transfer orders to be
placed with its transfer agent with respect to certificates for
Restricted Securities owned by such Securityholder but not as to
certificates for such shares of Purchaser Common Stock as to which the
legend set forth in paragraph (b) of this Section 6.2 is no longer
required because one or more of the conditions set forth in Section
6.2(d) shall have been satisfied.";
6. Section 6.3 is hereby amended by deleting such section in its entirety
and inserting the following in lieu thereof:
(a) "As used in this Section 6.3, the following terms shall
have the following meanings:
(i) "Other Shares" shall mean at any time those shares of
Purchaser Common Stock that do not constitute Primary Shares,
Registrable Shares or Registrable Founders Shares.
(ii) "Primary Shares" shall mean at any time the authorized
but unissued shares of Purchaser Common Stock or shares of Purchaser
Common Stock held in treasury.
(iii) "Registrable Founder's Shares" shall have the meaning
as set forth in that certain Amended and Restated Registration Rights
Agreement dated as of May 6, 1996 among the Purchaser and the
stockholders identified therein.
(v) "Registrable Shares" shall mean the shares of Purchaser
Common Stock that constitute Restricted Securities
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that are held by the Shareholder or AOL and that have not theretofore
been sold to the public pursuant to a registration statement under the
Securities Act or pursuant to Rule 144.
(v) "Rule 144" shall mean Rule 144 promulgated under the
Securities Act, as amended from time to time, or any successor or
complementary provision thereto.
(b) Subject to the provisions set forth below and to the last
sentence of this Section 6.3(b), if Purchaser at any time or times following six
months after an initial underwritten public offering of shares of Purchaser
Common Stock proposes for any reason to register Primary Shares under the
Securities Act (other than on From S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto), it shall promptly give written
notice to the Shareholder and AOL of its intention so to register such shares
and, upon the written request, given within 30 days after delivery of such
notice by Purchaser, of any Securityholder to include in such registration
Registrable Shares (which request shall specify the number of Registrable Shares
proposed to be included in such registration by such Securityholder),
Purchaser shall use its best efforts to cause all such Registrable Shares to be
included in such registration on the same terms and conditions as the securities
otherwise being sold in such registration; provided, however, that the rights
granted to the Shareholder and AOL hereunder shall be subject at all times to
the contractual rights of any third parties now or hereafter granted; further
provided, however, that if the managing underwriter in the good faith exercise
of its reasonable judgment advises Purchaser in writing that the inclusion of
all Registrable Shares proposed to be included in such registration would
interfere with the successful marketing (including pricing) of Primary Shares or
Other Shares proposed to be registered by Purchaser, then the number of Primary
Shares, Registrable Shares and Other Shares proposed to be included in such
registration shall be included in the following order:
(i) first, the primary Shares and Other Shares; and
(ii) second, the Registrable Shares and the Registrable
Founders Shares requested to be included in such registration, pro
rata based upon the number of Registrable Shares and Registrable
Founders Shares proposed to be included in such registration; provided
that it is agreed that for purpose of this subsection 6.3 and the
rights granted herein, the Registrable Shares shall be treated on a
pari passu basis with and with respect to the Registrable Founders'
Shares.
If any registration hereunder is to be underwritten,
Purchaser and each holder of Registrable Shares to be registered by such
registration statement shall, as a condition to
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participating in such registration, enter into an underwriting agreement in
customary form with a managing underwriter selected for such underwriting by
Purchaser. If any such holder elects not to include any or all of its, his or
her Registrable Shares in any registration statement filed by the Purchaser,
such holder shall nevertheless continue to have the right to include any of its,
his or her Registrable Shares in any subsequent registration statement or
registration statements as may be filed by the Purchaser with respect to
offerings of its securities, subject to the terms and conditions set forth in
this Section 6. Anything to the contrary contained herein notwithstanding,
Purchaser shall not be required to take any action to effect any such
registration, qualification or compliance pursuant to this Section 6.3 after
Purchaser has effected four (4) such requested registrations pursuant to this
Section 6.3 in which any such requesting holder has been given the opportunity
to "participate"; provided that for the purposes of this sentence "participate"
shall mean the registration of at lease 50% of the amount of Registrable Shares
originally requested to be registered in each such election pursuant to this
subsection 6.3.
