Exhibit 2.1
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
among
PRIMEDIA Inc.,
Abracadabra Acquisition Corporation
and
Xxxxx.xxx, Inc.
Dated as of October 29, 2000
TABLE OF CONTENTS
ARTICLE I THE MERGER 1
SECTION 1.1.The Merger.......................................................................................1
SECTION 1.2.Effective Time...................................................................................2
SECTION 1.3.Effects of the Merger............................................................................2
SECTION 1.4.Certificate of Incorporation; By-Laws............................................................2
SECTION 1.5.Directors and Officers...........................................................................2
SECTION 1.6.Conversion of Securities.........................................................................2
SECTION 1.7.Treatment of Employee Options and Stock Purchase Plan............................................3
SECTION 1.8.Fractional Interests.............................................................................4
SECTION 1.9.Surrender of Shares of Company Common Stock; Stock Transfer Books................................5
SECTION 1.10.Lost Certificates...............................................................................6
SECTION 1.11.Withholding Rights..............................................................................6
SECTION 1.12.Closing and Closing Date........................................................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7
SECTION 2.1.Organization and Qualification...................................................................7
SECTION 2.2.Certificate of Incorporation and By-Laws.........................................................8
SECTION 2.3.Capitalization; Subsidiaries.....................................................................8
SECTION 2.4.Authority Relative to This Agreement.............................................................9
SECTION 0.0.Xx Conflict; Required Filings and Consents.......................................................9
SECTION 2.6.Compliance......................................................................................10
SECTION 2.7.SEC Filings; Financial Statements...............................................................11
SECTION 2.8.Absence of Certain Changes or Events............................................................12
SECTION 2.9.Absence of Litigation...........................................................................12
SECTION 2.10.Employee Benefit Plans.........................................................................12
SECTION 0.00.Xxx Matters....................................................................................13
SECTION 2.12.Environmental Matters..........................................................................15
SECTION 2.13.Form S-4; Proxy Statement......................................................................15
SECTION 2.14.Opinion of Financial Advisor...................................................................16
SECTION 2.15.Brokers........................................................................................16
SECTION 2.16.Affiliate Transactions.........................................................................16
SECTION 0.00.Xxxx Required..................................................................................16
SECTION 2.18.DGCL Section 203; State Takeover Statutes......................................................16
SECTION 2.19.Material Contracts.............................................................................17
SECTION 2.20.Absence of Breaches or Defaults................................................................18
SECTION 2.21.Intellectual Property..........................................................................18
SECTION 0.00.Xxxxxxxxx......................................................................................20
SECTION 2.23.Labor Matters..................................................................................20
SECTION 2.24.Reorganization Qualification...................................................................20
SECTION 2.25.Guides.........................................................................................20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB 21
SECTION 3.1.Corporate Organization..........................................................................21
SECTION 3.2.Capitalization..................................................................................22
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SECTION 3.3.Authority Relative to This Agreement............................................................22
SECTION 0.0.Xx Conflict; Required Filings and Consents......................................................23
SECTION 3.5.Compliance......................................................................................23
SECTION 3.6.SEC Filings; Financial Statements...............................................................24
SECTION 3.7.Absence of Certain Changes or Events............................................................24
SECTION 3.8.Form S-4; Proxy Statement.......................................................................25
SECTION 3.9.Absence of Litigation...........................................................................25
SECTION 3.10.Opinion of Financial Advisor...................................................................25
SECTION 3.11.Brokers........................................................................................25
SECTION 3.12.Affiliate Transactions.........................................................................26
SECTION 3.13.Reorganization Qualification...................................................................26
SECTION 3.14.Stockholders'Consent and Approval Obtained.....................................................26
SECTION 3.15.Employee Benefit Plans.........................................................................26
SECTION 0.00.Xxx Matters....................................................................................26
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER 26
SECTION 4.1.Conduct of Business of the Company Pending the Merger...........................................26
SECTION 4.2.Conduct of Business of Parent Pending the Merger................................................29
ARTICLE V ADDITIONAL AGREEMENTS 30
SECTION 5.1.Preparation of Form S-4 and the Proxy Statement; Stockholder Meeting............................30
SECTION 0.0.Xxxxxxxxxxx'Letters.............................................................................31
SECTION 5.3.Access to Information; Confidentiality..........................................................32
SECTION 0.0.Xx Solicitation of Transactions.................................................................32
SECTION 5.5.Employee Benefits Matters.......................................................................34
SECTION 5.6.Directors'and Officers'Indemnification; Insurance...............................................34
SECTION 5.7.Notification of Certain Matters.................................................................35
SECTION 5.8.Further Action; Reasonable Best Efforts.........................................................35
SECTION 5.9.Public Announcements............................................................................36
SECTION 5.10.Stock Exchange Listing.........................................................................36
SECTION 5.11.Affiliates.....................................................................................36
SECTION 5.12.Board of Directors and Officers of Parent......................................................36
SECTION 5.13.Section 16b Approvals..........................................................................36
SECTION 5.14.SEC Documents..................................................................................36
SECTION 5.15.Continued Employment...........................................................................37
SECTION 5.16.Outstanding Company Securities.................................................................37
ARTICLE VI CONDITIONS OF MERGER 37
SECTION 6.1.Conditions to Obligation of Each Party to Effect the Merger.....................................37
SECTION 6.2.Conditions to Obligations of the Company to Effect the Merger...................................37
SECTION 6.3.Conditions to Obligations of Parent and Sub to Effect the Merger................................38
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER 40
SECTION 7.1.Termination.....................................................................................40
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SECTION 7.2.Effect of Termination...........................................................................41
SECTION 7.3.Fees and Expenses...............................................................................41
SECTION 7.4.Amendment.......................................................................................42
SECTION 7.5.Waiver..........................................................................................42
ARTICLE VIII GENERAL PROVISIONS 43
SECTION 8.1.Non-Survival of Representations, Warranties and Agreements......................................43
SECTION 8.2.Notices.........................................................................................43
SECTION 8.3.Certain Definitions.............................................................................44
SECTION 8.4.Severability....................................................................................45
SECTION 8.5.Entire Agreement; Assignment....................................................................45
SECTION 8.6.Parties in Interest.............................................................................45
SECTION 8.7.Governing Law...................................................................................45
SECTION 8.8.Headings........................................................................................46
SECTION 8.9.Counterparts....................................................................................46
SECTION 8.10.Interpretation.................................................................................46
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 29, 2000
(the "AGREEMENT"), among PRIMEDIA Inc., a Delaware corporation ("PARENT"),
Abracadabra Acquisition Corporation, a Delaware corporation and a direct wholly
owned subsidiary of Parent ("SUB"), and Xxxxx.xxx, Inc., a Delaware corporation
(the "COMPANY").
WHEREAS, the Boards of Directors of Parent and Sub and the
Company have declared this Agreement to be advisable, and the Boards of
Directors of Parent, Sub and the Company have each approved the merger of Sub
with and into the Company and the Company becoming a wholly owned direct
subsidiary of Parent (the "MERGER") in accordance with the General Corporation
Law of the State of Delaware ("DGCL") upon the terms and subject to the
conditions set forth herein;
WHEREAS, certain stockholders of Parent holding not less than
70% of the outstanding voting securities of Parent have entered into a voting
agreement, dated as of the date hereof (the "PARENT VOTING AGREEMENT"), pursuant
to which they have agreed, among other things, to consent to the issuance of
Parent Common Stock (as defined below) in the Merger;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as an inducement to the willingness of Parent and Sub to enter
into this Agreement, certain holders of shares of common stock, par value $.001
per share (the "COMPANY COMMON STOCK"), of the Company have each entered into a
voting agreement, dated as of the date hereof (the "SHAREHOLDER VOTING
AGREEMENT"), pursuant to which such holders have agreed to vote their shares of
Company Common Stock in the manner set forth therein; and
WHEREAS, for Federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "CODE");
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the
conditions of this Agreement and in accordance with the DGCL, at the Effective
Time (as defined in Section 1.2), Sub shall be merged with and into the Company.
As a result of the Merger, the separate corporate existence of Sub shall cease
and the Company shall continue as the surviving corporation of the Merger (the
"SURVIVING CORPORATION"). At Parent's election, the Merger may alternatively be
structured so that any direct wholly owned subsidiary of Parent may be
substituted for Sub as a constituent corporation in the Merger. In the event of
such an election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
SECTION 1.2. EFFECTIVE TIME. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger (the "CERTIFICATE OF MERGER") with the Secretary of State of the State of
Delaware, in such form as required by and executed in accordance with the
relevant provisions of the DGCL (the date and time of the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware (or
such later time as is specified in the Certificate of Merger and agreed upon by
the parties hereto) being the "EFFECTIVE TIME").
SECTION 1.3. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises of the Company
and Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 1.4. CERTIFICATE OF INCORPORATION; BY-LAWS. (a) At the
Effective Time and without any further action on the part of the Company and
Sub, the Restated Certificate of Incorporation of the Company (the "CERTIFICATE
OF INCORPORATION") as in effect immediately prior to the Effective Time shall be
the Restated Certificate of Incorporation of the Surviving Corporation until
thereafter and further amended as provided therein and under the DGCL.
(b) At the Effective Time and without any further action on
the part of the Company and Sub, the Amended and Restated By-Laws of the Company
(the "BY-LAWS") shall be the Amended and Restated By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with their
terms or the Certificate of Incorporation of the Surviving Corporation and as
provided by law.
SECTION 1.5. DIRECTORS AND OFFICERS. The directors of Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed (as the case may be) and qualified.
SECTION 1.6. CONVERSION OF SECURITIES. At the Effective Time,
by virtue of the Merger and without any action on the part of Sub, the Company
or the holders of any of the following securities:
(a) Subject to Section 1.8, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares of Company Common Stock to be canceled in accordance with Section 1.6(b)
hereof) shall be converted into 2.3409 (the "EXCHANGE RATIO") fully paid and
nonassessable shares of Common Stock, par value $0.01 per share (the "PARENT
COMMON STOCK"), of Parent (the "MERGER CONSIDERATION"). As of the Effective
Time, all such shares of Company Common Stock shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration and any cash in lieu of
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fractional shares of Parent Common Stock to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with Section 1.9,
without interest.
(b) Each share of Company Common Stock that is (i) held in the
treasury of the Company or (ii) owned by Parent immediately prior to the
Effective Time shall be cancelled and retired without any conversion thereof and
no payment or distribution shall be made with respect thereto.
(c) Each share of common stock of Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one validly
issued, fully paid and non-assessable share of common stock of the Surviving
Corporation and shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation.
SECTION 1.7. TREATMENT OF EMPLOYEE OPTIONS AND STOCK PURCHASE
PLAN.
(a) Prior to the Effective Time, the Board of Directors of the
Company (or, if appropriate, any Committee thereof) and the Board of Directors
of Parent (or, if appropriate, any Committee thereof) shall adopt appropriate
resolutions and take all other actions necessary to provide that as of the
Effective Time all outstanding stock options of the Company (the "COMPANY STOCK
RIGHTS") heretofore granted under any stock option plan of the Company or its
acquired subsidiaries (the "STOCK PLANS") and which are outstanding immediately
prior to the Effective Time shall be assumed by Parent and be deemed to
constitute an option to purchase shares of Parent Common Stock or, in the case
of Company Stock Rights which are in the form of restricted stock, shares of
restricted Parent Common Stock (collectively, "NEW STOCK RIGHTS") in an amount
and, if applicable, at an exercise price determined as provided below:
(i) The number of shares of Parent Common Stock to be
subject to the New Stock Rights shall be equal to the product
of the number of shares of Company Common Stock remaining
subject (as of immediately prior to the Effective Time) to the
original Company Stock Right and the Exchange Ratio, PROVIDED
that any fractional shares of Parent Common Stock resulting
from such multiplication shall be rounded down to the nearest
share; and
(ii) The exercise price per share of Parent Common
Stock under the New Stock Right shall be equal to the exercise
price per share of the Company Common Stock under the original
Company Stock Right divided by the Exchange Ratio, PROVIDED
that such exercise price shall be rounded down to the nearest
cent.
The adjustment provided herein with respect to any options
which are "incentive stock options" (as defined in Section 422 of the Code)
shall be and is intended to be effected in a manner which is consistent with
Section 424(a) of the Code. Except as may be required by the terms of the
Automatic Option Grant Program under the 1998 Stock Option/Stock Issuance Plan
or any grants thereunder as of the date hereof to directors, the Company shall
not accelerate the vesting, or otherwise amend the terms, of any unvested
Company Stock Rights under any of the Stock Plans. After the Effective Time,
each New Stock Right shall be exercisable and shall vest upon the same terms and
conditions as were applicable to the related Company Stock Right
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immediately prior to the Effective Time except that all references to the
Company shall be deemed to be references to the Parent.
(b) Immediately prior to the Effective Time, pursuant to the
terms of the Company's 1999 Employee Stock Purchase Plan (the "ESPP"), each
outstanding purchase right under the ESPP shall be exercised for the purchase of
Company Common Stock at the price per share set forth in the ESPP. The Company
Common Stock purchased under the ESPP shall be considered issued and outstanding
immediately prior to the Effective Time and shall be converted pursuant to
Section 1.6 hereof. In addition, prior to the Effective Time, the Company shall
amend the ESPP to provide for (i) its continuation from and after the Effective
Time and (ii) a new offering period to commence from and after the Effective
Time and to terminate immediately prior to the start of the next succeeding
offering period under the PRIMEDIA Employee Stock Purchase Plan for which
participants in the ESPP are eligible to particpate.
(c) The Company shall ensure that following the Effective Time
no holder of a Company Stock Right or any participant in any Stock Plans shall
have any right thereunder to acquire capital stock of the Company, Sub, or the
Surviving Corporation. The Company will take all reasonable steps to ensure
that, immediately following the Effective Time, none of Sub, the Company, the
Surviving Corporation or any of their respective subsidiaries is or will be
bound by any Company Stock Rights, other options, warrants, rights or agreements
which would entitle any person, other than Sub or its affiliates, to own any
capital stock of the Company, Sub, the Surviving Corporation or any of their
respective subsidiaries or to receive any payment in respect thereof.
