Agreement and Plan of Reorganization - Infoseek Corp. and The Walt Disney Co.
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
INFOSEEK CORPORATION,
THE WALT DISNEY COMPANY
AND
BINGO ACQUISITION CORP.
DATED AS OF JULY 10, 1999
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of July 10, 1999 by and among Infoseek Corporation, a
Delaware corporation (the "Company"), The Walt Disney Company, a Delaware
corporation ("Parent"), and Bingo Acquisition Corp. a Delaware corporation and
wholly owned, direct subsidiary of Parent ("Acquisition Company").
RECITALS
A. The Boards of Directors of each of Parent, the Company and Acquisition
Company believe that it is in the best interests of each such company and its
respective stockholders to consummate the reorganization provided for herein,
pursuant to which Parent will directly acquire all of the capital stock of the
Company through a merger of Acquisition Company with and into the Company, with
the Company being the surviving corporation.
B. For federal income tax purposes, it is intended that the foregoing
merger qualify as a reorganization under the provisions of Section 368(a)(1)(B)
and (a)(2)(E) of the United States Internal Revenue Code of 1986, as amended
(the "Code").
C. Concurrently with the execution hereof, in order to induce Parent to
enter into this Agreement, certain stockholders of the Company are entering into
support agreements (the "Support Agreements") providing for certain voting and
other restrictions with respect to shares of Company Common Stock held by them
upon the terms and conditions specified therein.
D. Immediately prior to the Effective Time (as defined herein), the
Restated Certificate of Incorporation of Parent will be amended and restated to,
among other things, authorize 1,000,000,000 shares of Internet Group Common
Stock (as defined herein).
E. The Company, on the one hand, and Parent and Acquisition Company, on the
other hand, desire to make certain representations, warranties, covenants and
other agreements in connection with the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration the receipt of which is hereby acknowledged, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger.
Subject to the terms and conditions of this Agreement and in accordance
with the Delaware General Corporation Law (the "DGCL"), at the Effective Time,
Acquisition
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Company shall merge (the "Merger") with and into the Company in accordance with
the applicable provisions of the DGCL, whereupon Acquisition Company's separate
corporate existence shall cease and the Company shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of Delaware. As a result of the
Merger, the Company shall become a wholly owned, direct subsidiary of Parent.
The effects and consequences of the Merger shall be as set forth in Section 1.3
below.
1.2 Filing of Certificate of Merger; Effective Time.
The Company shall cause a certificate of merger with respect to the
Merger in substantially the form attached hereto as Exhibit A (the "Certificate
of Merger") to be executed and filed on the date of the Closing (as defined
below), or such other date as the Company, Parent and Acquisition Company may
agree, with the Secretary of State of the State of Delaware as provided in the
DGCL. The Merger shall become effective at the time and date on which the
Certificate of Merger has been duly filed with the Secretary of State or such
time and date as is agreed upon by the parties and specified in the Certificate
of Merger, and such time and date are referred to herein as the "Effective
Time."
1.3 Effect of the Merger.
The parties agree to the following provisions with respect to the Merger:
(a) Name of Surviving Corporation.
The name of the Surviving Corporation from and after the Effective Time
shall be "Infoseek Corporation."
(b) Certificate of Incorporation.
The Certificate of Incorporation of the Surviving Corporation shall be
the Certificate of Incorporation of the Company until thereafter amended as
provided by law and such Certificate of Incorporation.
(c) Bylaws.
The Bylaws of the Surviving Corporation shall, at the Effective Time,
be the Bylaws of Acquisition Company until thereafter amended as provided by law
and such Bylaws.
(d) Directors.
The directors of Acquisition Company immediately prior to the Effective
Time shall be the directors of the Surviving Corporation as of the Effective
Time and until their successors are duly appointed or elected in accordance with
applicable law, or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws.
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(e) Officers.
The officers of the Surviving Corporation at the Effective Time shall
be the officers of the Company immediately prior to the Effective Time until
their successors are duly appointed or elected in accordance with applicable
law, or until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and Bylaws.
1.4 The Closing.
Subject to the terms and conditions of this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New
York 10019-6092, at 10:00 a.m., local time, on (a) the next business day after
the last to be fulfilled or waived of the conditions set forth in Article VI
shall be fulfilled or waived in accordance herewith (other than conditions which
by their nature are to be satisfied at the Closing, but subject to such
conditions) or (b) at such other time, date or place as the Company and Parent
may agree in writing. The date on which the Closing occurs is referred to herein
as the "Closing Date."
1.5 Internet Group.
On the Closing Date, immediately prior to the consummation of the Merger
and the filing of the Certificate of Merger, Parent shall file the proposed
amendment and restatement of the Restated Certificate of Incorporation of Parent
substantially as set forth as Exhibit B hereto (the "Parent Charter Amendment")
with the Secretary of State of the State of Delaware. The Board of Directors has
adopted resolutions approving the Parent Charter Amendment and certain policies
pertaining to the Parent Common Stock (as defined in Section 1.7) substantially
as set forth as Exhibit C hereto (the "Parent Common Stock Policies"), which
Parent Charter Amendment and Parent Common Stock Policies shall establish the
"Internet Group" effective as of the Effective Time. For purposes of this
Agreement, the term "Internet Group" shall have the meaning set forth in the
Parent Charter Amendment and the term "Internet Group Companies" shall have the
meaning set forth in the Parent Common Stock Policies; provided, however, that
for periods prior to the Effective Time, the term Internet Group shall not
include those assets, rights, properties and liabilities that are owned by the
Company immediately prior to the consummation of the transactions contemplated
hereby.
1.6 Conversion of Acquisition Company Stock.
At the Effective Time, each share of the common stock of Acquisition
Company outstanding immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into and shall become one (1) share of common stock of the Surviving
Corporation.
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1.7 Conversion of Company Common Stock and Company Options.
(a) At the Effective Time, each issued and outstanding share of Company
Capital Stock (i) other than the shares owned by Parent and Disney Enterprises,
Inc., a wholly owned subsidiary of Parent ("DEI") shall be converted, without
any action on the part of the holders thereof, into 1.15 shares of Internet
Group Common Stock (the "Exchange Ratio"), (ii) owned by Parent shall remain
outstanding and (iii) owned by DEI shall be converted, without any action on the
part of the holders thereof, into one-one-hundredth of a share (rounded up to
the nearest whole share) of Parent Series A Voting Preferred Stock. As used
herein, the following terms have the following meanings:
(i) "Company Capital Stock" means all shares of Company Common Stock
and all shares of any other capital stock of the Company;
(ii) "Company Common Stock" means the common stock, par value $.001
per share, of the Company, including any share purchase rights associated
therewith pursuant to the Company's share purchase rights plan;
(iii) "Company Options" means all issued and outstanding options,
warrants and other rights to acquire or receive Company Capital Stock (whether
or not vested); provided, however, that "Company Options" shall not include the
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Company Common Stock Warrant issued to Parent dated November 18, 1998;
(iv) "Internet Group Common Stock" means the Internet Group Common
Stock, par value $.01 per share, of Parent (including any share purchase rights
that may be associated therewith pursuant to any share purchase rights plan
adopted by Parent), a new class of Parent Capital Stock that will have the terms
and features set forth in the Parent Charter Amendment;
(v) "Parent Capital Stock" means all shares of Parent Common Stock
and all shares of any other capital stock of Parent;
(vi) "Parent Common Stock" means the common stock, par value $.01 per
share, of Parent, including any share purchase rights that may be associated
therewith pursuant to any share purchase rights plan adopted by Parent;
(vii) "Parent Options" means all issued and outstanding options,
warrants and other rights to acquire or receive Parent Capital Stock (whether or
not vested); and
(viii) "Total Outstanding Company Shares" means the aggregate number
of shares of Company Capital Stock outstanding immediately prior to the
Effective Time.
(b) Notwithstanding anything contained in this Section 1.7 to the
contrary, each share of Company Common Stock issued and held in the Company's
treasury immediately prior to the Effective Time shall, by virtue of the Merger,
cease to be
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outstanding and shall be canceled and retired without payment of any
consideration therefor.
(c) At the Effective Time, each outstanding Company Option shall be
transferred to and assumed by Parent in such manner that it is converted into an
option to purchase shares of Internet Group Common Stock (each an "Internet
Group Option"), as provided below. Notwithstanding the foregoing, the unvested
portion (and the unvested portion only) of the Company Options held by
non-employee directors of the Company as of the date hereof and any Company
Option granted to non-employee directors of the Company in the ordinary course
following the date hereof (the "Unvested Non-Employee Director Options") shall
not be transferred to and assumed by Parent (any vested portion of the Company
Options held by non-employee directors of the Company shall be transferred to
and assumed by Parent in such manner that it is converted into an Internet Group
Option). Following the Effective Time, each such Internet Group Option shall be
exercisable upon the same terms and conditions as then are applicable to such
Company Option, except that (i) each such Internet Group Option shall be
exercisable for that number of shares of Internet Group Common Stock equal to
the product obtained by multiplying the number of shares of Company Capital
Stock that were issuable upon exercise in full of such assumed Company Option
immediately prior to the Effective Time by the Exchange Ratio, rounded down to
the nearest whole number of shares of Internet Group Common Stock and (ii) the
per share exercise price for the shares of Internet Group Common Stock issuable
upon exercise of such Internet Group Option shall be equal to the quotient
obtained by dividing the exercise price per share of Company Capital Stock at
which such Company Option was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded up to the nearest whole cent. It is the
intention of the parties that, to the extent that any such Company Option
constituted an "incentive stock option" (within the meaning of Section 422 of
the Code) immediately prior to the Effective Time, the Internet Group Option
continue to qualify as an incentive stock option to the maximum extent permitted
by Section 422 of the Code, and that the assumption of the Company Options
provided by this Section 1.7(c) satisfy the conditions of Section 424(a) of the
Code.
(d) The Company shall cause all "purchase intervals" under all
"offering periods" of the Company's Employee Stock Purchase Plan (the "ESPP")
that have not previously terminated in accordance with their terms to terminate
immediately prior to the Effective Time and for a final exercise of ESPP options
to be made at such time. The amount of cash to be allocated by Parent to the
Internet Group as provided in Section 5.17 of this Agreement shall be decreased
by the sum of the exercise price of each option exercised under the ESPP on and
after the date hereof multiplied by the respective number of shares of each such
option under the ESPP.
1.8 Exchange Agent.
Parent shall appoint a reputable institution reasonably acceptable to the
Company to serve as exchange agent (the "Exchange Agent") in the Merger.
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1.9 Parent to Provide Common Stock.
Promptly after the Effective Time, Parent shall make available to the
Exchange Agent for exchange in accordance with this Article I the shares of
Internet Group Common Stock issuable pursuant to Article I in exchange for all
of the outstanding shares of Company Capital Stock.
1.10 Exchange Procedures.
Promptly after the Effective Time, Parent shall cause the Exchange
Agent to mail to each holder of record (as of the Effective Time) of a
certificate or certificates (the "Certificates"), which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock whose
shares were converted into shares of Internet Group Common Stock pursuant to
Section 1.7 and any dividends or other distributions pursuant to Section 1.11,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall contain such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Internet Group Common Stock and any dividends or other
distributions pursuant to Section 1.11. Upon surrender of Certificates for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holders of such Certificates shall be entitled to receive in exchange
therefor certificates representing the number of whole shares of Internet Group
Common Stock into which their shares of Company Capital Stock were converted at
the Effective Time and any dividends or distributions payable pursuant to
Section 1.11, and the Certificates so surrendered shall forthwith be canceled.