(c) In consideration for Purchaser agreeing to its
obligations udner this Section 6.3, if Purchaser shall include Registrable
Shares in a registration pursuant to Section 6.3(b)) for the sale thereof to
the public, each of the Shareholder and AOL agrees, upon the request of the
managing underwriter of such registration, to enter into an agreement not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of, any Registrable Shares, other than those Registrable
Shares actually included in such registration pursuant to Section 6.3(b) and
sold to the public thereunder, without the prior written consent of the
underwriters which period shall not begin more than 10 days prior to the
effectiveness of the registration statement pursuant to which such public
offering shall be made and shall not last more than 180 days after the
effective date of such registration statement; provided, that the Shareholder
and AOL shall be bound by this provision only if, and to the extent, the
executive officers of Purchaser owning Purchaser Common Stock shall be bound by
such a provision.
(d) In connection with any registration pursuant to this
Section 6.3, Purchaser shall in its sole discretion determine the terms and
conditions of such registration, including, without limitation, the timing
thereof; the scope of the offering contemplated thereby (i.e., whether the
offering shall be a combined primary offering and a secondary offering or
limited only to a secondary offering); the manner of distribution of
Registrable Shares; the period of effectiveness of registration for permissible
sales of Registrable Securities thereunder consistent with the plan of
distribution agreed upon by Purchaser, the Shareholder and AOL; and all other
material aspects of the registration and the registration process. In
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connection therewith, Purchaser may require that any such registration be
underwritten, in which event the managing underwriter shall be selected by
Purchaser.
(e) (i) In connection with any registration of any Registrable Shares
under the Securities Act pursuant to this Agreement, Purchaser shall indemnify
and hold harmless the Shareholder and AOL against any losses, claims, damages or
liabilities, joint or several (or actions in respect thereof), to which the
Shareholder and/or AOL may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the registration statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein or otherwise filed
with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Shares, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under with they were made not
misleading, or any violation by Purchaser of the Securities Act or state
securities or "blue-sky" laws applicable to Purchaser and relating to action or
inaction required of Purchaser in connection with such registration or
qualification under state securities or "blue-sky" laws; provided however, that
Purchaser shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said registration statement, preliminary prospectus, final prospectus,
amendment, supplement or document incident to registration or qualification of
any Registrable Shares in reliance upon and in conformity with written
information furnished to Purchaser by the Shareholder or AOL, as the case may
be, with respect to information regarding the Shareholder or AOL, as the case
may be, for use in the preparation thereof.
(ii) In connection with any registration of Registrable Shares
under the Securities Act pursuant to this Agreement, the Shareholder
shall indemnify and hold harmless (in the same manner and to the same
extent as set forth in the preceding paragraph of this Section 6.3 (e))
Purchaser, each director of Purchaser, each officer of Purchaser who
shall sign such registration statement, each underwriter, broker or
other person acting on behalf of Purchaser and each person who controls
any of the foregoing persons within the meaning of the Securities Act
with respect to any statement or omission from such registration, any
preliminary prospectus or final prospectus contained therein
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or otherwise filed with the Commission, any amendment or supplement
thereto or any document incident to registration or qualification of
any Registrable Share, if such statement or omission was made in
reliance upon and in conformity with written information furnished to
Purchaser or such underwriter by the Shareholder for use in connection
with the preparation of such registration statement, preliminary
prospectus, final prospectus, amendment, supplement or document;
provided that the maximum liability in respect of such indemnification
shall be limited, in the case of the Shareholder, to an amount equal to
the net proceeds received by the Shareholder from the sale of such
Registrable Shares effective pursuant to such registration statement.
(iii) In connection with any registration of Registrable
Shares under the Securities Act pursuant to this Agreement, AOL shall
indemnify and hold harmless (in the same manner and to the same extent
as set forth in clause (i) of this Section 6.3(c)) Purchaser, each
director of Purchaser, each officer of Purchaser, who shall sign such
registration statement, each underwriter, broker or other person acting
on behalf of Purchaser and each person who controls any for the
foregoing persons within the meaning of the Securities Act with respect
to any statement or omission from such registration statement, any
preliminary prospectus or final prospectus contained therein or
otherwise filed with the Commission, any amendment or supplement
thereto or any document incident to registration or qualification of
any Registrable Share, if such statement or omission was made in
reliance upon and in conformity with written information furnished to
Purchaser or such underwriter by AOL for use in connection with the
preparation of such registration statement, preliminary prospectus,
final prospectus, amendment, supplement or document; provided that the
maximum liability in respect of such indemnification shall be limited,
in the case of AOL, to an amount equal to the net proceeds received by
AOL from the sale of such Registrable Shares effected pursuant to such
registration statement.