(d) In connection with the issuance of New Stock Rights and
the assumption of the ESPP, Parent shall (i) reserve for issuance the aggregate
number of shares of Parent Common Stock that will become subject to New Stock
Rights and the ESPP pursuant to this Section 1.7 from and after the Effective
Time, upon exercise of New Stock Rights and the purchase rights under the ESPP,
(ii) make available for issuance all shares of Parent Common Stock covered
thereby, subject to the terms and conditions applicable thereto, and (iii) if
necessary, as soon as reasonably practicable following the Effective Time, file
a registration statement on Form S-8 covering the shares to be issued upon
exercise of the New Stock Rights and the purchase rights under the ESPP.
SECTION 1.8. FRACTIONAL INTERESTS. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and such fractional interests will not entitle the
owner thereof to any rights of a stockholder of Parent. In lieu of any such
fractional interests, each holder of shares of Company Common Stock exchanged
pursuant to Section 1.6(a) who would otherwise have been entitled to receive a
fraction of a share of Parent Common Stock (after taking into account all shares
of Company Common Stock then held of record by such holder) shall receive cash
(without interest) in an amount equal to the product of such fractional part of
a share of Parent Common Stock multiplied by the closing price of a share of
Parent Common Stock on the NYSE as reported by The Wall Street Journal (or if
not reported thereby, any other authoritative source) on the Closing Date (as
defined in Section 1.12), rounded down to the nearest cent.
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SECTION 1.9. SURRENDER OF SHARES OF COMPANY COMMON STOCK;
STOCK TRANSFER BOOKS. (a) Prior to the Closing Date, Sub shall designate a bank
or trust company to act as agent for the holders of shares of Company Common
Stock in connection with the Merger (the "EXCHANGE AGENT") to receive the shares
of Parent Common Stock (and any cash payable in lieu of any fractional shares of
Parent Common Stock) to which holders of shares of Company Common Stock shall
become entitled pursuant to Sections 1.6(a) and 1.8. When and as needed, Parent
or Sub will make available to the Exchange Agent sufficient shares of Parent
Common Stock and cash to make all exchanges pursuant to Section 1.9(b).
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each record holder, as of the Effective
Time, of an outstanding certificate or certificates which immediately prior to
the Effective Time represented shares of Company Common Stock (the
"CERTIFICATES"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock therefor and for
cash payable in lieu of any fractional shares of Parent Common Stock. Upon
surrender to the Exchange Agent of a Certificate, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor, (i) a certificate representing that number of whole shares
of Parent Common Stock which such holder has the right to receive pursuant to
the provisions of Section 1.6(a) and (ii) cash in lieu of any fractional shares
of Parent Common Stock to which such holder is entitled pursuant to Section 1.8,
after giving effect to any required tax withholdings, and the Certificate so
surrendered shall forthwith be cancelled. If the exchange of certificates
representing shares of Parent Common Stock is to be made to a person other than
the person in whose name the surrendered Certificate is registered, it shall be
a condition of exchange that the Certificate so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and that the person
requesting such exchange shall have paid any transfer and other taxes required
by reason of the exchange of certificates representing shares of Parent Common
Stock to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable.
(c) At any time following six months after the Effective Time,
the Surviving Corporation shall be entitled to require the Exchange Agent to
deliver to it any shares of Parent Common Stock (and any cash payable in lieu of
any fractional shares of Parent Common Stock) which had been made available to
the Exchange Agent and which have not been disbursed to holders of Certificates,
and thereafter such holders shall be entitled to look to the Surviving
Corporation (subject to abandoned property, escheat or other similar laws) only
as general creditors thereof with respect to the shares of Parent Common Stock
(and any cash payable in lieu of any fractional shares of Parent Common Stock)
payable upon due surrender of their Certificates. Notwithstanding the foregoing,
none of the Surviving Corporation, Parent or the Exchange Agent shall be liable
to any holder of a Certificate for shares of Parent Common Stock (and any cash
payable in lieu of any fractional shares of Parent Common Stock) delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
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(d) At the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of shares of Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such shares of Company
Common Stock except as otherwise provided for herein or by applicable law.
(e) No dividends or other distributions declared or made after
the Effective Time with respect to shares of Parent Common Stock shall be paid
to the holder of any unsurrendered Certificate with respect to the whole shares
of Parent Common Stock it is entitled to receive and no cash payment in lieu of
fractional interests shall be paid pursuant to Section 1.8 until the holder of
such Certificate shall surrender such Certificate in accordance with the
provisions of this Agreement. Upon such surrender, there shall be paid to the
person in whose name the certificates representing such whole shares of Parent
Common Stock shall be issued, any dividends or distributions with respect to
such shares of Parent Common Stock which have a record date after the Effective
Time and shall have become payable between the Effective Time and the time of
such surrender. In no event shall the person entitled to receive such dividends
or distributions be entitled to receive interest thereon.
(f) If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either Sub or the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers of the Surviving Corporation
shall be authorized to execute and deliver, in the name and on behalf of each of
Sub and the Company or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in such names and on such behalves or otherwise,
all such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under such
rights, properties or assets in the Surviving Corporation or otherwise to carry
out the purposes of this Agreement.
SECTION 1.10. LOST CERTIFICATES. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the holder claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such holder of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will deliver in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect to the shares of
Company Common Stock formerly represented thereby, any cash in lieu of
fractional shares of Parent Common Stock and unpaid dividends and distributions
on shares of Parent Common Stock deliverable in respect thereof pursuant to this
Agreement.
SECTION 1.11. WITHHOLDING RIGHTS. Each of the Surviving
Corporation and Parent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock such amounts as it is required to deduct and
withhold with respect to the making of such payment under the Code
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and the rules and regulations promulgated thereunder, or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by the
Surviving Corporation or Parent, as the case may be, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the shares of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Parent, as the case may be.
SECTION 1.12. CLOSING AND CLOSING DATE. Unless this Agreement
shall have been terminated and the transactions herein contemplated shall have
been abandoned pursuant to the provisions of Section 7.1, the closing (the
"CLOSING") of this Agreement shall take place (a) at 10:00 a.m. (New York time)
on the second business day after all of the conditions to the respective
obligations of the parties set forth in Article VI hereof shall have been
satisfied or waived or (b) at such other time and date as Parent and the Company
shall agree (such date and time on and at which the Closing occurs being
referred to herein as the "CLOSING DATE"). The Closing shall take place at such
location as Parent and the Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub
that, except as set forth in the corresponding sections or subsections of the
Disclosure Schedule delivered by the Company to Parent and Sub prior to the
execution of this Agreement (the " COMPANY DISCLOSURE SCHEDULE") or in any other
section or subsection of the Company Disclosure Schedule if it is reasonably
apparent that such disclosure applies:
SECTION 2.1. ORGANIZATION AND QUALIFICATION. Each of the
Company and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and any
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
have such power, authority and governmental approvals could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect (as
defined below). Each of the Company and each of its subsidiaries is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed or in good standing which could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. When
used in this Article II or otherwise in connection with the Company or any of
its subsidiaries, the term "MATERIAL ADVERSE EFFECT" means any change or effect
that would be materially adverse to the business, properties, assets, condition
(financial or otherwise) or results of operations of the Company and its
subsidiaries taken as a whole or that would materially impair the ability of the
Company to perform its obligations hereunder; PROVIDED that none of the
following shall be taken into account in determining whether there has been or
could be a Material Adverse Effect: (w) any employee attrition after the date
hereof; (x) any change arising from the public announcement of the Merger and
the other transactions contemplated by this Agreement; (y) any change in the
market price or trading volume of the Company Common
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Stock after the date hereof; or (z) any adverse effect on the Company
attributable solely to conditions affecting the business to consumer Internet
industry, the United States economy as a whole or foreign economies in any
locations where the Company or any of its subsidiaries has material operations
or sales (and not having a materially disproportionate effect on the Company).
SECTION 2.2. CERTIFICATE OF INCORPORATION AND BY-LAWS. The
Company has heretofore furnished or made available to Parent a complete and
correct copy of the Certificate of Incorporation and the By-Laws as currently in
effect. Such Certificate of Incorporation and By-Laws are in full force and
effect and no other organizational documents are applicable to or binding upon
the Company.
SECTION 2.3. CAPITALIZATION; SUBSIDIARIES. (a) The authorized
capital stock of the Company consists of 105,000,000 shares, consisting of (i)
5,000,000 shares of preferred stock, par value $0.001 per share ("PREFERRED
STOCK"), and (ii) 100,000,000 shares of Company Common Stock. As of September
30, 2000, (i) 18,462,290 shares of Company Common Stock were issued and
outstanding, all of which shares were duly authorized, validly issued, fully
paid and nonassessable and were issued free of preemptive (or similar) rights,
(ii) no shares of Company Common Stock were held in the treasury of the Company,
(iii) no shares of Company Common Stock which are restricted stock issued
pursuant to the ESPP were issued and outstanding, (iv) an aggregate of 8,024,872
shares, of Company Common Stock were reserved and available for issuance in
connection with the exercise of stock options issuable pursuant to the Stock
Plans (other than the ESPP); (v) an aggregate of 125,000 shares of Company
Common Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of purchase rights under the ESPP;
and (vi) an aggregate of 5,369,591 shares of Company Common Stock are issuable
upon or otherwise deliverable in connection with the exercise of all outstanding
Company Stock Rights issued pursuant to the Stock Plans or otherwise identified
on Section 2.3(a) of the Company Disclosure Schedule. All of the shares of
Company Common Stock that may be issued pursuant to the Stock Plans will be,
when issued, duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive (or similar) rights. No shares of preferred stock of
the Company are outstanding or held in the treasury of the Company. Except as
set forth above or in Section 2.3(a) of the Company Disclosure Schedule, there
are outstanding (A) no shares of capital stock or other voting securities
(including indebtedness having the right to vote) of the Company, (B) no
securities of the Company convertible into or exchangeable for shares of capital
stock or voting securities (including indebtedness having the right to vote) of
the Company, (C) no options, warrants or other rights to acquire from the
Company, and no obligation of the Company to issue, any capital stock, voting
securities (including indebtedness having the right to vote) or securities
convertible into or exchangeable for capital stock or voting securities
(including indebtedness having the right to vote) of the Company and (D) no
equity equivalents, interests in the ownership or earnings of the Company or
other similar rights (collectively, "COMPANY SECURITIES"). Except pursuant to
the Stock Plans and the Company Securities issued thereunder, there are no
outstanding obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities and there is no voting trust
or other agreement or understanding to which the Company or any of its
subsidiaries is a party or is bound with respect to the voting of the capital
stock of the Company of any of its subsidiaries. There are no other options,
calls, warrants or other rights, agreements, arrangements or commitments of any
8
character relating to the issued or unissued capital stock of the Company or any
of its subsidiaries to which the Company or any of its subsidiaries is a party.
(b) Each of the outstanding shares of capital stock of each of
the Company's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares are owned by the Company or another wholly
owned subsidiary of the Company and are owned free and clear of all security
interests, liens, claims, pledges, agreements, limitations in voting rights,
licenses, charges or other encumbrances of any nature whatsoever ("LIENS").
There are no outstanding contractual obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of any subsidiary or, except as set forth in Section 2.3(b) of the Company
Disclosure Schedule, to provide funds to or make any investment (in the form of
a loan, capital contribution or otherwise) in any such subsidiary or any other
entity. Section 2.3(b) of the Company Disclosure Schedule sets forth a complete
and correct list of all of the subsidiaries of the Company and all other
entities in which the Company owns, directly or indirectly, any equity interest.
Such list sets forth the amount of capital stock or other equity interests owned
by the Company, directly or indirectly, in such subsidiaries or other entities.
(c) The signatories to the Shareholder Voting Agreement hold
at least 10% of the outstanding shares of Company Common Stock (on a fully
diluted basis).
SECTION 2.4. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company
has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby has been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement, or to consummate the
transactions so contemplated (other than, with respect to the Merger, the
adoption of this Agreement by the holders of a majority of the outstanding
shares of Company Common Stock, and the filing of appropriate merger documents
as required by the DGCL). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery hereof by Parent and Sub (as applicable), constitutes a legal, valid
and binding obligations of the Company enforceable against the Company in
accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by principles governing the
availability of equitable remedies).
SECTION 2.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a)
The execution, delivery and performance of this Agreement by the Company do not
and will not: (i) conflict with or violate the Certificate of Incorporation or
By-Laws of the Company or the equivalent organizational documents of any of its
subsidiaries; (ii) conflict with or violate any law, statute, rule, regulation,
order, writ, award, judgment, directive, decree, injunction, determination,
settlement or stipulation ("ORDER") applicable to the Company or any of its
subsidiaries or by which its or any of their respective properties are bound or
affected (assuming that all consents, approvals and authorizations contemplated
by clauses (i), (ii) and (iii) of subsection (b) below have been obtained and
all filings described in such clauses have been made); or (iii) result in
9
any breach or violation of or constitute a default (or an event which with
notice or lapse of time or both could become a default) or result in the loss of
a benefit or creation of additional liabilities or fees under, or give rise to
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a Lien on any of the properties or assets of the Company or
any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective
properties are bound or affected, except, in the case of clauses (ii) and (iii),
for any such conflicts, violations, breaches, defaults or other occurrences
which could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(b) The execution, delivery and performance of this Agreement
by the Company and the consummation of the Merger by the Company do not and will
not require any consent, approval, authorization or permit of, action by, filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except for (i) applicable requirements of the Securities Act of 1933,
as amended (the "SECURITIES ACT"), and the rules and regulations promulgated
thereunder, the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), and the rules and regulations promulgated thereunder, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), the rules and regulations of the NYSE, Nasdaq National Market ("NASDAQ")
and state securities, takeover and Blue Sky laws, (ii) the filing and
recordation of appropriate merger or other documents as required by the DGCL and
(iii) such consents, approvals, authorizations, permits, actions, filings or
notifications the failure of which to make or obtain could not, individually or
in the aggregate, reasonably be expected to (x) prevent or delay consummation of
the Merger or (y) have a Material Adverse Effect.