Until so surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 1.11 as to the
payment of dividends, to evidence the ownership of the number of full shares of
Internet Group Common Stock into which such shares of Company Capital Stock
shall have been so converted and any dividends or distributions payable pursuant
to Section 1.11. If any portion of the Internet Group Common Stock, and cash in
lieu of fractional shares thereof (and any dividends or distributions thereon)
otherwise payable hereunder to any person, is to be issued or paid to a person
other than the person in whose name the Certificate is registered, it shall be a
condition to such issuance or payment that the Certificate so surrendered shall
be properly endorsed or otherwise be in proper form for transfer and that the
person requesting such issuance or payment shall pay to the Exchange Agent any
transfer or other taxes required as a result of such issuance or payment to a
person other than the registered holder of such Company Stock Certificate or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
1.11 Dividends, Fractional Shares, Etc.
(a) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared after the Effective Time on Internet
Group Common Stock shall be paid with respect to any shares of Company Capital
Stock represented by a
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Company Stock Certificate, nor shall any cash payment in lieu of fractional
shares be paid with respect to any such shares, until such Company Stock
Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such Company Stock
Certificate, there shall be paid to the holder of the Internet Group Common
Stock certificates issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole shares of Internet Group Common Stock and not paid, less the amount of any
withholding taxes which may be required thereon and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Internet Group Common
Stock, less the amount of any withholding taxes which may be required thereon.
(b) All shares of Internet Group Common Stock issued upon surrender of
Company Stock Certificates in accordance with this Article I shall be deemed to
be in full satisfaction of all rights pertaining to the shares of Company
Capital Stock represented thereby, and from and after the Effective Time, there
shall be no transfers on the stock transfer books of the Company of the shares
of Company Capital Stock. If, after the Effective Time, certificates
representing any such shares are presented to the Surviving Corporation, they
shall be canceled and exchanged for certificates for the consideration, if any,
deliverable in respect thereof pursuant to this Agreement in accordance with the
procedures set forth in this Article I.
(c) No fractional shares of Internet Group Common Stock shall be issued
pursuant to the Merger. In lieu of the issuance of any fractional share of
Internet Group Common Stock pursuant to the Merger, cash adjustments will be
paid to holders in respect of any fractional share of Internet Group Common
Stock that would otherwise be issuable, and the amount of such cash adjustment
shall be equal to the product of such fractional amount and the average closing
price of Internet Group Common Stock for the first five trading days commencing
on and immediately following the Closing Date.
(d) Upon demand by Parent, the Exchange Agent shall deliver to Parent
any portion of the Internet Group Common Stock made available to the Exchange
Agent pursuant to Section 1.10 hereof, and cash in lieu of fractional shares
thereof, that remains undistributed to holders of Company Capital Stock one year
after the Effective Time. Holders of Certificates who have not complied with
this Article I prior to such demand shall thereafter look only to Parent for
payment of any claim to such Internet Group Common Stock and dividends or
distributions, if any, in respect thereof.
(e) None of Parent, Acquisition Company, the Company, the Exchange
Agent or any other person shall be liable to any former holder of shares of
Company Capital Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws. Any amounts
remaining unclaimed by any holder of Company Capital Stock immediately prior to
such time when such amounts would otherwise escheat to or become the
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property of any Governmental Body (as defined in Section 2.5), shall, to the
extent permitted by applicable laws, become the property of Parent, free and
clear of all claims or interest of any person previously entitled thereto.
(f) Each of the Surviving Corporation and Parent shall be entitled to
deduct and withhold from the Internet Group Common Stock, and cash in lieu of
fractional shares thereof (and any dividends or distributions thereon) otherwise
payable hereunder to any person such amounts as it is required to deduct and
withhold with respect to the making of such payment under any provision of
federal, state, local or foreign income tax law. To the extent that the
Surviving Corporation or Parent so withholds those amounts, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of Company Capital Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Parent, as the case may be.
(g) In the event that any Company Stock Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Company Stock Certificate to be lost, stolen or destroyed
and, if required by Parent, the posting by such person of a bond in such
reasonable amount as Parent may direct as indemnity against any claim that may
be made against it with respect to such Company Stock Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Company Stock
Certificate the applicable merger consideration, cash in lieu of fractional
shares, and unpaid dividends and distributions on shares of Internet Group
Common Stock deliverable in respect thereof pursuant to this Agreement.
1.12 Rule 145.
Subject to applicable law, Company Stock Certificates surrendered for
exchange by any person constituting an "affiliate" of the Company for purposes
of Rule 145(c) under the Securities Act of 1933, as amended (the "Securities
Act"), shall not be exchanged until Parent has received a written agreement in
substantially the form attached hereto as Exhibit D from such person agreeing to
comply with the provisions of Rule 145 under the Securities Act.
1.13 Tax Consequences.
It is intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(1)(B) and (a)(2)(E) of the
Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Section 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION COMPANY
Each of Parent and Acquisition Company hereby, jointly and severally,
represents and warrants to the Company, subject to such exceptions as are
specifically disclosed in the disclosure schedule supplied by Parent to the
Company (the "Parent Disclosure
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Schedule"), as of the date hereof and as of the Effective Time as though made at
the Effective Time, as follows:
2.1 Organization of Parent and Acquisition Company.
Each of Parent and Acquisition Company is a corporation duly organized,
validly existing and in good standing under Delaware law. Each corporation or
general partnership included in the Internet Group (the "Internet Group
Companies") is a corporation or partnership, as the case may be, duly organized
or formed, validly existing and in good standing under the laws of its
jurisdiction of incorporation or formation. Each of the Internet Group Companies
is, directly or indirectly, wholly owned by Parent, or will be wholly owned by
Parent as a result of the Merger. Each of Parent, Acquisition Company and each
of the Internet Group Companies that is a corporation has the corporate power to
own its properties and to carry on its business as now being conducted. Each of
Parent and the Internet Group Companies that is a corporation is duly qualified
to do business and in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent or on the Internet Group, as the case may be. Each of
the Internet Group Companies that is a partnership has the legal power to own
its properties and to carry on its business as now conducted, and is duly
qualified to do business and in good standing as a foreign entity in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent or on the Internet Group, as the case may be. For all
purposes of this Agreement, the term "Material Adverse Effect" means any change,
event or effect that would be reasonably likely to have a material adverse
effect on the business, assets (including intangible assets), financial
condition or results of operations of the entity or business referred to
together with its subsidiaries, if any, taken as a whole; provided, however,
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that any adverse change, event or effect that is caused by (i) the announcement
or pendency of the Merger shall not be taken into account in determining whether
there has been or would be a Material Adverse Effect with respect to any party
and (ii) any breach of any covenant hereunder by any action or failure to act by
any of Parent or the Internet Group, on the one hand, or the Company, on the
other hand, shall not be taken into account in determining whether there has
been or would be a Material Adverse Effect on the other party. Parent has
delivered a true and correct copy of its Restated Certificate of Incorporation
and Bylaws and the charter or other organizational documents of each of the
Internet Group Companies, each as amended to date, to the Company.
2.2 Parent Capital Structure.
(a) The authorized capital stock of Parent consists of 3,600,000,000
shares of Parent Common Stock, of which 2,060,734,292 shares were issued and
outstanding as of July 1, 1999 and 100,000,000 shares of preferred stock, par
value $0.01 per share, of which no shares were issued and outstanding as of July
1, 1999. All outstanding shares of Parent Capital Stock are duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, the Restated Certificate of Incorporation or Bylaws
of Parent or any agreement to which Parent is a party or by which it is bound
and have been issued in compliance with federal and state securities
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laws. There are no accrued or unpaid dividends with respect to any shares of
Parent Capital Stock. Parent has no other capital stock authorized, issued or
outstanding.
(b) Except for those plans of Parent set forth in the Parent SEC
Documents (as defined in Section 2.6) or set forth in Section 2.2(b) of the
Parent Disclosure Schedule (the "Parent Stock Plans"), there is no stock option
plan or other plan providing for equity compensation maintained by Parent. There
are no other options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which Parent or any subsidiary of Parent is a
party or by which it is bound obligating Parent or any subsidiary of Parent to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of Parent Capital Stock or interests
in any subsidiary of Parent, as the case may be, or obligating Parent or any
subsidiary of Parent to grant, extend, accelerate the vesting of, change the
price of, otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. To Parent's knowledge, there are no voting trusts,
proxies, or other agreements or understandings with respect to the voting stock
of Parent or any subsidiary of Parent.
(c) The authorized capital stock of Acquisition Company ("Acquisition
Company Capital Stock") consists of 1,000 shares of common stock, of which 100
shares are issued and outstanding as of the date hereof and as of the Effective
Time. All outstanding shares of Acquisition Company Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Certificate of Incorporation or Bylaws
of Acquisition Company or any agreement to which Acquisition Company is a party
or by which it is bound and have been issued in compliance with federal and
state securities laws. There are no declared or accrued unpaid dividends with
respect to any shares of Acquisition Company Capital Stock. Acquisition Company
has no other capital stock authorized, issued or outstanding.
2.3 Authority.
Each of Parent and Acquisition Company has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of each of Parent and Acquisition
Company, and no further action is required on the part of Parent or Acquisition
Company to authorize this Agreement and the transactions contemplated hereby,
subject only to the approval of the holders of Parent Common Stock of the Parent
Charter Amendment and the issuance of the Internet Group Common Stock in
connection with the Merger. This Agreement, the Parent Charter Amendment and the
Merger have been approved unanimously by the Boards of Directors of Parent and,
as applicable, Acquisition Company and by the stockholder of Acquisition
Company. This Agreement has been, and all agreements to be executed and
delivered in connection with the transactions contemplated hereby by Parent or
Acquisition Company will be, duly executed and delivered by Parent or
Acquisition Company, as the case may be, and, assuming the due authorization,
execution and delivery by the other parties hereto and thereto, constitute the
valid and binding obligation of Parent or Acquisition Company, as the case may
be, enforceable in accordance with their respective terms,
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except as such enforceability may be limited by principles of public policy and
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and to rules of law governing specific performance,
injunctive relief or other equitable remedies.
2.4 No Conflict.
Except as set forth in Section 2.4 of the Parent Disclosure Schedule, the
execution and delivery of this Agreement do not, and all agreements to be
executed and delivered in connection with the transactions contemplated hereby
by Parent or Acquisition Company will not, and the performance and consummation
of the transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation,
modification or acceleration of any obligation or loss of any benefit under (any
such event, a "Conflict"), (i) any provision of the Restated Certificate of
Incorporation or Bylaws of Parent or Certificate of Incorporation or Bylaws of
Acquisition Company or the charter or organizational documents of any of the
Internet Group Companies, (ii) any material mortgage, indenture, lease, contract
or other agreement or instrument, permit, concession, franchise or license to
which Parent, Acquisition Company or any of their subsidiaries or any of their
material properties or assets are subject or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent, Acquisition
Company or any of their subsidiaries or their respective material properties or
assets, except, in the case of clauses (ii) and (iii) above, as would not have a
Material Adverse Effect on Parent or the Internet Group.