(f) The Shareholder and/or AOL, as applicable, shall furnish to Purchaser
such written information regarding the Shareholder or AOL, as the case may be,
as Purchaser shall reasonably deem necessary in connection with any
registration, qualification or compliance contemplated by this Section 6.3.
(g) Anything to the contrary contained herein notwithstanding, the rights
of the holders of Registrable Shares and the obligations of Purchaser under
Section 6.3(b) hereof shall terminate and be of no further force or effect (i)
as to any holder of Registrable Shares, at such time as all Registrable Shares
held by such holder may be sold under Rule 144 during any
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three-month period and (ii) as to all holders of Registrable Shares, on the
third anniversary of the Effective Date.
(h) Neither the Shareholder nor AOL may assign their respective rights
under this Section 6.3 to any purchaser or transferee of Restricted Securities
without the prior written consent of Purchaser; provided, however, that any such
purchaser or transferee shall, as a condition to the effectiveness of such
assignment if consented to by Purchaser, be required to execute a counterpart to
this Agreement agreeing to be treated as the Shareholder or AOL, as the case may
be, is treated hereunder solely for purposes of this Section 6.3, whereupon such
purchaser or transferee shall have the benefits of, and shall be subject to the
restrictions contained in, this Section 6.3.
(i) All expenses incurred by Purchaser in complying with this Section 6.3,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the NASD), fees and expenses of complying with
securities and "blue-sky" laws, printing expenses and fees and expenses of
Purchaser's counsel and accountants, shall be borne by Purchaser; provided,
however, that all fees and expenses of counsel for the holders of Registrable
Shares or any of them and all underwriting discounts, taxes and selling
commissions applicable to the Registrable Shares, and any expenses and fees that
would not have been incurred by Purchaser but for inclusion of Registrable
Shares in such registration, shall not be borne by Purchaser but shall be borne
by the holders of Registrable Shares pro rata based on the number of Registrable
Shares so registered.";
7. Section 6.5 is hereby amended by deleting in line 8 of such section after
the word "this" the words "subsection 6.6" and inserting in lieu thereof the
words "subsection 6.5";
8. Section 8.1(b) and (c) are hereby amended by deleting any reference to the
date "March 31, 1997" (as amended by Amendment No. 1 to be "May 15, 1997)
and inserting in place thereof the reference to the date "May 23, 1997.";
9. EXCEPT AS EXPRESSLY AMENDED HEREBY, THE AGREEMENT SHALL REMAIN IN FULL FORCE
AND EFFECT.
10. This Amendment shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be
performed wholly therein.
11. This Amendment may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts shall constitute one agreement.
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IN WITNESS WHEREOF, the undersigned have duly executed this Amendment
No. 2 as of the date first written above.
SHAREHOLDER iVILLAGE, INC.
/s/ Xxxx Xxxxxxxx By: /s/ Xxxxxx Xxxxx
------------------------ -------------------------
Xxxx Xxxxxxxx Name: Xxxxxx Xxxxx
Title: VP, Finance
HEALTH RESPONSEABILITY SYSTEMS, INC.
By: /s/ Xxxxx Xxxxx
-------------------------
Name: Xxxxx Xxxxx
Title: CEO
AMERICA ONLINE, INC.
By: /s/ Lennert J. Leader
-------------------------
Name: Lennert J. Leader
Title: Senior Vice President,
Chief Financial Officer
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AMENDMENT NO. 3 dated as of May 16, 1997, to the
AGREEMENT AND PLAN OR REORGANIZATION AND MERGER dated as
of January 31, 1997 (the "Agreement") (as amended by that
certain Amendment No. 1 dated as of March 31, 1997 and
that certain Amendment No. 2 dated as of May 15, 1997),
among iVILLAGE, INC., a Delaware corporation, HEALTH
RESPONSEABILITY SYSTEMS, INC., a Virginia corporation,
XXXX XXXXXXXX, the sole shareholder of Better Health, and
the other signatories thereto.
The parties desire to amend the Agreement to, among other things, to
modify certain terms of the Agreement in order to reflect the increase in the
number of Purchaser Common Stock that Xxxx Xxxxxxxx will receive. All
capitalized terms used but not otherwise defined herein shall have the
meanings ascribed thereto in the Agreement.