SECTION 2.6. COMPLIANCE. The Company and each of its
subsidiaries are in compliance with, and are not in default or violation of, (i)
the Certificate of Incorporation and By-Laws of the Company or the equivalent
organizational documents of such subsidiary, (ii) all laws (including, without
limitation, Environmental Laws) and Orders applicable to them or by which any of
their respective properties or businesses are bound or affected and (iii) all
notes, bonds, mortgages, indentures, contracts, agreements, leases, licenses,
permits, franchises and other instruments or obligations to which any of them
are a party or by which any of them or any of their respective properties are
bound or affected (including all of the foregoing respecting the privacy
information of users or visitors to their web sites, including minors), except,
in the case of clauses (ii) and (iii), for any such failures of compliance,
defaults and violations which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Except as disclosed
with reasonable specificity prior to the date hereof in the Company SEC Reports
(as defined in Section 2.7), neither the Company nor any of its subsidiaries has
received notice of any revocation or modification of any federal, state, local
or foreign governmental license, certification, tariff, permit, authorization or
approval material to the Company and its subsidiaries taken as a whole. The
Company and its subsidiaries have all permits, licenses, authorizations,
consents, approvals and franchises from governmental agencies required to
conduct their businesses as now being conducted, except for such permits,
licenses, authorizations, consents, approvals, and franchises the absence of
which could not, individually or in the aggregate, reasonably be expected have a
Material Adverse Effect.
10
SECTION 2.7. SEC FILINGS; FINANCIAL STATEMENTS. (a) The
Company and, to the extent applicable, each of its then or current subsidiaries,
has filed all forms, reports, statements and documents required to be filed with
the Securities and Exchange Commission (the "SEC") since January 1, 1999
(collectively, the "COMPANY SEC REPORTS"), each of which has complied in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations promulgated thereunder, or the Exchange Act and the rules
and regulations promulgated thereunder, each as in effect on the date so filed.
None of such Company SEC Reports (including but not limited to any financial
statements or schedules included or incorporated by reference therein)
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Except to the extent
revised or superseded by a subsequent filing with the SEC made prior to the date
hereof (a copy of which has been provided or made available to Parent), none of
the Company SEC Reports filed by the Company since January 1, 1999, contains any
untrue statement of a material fact or omits to state a material fact required
to be stated or incorporated by reference therein or necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the unaudited consolidated financial statements of
the Company and its subsidiaries (including any audited and related notes
thereto) included in the Company SEC Reports, complies or, if not yet filed,
will comply as to form in all material respects with all applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, has been or, if not yet filed, will have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited consolidated quarterly statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes thereto) and fairly presents in all material
respects or, if not yet filed, will fairly present in all material respects the
consolidated financial position of the Company and its subsidiaries at the
respective date thereof and the consolidated results of its and their operations
and changes in cash flows for the periods indicated (subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments).
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Company and its subsidiaries at June 30, 2000, including
the notes thereto, included in the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2000 (the "JUNE 30 10Q"), neither the Company
nor any of its subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise), except for liabilities or
obligations incurred in the ordinary course of business since June 30, 2000
which could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(d) The Company has heretofore furnished to Parent a complete
and correct copy of any amendments or modifications which have not yet been
filed with the SEC to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the Securities
Act and the rules and regulations promulgated thereunder or the Exchange Act and
the rules and regulations promulgated thereunder.
11
SECTION 2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
December 31, 1999, except as specifically disclosed in the Company SEC Reports
filed and publicly available prior to the date of this Agreement or set forth in
Section 2.8 of the Company Disclosure Schedule, the Company and its subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with past practice and since such date there has not been (i) any
change in the financial condition, results of operations, assets, business or
operations of the Company or any of its subsidiaries, individually or in the
aggregate, having or which could be reasonably likely to have a Material Adverse
Effect, (ii) any condition, event or occurrence which, individually or in the
aggregate, having or which could reasonably be expected to have a Material
Adverse Effect, (iii) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of the Company or any of its subsidiaries,
individually or in the aggregate, having or which could reasonably be expected
to have a Material Adverse Effect or (iv) any other action which, if it had been
taken after June 30, 2000, would have required the consent of Parent under
Section 4.1 hereof.
SECTION 2.9. ABSENCE OF LITIGATION. Except as specifically
disclosed in the Company SEC Reports filed and publicly available prior to the
date of this Agreement or Section 2.9 of the Company Disclosure Schedule, there
are no suits, claims, actions, arbitrations, proceedings or investigations
("ACTIONS") pending or, to the best knowledge of the Company, threatened against
the Company or any of its subsidiaries, or any properties or rights of the
Company or any of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign. To the Company's knowledge, neither the Company nor any of its
subsidiaries nor any of their respective properties is or are subject to any
Order having, or which could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
SECTION 2.10. EMPLOYEE BENEFIT PLANS. (a) Section 2.10(a) of
the Company Disclosure Schedule contains a true and complete list of each
"employee benefit plan" (within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), (including without
limitation multiemployer plans within the meaning of ERISA section 3(37)), stock
purchase, stock option, severance, employment, change-of-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or other
arrangements, whether or not subject to ERISA, whether formal or informal, oral
or written, legally binding or not under which any employee or former employee
of the Company or any of its subsidiaries has any present or future right to
benefits (with respect to his or her relationship to the Company or any of its
subsidiaries) or under which the Company or any of its subsidiaries has any
present or future liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "PLANS".
(b) With respect to each Plan, the Company has delivered or
made available to Parent a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the extent
applicable, (i) any related trust agreement, annuity contract or other funding
instrument; (ii) the most recent determination letter; (iii) any summary plan
description and other material written communications (or a description of any
oral communications) by the Company or any of its subsidiaries to its employees
concerning the extent of the benefits provided under a Plan; and (iv) for the
three most recent years: (I) the Form 5500
12
and attached schedules; (II) audited financial statements; and (III) actuarial
valuation reports.
(c) Except as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, (i) each Plan has been
established and administered in accordance with its terms, and in compliance
with the applicable provisions of ERISA, the Code and other applicable laws,
rules and regulations and if intended to be qualified within the meaning of
section 401(a) of the Code has received a favorable determination letter (or
opinion or notification letter, if applicable) from the Internal Revenue Service
or there is a period of time remaining under applicable Internal Revenue Service
regulations or pronouncements in which to apply for such a letter and make any
retroactive amendments necessary to obtain a favorable determination as to the
qualified status of each such Plan, and the Company is not aware of any
circumstances which could result in the revocation or denial of any such
favorable determination letter; (ii) with respect to any Plan, no Actions (other
than routine claims for benefits in the ordinary course) are pending or, to the
knowledge of the Company, threatened; (iii) neither the Company nor any other
party has engaged in a prohibited transaction, as such term is defined under
section 4975 of the Code or section 406 of ERISA, which would subject the
Company, the Surviving Corporation, any of their subsidiaries, Sub or Parent to
any taxes, penalties or other liabilities under section 4975 of the Code or
sections 409 or 502(i) of ERISA; (iv) no Plan provides for an increase in
benefits on or after the Closing Date; and (v) each Plan may be amended or
terminated without obligation or liability (other than those obligations and
liabilities for which specific assets have been set aside in a trust or other
funding vehicle or reserved for on the Company's June 30, 2000 balance sheet
included in the June 30 10Q).
(d) No Plan is, or at any time was, subject to Title IV of
ERISA, and neither the Company, nor any member of its "CONTROLLED GROUP"
(defined as any organization which is a member of a controlled group of
organizations within the meaning of sections 414(b), (c), (m) or (o) of the
Code), has any liability or will have any liability under Title IV of ERISA.
Neither the Company, nor any member of its Controlled Group, has any liability
or will have any liability in connection with any multiemployer plan (within the
meaning of section 4001(a)(3) of ERISA).
(e) Except as set forth on Section 2.10(e) of the Company
Disclosure Schedule, no Plan exists which could result in the payment to any
employee of the Company or any of its subsidiaries of any money or other
property or rights or accelerate or provide any other rights or benefits to any
such employee as a result of the transactions contemplated by this Agreement.
Neither the Company nor any of its subsidiaries has made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Sections 162(m) or 280G of the Code.
SECTION 2.11. TAX MATTERS. (a) The Company and each of its
subsidiaries have (i) filed all material Tax Returns (as hereinafter defined)
required to be filed by them (taking into account extensions) and all such Tax
Returns were true, correct and complete in all material respects, (ii) paid or
provided adequate reserves for all material Taxes whether or not shown to be due
on such Returns or which are otherwise due and payable and (iii) paid or
provided adequate reserves for all material Taxes for which a notice of
assessment or collection has been received. Neither the Internal Revenue Service
nor any other taxing authority has
13
asserted in writing any claim for Taxes, or to the Company's knowledge, is
threatening to assert any claims for Taxes, against the Company or any of its
subsidiaries. The Company and each of its subsidiaries have withheld or
collected and paid over to the appropriate governmental, administrative or
regulatory bodies or authorities (or are properly holding for such payment) all
material Taxes required by law to be withheld or collected. There are no
outstanding contracts, undertakings or agreements extending or waiving the
statutory period of limitation applicable to any material Tax Return of the
Company or any of its subsidiaries. Neither the Company nor any of its
subsidiaries has made an election under Section 341(f) of the Code. There are no
Liens for Taxes upon the assets of the Company or any of its subsidiaries, other
than Liens for Taxes that are not yet due, Liens that are being contested in
good faith in accordance with applicable law and disclosed in Section 3.14(a) of
the Company Disclosure Schedule (and for which adequate reserves have been
provided) and Liens which would not, individually or in the aggregate, have a
Material Adverse Effect. Neither the Company nor any of its subsidiaries (i) has
been a member of an affiliated group filing a consolidated federal income Tax
Return (other than a group the common parent of which was the Company), (ii) has
any liability for the Taxes of any Person, including under Treasury Regulation
Section 1.1502-6 or analogous state, local or foreign law for any Taxes, other
than for Taxes of the Company or its subsidiaries or (iii) is a party to, is
bound by or has any obligation under a Tax sharing or Tax indemnity contract,
undertaking, or agreement or any other contract of a similar nature with any
entity other than the Company or any of its subsidiaries that remains in effect.
No claim has been made in writing by a taxing authority in a jurisdiction where
the Company or any of its subsidiaries does not file Tax Returns that the
Company or any of its subsidiaries is or may be subject to taxation by that
jurisdiction where such claim, if determined adversely to the Company or such
subsidiary, would, individually or in the aggregate, have a Material Adverse
Effect. Neither the Company nor any of its subsidiaries is the subject of any
currently ongoing audit or examination with respect to Taxes, nor, to the
Company's knowledge, has any such audit been threatened or proposed by any
taxing authority.
(b) The Company does not know of any fact relating to the
Company or its stockholders that could reasonably be expected to prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
(c) For purposes of this Agreement: (i) "TAXES" shall mean any
and all federal, state, local, foreign or other taxes of any kind (together with
any and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any taxing authority, including but not limited
to taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, license, disability, severance, stamp, occupation, social security,
workers' compensation, unemployment compensation, or net worth, and taxes or
other charges in the nature of excise, withholding, ad valorem or value added,
and includes any liability for Taxes of another person, as a transferee or
successor, under Treasury Regulation Section 1.1502-6 or analogous provision of
law or otherwise; and (ii) "TAX RETURN" shall mean any return, report or similar
statement (including the attached schedules) required to be filed with any
governmental authority with respect to any Tax, including any information
return, claim for refund, amended return or declaration of estimated Tax.
14
SECTION 2.12. ENVIRONMENTAL MATTERS. (a) Except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) the operations of the Company and its subsidiaries has been
and is in compliance with all applicable Environmental Laws and with all
Environmental Permits and (ii) there are no pending or, to the knowledge of the
Company, threatened actions, suits, claims, investigations or other proceedings
(collectively, "ACTIONS") under or pursuant to Environmental Laws against the
Company or any of its subsidiaries or involving any real property currently or
formerly owned, operated or leased by the Company.
(b) For the purpose of this Agreement:
"ENVIRONMENTAL LAWS" means any and all Orders, ordinances,
guidelines, codes, decrees, or other legally enforceable requirements
(including, without limitation, common law) of any international authority,
foreign government, the United States, or any state, local, municipal or other
governmental authority, regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment or of human
health, or employee health and safety, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
xx.xx. 9601 ET seq., the Hazardous Materials Transportation Act, 49 U.S.C.
xx.xx. 1801 ET seq., the Resource Conservation and Recovery Act, 42 U.S.C.
xx.xX. 6901 et seq., the Clean Water Act, 33 U.S.C. xx.xx. 1251 ET seq., the
Clean Air Act, 42 U.S.C. xx.xX. 7401 et seq., the Toxic Substances Control Act,
15 U.S.C. XX.xx. 2601 et SEQ., the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C., xx.xx. 136 ET seq., Occupational Safety and Health
Act 29 U.S.C. xx.xx. 651 ET seq. and the Oil Pollution Act of 1990, 33 U.S.C.
xx.xX. 2701 et seq., as such laws have been amended or supplemented, and the
regulations promulgated pursuant thereto, and all analogous state or local
statutes.
"ENVIRONMENTAL PERMITS" means any and all permits, consents,
licenses, approvals, registrations, notifications, exemptions and any other
authorization required under any applicable Environmental Law.
SECTION 2.13. FORM S-4; PROXY STATEMENT. None of the information supplied by the
Company for inclusion or incorporation by reference in (i) the registration
statement on Form S-4 to be filed with the SEC by Parent in connection with the
issuance of shares of Parent Common Stock in connection with the Merger, or any
of the amendments or supplements thereto (collectively, the "FORM S-4"), will,
at the time the Form S-4 is filed with the SEC, at any time it is amended or
supplemented and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (ii) the proxy statement for use relating to the adoption by
the stockholders of the Company of this Agreement and the proxy or information
statement to be sent to the stockholders of Parent in connection with the
Merger, or any of the amendments or supplements thereto (collectively, the
"PROXY STATEMENT"), will, at the date it is first mailed to the Company's
stockholders and Parent's stockholders and at the time of the meeting of the
Company's stockholders held to vote on the adoption of this Agreement, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the
15
rules and regulations thereunder. No representation is made by the Company in
this Section 2.13 with respect to statements made or incorporated by reference
therein or in the Form S-4 based on information supplied by Parent or Sub
specifically for inclusion or incorporation by reference in the Proxy Statement
or in the Form S-4.