2.5 Consents.
Except as set forth in Section 2.5 of the Parent Disclosure Schedule, no
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Body or any other party is required
by or with respect to Parent, Acquisition Company or any of their respective
subsidiaries in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (i) the
filing with the Securities and Exchange Commission (the "SEC") of the Joint
Proxy Statement of Parent and the Company, as amended from time to time through
effectiveness (the "Joint Proxy Statement"), pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), for the solicitation of the
approval of the stockholders of Parent of the Parent Charter Amendment, (ii) the
filing with the SEC of a Registration Statement on Form S-4 (the "Form S-4
Registration Statement") pursuant to the Securities Act with respect to those
shares of Internet Group Common Stock issuable in the Merger, in which the Joint
Proxy Statement will be included as part of the Form S-4 Registration Statement,
(iii) such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, (iv) the filing of the Parent Charter Amendment and the
Certificate of Merger with the Secretary of State of the State of Delaware, (v)
any applicable filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (vi) the approval of the
stockholders of Parent of the Parent Charter Amendment, (vii) any other such
filings
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or approvals as may be required under Delaware law and (viii) such consents,
waivers, approvals, orders authorizations, registrations, declarations, and
filings, which, if not obtained or made, would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or the Internet Group or
prevent or materially delay the consummation of the transactions contemplated
hereby. For purposes of this Agreement, "Governmental Body" shall mean any: (a)
nation, state, commonwealth, province, territory, county, municipality, district
or other jurisdiction of any nature; (b) federal, state, local, municipal,
foreign or other government or (c) governmental or quasi-governmental authority
of any nature (including any governmental division, department, agency,
commission, instrumentality, official, organization, unit, body or entity and
any court or other tribunal).
2.6 SEC Documents and Parent Financial Statements.
Parent has furnished the Company with a true and complete copy of all of
its filings with the SEC since January 1, 1998 through the date hereof (the
"Parent SEC Documents"). Each of the Parent SEC Documents when filed (i)
complied as to form in all material respects with the applicable requirements of
the Exchange Act and (ii) was true and correct in all material respects and did
not omit to state any material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except in each case as superseded in any
subsequent filings. All financial statements (including any related schedules or
notes) of Parent included in the Parent SEC Documents were prepared in
accordance with United States generally accepted accounting principals,
consistently applied ("GAAP"), are consistent with each other and present fairly
in all material respects the consolidated financial condition and consolidated
operating results and cash flows of Parent as of their respective dates and
during the periods indicated therein, subject, in the case of unaudited
statements, to normal year-end adjustments, which will not be material in
amount. Parent maintains a system of internal accounting controls sufficient to
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability. Parent's unaudited consolidated balance sheet as
of March 31, 1999 included in the Parent SEC Documents is referred to herein as
the "Parent Current Balance Sheet," and Parent's audited consolidated balance
sheet as of September 30, 1998 and its audited consolidated statements of
operations and cash flows for the year then ended included in the Parent SEC
Documents are referred to herein as the "Parent Financials."
2.7 Internet Group Common Stock; Internet Group Companies and Business.
When issued and delivered in accordance with the terms of this Agreement,
the Internet Group Common Stock will be duly authorized, validly issued, fully
paid and nonassessable and free of any preemptive or similar right. Except as
set forth in Section 2.7 of the Parent Disclosure Schedule, there is no stock
option plan or other plan providing for equity compensation maintained by
Internet Group. Except as set forth in Section 2.7 of the Parent Disclosure
Schedule, there are no other options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which Parent or
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any subsidiary of Parent is a party or by which it is bound obligating Parent or
any subsidiary of Parent to issue, deliver, sell, repurchase or redeem, or cause
to be issued, delivered, sold, repurchased or redeemed, any shares of Internet
Group Common Stock (except in exchange for Company Options pursuant to Section
1.7 above) or interests in any of the Internet Group Companies, as the case may
be. Except as set forth in Section 2.7 of the Parent Disclosure Schedule, there
are no outstanding or authorized stock appreciation, phantom stock, profit
participation or other similar rights with respect to Internet Group Common
Stock. Except as set forth in Section 2.7 of the Parent Disclosure Schedule,
there are no minority interests or options, calls or other rights to acquire
whatsoever any equity or other interests (ownership, economic or otherwise) in
any of the Internet Group Companies or the business or assets of the Internet
Group.
2.8 Ownership of Acquisition Company; No Prior Activities.
Acquisition Company is a wholly owned, direct subsidiary of Parent
created solely for the purpose of effecting the Merger. As of the date hereof
and the Effective Time, except for obligations or liabilities incurred in
connection with its incorporation or organization and the transactions
contemplated by this Agreement and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, Acquisition Company
has not and will not have incurred, directly or indirectly, through any
subsidiary or affiliate, any material obligations or liabilities or engaged in
any material business activities of any type or kind whatsoever or entered into
any agreements or arrangements with any person.
2.9 Internet Group Financial Statements.
Section 2.9 of the Parent Disclosure Schedule sets forth the Internet
Group's (i) audited combined balance sheet as of September 30, 1998 and the
statements of operations and cash flows for the year then ended, including notes
thereto (the "Year-End Financials"), and (ii) unaudited combined balance sheet
as of March 31, 1999 and the related combined statements of operations and cash
flows for the six months then ended (the "Interim Financials"). Such Year-End
Financials have been prepared with a materiality standard based upon the
Internet Group and not Parent taken as a whole. Except as otherwise specifically
described in Section 2.9 of the Parent Disclosure Schedule, the Year-End
Financials and the Interim Financials have been prepared in accordance with GAAP
applied on a basis consistent throughout the periods indicated and are
consistent with each other, and each of the Year-End Financials and the Interim
Financials have been prepared as though the Parent Common Stock Policies, as
will be applied following the Effective Time, had been in place for, and applied
consistently during, such periods (except with respect to the royalties payable
to Parent in connection with DisneyStore.com). The Year-End Financials and
Interim Financials present fairly in all material respects the combined
financial condition and combined operating results of the Internet Group as of
the dates and during the periods indicated therein, subject in the case of the
Interim Financials, to normal year-end adjustments, which will not be material
in amount. As of the date hereof, Parent maintains a system of internal
accounting controls sufficient to provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements of the
Internet Group in
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conformity with GAAP and to maintain asset accountability. The Internet Group
combined balance sheet as of March 31, 1999 included in the Interim Financials
shall be hereinafter referred to as the "Current Balance Sheet."
2.10 No Changes.
Since March 31, 1999, except as otherwise expressly contemplated by
this Agreement, the Internet Group's business has been conducted in the ordinary
course consistent with past practice and there has not been any action, event,
occurrence, development, change in method of doing business or state of
circumstances or facts that, individually or in the aggregate, has had a
Material Adverse Effect on the Internet Group.
2.11 Restrictions on Business Activities.
Except as described in Section 2.11 of the Parent Disclosure Schedule as
of the date hereof, there is no agreement (non-compete or otherwise),
commitment, judgment, injunction, order or decree to which Parent or any of its
subsidiaries is a party or otherwise binding upon Parent or its subsidiaries
which has the effect of prohibiting any business practice of the Internet Group,
any acquisition of property (tangible or intangible) by the Internet Group or
the conduct of the business by the Internet Group which would have a Material
Adverse Effect on the Internet Group and the Company taken as a whole. Without
limiting the foregoing, as of the date hereof, none of Parent or its
subsidiaries has entered into any agreement under which any of the Internet
Group Companies is restricted from selling, licensing or otherwise distributing
any of its material technology or products to or providing services to or
selling advertising to, customers or potential customers or any class of
customers, in any geographic area, during any period of time or in any market
which would have a Material Adverse Effect on the Internet Group and the Company
taken as a whole.
2.12 Title to Properties; Absence of Liens and Encumbrances.
(a) Section 2.12(a) of the Parent Disclosure Schedule sets forth a list
of all real property used in the business of the Internet Group that would be
required to be identified by Item 102 of Regulation S-K.
(b) Except as set forth in Section 2.12(b) of the Parent Disclosure
Schedule, either Parent, its subsidiaries or the Internet Group Companies, as
the case may be, has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all material tangible
properties and assets, real, personal and mixed, used or held for use in
connection with business of the Internet Group, free and clear of any Liens (as
defined in Section 3.12), except (i) as reflected in the Current Balance Sheet,
(ii) for Taxes (as defined in Section 3.12) not yet due and payable or
delinquent and (iii) where such imperfections of title and encumbrances, if any,
are not material in character, amount or extent, and do not materially detract
from the value, or materially interfere with the present use, of the property
subject thereto or affected thereby.
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2.13 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following
and all rights in, arising out of, or associated therewith: (i) all United
States and foreign patents and utility models and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, and equivalent or similar rights anywhere in the
world in inventions and discoveries; (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and all
documentation relating to any of the foregoing; (iii) all copyrights, copyright
registrations and applications therefor and all other rights corresponding
thereto throughout the world; (iv) all trade names, logos, common law trademarks
and service marks; trademark and service mark registrations and applications
therefor and all goodwill associated therewith throughout the world; (v) all
databases and data collections and all rights therein throughout the world; (vi)
all computer software including all source code, object code, firmware,
development tools, files, records and data, all media on which any of the
foregoing is recorded, all Web addresses, sites and domain names, all rights of
publicity and privacy; (vii) any similar, corresponding or equivalent rights to
any of the foregoing; and (viii) all documentation related to any of the
foregoing.
"Internet Group Intellectual Property" shall mean any Intellectual
Property that is (i) owned by or exclusively licensed to Parent, any of the
Internet Group Companies or any of their respective subsidiaries and (ii) used
in connection with the business of the Internet Group, but in all events
excluding (A) Intellectual Property owned by the Company or the Company
Subsidiaries other than ABC News/Starwave Partners (d/b/a ABC News Internet
Ventures) ("AIV") and ESPN/Starware Partners (d/b/a ESPN Internet Ventures)
("EIV"), which Intellectual Property is exclusively licensed to AIV or EIV, (B)
Intellectual Property that is or was developed or owned by AIV or EIV and (C)
Intellectual Property that is or was jointly developed, funded or owned by the
Company or any of the Company Subsidiaries (other than AIV and EIV) on the one
hand and Parent or any of the Internet Group Companies or their respective
subsidiaries (other than AIV and EIV) on the other hand.
"Registered Intellectual Property" shall mean all United
States, international and foreign: (i) patents and patent applications
(including provisional applications); (ii) registered trademarks, applications
to register trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and applications
for copyright registration; (iv) any mask work registrations and applications to
register mask works; and (v) any other Internet Group Intellectual Property that
is the subject of an application, certificate, filing, registration or other
document issued by, filed with, or recorded by, any state, government or other
public legal authority.
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(b) Section 2.13(b) of the Parent Disclosure Schedule lists all
Registered Intellectual Property owned by, or filed in the name of, Parent, any
of the Internet Group Companies or any of their respective subsidiaries except
such Registered Intellectual Property the absence of which would not have a
Material Adverse Effect on the Internet Group or the conduct of the Internet
Group's business and which is used primarily in connection with the business of
the Internet Group (the " Internet Group Registered Intellectual Property") and
lists any proceedings or actions before any court, tribunal (including the
United States Patent and Trademark Office (the "PTO") or equivalent authority
anywhere in the world) related to any of the Internet Group Registered
Intellectual Property, except for any proceedings which, if adversely
determined, would not have a Material Adverse Effect on the Internet Group.