NOW, THEREFORE, pursuant to Section 9.10 of the Agreement, the
undersigned hereby amend the Agreement as follows:
1. Subsection 2.1(a)(ii) is hereby amended by deleting the words "1,038,000
shares of Purchaser Common Stock" and inserting in lieu thereof the words
"1,300,200 shares of Purchaser Common Stock";
2. Subsection 2.1(b)(1)(A) is hereby amended by deleting the words
"1,038,000 shares of Purchaser Common Stock" and inserting in lieu
thereof the words "1,300,200 shares of Purchaser Common Stock";
3. Subsection 2.2(b) is hereby amended by inserting the following sentence
after the last sentence thereof: "Of the Purchaser Common Stock being
issued to AOL hereunder, the first shares of Purchaser Common Stock with
a total aggregate value of $270,000 shall be paid to AOL as repayment of
the AOL Note, and the remaining shares of Purchaser Common Stock shall be
consideration in exchange for the AOL Warrant.";
4. Subsection 2.3(b)(ii) is hereby amended by deleting the words "103,800
Merger Shares" and inserting in lieu thereof the words "130,020 Merger
Shares";
5. Section 5.3 is hereby amended by inserting the following subsection after
the last subsection thereof:
"(j) Acquisition Stock Option Plan. The proposed 1997 Acquisition Stock
Option Plan will have been approved by the requisite number of
shareholders pursuant to a shareholder written consent."
6. EXCEPT AS EXPRESSLY AMENDED HEREBY, THE AGREEMENT SHALL REMAIN IN FULL
FORCE AND EFFECT.
7. This Amendment shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be
performed wholly therein.
8. This Amendment may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all
such counterparts shall constitute one agreement.
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IN WITNESS WHEREOF, the undersigned have duly executed this Amendment
No. 3 as of the date first written above.
SHAREHOLDER iVILLAGE, INC.
/s/ Xxxx Xxxxxxxx By: /s/ [ILLEGIBLE]
------------------------ -------------------------
Xxxx Xxxxxxxx Name: [ILLEGIBLE]
Title: Chief Executive Officer
HEALTH RESPONSEABILITY SYSTEMS, INC.
By: /s/ Xxxxx Xxxxx
-------------------------
Name: Xxxxx Xxxxx
Title: Chief Executive Officer
AMERICA ONLINE, INC.
By: /s/ Lennert J. Leader
-------------------------
Name: Lennert J. Leader
Title: Senior Vice President,
Chief Financial Officer
AMENDMENT NO. 4 dated as of May 23, 1997, to the
AGREEMENT AND PLAN OR REORGANIZATION AND MERGER dated as
of January 31, 1997 (the "Agreement") (as amended by that
certain Amendment No. 1 dated as of March 31, 1997,
that certain Amendment No. 2 dated as of May 15, 1997 and
that certain Amendment No. 3 dated May 23, 1997), among
iVILLAGE, INC., a Delaware corporation, HEALTH
RESPONSEABILITY SYSTEMS, INC., a Virginia corporation,
XXXX XXXXXXXX, the sole shareholder of Better Health, and
the other signatories thereto.
The parties desire to amend the Agreement to, among other things,
extend the termination date thereof to May 28, 1997 and to modify certain
terms of the Agreement in order to reflect the conversion of certain cash
consideration payable to AOL into rights to receive Purchaser Common Stock.
All capitalized terms used but not otherwise defined herein shall have the
meanings ascribed thereto in the Agreement.
NOW, THEREFORE, pursuant to Section 9.10 of the Agreement, the
undersigned hereby amend the Agreement as follows:
1. Subsection 8.1(b) and (c) are hereby amended by deleting any reference to
the date "March 31, 1997" (as amended by Amendment No. 2 to be "May 23,
1997) and inserting in place thereof the reference to the date "May 28,
1997.";
2. EXCEPT AS EXPRESSLY AMENDED HEREBY, THE AGREEMENT SHALL REMAIN IN FULL
FORCE AND EFFECT.
3. This Amendment shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be
performed wholly therein.
4. This Amendment may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all
such counterparts shall constitute one agreement.
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment
No. 4 as of the date first written above.
SHAREHOLDER iVILLAGE, INC.
/s/ Xxxx Xxxxxxxx By: /s/ Xxxxxx Xxxxx
------------------------ -------------------------
Xxxx Xxxxxxxx Name: Xxxxxx Xxxxx
Title: Vice President, Finance
HEALTH RESPONSEABILITY SYSTEMS, INC.
By: /s/ Xxxxx Xxxxx
-------------------------
Name: Xxxxx Xxxxx
Title: Chief Executive Officer
AMERICA ONLINE, INC.
By: /s/ [ILLEGIBLE]
-------------------------
Name: [ILLEGIBLE]
Title: President and Chief Executive
Officer; [ILLEGIBLE]
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