SECTION 2.14. OPINION OF FINANCIAL ADVISOR. The Company has received the written
opinion of Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation (the "COMPANY
FINANCIAL ADVISOR"), dated the date hereof, to the effect that the consideration
to be received in the Merger by the Company's stockholders is fair to such
stockholders from a financial point of view. An executed copy of such opinion
has been delivered to Parent. The Company has been authorized by the Company
Financial Advisor to permit, subject to prior review and consent by such Company
Financial Advisor (such consent not to be unreasonably withheld), the inclusion
of such fairness opinion in the Form S-4 and the Proxy Statement.
SECTION 2.15. BROKERS. No broker, finder or investment banker
(other than the Company Financial Advisor) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The Company has heretofore furnished to Parent a complete and
correct copy of all agreements between the Company and the Company Financial
Advisor pursuant to which such firm would be entitled to any payment relating to
the transactions contemplated hereby.
SECTION 2.16. AFFILIATE TRANSACTIONS. Except as set forth in
Section 2.16 of the Company Disclosure Schedule or as disclosed in the Company
SEC Reports filed and publicly available prior to the date of this Agreement,
there are no material contracts, commitments, agreements, arrangements or other
transactions between the Company or any of its subsidiaries, on the one hand,
and any (i) officer or director of the Company or any of its subsidiaries, (ii)
record or beneficial owner of five percent or more of the voting securities of
the Company or (iii) affiliate (as such term is defined in Regulation 12b-2
promulgated under the Exchange Act) of any such officer, director or beneficial
owner, on the other hand.
SECTION 2.17. VOTE REQUIRED. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock entitled
to vote thereon is the only vote of the holders of any class or series of the
Company's capital stock necessary to adopt this Agreement. The Board of
Directors of the Company (the "COMPANY BOARD") (at a meeting duly called and
held) has (i) approved and declared advisable this Agreement, (ii) determined
that the transactions contemplated hereby are advisable, fair to and in the best
interests of the holders of Company Common Stock, (iii) resolved to recommend
adoption of this Agreement, the Merger and the other transactions contemplated
hereby to such holders and (iv) directed that adoption of this Agreement be
submitted to the Company's stockholders. Subject to the provisions of Section
5.4, the Company hereby agrees to the inclusion in the Form S-4 and the Proxy
Statement of the recommendations of the Company Board described in this Section
2.17.
SECTION 2.18. DGCL SECTION 203; STATE TAKEOVER STATUTES. Prior
to the date hereof, the Board of Directors of the Company has approved this
Agreement and the Merger and the other transactions contemplated hereby and such
approval is sufficient to render the restrictions on "business combinations" set
forth in Section 203 of the DGCL inapplicable to this
16
Agreement, the Merger and any of such other transactions contemplated hereby. No
other state takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement or any of the transactions
contemplated by this Agreement, and no provision of the Certificate of
Incorporation or By-Laws of the Company or similar governing instruments of any
of the Company's subsidiaries would, directly or indirectly, restrict or impair
the ability of Parent to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of the Company and its subsidiaries that may
be acquired or controlled by Parent.
SECTION 2.19. MATERIAL CONTRACTS. (a) Section 2.19 of the
Company Disclosure Schedule contains a complete list of all material contracts
(written or oral), plans, undertakings, commitments or agreements to which the
Company or any of its subsidiaries is a party or by which any of them is bound
as of the date of this Agreement.
(b) Section 2.19 of the Company Disclosure Schedule contains a
complete and accurate list of the following:
(i) promissory notes, loans, agreements, indentures,
evidences of indebtedness or other instruments providing for
the lending of money, whether as borrower, lender or guarantor
(excluding trade payables or receivables arising in the
ordinary course of business);
(ii) contracts or agreements containing covenants
limiting the freedom of the Company or any of its subsidiaries
or affiliates to engage in any line of business or compete
with any person or operate at any location;
(iii) change in control or similar arrangements with
any officers, employees or agents of the Company that will
result in any obligation (absolute or contingent) of the
Company or any of its subsidiaries to make any payment to any
officers, employees or agents of the Company following either
the consummation of the transactions contemplated hereby,
termination of employment, or both (other than as set forth in
Section 2.10(e) of the Company Disclosure Schedule);
(iv) labor contracts;
(v) license, consent, royalty and other agreements
concerning Intellectual Property (as defined below) (other
than agreements with guides and other providers of content
entered into in the ordinary course of business);
(vi) distribution and syndication partnerships or
arrangements;
(vii) joint venture or partnership agreements or joint
development or similar agreements pursuant to which any third
party is entitled to develop any products on behalf of the
Company or its subsidiaries (other than agreements with guides
and other providers of content entered into in the ordinary
course of business);
17
(viii) any contract or agreement for the acquisition,
directly or indirectly (by merger or otherwise), of material
assets (other than inventory) or capital stock of another
person; and
(ix) contracts or agreements involving the issuance or
repurchase of any capital stock of the Company or any of its
subsidiaries (other than the Stock Plans and the ESPP and the
Company's repurchase rights with respect to Company Common
Stock issued in connection with any of the foregoing).
(c) For the purpose of this Agreement, the term "CONTRACTS"
shall mean all of the contracts (written or oral), plans, undertakings,
commitments and agreements are, or are required to be, contained in Section 2.19
of the Company Disclosure Schedule. True and complete copies of the written
Contracts identified on Section 2.19 of the Company Disclosure Schedule have
been delivered or made available to Parent.
SECTION 2.20. ABSENCE OF BREACHES OR DEFAULTS. Except as set
forth in Section 2.20 of the Company Disclosure Schedule, neither the Company
nor any of its subsidiaries is and, to the knowledge of the Company, no other
party is in default under, or in breach or violation of, any Contract, Guide
Agreement (as defined below) or other content agreement and, to the knowledge of
the Company, no event has occurred which, with the giving of notice or passage
of time or both would constitute a default under any Contract or Guide Agreement
except for defaults, breaches, violations or events which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Other than Contracts and Guide Agreements which have terminated
or expired in accordance with their terms, and except as set forth in Section
2.20 of the Company Disclosure Schedule, each of the Contracts and Guide
Agreements is in full force and effect, and assuming all consents required by
the terms thereof or applicable law have been obtained, such Contracts and Guide
Agreements will continue to be in full force and effect immediately following
the consummation of the transactions contemplated hereby, in each case except
where the failure to be in full force and effect could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. No
event has occurred which either entitles, or would, on notice or lapse of time
or both, entitle the holder of any indebtedness for borrowed money affecting the
Company or any of its subsidiaries (except for the execution of this Agreement)
to accelerate, or which does accelerate, the maturity of any indebtedness
affecting the Company or any of its subsidiaries, except as set forth in Section
2.20 of the Company Disclosure Schedule.
SECTION 2.21. INTELLECTUAL PROPERTY. Each patent, patent
application, registered trademark, material unregistered trademark, trademark
application, registered service xxxx, material unregistered service xxxx,
service xxxx application, registered trade name, material unregistered trade
name, material domain name, copyright registration and copyright application
owned by the Company is set forth on Section 2.21 of the Company Disclosure
Schedule. Except as set forth on Section 2.21 of the Company Disclosure
Schedule:
(a) The Company (i) owns all right, title and interest in and
to, free and clear of any Lien, or (ii) has a valid license to use, all the
Intellectual Property necessary to carry out the Company's current activities.
The Company is not in breach of any such licenses except for breaches which
could not, individually or in the aggregate, reasonably be expected to have a
18
Material Adverse Effect. To the Company's knowledge, all registered patents,
trademarks, service marks and copyrights listed on Section 2.21 of the Company
Disclosure Schedule are valid and subsisting and in full force and effect, and
all applications are currently pending;
(b) The Company Intellectual Property is all the Intellectual
Property that is necessary for the ownership, maintenance and operation of the
Company's business as currently conducted, and the consummation of the
transactions contemplated hereby will not alter or impair any such rights;
(c) The Company has not, and the continued operation of the
Company's business as presently conducted and as presently proposed to be
conducted will not, to the Company's knowledge, interfere with, infringe upon or
misappropriate ("INFRINGE") any Intellectual Property rights of third parties.
To the best knowledge of the Company, there are no material pending charges,
complaints, claims, demands or notices alleging that the Company's use of its
material Intellectual property Infringes upon the Intellectual Property rights
of any third party;
(d) To the Company's knowledge, no third party has Infringed
upon any material Company Intellectual Property;
(e) No Action or Order has been made, is pending, or, to the
knowledge of the Company, is threatened which challenges the legality, validity,
enforceability, use or ownership of any Company Intellectual Property that,
individually or in the aggregate, could be expected to have a Material Adverse
Effect; and
(f) The Company takes reasonable steps necessary to maintain
and protect its Intellectual Property and has executed non-disclosure agreements
and Intellectual Property assignments with all employees and independent
contractors who contribute to or create Intellectual Property, alone or with
others, that is owned or used by the Company.
(g) As used in this Agreement, "INTELLECTUAL PROPERTY" means
(i) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereon, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (ii) all trademarks, service marks, trade dress, logos, trade names,
domain names, and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (iii) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all trade secrets and
confidential business information (including ideas, know-how, customer and
supplier lists, pricing and cost information and business and marketing plans
and proposals), (v) all computer software (including data and related
documentation), (vi) all other proprietary rights, (vii) all copies and tangible
embodiments of the foregoing categories of intellectual property listed in
subsections (i) through (vi) herein (in whatever form or medium), and (viii) all
rights under licenses, sublicenses, agreements, or permissions related to the
foregoing categories of intellectual property listed in subsections (i) through
(vii) herein. As used in this Agreement, "COMPANY INTELLECTUAL PROPERTY" means
all Intellectual Property currently owned or used by Company.
19
(h) The Company utilizes industry standard measures and
practices to protect (i) the security and integrity of its networks, software,
Web sites and related systems from unauthorized use or access and (ii) the
privacy of all information stored thereon.
SECTION 2.22. INSURANCE. The Company has provided or made
available to the Parent true, correct and complete copies of all policies of
insurance to which the Company or any of its subsidiaries is a party or is a
beneficiary or named insured. The Company and its subsidiaries maintain
insurance coverage with reputable insurers in such amounts and covering such
risks as are in accordance with normal industry practice for companies engaged
in businesses similar to that of the Company (taking into account the cost and
availability of such insurance).
SECTION 2.23. LABOR MATTERS. The Company and each of its
subsidiaries is in compliance with all applicable laws (domestic and foreign),
agreements, contracts, and policies relating to employment, employment
practices, wages, hours, and terms and conditions of employment except for
failures so to comply, if any, that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Company has
complied in all material respects with its payment obligations to all employees
of the Company and its subsidiaries in respect of all wages, salaries,
commissions, bonuses, benefits and other compensation due and payable to such
employees under any Company policy, practice, agreement, plan, program or any
statute or other law. Except as set forth in Section 2.23 of the Company
Disclosure Schedule, the Company is not liable for any severance pay or other
payments to any employee or former employee arising from the termination of
employment under any benefit or severance policy, practice, agreement, plan, or
program of the Company, nor will the Company have any liability that exists or
arises, or may be deemed to exist or arise, under any applicable law or
otherwise, as a result of or in connection with the transactions contemplated
hereunder or as a result of the termination by the Company of any persons
employed by the Company or any of its subsidiaries on or prior to the Effective
Time of the Merger except as required by Code Section 4980B. The Company is in
compliance with its obligations pursuant to the Worker Adjustment and Retraining
Notification Act of 1988 and part 6 and 7 of Title I of ERISA, to the extent
applicable, and all other employee notification and bargaining obligations
arising under any collective bargaining agreement or statute. To the knowledge
of the Company, the employment of any employee or independent contractor by the
Company does not violate any legal or contractual rights of any third party,
including any rights with respect to Intellectual Property.
SECTION 2.24. REORGANIZATION QUALIFICATION. Neither the
Company nor, to its knowledge, any of its affiliates has taken or agreed to take
any action, or knows of any circumstances, that (without regard to any action
taken or agreed to be taken by Parent or any of its affiliates) would prevent
the Merger from qualifying as a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code.
SECTION 2.25. GUIDES. The Company has made available to Parent
forms of its guide agreements (the "FORM GUIDE AGREEMENTS") and each guide has
executed and delivered to the Company a guide agreement in one of such forms
without material modification (each, a "GUIDE AGREEMENT").
20
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND SUB
Parent and Sub hereby, jointly and severally, represent and
warrant to the Company that, except as set forth in the corresponding sections
or subsections of the Disclosure Schedule delivered by Parent and Sub to the
Company prior to the execution of this Agreement (the "PARENT DISCLOSURE
Schedule"), or in any other section or subsection of the Parent Disclosure
Schedule if it is reasonably apparent that such disclosure applies:
SECTION 3.1. CORPORATE ORGANIZATION. (a) Each of Parent and
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is incorporated and has the requisite
corporate power and authority and any necessary governmental authority to own,
operate or lease its properties and to carry on its business as it is now being
conducted, except where the failure to have such power, authority and
governmental approvals could not, individually or in the aggregate, reasonably
be expected to have a Parent Material Adverse Effect (as defined below). Each of
Parent and Sub is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed or in good standing which could not, individually
or in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect. When used in this Article III or otherwise in connection with Parent or
any of its subsidiaries (including Sub), the term "PARENT MATERIAL ADVERSE
EFFECT" means any change or effect that would be materially adverse to the
business, properties, assets, condition (financial or otherwise) or results of
operations of Parent and its subsidiaries taken as a whole or that would
materially impair the ability of Parent to perform its obligations hereunder;
PROVIDED that none of the following shall be taken into account in determining
whether there has been or could be a Parent Material Adverse Effect: (w) any
employee attrition after the date hereof, (x) any change arising from the public
announcement of the Merger and the other transactions contemplated by this
Agreement; (y) any change in the market price or trading volume of the Parent
Common Stock after the date hereof; or (z) any adverse effect on Parent
attributable solely to conditions affecting the publishing business, the United
States economy as a whole or foreign economies in any locations where Parent or
any of its subsidiaries has material operations or sales (and not having a
materially disproportionate effect on Parent).