(c) Except as set forth in Section 2.13(c) of the Parent Disclosure
Schedule or as would not have a Material Adverse Effect on the Internet Group or
the conduct of the Internet Group's business, each item of Internet Group
Intellectual Property owned by Parent, any Internet Group Companies or their
respective subsidiaries, including all Internet Group Registered Intellectual
Property listed in Section 2.13(b) of the Parent Disclosure Schedule, is free
and clear of any Liens, except for Liens for Taxes not yet due and payable or
delinquent. Except as set forth in Section 2.13(c) of the Parent Disclosure
Schedule or as would not have a Material Adverse Effect on the Internet Group or
the conduct of the Internet Group's business, one or more of Parent, the
Internet Group Companies or any of their respective subsidiaries, as the case
may be, (i) is the exclusive owner or has valid and enforceable rights to use of
all trade names, logos, common law trademarks and service marks used in
connection with the operation or conduct of the business of the Internet Group
as currently conducted, including the sale of any products or technology or the
provision of any services by the Internet Group; and (ii) is the exclusive owner
of or has valid and enforceable rights to use, all copyrighted works that are
Parent's or any of the Internet Group Companies' or any of their respective
subsidiaries', as the case may be, products or other works of authorship used in
connection with the operation or conduct of the Internet Group's business as
currently conducted, including the sale of any products or technology or the
provision of any services by the Internet Group.
(d) Except as set forth in Section 2.13(d) of the Parent Disclosure
Schedule and except for any transfers, grants or authorizations that have not or
do not have a Material Adverse Effect on the Internet Group or the conduct of
the Internet Group's business, none of Parent or the Internet Group Companies or
any of their respective subsidiaries has transferred ownership of or authorized
the retention of any rights to use any Internet Group Intellectual Property to
any other person.
(e) Except (i) as set forth in Section 2.13(e) of the Parent Disclosure
Schedule, (ii) for Intellectual Property the absence of which would not have a
Material Adverse Effect on the Internet Group, (iii) for "shrink-wrap" software
and similar widely available commercial end-user software used by the Internet
Group or in the conduct of the Internet Group's business, and (iv) open source
and similar free software available generally without payment of any royalties
or other license fees: the Internet Group Intellectual Property constitutes all
of the Intellectual Property used in or necessary to the
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conduct of the Internet Group's business as currently conducted, including,
without limitation, the design, development, copying, performance, display,
creation of derivative works, distribution, manufacture, use, import, license
and sale of the products, technology and services of the Internet Group. Except
as set forth in Section 2.13(e) of the Parent Disclosure Schedule, no person who
has licensed Internet Group Intellectual Property to Parent or any of the
Internet Group Companies or any of their respective subsidiaries has ownership
rights or license rights to improvements in such licensed Internet Group
Intellectual Property, provided that the foregoing shall apply only to
improvements (A) the absence of which would have a Material Adverse Effect on
the Internet Group or the conduct of Internet Group's business and (B) which
were made by Parent, any Internet Group Company or any of their respective
subsidiaries.
(f) Except for "shrink-wrap" and similar widely available commercial
end-user licenses or contracts, licenses and agreements the existence,
termination or breach of which would not have a Material Adverse Effect on the
Internet Group or the conduct of the Internet Group's business, the contracts,
licenses and agreements listed in Section 2.13(f) of the Parent Disclosure
Schedule include all contracts, licenses and agreements to which Parent, any of
the Internet Group Companies or any of their respective subsidiaries is a party
with respect to any Internet Group Intellectual Property.
(g) Except as set forth in Section 2.13(g) of the Parent Disclosure
Schedule or except for matters which, if adversely determined, would not have a
Material Adverse Effect on the Internet Group or the conduct of the Internet
Group's business: the operation of the Internet Group's business as currently
conducted, including, without limitation, the design, development, copying,
performance, display, creation of derivative works, distribution, manufacture,
use, import, license and sale of the products, technology and services of the
Internet Group, does not infringe or misappropriate the Intellectual Property of
any person, violate the rights of any person (including, but not limited to,
rights to privacy or publicity), or constitute unfair competition or trade
practices under the laws of any relevant jurisdiction; and none of Parent, the
Internet Group Companies or any of their respective subsidiaries has received
notice from any person claiming that such operation, or any act, product,
technology or service of the Internet Group infringes or misappropriates the
Intellectual Property of any person, or that Parent, any of the Internet Group
Companies or any of their respective subsidiaries has engaged in unfair
competition or trade practices under the laws of any relevant jurisdiction (nor
does Parent, any Internet Group Company or any of their respective subsidiaries
have knowledge of any basis therefor).
(h) All necessary registration, maintenance and renewal fees in
connection with the Internet Group Registered Intellectual Property the absence
of which would have a Material Adverse Effect on the Internet Group or the
conduct of the Internet Group's business have been paid and all necessary
documents and certificates in connection with such Internet Group Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property when commercially reasonable.
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(i) Except as set forth in Section 2.13(i) of the Parent Disclosure
Schedule or for those contracts, licenses or agreements the existence,
termination or breach of which would not have a Material Adverse Effect on the
Internet Group or the conduct of Internet Group's business, there are no
contracts, licenses or agreements between Parent, any of the Internet Group
Companies or any of their respective subsidiaries and any other person with
respect to Internet Group Intellectual Property under which there is any dispute
regarding the scope of such contract, license or agreement or performance under
such contract, license or agreement, including with respect to any payments to
be made or received by Parent, any of the Internet Group Companies or any of
their respective subsidiaries, as the case may be, which, if adversely
determined, would have a Material Adverse Effect on the Internet Group or the
conduct of the Internet Group's business.
(j) Except as set forth in Section 2.13(j) of the Parent Disclosure
Schedule or for pending claims which, if successfully asserted, would not have a
Material Adverse Effect on the Internet Group or the conduct of the Internet
Group's business, there is no pending claim by Parent, any of the Internet Group
Companies or any of their respective subsidiaries against any person for
infringing or misappropriating any Internet Group Intellectual Property. Without
limiting the foregoing, to the knowledge of Parent, any of the Internet Group
Companies or any of their respective subsidiaries, there is no pending claim by
any person other than Parent, any of the Internet Group Companies or any of
their respective subsidiaries against any person for infringing or
misappropriating any Internet Group Intellectual Property, which claim, if
adversely determined, would have a Material Adverse Effect on the Internet Group
or the conduct of the Internet Group's business.
(k) Except as set forth in Section 2.13(k) of the Parent Disclosure
Schedule or as would not have a Material Adverse Effect on the conduct of the
Internet Group or the Internet Group's business as currently conducted, no
Internet Group Intellectual Property or product, technology or service of the
Internet Group is subject to any proceeding or outstanding decree, order,
judgment, settlement or other similar agreement or stipulation that restricts in
any manner the use, transfer or licensing thereof by Parent, any of the Internet
Group Companies or any of their respective subsidiaries, as the case may be, or
would affect the validity, use or enforceability of such Internet Group
Intellectual Property.
(l) The consummation of the transaction contemplated by this Agreement
will not result in the loss of, or otherwise adversely affect, any ownership
rights of Parent, any of the Internet Group Companies or any of their respective
subsidiaries in any Internet Group Intellectual Property material to the
Internet Group, or result in the breach or termination of any license, contract
or agreement to which any of the foregoing persons are a party with respect to
any Internet Group Intellectual Property material to the Internet Group. The
consummation of the transactions contemplated by this Agreement will not cause
or obligate Parent, any of the Internet Group Companies or any of their
respective subsidiaries to (i) grant to any third party any rights or licenses
with respect to any Internet Group Intellectual Property material to the
Internet Group, or (ii) pay any royalties or other amounts with respect to
Internet Group Intellectual Property material to the Internet Group in excess of
those being paid prior to the Effective Time.
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2.14 Agreements, Contracts and Commitments.
Section 2.14 of the Parent Disclosure Schedule sets forth all material
agreements, contracts, covenants, instruments, leases, licenses or commitments
of the Internet Group (collectively, the "Internet Group Contracts"). Parent and
each of its subsidiaries is in compliance in all material respects with, and has
not, in any material respects, breached, violated or defaulted under, or
received notice that it has breached, violated or defaulted in such manner
under, any of the terms or conditions of the Internet Group Contracts, nor does
Parent have knowledge of any event that would constitute such a breach,
violation or default with the lapse of time, giving of notice or both. Each
Internet Group Contract is in full force and effect and, to the knowledge of
Parent, is not subject to any material default thereunder by any party obligated
to Parent or any of its subsidiaries pursuant thereto. Parent and each of its
subsidiaries has obtained, or will obtain prior to the Closing Date, all
necessary consents, waivers and approvals of parties to any Internet Group
Contract as are required thereunder in connection with the Merger or for such
Internet Group Contracts to remain in effect without material modification after
the Effective Time. Following the Effective Time, Parent and each of its
subsidiaries will be permitted to exercise all of their respective rights under
each Internet Group Contract then in effect without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which Parent or any of its subsidiaries would otherwise be required to
pay had the transactions contemplated by this Agreement not occurred.
2.15 Litigation.
Except as set forth in the Parent SEC Documents or in Section 2.15 of the
Parent Disclosure Schedule, as of the date hereof, there is no material action,
suit or proceeding of any nature pending, or, to Parent's knowledge threatened,
against Parent, any of its subsidiaries or the Internet Group Companies, their
properties or any of their officers or directors, relating to the Internet
Group. To Parent's knowledge, as of the date hereof, there is no material
investigation pending or threatened against Parent, or any of its subsidiaries
or the Internet Group Companies or their properties (nor, to the knowledge of
Parent, is there any reasonable basis therefor), relating to the Internet Group
by or before any Governmental Body.
2.16 Governmental Authorizations.
Section 2.16 of the Parent Disclosure Schedule sets forth each consent,
license, permit, grant or other authorization issued to Parent or its
subsidiaries by a Governmental Body (i) pursuant to which the Internet Group
currently operates or holds any interest in any of their properties or (ii)
which is required for the operation of the Internet Group's business or the
holding of any such interest, in each case the absence of which would have a
Material Adverse Effect on the Internet Group (herein collectively called the
"Internet Group Authorizations"). The Internet Group Authorizations are in full
force and effect and constitute all licenses, permits, grants or other
authorizations by Governmental Bodies required to permit the Internet Group to
operate or conduct its
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business or hold any interest in its properties or assets, in each case except
to the extent that would not result in a Material Adverse Effect on the Internet
Group.
2.17 Minute Books.
The minutes of the Internet Group Companies made available to counsel for
the Company are the only minutes of the Internet Group Companies.
2.18 Environmental Matters.
(a) Hazardous Material. Except as would not have a Material Adverse
Effect on the Internet Group: none of the Internet Group Companies has: (i)
operated any underground storage tanks at any property that any Internet Group
Company has at any time owned, operated, occupied or leased; or (ii) illegally
released in violation of applicable environmental laws as in effect at the time
of such release any material amount of any substance that has been designated by
any Governmental Body or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, and
ureaformaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office, maintenance and
janitorial supplies used in the ordinary course of business (a "Hazardous
Material"). No Hazardous Materials are present as a result of the deliberate
actions of Parent or any of its subsidiaries in, on or under any property,
including the land and the improvements, ground water and surface water thereof,
that any Internet Group Company currently owns, operates, occupies or leases,
except for such Hazardous Materials which would not have a Material Adverse
Effect on the Internet Group.