(b) Parent has heretofore furnished to or made available to
the Company a complete and correct copy of its certificate of incorporation and
by-laws as currently in effect. Such certificate of incorporation and by-laws
are in full force and effect and no other organizational documents are
applicable to or binding upon Parent.
(c) Sub has heretofore furnished to or made available to the
Company a complete and correct copy of the certificate of incorporation of Sub
and the by-laws of Sub as currently in effect. Such certificate of incorporation
and bylaws are in full force and effect and no other organizational documents
are applicable to or binding upon Sub.
21
SECTION 3.2. CAPITALIZATION. (a) The authorized capital stock
of Parent consists of 255,750,000 shares, consisting of 250,000,000 shares of
Parent Common Stock and 5,750,000 shares of preferred stock, par value $.01 per
share. As of September 30, 2000, (i) 166,765,849 shares of Parent Common Stock
were issued and outstanding, all of which were duly authorized, validly issued,
fully paid and nonassessable and were issued free of preemptive (or similar)
rights, (ii) 123,848 shares of Parent Common Stock were held in the treasury of
Parent, (iii) an aggregate of 13,620,464 shares of Parent Common Stock were
reserved for issuance and issuable upon or otherwise deliverable in connection
with the exercise of outstanding stock options to purchase shares of Parent
Common Stock ("PARENT OPTIONS") identified on Section 3.2(a) of the Parent
Disclosure Schedule and issued pursuant to the employee benefit plans of Parent,
(iv) 2,000,000 shares of $10.00 Series D Exchangeable Preferred Stock of Parent
were issued and outstanding, (v) 1,250,000 shares of $9.20 Series F Exchangeable
Preferred Stock of Parent were issued and outstanding and (vi) 2,500,000 shares
of $8.625 Series H Exchangeable Preferred Stock of Parent were issued and
outstanding. Except (i) as set forth above or (ii) as a result of the exercise
of the Parent Options outstanding as of the date hereof and identified on
Section 3.2(a) of the Parent Disclosure Schedule, as of the date hereof there
are outstanding (a) no shares of capital stock or other voting securities
(including indebtedness having the right to vote) of Parent, (b) no securities
of Parent convertible into or exchangeable for shares of capital stock or voting
securities (including indebtedness having the right to vote) of Parent, (c) no
options, warrants, or other rights to acquire from Parent, and no obligation of
Parent to issue, any capital stock, voting securities (including indebtedness
having the right to vote) or securities convertible into or exchangeable for
capital stock or voting securities (including indebtedness having the right to
vote) of Parent and (d) no equity equivalents, interests in the ownership or
earnings of Parent or other similar rights (collectively, "PARENT SECURITIES").
Except as set forth in Section 3.2(a) of the Parent Disclosure Schedule, as of
the date hereof, there are no outstanding obligations of Parent or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Parent Securities
except pursuant to existing arrangements with employees. As of the date hereof,
there are no other options, calls, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of Parent or any of its subsidiaries to which Parent or any of its
subsidiaries is a party.
(b) The authorized capital stock of Sub consists of 100 shares
of common stock, par value $0.01 per share, 100 shares of which are duly
authorized, validly issued and outstanding, fully paid and nonassessable and
owned by Parent free and clear of all Liens. Sub was formed solely for the
purpose of engaging in a business combination transaction with the Company and
has engaged in no other business activities and has conducted its operations
only as contemplated hereby.
SECTION 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of
Parent and Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform their respective obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by each of Parent and Sub and the consummation by
each of Parent and Sub of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of Parent
and Sub and no other corporate proceedings on the part of Parent or Sub are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than (i) the effectiveness of
22
a registration statement on Form S-4 relating to the Parent Common Stock to be
issued in the Merger, (ii) stockholder approval of the issuance of Parent Common
Stock in the Merger, and (iii) the filing of appropriate merger documents as
required by the DGCL). This Agreement has been duly and validly executed and
delivered by Parent and Sub and, assuming due authorization, execution and
delivery hereof by the Company, constitutes a legal, valid and binding
obligation of each such corporation enforceable against such corporation in
accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by principles governing the
availability of equitable remedies).
SECTION 3.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a)
The execution, delivery and performance of this Agreement by Parent and Sub do
not and will not: (i) conflict with or violate the respective certificates of
incorporation or by-laws of Parent or Sub; (ii) assuming that all consents,
approvals and authorizations contemplated by clauses (i), (ii) and (iii) of
subsection (b) below have been obtained and all filings described in such
clauses have been made, conflict with or violate any Order applicable to Parent
or Sub or by which either of them or any of their respective properties are
bound or affected; or (iii) result in any breach or violation of or constitute a
default (or an event which with notice or lapse of time or both could become a
default) or result in the loss of a material benefit under, or give rise to any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien on any of the property or assets of Parent or Sub
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
Sub is a party or by which Parent or Sub or any of their respective properties
are bound or affected, except, in the case of clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences which could
not, individually or in the aggregate, reasonably be expected to prevent the
consummation of the Merger or to have a Parent Material Adverse Effect. All of
the conflicts, violations, breaches, defaults and other occurrences referred to
in the immediately preceding sentence are identified in Section 3.4(a) of the
Parent Disclosure Schedule.
(b) The execution, delivery and performance of this Agreement
by Parent and Sub do not and will not require any consent, approval,
authorization or permit of, action by, filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements of the Securities Act and the rules and regulations
promulgated thereunder, the Exchange Act and the rules and regulations
promulgated thereunder, the HSR Act, the rules and regulations of Nasdaq, the
NYSE and state securities, takeover and Blue Sky laws, (ii) the filing and
recordation of appropriate merger or other documents as required by the DGCL,
and (iii) such consents, approvals, authorizations, permits, actions, filings or
notifications the failure of which to make or obtain could not, individually or
in the aggregate, be expected to (x) prevent the consummation of the Merger or
(y) have a Parent Material Adverse Effect.
SECTION 3.5. COMPLIANCE. Parent is in compliance with, and is
not in default or violation of, its certificate of incorporation and by-laws.
Parent and each of its subsidiaries are in compliance with, and are not in
default or violation of (i) all laws (including, without limitation,
Environmental Laws) and Orders applicable to them or by which any of their
respective properties are bound or affected and (ii) all notes, bonds,
mortgages, indentures,
23
contracts, agreements, leases, licenses, permits, franchises and other
instruments or obligations to which any of them are a party or by which any of
them or any of their respective properties are bound or affected, except, in the
case of clauses (i) and (ii), for any such failures of compliance, defaults and
violations which could not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. Except as disclosed prior to
the date hereof in the Parent SEC Reports (as defined in Section 3.6), neither
Parent nor any of its subsidiaries has received notice of any revocation or
modification of any federal, state, local or foreign governmental license,
certification, tariff, permit, authorization or approval material to Parent and
its subsidiaries taken as a whole. Parent and its subsidiaries have all permits,
licenses, authorizations, consents, approvals and franchises from governmental
agencies required to conduct their businesses as now being conducted, except for
such permits, licenses, authorizations, consents, approvals, and franchises the
absence of which could not, individually or in the aggregate, reasonably be
expected have a Parent Material Adverse Effect.
SECTION 3.6. SEC FILINGS; FINANCIAL STATEMENTS. (a) Parent
and, to the extent applicable, each of its then or current subsidiaries, has
filed all forms, reports, statements and documents required to be filed with the
SEC since January 1, 1999 (collectively, the "PARENT SEC REPORTS"), each of
which has complied in all material respects with the applicable requirements of
the Securities Act and the rules and regulations promulgated thereunder, or the
Exchange Act and the rules and regulations promulgated thereunder, each as in
effect on the date so filed. None of such Parent SEC Reports (including but not
limited to any financial statements or schedules included or incorporated by
reference therein) contained, when filed, any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Except to the extent revised or superseded by a subsequent filing with the SEC
prior to the date hereof, none of the Parent SEC Reports filed by Parent since
January 1, 1999 and prior to the date hereof contains any untrue statement of a
material fact or omits to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the audited and unaudited consolidated financial
statements of Parent and its subsidiaries (including any related notes thereto)
included in Parent SEC Reports complies or, if not yet filed, will comply as to
form in all material respects with all applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, has
been or, if not yet filed, will have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited consolidated
quarterly statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto) and fairly presents in all material respects or, if not yet
filed, will fairly present in all material respects the consolidated financial
position of Parent and its subsidiaries at the respective date thereof and the
consolidated results of its operations and changes in cash flows for the periods
indicated (subject, in the case of unaudited quarterly statements, to normal
year-end audit adjustments).
SECTION 3.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
December 31, 1999, except as specifically disclosed in the Parent SEC Reports
filed and publicly available prior to the date of this Agreement or disclosed in
Section 3.7 of the Parent Disclosure Schedule,
24
Parent and its subsidiaries have conducted their businesses only in the ordinary
course and in a manner consistent with past practice and since such date there
has not been (i) any change in the financial condition, results of operations,
assets, business or operations of Parent or any of its subsidiaries having or
which could be reasonably likely to have a Parent Material Adverse Effect or
(ii) any condition, event or occurrence which, individually or in the aggregate,
having or which could reasonably be expected to have a Parent Material Adverse
Effect.
SECTION 3.8. FORM S-4; PROXY STATEMENT. None of the
information supplied by Parent or Sub for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 is filed with
the SEC, at any time it is amended or supplemented and at the time it becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii)
the Proxy Statement will, at the date it is first mailed to the Company's
stockholders and Parent's stockholders and at the time of the meeting of the
Company's stockholders held to vote on adoption of this Agreement, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 will comply as to form in all material respects with
the requirements of the Securities Act and the rules and regulations
thereunder, except that no representation is made by Parent or Sub with
respect to statements made or incorporated by reference therein based on
information supplied by the Company specifically for inclusion or
incorporation by reference in the Form S-4.
SECTION 3.9. ABSENCE OF LITIGATION. Except as specifically
disclosed in the Parent SEC Reports filed and publicly available prior to the
date of this Agreement or in Section 3.9 of the Parent Disclosure Schedule,
there are no Actions pending or, to the best knowledge of Parent, threatened
against Parent or any of its subsidiaries, or any properties or rights of Parent
or any of its subsidiaries, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, that could,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect. To Parent's knowledge, neither Parent nor any of its
subsidiaries nor any of their respective properties is or are subject to any
Order having, or which, insofar as can be reasonably foreseen, in the future
could, individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect or to prevent or delay the consummation of the
transactions contemplated hereby.
SECTION 3.10. OPINION OF FINANCIAL ADVISOR. Parent has
received the opinion of Wit Capital, dated the date of this Agreement, to the
effect that the consideration to be paid by Parent in connection with the Merger
is fair to Parent and the holders of the Parent Common Stock from a financial
point of view, a signed copy of which has been delivered to the Company.
SECTION 3.11. BROKERS. No broker, finder or investment banker
(other than Wit Capital, Xxxxxxx Xxxxx & Co. and the others identified on
Section 3.11 of the Parent Disclosure Schedule, the fees and expenses of which
shall be paid by Parent) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Sub.
25
SECTION 3.12. AFFILIATE TRANSACTIONS. Except as set forth in
Section 3.12 of the Parent Disclosure Schedule or as disclosed in the Parent SEC
Reports filed and publicly available prior to the date of this Agreement, as of
the date hereof there are no material contracts, commitments, agreements,
arrangements or other transactions between Parent or any of its subsidiaries, on
the one hand, and any (i) officer or director of Parent or (ii) record or
beneficial owner of five percent or more of the voting securities of Parent, on
the other hand.
SECTION 3.13. REORGANIZATION QUALIFICATION. Neither Parent nor
Sub, nor to Parent's knowledge, any affiliate of Parent, has taken or agreed to
take any action, or knows of any circumstances, that (without regard to any
action taken or agreed to be taken by the Company or any of its affiliates)
would prevent the Merger from qualifying as a reorganization within the meaning
of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
SECTION 3.14. STOCKHOLDERS' CONSENT AND APPROVAL OBTAINED.
Stockholders of Parent holding not less than 70% of the outstanding shares of
Parent Common Stock have executed voting agreements agreeing to consent to and
approve the issuance of Parent Common Stock in the Merger. Such consent and
approval are the only consent and approval of the holders of any class or series
of Parent's capital stock necessary to adopt and approve of the terms of this
Agreement, the Merger and the transactions contemplated herein.
SECTION 3.15. EMPLOYEE BENEFIT PLANS. Except as could not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect, each "employee benefit plan" (within the meaning of
section 3(3) of ERISA) under which any employee or former employee of Parent has
any present or future right to benefits or under which Parent has any present or
future liability has been established and administered in accordance with its
terms, and in compliance with the applicable provisions of ERISA, the Code and
other applicable laws, rules and regulations.
SECTION 3.16. TAX MATTERS. Parent has (i) filed all material
Tax Returns required to be filed by it (taking into account extensions) and all
such Tax Returns were true, correct and complete in all material respects, (ii)
paid or provided adequate reserves for all material Taxes whether or not shown
to be due on such Returns or which are otherwise due and payable and (iii) paid
or provided adequate reserves for all material Taxes for which a notice of
assessment or collection has been received, except, in the case of clause (i),
(ii) or (iii), for any such filings, payments or accruals which would not,
individually or in the aggregate, have a Parent Material Adverse Effect.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1. CONDUCT OF BUSINESS OF THE COMPANY PENDING THE
MERGER. The Company covenants and agrees that, during the period from the date
hereof to the Effective Time, unless Parent shall otherwise consent in writing
in advance, the businesses of the Company and its subsidiaries shall be
conducted only in, and the Company and its subsidiaries shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice and in compliance with applicable laws; and the Company and
its subsidiaries
26
shall each use its commercially reasonable efforts to preserve substantially
intact the business organization of the Company and its subsidiaries, to keep
available the services of the present officers, employees and consultants of the
Company and its subsidiaries and to preserve the present relationships of the
Company and its subsidiaries with customers, suppliers, licensors, licensees,
advertisers, distributors and other persons with which the Company or any of its
subsidiaries has significant business relations. By way of amplification and not
limitation, neither the Company nor any of its subsidiaries shall, between the
date of this Agreement and the Effective Time, directly or indirectly do, or
propose or commit to do, any of the following without the prior written consent
of Parent:
(a) Amend its Certificate of Incorporation or By-Laws or
equivalent organizational documents;
(b) Issue, deliver, sell, pledge, dispose of or encumber, or
authorize or commit to the issuance, sale, pledge, disposition or encumbrance
of, any shares of capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
capital stock, or any other ownership interest (including but not limited to
stock appreciation rights or phantom stock), of the Company or any of its
subsidiaries (except for the issuance of shares of Company Common Stock in
accordance with the terms of (i) outstanding Company Stock Rights, (ii)
beginning in November 2000, up to 100,000 options per calendar month to be
issued to new hires and up to 25,000 options (net of options forfeited) per
calendar month to be issued to non-officer employees; PROVIDED that, for the
period from the date hereof until the Closing, no existing employee shall
receive more than 3,000 options pursuant to this clause (ii), (iii) the ESPP,
and (iv) the securities on Section 2.3(a) of the Company Disclosure Schedule);
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
(d) Reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock or any
capital stock of any of its subsidiaries (other than pursuant to the Company's
repurchase rights for departing employees with respect to Company Common Stock
issued in connection with the ESPP or the Company Stock Rights);
(e) (i) Acquire (by merger, consolidation or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof or (except for the purchase of inventory, equipment, content
and other rights or properties in the ordinary course of business) any material
assets; (ii) sell, transfer, lease, mortgage, pledge, license, encumber or
otherwise dispose of or subject to any Lien any of its assets or rights
(including capital stock of subsidiaries), except the disposition of obsolete
assets or otherwise unused or immaterial assets and the licensing of names in
the ordinary course of business consistent with past practice; (iii) except as
set forth in Section 4.1(e) of the Company Disclosure Schedule, incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible for,
the obligations of any person, or make any loans, advances or capital
contributions to, or investments in, any other person (other than trade payables
and receivables incurred in the ordinary course of business); (iv) except in
27
the ordinary course of business consistent with past practice, enter into,
amend, terminate or renew any material contract or agreement (including, without
limitation, the Contracts) or enter into, or amend or terminate any joint
venture arrangements (including distribution and syndication agreements); (v)
enter into any transaction, contract, commitment, arrangement or understanding
with any affiliate of the Company other than with its subsidiaries; (vi) enter
into any commitments or transactions or related commitments or transactions
material, individually, to the Company and its subsidiaries taken as a whole;
(vii) enter into any new material line of business; (viii) change the Form Guide
Agreements used by the Company and its subsidiaries, except for changes
consistent with past practice; (ix) authorize any single capital expenditure
which is in excess of $500,000 or capital expenditures which are, in the
aggregate, in excess of $4,000,000 for the Company and its subsidiaries taken as
a whole; or (x) enter into or amend any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this Section 4.1(e);
(f) Except to the extent required under existing employee and
director benefit plans, agreements or arrangements as in effect on the date of
this Agreement, (i) increase or otherwise amend the compensation or fringe
benefits of any of its directors, officers or employees, except for merit
increases in salary or wages of employees of the Company or its subsidiaries who
are not officers of the Company in the ordinary course of business in accordance
with past practice, or (ii) grant any retention, severance or termination pay
not currently required to be paid under existing severance plans or (iii) enter
into, or amend, any employment, consulting or severance agreement or arrangement
with any present or former director, officer or other employee of the Company or
its subsidiaries except for severance arrangements consistent with past practice
offered in the ordinary course to employees who have been terminated, or (iv)
establish, adopt, enter into or amend or terminate any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any directors, officers or employees, or (v) amend the terms of any outstanding
options to purchase any equity of the Company or any subsidiary (including
accelerating the vesting or lapse of repurchase rights or obligations);
(g) Except as may be required as a result of a change in law
or in generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(h) Take any action that (without regard to any action taken
or agreed to be taken by Parent or any of its affiliates) would prevent the
Merger from qualifying as a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code;
(i) Make or change any material Tax election, file any amended
Tax Return with respect to any material Taxes, settle or compromise any material
federal, state, local or foreign Tax liability, change any annual Tax accounting
period, change any method of Tax accounting, enter into any closing agreement
relating to any material Tax, surrender any right to claim a material Tax
refund, or consent to any extension or waiver of the limitations period
applicable to any Tax claim or assessment; PROVIDED, HOWEVER, that an action
permitted as a result of the materiality qualifiers in this clause (i) shall not
be taken if such action could be taken after the Effective Time without causing
an adverse effect on the Company;
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(j) Settle or compromise any pending or threatened Action
which is material or which relates to the transactions contemplated hereby;
(k) Adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the
Merger);
(l) Pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of liabilities reflected or
reserved against in the financial statements of the Company or incurred in the
ordinary course of business and consistent with past practice;
(m) Effectuate a "plant closing" or "mass layoff", as those
terms are defined in WARN, affecting in whole or in part any site of employment,
facility, operating unit or employee of the Company or any of its subsidiaries;
(n) Fail to maintain in full force and effect the existing
insurance policies covering the Company and its subsidiaries and their
respective properties, assets and businesses; or
(o) Take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Section 4.1 clauses (a)
through (n) which would make any of the representations or warranties of the
Company contained in this Agreement untrue and incorrect as of the date when
made if such action had then been taken or would result in any of the conditions
set forth in Article VI not being satisfied.
SECTION 4.2. CONDUCT OF BUSINESS OF PARENT PENDING THE MERGER.
(a) During the period from the date of this Agreement to the Effective Time
(except as otherwise contemplated by the terms of this Agreement), Parent shall
use its commercially reasonable efforts to preserve intact its and its
subsidiaries' current business organizations, keep available the services of
their current officers and employees and preserve their relationships with
customers, suppliers, licensors, licensees, advertisers, distributors and other
persons with which the Company or any of its subsidiaries has significant
business relations. By way of amplification and not limitation, without limiting
the generality of the foregoing, during the period from the date of this
Agreement to the Effective Time, Parent shall not, without the prior consent of
the Company:
(i) Amend Parent's certificate of incorporation
(except to change the number of authorized shares of capital
stock or to permit the issuance of a series preferred stock)
or by-laws in a manner that would be materially adverse to the
holders of Parent Common Stock;
(ii) Reclassify, combine, split or subdivide any of
its capital stock;
(iii) Take, or offer or propose to take, or agree to
take in writing or otherwise, any of the actions described in
Sections 4.2(b)(i) and (ii) or any action which would make any
of the representations or warranties of Parent contained in
29
this Agreement untrue and incorrect as of the date when made
if such action had then been taken or (except as otherwise
provided herein) would result in any of the conditions set
forth in Article VI not being satisfied;
(iv) Issue, deliver, sell, pledge, dispose of or
encumber, or authorize or commit to the issuance, sale,
pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares
of capital stock, or any other ownership interest (including,
but not limited to stock appreciation rights or phantom stock)
of Parent or any of its subsidiaries to any record or
beneficial owner of five percent or more of the voting
securities of Parent, except on an arms-length basis; or
(v) Adopt a plan of complete or partial liquidation or
dissolution of Parent (other than the Merger).
(b) Parent shall not, and shall not permit any of its
subsidiaries to, intentionally take any action that (without regard to any
action taken or agreed to be taken by the Company or any of its affiliates)
would prevent the Merger from qualifying as a reorganization within the meaning
of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. PREPARATION OF FORM S-4 AND THE PROXY STATEMENT;
STOCKHOLDER MEETING. (a) Promptly following the date of this Agreement, the
Company and Parent shall prepare and file with the SEC the Proxy Statement, and
Parent shall prepare and file with the SEC the Form S-4, in which the Proxy
Statement will be included as a prospectus. Each of the Company and Parent shall
use its reasonable best efforts to have the Form S-4 declared effective under
the Securities Act as promptly as practicable after such filing. Each of the
Company and Parent will use its reasonable best efforts to cause the Proxy
Statement to be mailed to its respective stockholders as promptly as practicable
after the Form S-4 is declared effective under the Securities Act. Parent shall
also take any action (other than qualifying to do business in any jurisdiction
in which it is not now so qualified) required to be taken under any applicable
state securities law in connection with the issuance of Parent Common Stock in
connection with the Merger, and the Company shall furnish all information
concerning the Company and the holders of the Company Common Stock and rights to
acquire Company Common Stock pursuant to the Stock Plans as may be reasonably
required in connection with any such action. Each of Parent and the Company
shall furnish all information concerning itself to the other as may be
reasonably requested in connection with any such action and the preparation,
filing and distribution of the Form S-4 and the preparation, filing and
distribution of the Proxy Statement. The Company, Parent and Sub each agree to
correct any information provided by it for use in the Form S-4 or the Proxy
Statement that shall have become false or misleading.
(b) The Company, acting through its Board of Directors, shall,
subject to and in accordance with its Certificate of Incorporation and By-Laws,
promptly and duly call, give
30
notice of, convene and hold as soon as practicable following the date upon which
the Form S-4 becomes effective a meeting of the holders of Company Common Stock
for the purpose of voting to approve and adopt this Agreement and the
transactions contemplated hereby, and (i) recommend approval and adoption of
this Agreement and the transactions contemplated hereby, by the stockholders of
the Company and include in the Proxy Statement such recommendation and (ii) take
all reasonable and lawful action to solicit and obtain such approval. The Board
of Directors of the Company shall not withdraw, amend or modify in a manner
adverse to Parent its recommendation referred to in clause (i) of the preceding
sentence (or announce publicly its intention to do so), except that such Board
of Directors shall be permitted to withdraw, amend or modify its recommendation
(or publicly announce its intention to do so) if: (i) the Company has complied
with Section 5.4; (ii) an unsolicited Superior Proposal (as defined in Section
5.4) shall have been proposed by any person other than Parent and such proposal
is pending at the time of such withdrawal, amendment or modification and (iii)
the Company shall have notified Parent of such Superior Proposal at least three
business days in advance of such withdrawal, amendment or modification; PROVIDED
that, in the event that, during the period prior to such withdrawal, amendment
or modification, Parent offers to enter into a transaction with the Company on
substantially the same or more favorable financial terms to the Company as such
Superior Proposal, as determined in good faith by a financial advisor to the
Company of nationally recognized standing, the Company shall not be permitted to
withdraw, amend or modify its recommendation (or publicly announce its intention
to do so) or accept such Superior Proposal. Without limiting the generality of
the foregoing, (i) the Company agrees that its obligation to duly call, give
notice of, convene and hold a meeting of the holders of Company Common Stock, as
required by this Section 5.1, shall not be affected by the withdrawal, amendment
or modification of the Board of Directors' recommendation of approval and
adoption of this Agreement and the transactions contemplated hereby and (ii)
subject to the Company's rights pursuant to Section 5.4, the Company agrees that
its obligations under this Section 5.1(b) shall not be affected by the
commencement, public proposal, public disclosure or communication to the Company
of any Acquisition Proposal (as defined in Section 5.4).
(c) The Company will cause its transfer agent to make stock
transfer records relating to the Company available to the extent reasonably
necessary to effectuate the intent of this Agreement.
(d) Parent, acting through its Board of Directors, shall,
subject to and in accordance with its certificate of incorporation and by-laws,
duly as soon as possible, set a record date for the determination of
stockholders of Parent entitled to vote by written consent to approve the
issuance of Parent Common Stock in the Merger. Parents shall take all other
actions necessary or advisable to cause the execution of such consent as soon as
possible thereafter.
(e) Parent, acting through its Board of Directors, shall, in
accordance with its certificate of incorporation and by-laws, send the Proxy
Statement to its other stockholders pursuant to Rule 14C of the Exchange Act.
SECTION 5.2. ACCOUNTANTS' LETTERS. (a) The Company shall use
its reasonable best efforts to cause to be delivered to Parent a "comfort"
letter of each of Ernst & Young LLP, the Company's independent public
accountants, and KPMG LLP, the Company's previous independent public
accountants, dated a date within two business days before the date on which
31
the Form S-4 shall become effective and addressed to Parent, in form and
substance reasonably satisfactory to Parent and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4. In connection with the
Company's efforts to obtain such letter, if requested by Ernst & Young LLP
and/or KPMG LLP, Parent shall provide a representation letter to Ernst & Young
LLP and/or KPMG LLP, complying with the Statement on Auditing Standards No. 72
("SAS 72"), if then required.
(b) Parent shall use its reasonable best efforts to cause to
be delivered to the Company a "comfort" letter of Deloitte & Touche LLP,
Parent's independent public accountants, dated a date within two business days
before the date on which the Form S-4 shall become effective and addressed to
the Company, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
In connection with the Parent's efforts to obtain such letter, if requested by
Deloitte & Touche LLP, the Company shall provide a representation letter to
Deloitte & Touche LLP complying with SAS 72, if then required.
SECTION 5.3. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From
the date hereof to the Effective Time, each of the Company and Parent shall, and
shall cause its subsidiaries, officers, directors, employees, auditors and other
agents to, afford the officers, employees, auditors and other agents of Parent
or the Company, respectively, who shall agree to be bound by the provisions of
this Section 5.3 as though a party hereto, complete access at all reasonable
times to its officers, employees, agents, properties, offices, plants and other
facilities and to all books and records, and shall furnish Parent or the
Company, respectively, with all financial, operating and other data and
information as Parent or the Company, respectively, through its officers,
employees or agents may from time to time request. In addition, subsequent to
the date of this Agreement, Parent and/or any of its subsidiaries may initiate
communications with any officer or key employee of the Company for the purpose
of addressing the prospective retention of such officer or employee following
the Closing, PROVIDED that Parent believes, in good faith, that there is a
compelling, legitimate business need to initiate such communication prior to the
Closing Date.
(b) Each of the Company and Parent will hold and will cause
its directors, officers, employees, agents, advisors (including, without
limitation, counsel and auditors) and controlling persons to hold any such
information which is nonpublic in confidence on the same terms and conditions as
the confidentiality provisions set forth in the Confidentiality Agreement dated
July 27, 2000, as amended from time to time, between the Company and Parent (the
"CONFIDENTIALITY AGREEMENT").