(b) Hazardous Materials Activities. Except as would not have a Material
Adverse Effect on the Internet Group: none of the Internet Group Companies has
illegally transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of any
environmental law as in effect at the time of such transport, storage, use,
manufacture, disposal, release or exposure, nor has any Internet Group Company
illegally disposed of, transported, sold, or manufactured any product containing
a Hazardous Material in violation of any environmental law as in effect at the
time of such transport, manufacture, disposal or sale (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities").
(c) Permits. Except as would not have a Material Adverse Effect on the
Internet Group, Parent and its subsidiaries currently hold all material
environmental approvals, permits, licenses, clearances and consents (the
"Environmental Permits"), if any, necessary for the conduct of any Hazardous
Material Activities by any Internet Group Company and the other businesses of
Internet Group as such activities and businesses are currently being conducted.
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(d) Environmental Liabilities. Except as would not have a Material
Adverse Effect on the Internet Group, no action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending and served
or, to Parent's knowledge threatened, against Parent or any subsidiary of Parent
concerning any Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of the Internet Group. Except as would not have a Material
Adverse Effect on the Internet Group, Parent has no knowledge of any fact or
circumstance which would reasonably be expected to involve the Internet Group in
any environmental litigation or impose upon the Internet Group any environmental
liability.
The representations set forth in this Section 2.18 are the sole and exclusive
representations of Parent with respect to the subject matter hereof, including,
without limitation, with respect to environmental laws, Environmental Permits,
Hazardous Materials or Hazardous Materials Activities.
2.19 Brokers' and Finders' Fees.
Except as set forth in Section 2.19 of the Parent Disclosure Schedule,
Parent has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
2.20 Employee Benefit Plans; Employment Matters.
(a) Definitions.
For purposes of this Section 2.20, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common
control with Parent within the meaning of Section 414(b), (c), (m) or (o) of the
Code and the regulations thereunder.
(ii) "Employee Plan" shall refer to any plan, program, policy,
contract or agreement or other arrangement providing for bonuses, severance or
retention payments or benefits, termination pay, deferred compensation,
pensions, profit sharing, performance awards, stock or stock- related awards, or
fringe benefits, or other employee benefits of any kind, written or otherwise,
funded or unfunded, including, without limitation, any plan which is or has been
maintained, contributed to, or required to be contributed to, by Parent or any
affiliate for the benefit of any Employee, and pursuant to which Parent or any
affiliate has or may have any material liability, contingent or otherwise.
(iii) "Employee" shall mean any current, former, or retired
employee, consultant, officer, or director of Parent or any of its subsidiaries
who performs services to the Internet Group.
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(b) Employee Plans. Except as disclosed in the Parent SEC Documents or
as would not have a Material Adverse Effect on the Internet Group, all Employee
Plans are in compliance with all applicable requirements of law, including ERISA
and the Code, and in compliance with the terms of such Employee Plans.
(c) Employment Matters.
Except as disclosed in the Parent SEC Documents or as would not have a
Material Adverse Effect on the Internet Group, as of the Effective Time. Parent
and its subsidiaries will be in compliance in all material respects with all
material applicable laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours, in
each case, with respect to Employees.
2.21 Parent Charter Amendment and Parent Common Stock Policies.
The Board of Directors of Parent has unanimously approved (i) the
Parent Charter Amendment, which amendment, subject to the approval of the
holders of a majority of the shares of Parent Common Stock outstanding as of the
record date for the Parent Stockholders Meeting (as defined in Section 5.2) and
the filing thereof with the Secretary of State of Delaware, will become
effective immediately prior to the Effective Time and (ii) the Parent Common
Stock Policies which will become effective as of the Effective Time.
2.22 Compliance with Laws.
Parent and its subsidiaries have complied in all material respects with,
are not in material violation of, and have not received any notices of material
violation with respect to, any material federal, state or local statute, law or
regulation relating to the operation of the Internet Group's business.
2.23 Opinion of Financial Advisor.
The Board of Directors of Parent has received an opinion of Goldman Sachs
& Co. to the effect that, as of the date hereof, the consideration to be paid by
Parent pursuant to this Agreement is fair to Parent from a financial point of
view.
2.24 Reorganization.
As of the date hereof, Parent does not have any knowledge of any fact or
circumstance that is reasonably likely to prevent the Merger from qualifying as
a reorganization described in section 368(a) of the Code.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent, subject to such
exceptions as are specifically disclosed in the disclosure schedule supplied by
the Company to Parent (the "Company Disclosure Schedule"), as of the date hereof
and as of the Effective Time as though made at the Effective Time, as follows:
3.1 Organization, Standing and Power.
The Company is a corporation duly organized, validly existing and in good
standing under Delaware law. The Company has the corporate power to own, lease
and operate its properties and to carry on its business as now being conducted
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect on the Company. The Company has delivered to
Parent a true and correct copy of the Amended and Restated Certificate of
Incorporation and Bylaws of the Company, as amended to date. Each of the Company
Subsidiaries (as defined in Section 3.2) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
formation and has the corporate or other applicable power to own its property
and to carry on its business as now being conducted. Each of the Company
Subsidiaries is duly qualified to do business and in good standing in each
jurisdiction outside of the jurisdiction of its incorporation or formation in
which the failure to be so qualified would have a Material Adverse Effect on the
Company. The Company has made available a true and correct copy of the charter
and bylaws or other organizational document of each of the Company Subsidiaries,
each as amended to date, to Parent.
3.2 Company Subsidiaries.
Except as set forth in Section 3.2 of the Company Disclosure Schedule,
the Company does not have, and has never had, any subsidiaries, in each case
that would be required to be listed as a "Subsidiary" in exhibits to the
periodic reports of the Company under the Exchange Act. The entities set forth
in Section 3.2 of the Company Disclosure Schedule are hereinafter occasionally
referred to individually as a "Company Subsidiary" and collectively as the
"Company Subsidiaries," except as otherwise set forth in Section 3.2 of the
Company Disclosure Schedule. Section 3.2 of the Company Disclosure Schedule also
sets forth the form and percentage interest of the Company in the Company
Subsidiaries and, to the extent that a Company Subsidiary set forth thereon is
not wholly owned by the Company, lists the other person or persons, or entity or
entities, who have an interest in such Company Subsidiary and the percentage of
such interest.
3.3 Authority; No Conflict; Consents.
The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and
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delivery of this Agreement, and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, and no further action is required on the part of the
Company to authorize this Agreement or the transactions contemplated hereby,
subject only to the approval of this Agreement by the Company's stockholders
(which approval must include approval by more than 50% of the Company's total
current voting power held by the Disinterested Stockholders (as defined below)).
This Agreement and the Merger have been unanimously approved by "Disinterested
Directors" of the Company, as defined in the Amended and Restated Certificate of
Incorporation of the Company. The Disinterested Directors of the Company have
duly and validly authorized and approved by all necessary corporate action, this
Agreement, the Support Agreement and the transactions contemplated hereby and
thereby, so that by the execution and delivery hereof no restrictive provision
of any "fair price," "moratorium," "control-share acquisition," "interested
stockholders" or other similar anti-takeover statute or regulation (including,
without limitation, Section 203 of the Delaware General Corporation Law) or
restrictive provision of any applicable anti-takeover provision in the Amended
and Restated Certificate of Incorporation or Bylaws of the Company is, or at the
closing of the transactions contemplated hereby will be, applicable to the
Company, Parent, Acquisition Company and the Parent Common Stock, the Merger or
any other transaction contemplated by this Agreement and so that the
transactions contemplated hereby and by the Support Agreement may be consummated
as promptly as practicable on the terms contemplated hereby and thereby. This
Agreement has been, and all agreements to be executed and delivered in
connection with the transactions contemplated hereby by the Company or any of
the Company Subsidiaries will be, duly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by the other parties
hereto and thereto, constitute the valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by principles of public policy and subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and to rules of law governing specific performance, injunctive relief or
other equitable remedies. The execution and delivery by the Company of this
Agreement does not, and all agreements to be executed and delivered in
connection with the transactions contemplated hereby by the Company or any of
the Company Subsidiaries will not, and the performance and consummation of the
transactions contemplated hereby and thereby will not, result in any Conflict
with (i) any provision of the Amended and Restated Certificate of Incorporation
or Bylaws of the Company, (ii) any material mortgage, indenture, lease, contract
or other agreement or instrument, permit, concession, franchise or license to
which the Company or any Company Subsidiary, or any of their properties or
assets are subject, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any Company
Subsidiary or their respective properties or assets, except in the case of
clauses (ii) and (iii) above, as would not have a Material Adverse Effect on the
Company. Except as set forth in Section 3.3 of the Company Disclosure Schedule,
no consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Body or any other party is required
by or with respect to the Company in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing with the
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SEC of the Joint Proxy Statement, (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware, (iii) such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws,
(iv) any applicable filings required under the HSR Act, (v) the approval of this
Agreement and the Merger by the Company's stockholders (which approval must
include approval by more than 50% of the Company's total current voting power
held by the "Disinterested Stockholders" of the Company, as defined in the
Company's Amended and Restated Certificate of Incorporation), (vi) any other
such filings or approvals as may be required under Delaware law and (vii) such
consents, waivers, approvals, orders authorizations, registrations,
declarations, and filings, which, if not obtained or made, would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
or prevent or materially delay the consummation of the transactions contemplated
hereby.
3.4 Company Capital Structure.
(a) The authorized capital stock of the Company consists of 500,000,000
shares of Company Common Stock of which 62,169,544 shares are issued and
outstanding as of June 30, 1999, and 25,000,000 shares of preferred stock, par
value $.001 per share, of which no shares are issued and outstanding as of the
date hereof. All issued and outstanding shares of Company Capital Stock have
been duly authorized, and are validly issued, fully paid and non-assessable and
not subject to preemptive rights created by statute, the Amended and Restated
Certificate of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound and have been issued in
compliance with federal and state securities laws. There are no declared or
accrued unpaid dividends with respect to any shares of Company Capital Stock.
The Company has no other capital stock authorized, issued or outstanding.
(b) Except for those option plans of the Company set forth in the
Company SEC Documents (as defined in Section 3.5) (the "Company Option Plans"),
there is no stock option plan or other plan providing for equity compensation of
any person maintained by the Company or a Company Subsidiary. As of June 30,
1999, the Company has reserved 13,825,000 shares of Company Capital Stock for
issuance to employees and consultants pursuant to the Company Option Plans, of
which options to purchase 11,318,423 shares of Company Capital Stock have been
issued as of the date hereof, of which 9,797,948 shares remain subject to
options unexercised as of the date hereof. Section 3.4(b) of the Company
Disclosure Schedule sets forth the name of the holder of any Company Capital
Stock subject to vesting, the number of shares of Company Capital Stock subject
to vesting and the vesting schedule for such Company Capital Stock, including
the extent vested as of the most recent practicable date, and sets forth the
name of the holder of any Company Options, the number of shares of Company
Capital Stock subject to such Company Options and the vesting schedule for such
Company Options, including the extent vested to date. Except as set forth in
Section 3.4(b) of the Company Disclosure Schedule, there is no outstanding
Company Capital Stock which is subject to vesting or Company Options, and there
are no options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which the Company or any Company Subsidiary is a
party or by which it is bound
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obligating the Company or any Company Subsidiary to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of Company Capital Stock or interests in any Company
Subsidiary, as the case may be, or obligating the Company or any Company
Subsidiary to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or other similar rights with respect to the Company
or any Company Subsidiary. Except as contemplated by this Agreement, to the
Company's knowledge, there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting stock of the Company or any Company
Subsidiary.