(c) No investigation pursuant to this Section 5.3 shall affect
any representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
SECTION 5.4. NO SOLICITATION OF TRANSACTIONS. The Company
agrees that neither it nor any of its subsidiaries nor any of the officers and
directors of it or its subsidiaries shall, and that it shall direct and cause
its and its subsidiaries' employees, agents and
32
representatives (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, directly or indirectly,
initiate, solicit, knowingly encourage or otherwise facilitate (including by way
of furnishing information) any inquiries or the making of any proposal or offer
with respect to (i) a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving it or any of its subsidiaries, or (ii) any purchase or
sale of all or any significant portion of the assets or 15% or more of the
equity securities of it or any of its subsidiaries (any such proposal or offer
being hereinafter referred to as an "ACQUISITION PROPOSAL"), and agrees that
neither it nor any of its subsidiaries nor any of the officers and directors of
it or its subsidiaries shall, and that it shall direct and cause its and its
subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its subsidiaries) not
to, directly or indirectly, have any discussion with or provide any confidential
information or data to any person relating to an Acquisition Proposal, or engage
in any negotiations concerning an Acquisition Proposal, or otherwise knowingly
facilitate any effort or attempt to make or implement an Acquisition Proposal or
accept an Acquisition Proposal. Notwithstanding the foregoing, the Company or
its Board of Directors shall be permitted to (A) to the extent applicable,
comply with Rule 14e-2(a) promulgated under the Exchange Act with regard to an
Acquisition Proposal, or (B) engage in any discussions or negotiations with, or
provide any information to, any person in response to an unsolicited bona fide
written Acquisition Proposal by any such person, if and only to the extent that,
in the case of the actions referred to in clause (B), (i) the Company's
stockholders meeting relating to the adoption of this Agreement by the
stockholders of the Company shall not have occurred, (ii) such Acquisition
Proposal constitutes a Superior Proposal and was not solicited by it and did not
otherwise result from a breach of this Section 5.4, (iii) the Board of Directors
of the Company determines in good faith, based on the advice of its outside
legal advisors, that in light of this Superior Proposal, if the Company fails to
participate in such discussions or negotiations with, or provide such
information to, the person making such Superior Proposal, it would be in
violation of its fiduciary duties under applicable law, (iv) prior to providing
any information or data to any person in connection with an Acquisition Proposal
by any such person, the Board of Directors of the Company receives from such
person an executed confidentiality agreement on terms no less favorable to the
Company than those contained in the Confidentiality Agreement and (v) prior to
providing any information or data to any person or entering into discussions or
negotiations with any person, the Board of Directors of the Company notifies
Parent promptly of such inquiries, proposals or offers received by, any such
information requested from, or any such discussions or negotiations sought to be
initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such person and the material terms and
conditions of any proposals or offers. The Company agrees that it will keep
Parent informed reasonably promptly of any material change in the terms of any
such proposals or offers and will notify Parent 24 hours in advance before an
agreement is reached. The Company agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal or
similar transaction or arrangement. The Company agrees that it will take the
necessary steps to promptly inform the individuals or entities referred to in
the first sentence of this Section 5.4 of the obligations undertaken in this
Section 5.4. Nothing in this Section 5.4 shall (x) permit the Company to
terminate this Agreement (except as specifically provided in Article VII hereof)
or (y) affect any other obligation of the Company under this Agreement. For
purposes of this Section 5.4, "SUPERIOR
33
PROPOSAL" shall mean a bona fide written Acquisition Proposal which the Board of
Directors of the Company concludes in good faith, upon the advice of a financial
advisor of nationally recognized reputation, taking into account all legal,
financial, regulatory and other aspects of the proposal and the person making
the proposal (including any break-up fees, expense reimbursement provisions and
conditions to consummation), (i) would, if consummated, result in a transaction
that is more favorable to all of the Company's stockholders (in their capacities
as stockholders), from a financial point of view, than the transactions
contemplated by this Agreement and (ii) is reasonably capable of being completed
(PROVIDED that for purposes of this definition of "Superior Proposal," the term
Acquisition Proposal shall have the meaning assigned to such term in this
Section 5.4, except that the reference to "15%" in the definition of
"Acquisition Proposal" shall be deemed to be a reference to "51%" and
"Acquisition Proposal" shall only be deemed to refer to a transaction involving
the Company, and the reference to "assets" (including the shares of any
subsidiary of the Company) shall refer to the assets of the Company and its
subsidiaries, taken as a whole, and not the assets of any of the subsidiaries
alone).
SECTION 5.5. EMPLOYEE BENEFITS MATTERS. (a) The Company shall
or Parent shall cause the Company and the Surviving Corporation to promptly pay
or provide when due all compensation and benefits earned through or prior to the
Effective Time as provided pursuant to the terms of any Plans in existence as of
the date hereof and set forth on Section 2.10 of the Company Disclosure
Schedule. Parent and the Company agree that the Company and the Surviving
Corporation shall pay promptly or provide when due all compensation and benefits
required to be paid pursuant to the terms of any individual agreement with any
employee, former employee, director or former director in effect and disclosed
to Parent as of the date hereof. Nothing herein shall require the continued
employment of any person or prevent the Company and/or the Surviving Corporation
from taking any action or refraining from taking any action that the Company
could take or refrain from taking prior to the Effective Time.
(b) Parent shall, for the period ending on December 31, 2001,
maintain (or cause the Surviving Corporation to maintain) employee benefit plans
(other than with respect to equity-based compensation, except as contemplated by
Section 1.7(b)) for the benefit of each employee of the Company or its
subsidiaries who continues employment with the Surviving Corporation as of the
Effective Time that are no less favorable in the aggregate to the Plans in
effect immediately prior to the Effective Time with respect to each such
employee; provided, that nothing herein shall require Parent and/or the
Surviving Corporation to continue to maintain any Plan or grant any such
employee any equity-based compensation in the Surviving Corporation or Parent.
For purposes of determining eligibility to participate, eligibility for benefit
forms and subsidies and the vesting of benefits under such plans (without
duplication of benefits as a result thereof), the Surviving Corporation shall
give effect to years of service with the Company and its subsidiaries in respect
of years of service for which credit was given by the Company and its
subsidiaries. No employee electing coverage under the medical insurance plans of
the Surviving Corporation shall be excluded from coverage thereunder (for such
employee and any person covered by virtue of such employee's employment) on the
basis of a pre-existing condition that was not also excluded under the Company's
medical insurance plan.
SECTION 5.6. DIRECTORS' AND OFFICERS' INDEMNIFICATION;
INSURANCE. (a) The By-Laws of the Surviving Corporation shall contain provisions
no less favorable with respect to
34
indemnification and exculpation from liability than are set forth in the
Certificate of Incorporation of the Company, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers or employees
of the Company.
(b) For six years from the Effective Time, the Surviving
Corporation shall, unless Parent agrees in writing to guarantee the
indemnification obligations set forth in Section 5.6(a), maintain in effect the
current directors' and officers' liability insurance covering those persons who
are currently covered by the Company's directors' and officers' liability
insurance policy to the extent that it provides coverage for events occurring
prior to the Effective Time (a copy of which has been heretofore delivered to
Parent), so long as the annual premium therefor would not be in excess of 150%
of the last annual premium paid prior to the date of this Agreement (the
"COMPANY'S CURRENT PREMIUM"). If such premiums for such insurance would at any
time exceed 150% of the Company's Current Premium, then the Surviving
Corporation shall cause to be maintained policies of insurance that in the
Surviving Corporation's good faith determination, provide the maximum coverage
available at an annual premium equal to 150% of the Company's Current Premium.
SECTION 5.7. NOTIFICATION OF CERTAIN MATTERS. The Company
shall give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which could be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
and (ii) any failure of the Company, Parent or Sub, as the case may be, to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER,
that the delivery of any notice pursuant to this Section 5.7 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 5.8. FURTHER ACTION; REASONABLE BEST EFFORTS. Upon the
terms and subject to the conditions hereof, each of the parties hereto shall use
its reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable after the
date hereof, including but not limited to (i) cooperation in the preparation and
filing of the Form S-4, the Proxy Statement, and required filings under the HSR
Act and any amendments to any thereof and (ii) using its reasonable best efforts
to make all required regulatory filings and applications and to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company and
its subsidiaries as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Merger. In
furtherance and not in limitation of the foregoing, each party hereto agrees to
make, to the extent it has not already done so, an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable and in any event
within five business days of the date hereof and to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the
35
proper officers and directors of each party to this Agreement shall use their
reasonable best efforts to take all such necessary action. In the event that a
suit or objection is instituted by any person or governmental authority
challenging this Agreement and the transactions contemplated hereby as violative
of applicable competition and antitrust laws, each of Parent and the Company
shall use their reasonable best efforts to resist or resolve such suit or
objection. Notwithstanding the foregoing, in connection with any such objection
or suit instituted by such person or governmental authority (including, but not
limited to, the Federal Trade Commission or the Antitrust Division of the
Department of Justice), neither Parent nor Sub shall be required to provide any
undertakings or agree to any condition that could reasonably be expected to
result in a substantial detriment to Parent's or the Company's business or
results of operations (a "SUBSTANTIAL DETRIMENT").
SECTION 5.9. PUBLIC ANNOUNCEMENTS. Parent and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to the Merger and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by law or any listing agreement with its securities
exchange.
SECTION 5.10. STOCK EXCHANGE LISTING. Parent shall use its
reasonable best efforts to have approved for listing on the NYSE prior to the
Effective Time, subject to official notice of issuance, the Parent Common Stock
to be issued pursuant to the Merger.
SECTION 5.11. AFFILIATES. Prior to the Closing Date, the
Company shall deliver to Parent a letter identifying all persons who are, at the
time this Agreement is submitted for adoption by the stockholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use its reasonable best efforts to cause each
such person to deliver to Parent on or prior to the Closing Date a written
agreement substantially in the form attached as Exhibit A hereto.
SECTION 5.12. BOARD OF DIRECTORS AND OFFICERS OF PARENT.
Parent shall use its reasonable efforts to appoint the Company's Chief Executive
Officer to the Board of Directors of Parent, effective immediately following the
Effective Time. The Board of Directors of Parent also shall appoint the
Company's Chief Executive Officer as Chief Internet Officer of Parent, effective
immediately following the Effective Time.
SECTION 5.13. SECTION 16B APPROVALS. The Board of Directors or
Compensation Committee of Parent shall grant all approvals and take all other
actions required pursuant to Rules 16b-3(d) and 16b-3(e) under the Exchange Act
to cause the Parent Common Stock and New Stock Rights to be exempt from the
provisions of Section 16(b) of the Exchange Act.
SECTION 5.14. SEC DOCUMENTS. From the date hereof to the
Effective Time, each of Parent and the Company shall furnish to the Company and
Parent, respectively, a complete and correct copy of any agreements, documents
or other instruments, or amendment or modifications thereto, which are filed by
Parent or the Company, respectively, with the SEC pursuant to the Securities Act
and the rules and regulations promulgated thereunder or the Exchange Act and the
rules and regulations promulgated thereunder.
36
SECTION 5.15. CONTINUED EMPLOYMENT. The Company shall take no
action to terminate the employment of Messrs. Kurnit and Day in their current
jobs and shall not diminish their respective responsibilities or compensation,
except that the Company may, after consultation with Parent, terminate either
individual "for cause."
SECTION 5.16. OUTSTANDING COMPANY SECURITIES. The Company
shall use commercially reasonable efforts to cause the Company Securities listed
in Section 5.16 of the Company Disclosure Schedule to be exercised or cancelled,
and the Company's obligations thereunder to be discharged, prior to the Closing.
ARTICLE VI
CONDITIONS OF MERGER
SECTION 6.1. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT
THE MERGER. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) This Agreement shall have been adopted by the affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock.
(b) No Order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any court or
governmental authority of competent jurisdiction which prohibits, restrains,
enjoins or restricts the consummation of the Merger; PROVIDED, HOWEVER, that the
parties shall use their reasonable best efforts to cause any such Order to be
vacated or lifted.
(c) Any waiting period applicable to the Merger under the HSR
Act shall have terminated or expired.
(d) The Form S-4 and any required post-effective amendment
thereto shall have become effective under the Securities Act and shall not be
the subject of any stop order or proceedings seeking a stop order, and any
material "blue sky" and other state securities laws applicable to the
registration of the Parent Common Stock to be exchanged for Company Common Stock
shall have been complied with.
(e) The shares of Parent Common Stock issuable to the holders
of Company Common Stock pursuant to this Agreement shall have been approved for
listing on the NYSE, subject to official notice of issuance.
(f) Any waiting period under the proxy rules applicable to
Parent shall have expired.
SECTION 6.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO
EFFECT THE MERGER. The obligation of the Company to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:
37
(a) (i) Parent and Sub shall have performed or complied with
in all material respects their agreements and covenants contained in this
Agreement required to be performed or complied with at or prior to the Closing
Date; (ii) the representations and warranties of Parent and Sub contained in
this Agreement shall be true in all respects (without regard to materiality or
Material Adverse Effect qualifiers), in each case when made and, unless a
representation speaks of a specific date, on and as of the Closing Date with the
same force and effect as if made on and as of such date, except where failures
to be so true could not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect; PROVIDED HOWEVER, such Parent
Material Adverse Effect qualification shall be inapplicable with respect to the
representations and warranties contained in Sections 3.2 and 3.10 (which
representations shall be true and correct at the applicable times in all
material respects) and (iii) the Company shall have received a certificate
signed on behalf of Parent by the chief executive officer and chief financial
officer of Parent to such effect.
(b) The opinion, based on appropriate representations of the
Company and Parent, of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel to the Company,
to the effect that (i) the Merger will be treated for Federal income Tax
purposes as a reorganization within the meaning of Section 368(a) of the Code
and (ii) Parent, Sub and the Company will each be a party to the reorganization
under the meaning of Section 368(b) of the Code, dated on or about the date of
and referred to in the Proxy Statement as first mailed to stockholders of the
Company, which shall not have been withdrawn or modified in any material respect
as of the Closing Date.
(c) At any time on or after the date of this Agreement there
shall not have occurred any condition, event or occurrence which could,
individually or in the aggregate, reasonably be likely to cause a Parent
Material Adverse Effect.