3.5 SEC Documents and Company Financial Statements.
The Company has furnished Parent with a true and complete copy of all of
its filings with the SEC since January 1, 1998 through the date hereof (the
"Company SEC Documents"). Each of the Company SEC Documents when filed (i)
complied as to form in all material respects with the applicable requirements of
the Exchange Act and (ii) was true and correct in all material respects and did
not omit to state any material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except in each case as superseded in any
subsequent filings. All financial statements (including any related Schedules or
notes) of the Company included in the Company SEC Documents were prepared in
accordance with GAAP, are consistent with each other, and fairly present in all
material respects the consolidated financial condition and consolidated
operating results and cash flows of the Company as of their respective dates and
during the periods indicated therein, subject, in the case of unaudited
financial statements, to normal year-end adjustments, which will not be material
in amount. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability. The Company's unaudited consolidated
balance sheet as of March 31, 1999 included within the Company SEC Documents is
referred to herein as the "Company Current Balance Sheet," and the Company's
audited consolidated balance sheet as of October 3, 1998 and its audited
consolidated statements of operations and cash flows for the period then ended
included in the Company SEC Documents are referred to herein as the "Company
Financials."
3.6 No Undisclosed Liabilities.
Except (i) as reflected in the Company Current Balance Sheet, (ii) as set
forth in Section 3.6 to the Company Disclosure Schedule, or (iii) with respect
to any matter arising in the ordinary course of business consistent with past
practices since March 31, 1999, the Company and the Company Subsidiaries have no
liability, indebtedness, obligation, expense, claim, deficiency, guarantee or
endorsement of any type, including any related to Taxes, whether accrued,
absolute, contingent, matured, unmatured or other, which individually or in the
aggregate are required to be reflected or reserved against on the consolidated
balance sheet of the Company and the Company Subsidiaries in
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accordance with GAAP, or that, individually or in the aggregate, would have a
Material Adverse Effect on the Company. In addition, since March 31, 1999, there
has not been any declaration, setting aside or payment of a dividend or other
distribution with respect to the Company Capital Stock or any material change in
accounting methods or practices by the Company or any Company Subsidiary.
3.7 No Changes.
Since the date of the Company Current Balance Sheet, except as otherwise
expressly contemplated by this Agreement, the Company and the Company
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been any action, event, occurrence,
development, change in method of doing business or state of circumstances or
facts that, individually or in the aggregate, has had a Material Adverse Effect
on Company.
3.8 Restrictions on Business Activities.
Except as described in Section 3.8 of the Company Disclosure Schedule as
of the date hereof, there is no agreement (non-compete or otherwise),
commitment, judgment, injunction, order or decree to which the Company or any of
the Company Subsidiaries is a party or otherwise binding upon the Company or the
Company Subsidiaries which has the effect of prohibiting any business practice
of the Company, any acquisition or property (tangible or intangible) by the
Company or the conduct of the business by the Company which would have a
Material Adverse Effect on the Company and the Internet Group taken as a whole.
Without limiting the foregoing, as of the date hereof, none of the Company or
the Company Subsidiaries has entered into any agreement under which the Company
or any of the Company Subsidiaries is restricted from selling, licensing or
otherwise distributing any of its material technology or products to or
providing services to or selling advertising to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any market which would have a Material Adverse Effect on the
Company and the Internet Group taken as a whole.
3.9 Title to Properties; Absence of Liens and Encumbrances.
The Company SEC Documents set forth all material real property used in
the Company's business. The Company or the Company Subsidiaries, as the case may
be, has good and valid title to, or, in the case of leased properties and
assets, valid leasehold interests in, all material tangible properties and
assets, real, personal and mixed, used or held for use in connection with
business of the Company and the Company Subsidiaries, free and clear of any
Liens, except (i) as reflected in the Company Current Balance Sheet, (ii) for
Taxes not yet due and payable or delinquent and (iii) where such imperfections
of title and encumbrances, if any, are not material in character, amount or
extent, and do not materially detract from the value, or materially interfere
with the present use, of the property subject thereto or affected thereby.
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3.10 Brokers' and Finders' Fees.
Except for those fees payable to Merrill Lynch & Co., Inc. ("Merrill
Lynch"), as financial advisor to the Company (the "Company Financial Advisor")
pursuant to an engagement letter, a true and correct copy of which has been
furnished to Parent, neither the Company nor any Company Subsidiary has
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
3.11 Litigation.
Except as set forth in the Company SEC Documents or in Section 3.11 of
the Company Disclosure Schedule, as of the date hereof, there is no material
action, suit or proceeding of any nature pending, or, to the Company's knowledge
threatened, against the Company or any of the Company Subsidiaries, their
properties or any of their officers or directors. To the Company's knowledge, as
of the date hereof, there is no material investigation pending or threatened
against the Company or any of the Company Subsidiaries, their properties or any
of their officers or directors (nor, to the knowledge of the Company, is there
any reasonable basis therefor) by or before any Governmental Body.
3.12 Taxes.
(a) Tax Definitions.
(i) "Tax" or, collectively, "Taxes" means (A) any and all federal,
state, local and foreign taxes, assessments and other governmental charges,
duties, impositions and liabilities, including taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts; (B) any liability for the payment of any
amounts of the type described in clause (A) as a result of being or ceasing to
be a member of an affiliated, consolidated, combined or unitary group for any
period (including, without limitation, any liability under Treas. Reg. Section
1.1502-6 or any comparable provision of foreign, state or local law); and (C)
any liability for the payment of any amounts of the type described in clause (A)
or (B) as a result of any express or implied obligation to indemnify any other
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(ii) "Tax Return" means any report, return, election, notice,
estimate, declaration, information statement and other forms and documents
(including, without limitation, all schedules, exhibits and other attachments
thereto) relating to and filing or required to be filed with a Taxing authority
in connection with any Taxes (including, without limitation, estimated Taxes).
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(iii) "Lien" means any lien, pledge, charge, claim, restriction or
transfer, mortgage, security interest or other encumbrance of any sort.
(b) Tax Returns and Audits.
(i) As of the Effective Time, the Company and the Company
Subsidiaries will have prepared and timely filed (or caused to be prepared and
timely filed) all required federal Tax Returns and all material, state, local
and foreign Tax Returns, relating to any and all Taxes concerning or
attributable to the Company and the Company Subsidiaries or their operations and
such Tax Returns shall be true and correct in all material respects and have
been completed in all material respects in accordance with applicable law.
Notwithstanding the foregoing, no representation is made hereby regarding the
size or availability of net operating losses of the Company or the Company
Subsidiaries.
(ii) Except to the extent the failure to do so would not be
material, as of the Effective Time, the Company and each of the Company
Subsidiaries (A) will have paid (or caused to be paid) all Taxes that the
Company or any Company Subsidiary is required to pay and will have withheld (or
caused to be withheld) with respect to employees of the Company and/or the
Company Subsidiaries, or otherwise, all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld, and (B) will have accrued on the
Company Financials, all Taxes attributable to the operations of the Company and
the Company Subsidiaries for the periods covered by the Company Financials in
accordance with GAAP. The Company and the Company Subsidiaries will not have
incurred any material liability for Taxes for the period from the date of the
Company Current Balance Sheet to the Effective Time other than in the ordinary
course of business;
(iii) There has been no delinquency in the payment of any
material, unaccrued Tax with respect to the Company, any of the Company
Subsidiaries or their operations, nor is there any material Tax deficiency
outstanding, assessed or proposed with respect to the operations of the Company
or any of the Company Subsidiaries, nor has the Company or any of the Company
Subsidiaries executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax relating to the Company
or any of the Company Subsidiaries;
(iv) No audit or other examination of any federal Tax Return or
any material state, local or foreign Tax Return relating to Taxes with respect
to the Company or any Company Subsidiary is presently in progress, nor has the
Company or any Company Subsidiary been notified in writing of any request for
such an audit or other examination;
(v) There are (and there will be immediately following the
Effective Time) no Liens on the assets of the Company or any of the Company
Subsidiaries relating to or attributable to Taxes other than Liens for Taxes not
yet due and payable;
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(vi) Other than with respect to Parent or its subsidiaries,
neither the Company nor any of the Company Subsidiaries is a party to any Tax
sharing, Tax indemnification or Tax allocation agreement nor does the Company or
any of the Company Subsidiaries owe any amount under any such agreement;
(vii) Neither the Company nor any of the Company Subsidiaries has
filed any consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(4) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by the Company or a Company
Subsidiary;
(viii) The Company and each of the Company Subsidiaries have made
available to Parent or its legal counsel, copies of all foreign, federal and
state income and all state sales and use Tax Returns for the Company and each
Company Subsidiary filed for all periods since its inception; and
(ix) Notwithstanding anything herein to the contrary, no
representation or warranty with respect to Taxes is made concerning any Tax
liability to Parent or any of its subsidiaries or any Tax matter whatsoever
arising out of transactions contemplated by this Agreement.
(c) Compensation Taxes.
There is no contract, agreement, plan or arrangement to which the Company
is a party as of the date of this Agreement, including, but not limited to, the
provisions of this Agreement, covering any service provider or former service
provider to the Company or any Company Subsidiary, which as a result of the
Merger (either alone or together with the occurrence of any additional or
subsequent events), could give rise to the payment of any amount that would not
be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
(d) Reorganization.
As of the date hereof, the Company does not have any knowledge of any
fact or circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization described in section 368(a) of the Code.
3.13 Employee Benefit Plans; Compensation.
(a) Definitions.
For purposes of this Section 3.13, the following terms shall have
the meanings set forth below:
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(i) As used in this Section 3.13, "Affiliate" shall mean any other
person or entity under common control with the Company within the meaning of
Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder.
(ii) As used in this Section 3.13 and Section 4.1(a), "Employee
Plan" shall refer to any plan, program, policy, contract, agreement or other
arrangement providing for bonuses, severance or retention payments or benefits,
termination pay, deferred compensation, pensions, profit sharing, performance
awards, stock or stock-related awards or fringe benefits of any kind, written or
otherwise, funded or unfunded, including, without limitation, any plan which is
or has been maintained, contributed to, or required to be contributed to, by the
Company or any Affiliate for the benefit of any Employee, and pursuant to which
the Company or any Affiliate has or may have any material liability, contingent
or otherwise.
(iii) As used in this Section 3.13 and Section 4.1(a), "Employee"
shall mean any current, former, or retired employee, consultant, officer, or
director of the Company or any Affiliate.
(iv) As used in this Section 3.13 and Section 4.1(a), "Employee
Agreement" shall refer to each employment, severance, retention, stock option,
stock purchase, restrictive covenant or other agreement or contract between the
Company or any Affiliate and any Employee;
(b) Schedule. Section 3.13(b) of the Company Disclosure Schedule
contains an accurate and complete list of each Employee Plan and each Employee
Agreement. The Company has provided or made available to Parent true and
complete copies of all Employee Plans and Employee Agreements, all written
summaries or material employee communications relating thereto, and all
governmental or regulatory filings, reports or material governmental or
regulatory communications relating thereto.
(c) Employee Plan Compliance.
(i) The Company has performed in all material respects all
obligations required to be performed by it under each Employee Plan and Employee
Agreement and each Employee Plan and Employee Agreement has been established and
maintained in material conformity with its terms and in material compliance with
all applicable laws, statutes, orders, rules and regulations, including ERISA
and the Code; (ii) each Employee Plan intended to qualify under Section 401(a)
of the Code and each trust intended to qualify under Section 501(a) of the Code
has either received a favorable determination letter with respect to each such
Plan from the IRS or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a determination
letter and make any amendments necessary to obtain a favorable determination;
(iii) there are no actions, suits or claims pending, or, to the knowledge of the
Company, threatened or anticipated (other than routine claims for benefits)
against any Employee Plan or against the assets of any Employee Plan; (iv) each
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to the Company,
any of the Company
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Subsidiaries, Parent, Acquisition Company or any Affiliate (other than ordinary
administration expenses typically incurred in a termination event); and (v)
there are no inquiries or proceedings pending or, to the knowledge of the
Company, threatened by the IRS or DOL with respect to any Employee Plan.
(d) No Pension Plans.
The Company or any of its Affiliates does not now, nor have
they ever, maintained, established, sponsored, participated in, or contributed
to, any Employee Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code.
(e) No Multiemployer Plans.
At no time has the Company or any of its Affiliates
contributed to or been requested to contribute to any Employer Plan that is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
(f) No Post-Employment Obligations.
No Employee Plan provides, or has any liability to provide,
life insurance, medical or other employee welfare benefits to any Employee upon
his or her retirement or termination of employment for any reason, except as may
be required by statute, and has not represented, promised or contracted (whether
in oral or written form) to any Employee (other than (i) benefit coverage
mandated by applicable law, including benefits provided pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and the
regulations thereunder ("COBRA"), (ii) benefits the full cost of which are borne
by current or former employees of the Company (or such employees' beneficiaries
or dependents); (iii) disability benefits under any of the Employee Plans; (iv)
benefits under any Employment Agreement and (v) life insurance benefits for any
Employee who dies while in service with the Company (either individually or to
Employees as a group)) that such Employees(s) would be provided with life
insurance, medical or other employee welfare benefits upon their retirement or
termination of employment, except to the extent required by statute.
(g) Effect of Transaction.
Except as set forth in Section 3.13(g) of the Company
Disclosure Schedule, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, stock option or restricted stock vesting acceleration,
distribution, increase in benefits or obligation to fund benefits with respect
to any Employee (except to the extent required by the Code and ERISA if Parent
causes a partial or full termination to occur under any Employee Plan).
(h) Employment Matters.
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The Company (i) is in compliance in all material respects with
all material applicable laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours, in
each case, with respect to Employees; (ii) has withheld all amounts required by
law or by agreement to be withheld from the wages, salaries and other payments
to Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; (iv) is not liable for
any payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for Employees.
(i) Labor.
The Company has not engaged in any unfair labor practices
which could, individually or in the aggregate, directly or indirectly result in
any material liability to the Company, the Company Subsidiaries or any
Affiliate. None of the Company or any Company Subsidiary is presently a party
to, or bound by, any collective bargaining agreement or union contract with
respect to Employees and no collective bargaining agreement is being negotiated
by the Company.
3.14 Compliance with Laws.
The Company and the Company Subsidiaries have complied in all material
respects with, are not in violation of, and have not received any notices of
violation with respect to, any material foreign, federal, state or local
statute, law or regulation.
3.15 Agreements, Contracts, Commitments.
The Company and each Company Subsidiary is in compliance in all material
respects with, and has not, in any material respects, breached, violated or
defaulted under, or received notice that it has breached, violated or defaulted
in such manner under, any of the terms or conditions of any agreement, contract,
covenant, instrument, lease, license or commitment that is included in any
Securities Act or Exchange Act filing of the Company as a "Material Contract"
(collectively, "Company Contracts"), nor does the Company have knowledge of any
event that would cause such a breach, violation or default with the lapse of
time, giving of notice or both. Each Company Contract is in full force and
effect and, to the knowledge of the Company, is not subject to any material
default thereunder by any party obligated to the Company or the Company
Subsidiaries pursuant thereto. The Company and each Company Subsidiary has
obtained, or will obtain prior to the Closing Date, all necessary consents,
waivers and approvals of parties to any Company Contract as are required
thereunder in connection with the Merger or for such Contracts to remain in
effect without material modification after the Effective Time. Following the
Effective Time, the Company and each Company Subsidiary will be permitted to
exercise all of their respective rights under each Contract then in effect
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company or Company Subsidiaries
would otherwise be required to pay had the transactions contemplated by this
Agreement not occurred.
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3.16 Intellectual Property.
(a) For purposes of this Agreement, "Company Intellectual Property"
shall mean any Intellectual Property owned by or exclusively licensed to the
Company (including, without limitation, Patent Number 5,751,956 ("Method and
Apparatus for Redirection of Server External Hyper-Link References")) (the
"Click-On Patent") or any of the Company Subsidiaries, but in all events
excluding: (i) Intellectual Property owned by or exclusively licensed to
Starwave Corporation as of the Effective Time as defined in that certain
Agreement and Plan of Reorganization, dated June 18, 1998, by and among Infoseek
Corporation, a California corporation, Infoseek Corporation, a Delaware
corporation, Starwave Corporation, a Washington corporation, and Disney
Enterprises, Inc., a Delaware corporation; (ii) Intellectual Property owned by
Parent, any of the Internet Group Companies or their respective subsidiaries
other than AIV and EIV which Intellectual Property is exclusively licensed to
AIV and EIV; (iii) Intellectual Property that is or was developed or owned by
AIV or EIV; (iv) Intellectual Property that is or was developed, funded or owned
by the Company or any of the Company Subsidiaries (other than AIV and EIV) on
the one hand and Parent or any of the Internet Group Companies or any of their
respective subsidiaries (other than AIV and EIV) on the other hand and (v)
Licensor Properties (as defined in that certain License Agreement, dated June
18, 1998 (the "License Agreement") by and among Infoseek Corporation, a
California corporation and Disney Enterprises, Inc., a Delaware corporation)
exclusively licensed to the Company as of the Effective Date (as defined in the
License Agreement).
(b) Section 3.16(b) of the Company Disclosure Schedule lists all
Registered Intellectual Property owned by, or filed in the name of, the Company
or any Company Subsidiary except such Registered Intellectual Property the
absence of which would not have a Material Adverse Effect on the Company or the
conduct of the Company's business (the "Company Registered Intellectual
Property") and lists any proceedings or actions before any court or tribunal
(including the PTO or equivalent authority anywhere in the world) related to any
of the Company Registered Intellectual Property, except for any proceeding
which, if adversely determined, would not have a Material Adverse Effect on the
Company.
(c) Except as set forth in Section 3.16(c) of the Company Disclosure
Schedule or as would not have a Material Adverse Effect on the Company or the
conduct of the Company's business, each item of Company Intellectual Property
owned by Company or the Company Subsidiaries, including all Company Registered
Intellectual Property listed in Section 3.16(b) of the Company Disclosure
Schedule, is free and clear of any Liens, except for Liens for Taxes not yet due
and payable or delinquent. Except as set forth in Section 3.16(c) of the Company
Disclosure Schedule or as would not have a Material Adverse Effect on the
Company, or the conduct of the Company's business, one or more of the Company
and the Company Subsidiaries, as the case may be: (i) is the exclusive owner of
or has valid and enforceable rights to use all trade names, logos common law
trademarks and service marks used in connection with the operation or conduct of
the business of the Company or any of the Company Subsidiaries as currently
conducted, including the sale of any products or technology or the provision of
any services by the Company or any of the Company Subsidiaries and (ii) is the
exclusive owner of or has
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valid and enforceable rights to use all copyrighted works that are the Company's
or the Company Subsidiaries' products or any works of authorship used in
connection with the operation or conduct of the business of the Company or any
of the Company Subsidiaries as currently conducted, including the sale of any
products or technology or the provision of any services by the Company or any of
the Company Subsidiaries.
(d) Except as set forth in Section 3.16(d) of the Company Disclosure
Schedule and except for any transfers, grants or authorizations that have not or
do not have a Material Adverse Effect on the Company or the conduct of the
Company's business, neither the Company nor any of the Company Subsidiaries has
transferred ownership of or authorized the retention of any rights to use any
Intellectual Property that is or was Company Intellectual Property to any other
person.
(e) Except (i) as set forth in Section 3.16(e) of the Company
Disclosure Schedule, (ii) for Intellectual Property the absence of which would
not have a Material Adverse Effect on the Company, (iii) "shrink-wrap" software
and similar widely available commercial end-user software used by the Company or
Company Subsidiaries or in the conduct or the Company's and the Company
Subsidiaries' businesses, and (iv) open source and similar free software
available generally without payment of any royalties or other license fees: the
Company Intellectual Property constitutes all of the Intellectual Property used
in or necessary to the conduct of the Company's and the Company Subsidiaries'
business as currently conducted, including, without limitation, the design,
development, copying, performance, display, creation of derivative works,
distribution, manufacture, use, import, license and sale of products, technology
and services of the Company and of any of the Company's Subsidiaries. Except as
set forth in Section 3.16(e) of the Company Disclosure Schedule, no person who
has licensed Intellectual Property to the Company or any of the Company
Subsidiaries has ownership rights or license rights to improvements in such
licensed Intellectual Property provided the foregoing shall apply only to
improvements (A) the absence of which would have a Material Adverse Effect on
the Company or the conduct of the Company's business and (B) which were made by
the Company or any of the Company's Subsidiaries.
(f) Except for "shrink-wrap" and similar widely available commercial
end-user licenses or contracts, licenses and agreements the existence,
termination or breach of which would not have a Material Adverse Effect on the
Company or the conduct of the Company's business, the contracts, licenses and
agreements listed in Section 3.16(f) of the Company Disclosure Schedule include
all contracts, licenses and agreements to which the Company or any of the
Company Subsidiaries is a party with respect to any Company Intellectual
Property.
(g) Except as set forth in Section 3.16(g) of the Company Disclosure
Schedule or except for matters which, if adversely determined, would not have a
Material Adverse Effect on the Company or the conduct of the Company's business:
the operation of the business of the Company and the Company Subsidiaries as it
currently is conducted, including, without limitation, the design, development,
copying, performance, display, creation of derivative works, distribution,
manufacture, use, import, license and sale of products, technology and services
of the Company or any of the Company Subsidiaries,
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does not infringe or misappropriate the Intellectual Property of any person,
violate the rights of any person (including, but not limited to, rights to
privacy or publicity), or constitute unfair competition or trade practices under
the law of any relevant jurisdiction, and neither the Company nor any of the
Company Subsidiaries has received notice from any person claiming that such
operation, or any act, product, technology or service of or by the Company or
any of the Company Subsidiaries infringes or misappropriates the Intellectual
Property of any person or that the Company or any of the Company Subsidiaries
has engaged in unfair competition or trade practices under the laws of any
relevant jurisdiction (nor does the Company or any Company Subsidiary have
knowledge of any basis therefor).
(h) To the Company's knowledge, there is no prior art that would
compromise the validity of the Click-On Patent under any subsection of 35 U.S.C.
Section 102. The Company has no knowledge of any public knowledge or use
anywhere, by anyone, of the subject matter disclosed in the Click-On Patent
before the invention date. The Company has no knowledge of the subject matter
disclosed in the Click-On Patent having been patented or described anywhere in a
printed publication by anyone before the invention date. The Company has no
knowledge of the subject matter disclosed in the Click-On Patent having been in
public use or on sale anywhere, by anyone, before February 22, 1995.