(d) There shall not be pending or threatened by any
governmental authority any Action before any United States court or other
governmental body of competent jurisdiction, which challenges or seeks to
restrain or prohibit the consummation of the Merger.
(e) All approvals or consents of any governmental authority
(whether domestic, foreign or supranational) in connection with the Merger and
the consummation of the other transactions contemplated hereby (including all
relevant statutory, regulatory or other governmental waiting period expirations)
referred to in Section 2.5(a) of the Company Disclosure Schedule shall have been
obtained, have been declared or filed or be deemed to have occurred, as the case
may be, and all such approvals or consents shall be in full force and effect.
SECTION 6.3. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO
EFFECT THE MERGER. The obligations of Parent and Sub to effect the Merger shall
be subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:
(a) (i) The Company shall have performed or complied with in
all material respects its agreements and covenants contained in this Agreement
required to be performed or complied with at or prior to the Closing Date; (ii)
the representations and warranties of the Company contained in this Agreement
shall be true in all respects (without regard to materiality or Material Adverse
Effect qualifiers), in each case when made and unless a representation speaks of
a specific date, on and as of the Closing Date with the same force and effect as
if made
38
on and as of such date, except where failures to be so true could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; PROVIDED HOWEVER, such Material Adverse Effect qualification
shall be inapplicable with respect to the representations and warranties
contained in Sections 2.3, 2.14, 2.17 and 2.18 (which representations shall be
true and correct at the applicable times in all material respects); and (iii)
Parent shall have received a certificate signed on behalf of the Company by the
chief executive officer and chief financial officer of the Company to such
effect.
(b) At any time on or after the date of this Agreement there
shall not have occurred any condition, event or occurrence which could,
individually or in the aggregate, reasonably be likely to cause a Material
Adverse Effect.
(c) The opinion, based on appropriate representations of the
Company and Parent, of Xxxxxxx Xxxxxxx & Xxxxxxxx, counsel to Parent, to the
effect that (i) the Merger will be treated for Federal income Tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and (ii) Parent,
Sub and the Company will each be a party to the reorganization within the
meaning of Section 368(b) of the Code, dated on or about the date of and
referred to in the Proxy Statement as first mailed to the stockholders of the
Company, which shall not have been withdrawn or modified in any material respect
as of the Closing Date.
(d) There shall not be pending or threatened by any
governmental authority any Action before any United States court or other
governmental body of competent jurisdiction (i) challenging or seeking to
restrain or prohibit the consummation of the Merger or seeking to obtain from
Parent or any of its subsidiaries or the Company any material damages, (ii)
seeking to prohibit or limit the ownership or operation by the Company, Parent
or any of their respective subsidiaries of any material portion of the business
or assets of the Company, Parent or any of their respective subsidiaries, to
dispose of or hold separate any significant portion of the business or assets of
the Company, Parent or any of their respective subsidiaries, as a result of the
Merger or any of the other transactions contemplated by this Agreement, or (iii)
seeking to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect the business or operations of the Company or
its subsidiaries.
(e) All approvals or consents of any governmental authority
(whether domestic, foreign or supranational) in connection with the Merger and
the consummation of the other transactions contemplated hereby (including all
relevant statutory, regulatory or other governmental waiting period
expirations), which if not obtained in connection with the consummation of the
transactions contemplated hereby, could reasonably be expected to result in a
Substantial Detriment (each a "REQUIRED REGULATORY APPROVAL"), shall have been
obtained, have been declared or filed or be deemed to have occurred, as the case
may be, and all such Required Regulatory Approvals shall be in full force and
effect; provided, however, that a Required Regulatory Approval shall not be
deemed to have been obtained if in connection with the grant thereof there shall
have been an imposition by any governmental authority of any condition,
requirement, restriction or change of regulation, or any other action directly
or indirectly related to such grant taken by such governmental authority
(including with respect to divestitures of assets or subsidiaries), which could
reasonably be expected to result in a Substantial Detriment.
39
(f) All third party consents set forth on Schedule 6.3(f)
attached hereto shall have been obtained.
(g) Parent shall have received the agreements referred to in
Section 5.11.
(h) Parent shall have received the letters referred to in
Section 5.2(a).
(i) Each of the members of the Board of Directors of the
Company shall have duly delivered to the Company their written resignations,
effective as of the Effective Time, as directors of the Company, and Parent
shall have received copies of each such resignation and prior to such
resignation, the Board of Directors of the Company shall have fixed the
authorized number of directors of the Company, effective as of the Effective
Time, at three (3) and shall have appointed, effective as of the Effective Time,
Xxxxxx Xxxxxx, Xxxxxxx XxXxxxx and Xxxxxxx Xxxxx as the members of the Board of
Directors of the Surviving Corporation, and Parent shall have received evidence
of such actions.
(j) For all times prior to the Closing, each of Messrs. Kurnit
and Day (absent death or disability) shall have been employed by the Company in
accordance with the terms of Section 5.15 and, as of the Closing, each of
Messrs. Kurnit and Day shall be ready, willing and able (absent death or
permanent disability) to commence employment with Parent in accordance with the
terms of their respective employment agreements with Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. TERMINATION. This Agreement may be terminated and
the Merger contemplated hereby may be abandoned at any time prior to the Closing
Date, whether before or after approval of matters presented in connection with
the Merger by the stockholders of the Company (except as otherwise stated
herein):
(a) By mutual written consent of Parent and the Company;
(b) By either Parent or the Company, if the Merger shall not
have been consummated on or before June 30, 2001 (other than due to the failure
of the party seeking to terminate this Agreement to perform its obligations
under this Agreement required to be performed at or prior to the Effective
Time);
(c) By either Parent or the Company, if any required approval
of the stockholders of the Company for this Agreement or the Merger shall not
have been obtained by reason of the failure to obtain the required vote upon a
vote held at a duly held meeting of stockholders or at any adjournment thereof;
(d) By either Parent or the Company, if any court or other
governmental body of competent jurisdiction shall have issued a final Order or
ruling or taken any other final action restraining, enjoining or otherwise
prohibiting the Merger and such Order, ruling or other action is or shall have
become final and nonappealable;
40
(e) By the Company, if prior to the Closing Date (i) there
shall have been a breach of any representation or warranty on the part of Parent
contained in this Agreement which could reasonably be expected to have a Parent
Material Adverse Effect or which could reasonably be expected to materially
adversely affect (or materially delay) the consummation of the Merger, or (ii)
there shall have been a breach of any covenant or agreement on the part of
Parent contained in this Agreement which could reasonably be expected to have a
Parent Material Adverse Effect or which could reasonably be expected to
materially adversely affect (or materially delay) the consummation of the
Merger, which breach shall not have been cured prior to 10 days following notice
thereof; or
(f) By Parent, if prior to the Closing Date (i) there shall
have been a breach of any representation or warranty on the part of the Company
contained in this Agreement which could reasonably be expected to have a
Material Adverse Effect or which could reasonably be expected to materially
adversely affect (or materially delay) the consummation of the Merger, or (ii)
there shall have been a breach of any covenant or agreement on the part of the
Company contained in this Agreement which could reasonably be expected to have a
Material Adverse Effect or which could reasonably be expected to materially
adversely affect (or materially delay) the consummation of the Merger, which
breach shall not have been cured prior to 10 days following notice thereof; or
(g) By Parent, (i) if the Board of Directors of the Company
shall have (A) failed to recommend or withdrawn, modified or amended in any
respect adverse to Parent or Sub its approval or recommendation of this
Agreement, the Merger or any of the other transactions contemplated herein or
resolved to do so, or (B) approved or recommended a Superior Proposal from a
person (other than Parent) or resolved to do so, or (ii) the Company breaches
any of its agreements set forth in Section 5.4; or
(h) By Parent, if any person or group (as defined in Section
13(d)(3) of the Exchange Act) (other than Parent, Sub or any of their
affiliates) shall have become (x) the beneficial owner (as defined in Rule 13d-3
promulgated under the Exchange Act) of at least 25% of the outstanding shares of
Company Common Stock or (y) shall have acquired 25% or more of the assets of the
Company and its subsidiaries, taken as a whole.
SECTION 7.2. EFFECT OF TERMINATION. In the event of the
termination of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except as set forth in Sections 5.3(b), 7.3 and 8.1; provided, however,
that nothing herein shall relieve any party from liability for any willful
breach hereof.
SECTION 7.3. FEES AND EXPENSES. (a) If:
(i) This Agreement is terminated pursuant to Section
7.1(g) or (h); or
(ii) (x) (A) Parent or the Company terminate this
Agreement pursuant to Section 7.1(c), or (B) Parent terminates
this Agreement pursuant to Section 7.1(f) and (y) in the case
of (A) or (B), within 18 months thereafter, the Company
41
enters into an agreement with respect to an Alternative
Transaction or an Alternative Transaction is consummated;
then the Company shall pay to Parent and Sub, (A) within two business days
following any termination by Parent contemplated by Section 7.3(a)(i) and (B)
within two business days following the occurrence of one of the events described
in clause (y) of Section 7.3(a)(ii), a fee, in cash, of $23.5 million (the
"FEE"), PROVIDED, HOWEVER, that the Company shall in no event be obligated to
pay more than one such fee with respect to all such occurrences and such
termination.
(b) Within two business days after the termination of this
Agreement pursuant to Section 7.1(c), (f), (g) or (h), the Company shall pay all
of Parent's and Sub's Expenses (as defined below) up to a maximum payment
pursuant to this Section 7.3(b) of $1.0 million. The term "Expenses" shall
include all out-of-pocket expenses and fees (including without limitation fees
and expenses payable to all banks, investment banking firms and other financial
institutions and their respective agents and counsel for arranging or providing
financial advice with respect to the Merger and all reasonable fees and expenses
of counsel, accountants, experts and consultants to Parent and Sub) actually
incurred by Parent or Sub or on their behalf in connection with the consummation
of all transactions contemplated by this Agreement, including the Merger.
For purposes of this Section 7.3, "ALTERNATIVE TRANSACTION"
means any of the following events: (i) the acquisition of the Company by merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, dissolution or otherwise by any person other than Parent, Sub
or any affiliate thereof (a "THIRD PARTY"); (ii) the acquisition by a Third
Party of 25% or more of the assets of the Company and its subsidiaries, taken as
a whole; (iii) the acquisition by a Third Party of 25% or more of the
outstanding shares of Company Common Stock; (iv) the adoption by the Company of
a plan of liquidation or the declaration or payment of an extraordinary
dividend; or (v) the repurchase by the Company or any of its subsidiaries of 25%
or more of the outstanding shares of Company Common Stock.
(c) Except as otherwise specifically provided herein, each
party shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby, except that each of Parent and the Company
shall bear and pay one-half of the costs and expenses incurred in connection
with the printing and mailing of the Form S-4 and the Proxy Statement.
SECTION 7.4. AMENDMENT. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time before or after any required approval of matters presented
in connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
SECTION 7.5. WAIVER. At any time prior to the Closing Date,
any party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other
42
parties hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein, subject to
the requirements of applicable law. Any such extension or waiver shall be valid
if set forth in an instrument in writing signed by the party or parties to be
bound thereby. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.1, as the case may be, except that the agreements set
forth in Article I and Sections 5.5 and 5.6 shall survive the Effective Time and
those set forth in Section 5.3(b) and Section 7.3 shall survive termination of
this Agreement.
SECTION 8.2. NOTICES. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
if to Parent or Sub:
PRIMEDIA Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx XxXxxxx
Fax: (000) 000-0000
with an additional copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
if to the Company:
Xxxxx.xxx, Inc.
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxxx
President-Corporate Development
Fax: (000) 000-0000
43
with an additional copy to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
SECTION 8.3. CERTAIN DEFINITIONS. For purposes of this
Agreement, the term:
(a) "AFFILIATE" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned person;
(b) "BENEFICIAL OWNER" with respect to any shares of Company
Common Stock means a person who shall be deemed to be the beneficial owner of
such shares of Company Common Stock (i) which such person or any of its
affiliates or associates beneficially owns, directly or indirectly, (ii) which
such person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 of the Exchange Act) has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or subject only to the
passage of time), pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement or
understanding, or (iii) which are beneficially owned, directly or indirectly, by
any other persons with whom such person or any of its affiliates or person with
whom such person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares;
(c) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession in the
United States, in each case applied on a basis consistent with the manner in
which the audited financial statements for the fiscal year of the Company or the
Parent ended December 31, 1999 were prepared;
(e) "PERSON" means an individual, corporation, limited
liability company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act); and
(f) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, the
Surviving Corporation, Parent or any other person means any corporation,
partnership, joint venture or other legal entity of which the Company, the
Surviving Corporation, Parent or such other person, as the case may
44
be (either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other voting or economic
equity interests.
SECTION 8.4. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
SECTION 8.5. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement,
together with the Confidentiality Agreement, the Parent Voting Agreement and the
Shareholder Voting Agreement, constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
operation of law or otherwise, except that Parent and Sub may assign all or any
of their respective rights and obligations hereunder to any direct or indirect
wholly owned subsidiary or subsidiaries of Parent, PROVIDED that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations. Any attempted assignment that
does not comply with the provisions of this Section 8.5 shall be null and void
AB INITIO.
SECTION 8.6. PARTIES IN INTEREST. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and, except
as provided in the following sentence, nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement. The parties hereto expressly intend the provisions of Section 5.6 to
confer a benefit upon and be enforceable by, as third party beneficiaries of
this Agreement, the third persons referred to in, or intended to be benefited
by, such provisions.
SECTION 8.7. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware, without
regard to principles of conflicts of laws.
45
SECTION 8.8. HEADINGS. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 8.9. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
SECTION 8.10. INTERPRETATION. The parties hereto agree that in
interpreting this Agreement there shall be no inferences against the drafting
party.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
PRIMEDIA INC.
By: /S/ XXXXXXX X. XXXXX
------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice Chairman
ABRACADABRA ACQUISITION CORPORATION
By: /S/ XXXXXXX X. XXXXX
-----------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice Chairman
XXXXX.XXX, INC.
By: /S/ XXXXX XXXXXX
------------------------------------------
Name: Xxxxx Xxxxxx
Title: Chairman and Chief Executive Officer
[Signature page to Agreement and Plan of Merger]