(i) All necessary registration, maintenance and renewal fees in
connection with Company Registered Intellectual Property the absence of which
would have a Material Adverse Effect on the Company or the conduct of the
Company's business have been paid and all necessary documents and certificates
in connection with such Company Registered Intellectual Property have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property when commercially reasonable.
(j) Except as set forth in Section 3.16(j) of the Company Disclosure
Schedule or for those contracts, licenses and agreements the existence,
termination or breach of which would not have Material Adverse Effect on the
Company or the conduct of the Company's business, there are no contracts,
licenses or agreements between the Company or any of the Company Subsidiaries
and any other person with respect to Company Intellectual Property under which
there is any dispute regarding the scope of such contract, license or agreement
or performance under such contract, license or agreement, including with respect
to any payments to be made or received by the Company or any Company Subsidiary
which, if adversely determined, would have a Material Adverse Effect on the
Company or the conduct of the Company's business.
(k) Except as set forth in Section 3.16(k) of the Company Disclosure
Schedule or for pending claims which, if successfully asserted, would not have a
Material Adverse Effect on the Company or the conduct of the Company's business,
there is no pending claim by the Company or any Company Subsidiary against any
person for infringing or misappropriating any Company Intellectual Property.
Without limiting the generality of the foregoing, to the knowledge of the
Company or any Company Subsidiary, there is no
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pending claim by any person other than the Company or any Company Subsidiary
against any person for infringing or misappropriating any Company Intellectual
Property which claim, if adversely determined, would have a Material Adverse
Effect on the Company or the conduct of the Company's business.
(l) Except as set forth in Section 3.16(l) of the Company Disclosure
Schedule or as would not have a Material Adverse Effect on the Company or the
conduct of the Company's business as currently conducted, no Company
Intellectual Property or product, technology or service of the Company or any of
the Company Subsidiaries is subject to any proceeding or outstanding decree,
order, judgment, settlement or other similar agreement or stipulation that
restricts in any manner the use, transfer or licensing thereof by the Company or
any Company Subsidiary or would affect the validity, use or enforceability of
such Company Intellectual Property.
(m) The consummation of the transactions contemplated by this Agreement
will not result in the loss of, or otherwise adversely affect, any ownership
rights of the Company or any of the Company Subsidiaries in any Company
Intellectual Property material to the Company, or result in the breach or
termination of any license, contract or agreement to which any of the foregoing
persons are a party with respect to any Company Intellectual Property material
to the Company. The consummation of the transactions contemplated by this
Agreement will not cause or obligate the Company or any of the Company
Subsidiaries to (i) grant to any third party any rights or licenses with respect
to any Company Intellectual Property material to the Company, or (ii) pay any
royalties or other amounts with respect to Company Intellectual Property
material to the Company in excess of those being paid prior to the Effective
Time.
3.17 Governmental Authorization.
Section 3.17 of the Company Disclosure Schedule accurately list each
consent, license, permit, grant or other authorization issued to the Company or
the Company Subsidiaries by a Governmental Body (i) pursuant to which the
Company currently operates or holds any interest in any of its properties or
(ii) which is required for the operation of the Company's business or the
holding of any such interest, in each case the absence of which would have a
Material Adverse Effect on the Company (herein collectively called the "Company
Authorizations"). The Company Authorizations are in full force and effect and
constitute all licenses, permits, grants or other authorization by Governmental
Bodies required to permit the Company to operate or conduct its business or hold
any interest in its properties or assets, in each case except as would not have
a Material Adverse Effect on the Company.
3.18 Environmental Matters.
(a) Hazardous Material. Except as would not have a Material Adverse
Effect on the Company, none of the Company and the Company Subsidiaries has: (i)
operated any underground storage tanks at any property that any of the Company
and the Company Subsidiaries has at any time owned, operated, occupied or
leased; or (ii) illegally released in violation of applicable environmental laws
as in effect at the time of
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such release any material amounts of Hazardous Material. No Hazardous Materials
are present as a result of the deliberate actions of the Company or any of the
Company Subsidiaries in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that any of the Company or
the Company Subsidiaries has at any time owned, operated, occupied or leased,
except for such Hazardous Materials which would not have a Material Adverse
Effect on the Company.
(b) Hazardous Materials Activities. Except as would not have a Material
Adverse Effect on the Company: none of the Company or the Company Subsidiaries
has illegally transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of any
environmental law as in effect at the time of such transport, manufacture,
disposal or sale, nor has any of the Company or the Company Subsidiaries has
engaged in illegal Hazardous Materials Activities.
(c) Permits. Except as would not have a Material Adverse Effect on the
Company, the Company and the Company Subsidiaries currently hold all
Environmental Permits necessary for the conduct of any Hazardous Material
Activities by any of the Company or the Company Subsidiaries, and the other
businesses of the Company and the Company Subsidiaries as such activities and
businesses are currently being conducted.
(d) Environmental Liabilities. Except as would not have a Material
Adverse Effect on the Company, no action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending as served or, to the
Company's knowledge threatened, against the Company or any Company Subsidiary
concerning any Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of the Company or the Company Subsidiaries. The Company has
no knowledge of any fact or circumstance which would reasonably be expected to
involve the Company or the Company Subsidiaries in any environmental litigation
or impose upon the Company or the Company Subsidiaries any environmental
liabilities, in each case which would have a Material Adverse Effect on the
Company.
The representations set forth in this Section 3.18 are the sole and exclusive
representations of the Company with respect to the subject matter hereof,
including, without limitation, with respect to environmental laws, Environmental
Permits, Hazardous Material or Hazardous Materials Activities.
3.19 Minute Books.
The minutes of the Company and the Company Subsidiaries made available to
counsel for Parent are the only minutes of the Company and the Company
Subsidiaries.
3.20 Opinion of Financial Advisor.
The Board of Directors of the Company has received an opinion of Merrill
Lynch to the effect that as of the date hereof the consideration to be received
in the Merger is
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fair to the holders of the Company Capital Stock (other than Parent and its
affiliates) from a financial point of view.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of the Parties.
(a) Conduct of Business of the Company and the Company Subsidiaries.
Except as otherwise contemplated by this Agreement and the
other agreements by and between the Company and its affiliates, on the one hand,
and Parent and its affiliates, on the other hand, and the several transactions
contemplated hereby and thereby, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, the Company agrees (except to the extent that Parent
shall otherwise have previously consented in writing) to carry on the Company's
and the Company Subsidiaries' respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to pay
the debts and Taxes of the Company and the Company Subsidiaries when due (unless
debts and Taxes are subject to a dispute that the Company is reasonably and
actively seeking to resolve), to pay or perform other obligations when due
(unless such obligations are the subject of a dispute that the Company is
actively seeking to resolve) and, to the extent consistent with such businesses,
use their reasonable efforts consistent with past practice and policies to
preserve intact the Company's and the Company Subsidiaries' present business
organizations, keep available the services of the Company's and the Company
Subsidiaries' present officers and key employees and preserve the Company's and
the Company Subsidiaries' relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it, all with the
goal of preserving the Company's and the Company Subsidiaries' goodwill and
ongoing businesses at the Effective Time, and to refrain from taking such action
that would cause any of the conditions contained in Article VI hereof not to be
satisfied; provided, however, that the Company shall not be deemed in breach of
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this Section 4.1(a) because of attrition, if any, among the Company's employees
which may occur as a result of the transactions contemplated hereby, so long as
the Company uses all reasonable efforts to retain such employees at the Company.
Except as expressly contemplated by this Agreement or as set forth in Section
4.1(a) of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary shall, without the prior written consent of Parent pursuant to a
request made in accordance with the notice provisions set forth in Section 9.1
of this Agreement (which written consent will be granted or denied within
seventy-two (72) hours of receipt of such notice by Parent, provided that any
failure to reply within such time period will be deemed as non-consent, and
which consent will not be unreasonably withheld):
(i) Other than in the ordinary course of business consistent with
past practices, or as permitted by Section 4.1(a) (v) hereof, sell or transfer
to any person or entity any material rights to the Company Intellectual Property
or buy any material rights
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to Intellectual Property or enter into any material license agreement with any
person or entity with respect to the Company Intellectual Property;
(ii) Other than in the ordinary course of business, consistent with
past practices, enter into any agreement, or materially amend any Company
Contract, pursuant to which any other party is granted marketing or distribution
rights of any type or scope with respect to any material products or technology
of the Company or any Company Subsidiary;
(iii) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock or any other equity interests, as applicable, or split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities or any other equity interests of the Company (other than
issuances of, or agreements to issue, capital stock at fair market value in
connection with transactions permitted by Section 4.1(a)(v) hereof), as
applicable, in respect of, in lieu of or in substitution for shares of capital
stock of the Company or any other equity interests, as applicable, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares of
the capital stock of the Company or any Company Subsidiary or other equity
interests as applicable, of any Company Subsidiary (or options, warrants or
other rights exercisable therefor);
(iv) Except as set forth in Section 4.1(a)(iv) of the Company
Disclosure Schedule and except for (A) any grants of options to purchase Company
Common Stock (with an exercise price equal to the fair market value of the
Company Common Stock at the date of the option grant) granted to employees in
the ordinary course of the Company's business consistent with past practices,
not to exceed options with respect to 5.7 million shares of Company Common Stock
in the aggregate and (B) stock purchases pursuant to the Company's Employee
Stock Purchase Plan in accordance with its current terms, issue, grant, deliver
or sell or authorize the issuance, grant, delivery or sale of, or purchase of
any shares of Company Capital Stock (other than issuances of, or agreements to
issue, capital stock at fair market value in connection with transactions
permitted by Section 4.1(a)(v) hereof) or any other equity interests, as
applicable, or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue or purchase of any such shares or any other equity
interests of the Company or any of the Company Subsidiaries, as applicable, or
other convertible securities of the Company or any of the Company Subsidiaries;
(v) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or except in the ordinary course otherwise
acquire or agree to acquire any assets, in each case involving an investment
(including assumed liabilities) in excess of $1,000,000 individually or
$5,000,000 in the aggregate;
(vi) Without limiting any other provisions of clause 4.1(a)(i)
above, sell, lease, license or otherwise dispose of any of its properties or
assets, except in the
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ordinary course of business and consistent with past practices, and except in
the case of properties or assets of less than $1,000,000 individually or
$5,000,000 in the aggregate;
(vii) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee any debt
securities of others except for obligations (A) not exceeding $1,000,000
individually or $5,000,000 in the aggregate other than in the ordinary course in
connection with lease obligations or (B) incurred in connection with
transactions permitted by Section 4.1(a)(v) hereof;
(viii) Except as set forth in Section 4.1(a)(viii) of the Company
Disclosure Schedule, grant any severance, retention, or termination pay to any
director, officer or employee of the Company except in each case payments made
pursuant to the existing terms of any Employee Agreement outstanding on the date
hereof and disclosed in the Company Disclosure Schedule;
(ix) Except as set forth in Section 4.1(a)(ix) of the Company
Disclosure Schedule, adopt any Employee Plan, enter into any Employee Agreement,
amend any Employee Plan or Employee Agreement (except as required by law), pay
or agree to pay any special bonus or special remuneration to any director or
Employee, or increase the salaries or wage rates of its Employees other than
routine increases and promotions in the ordinary course of business, consistent
with past practices;
(x) Except with respect to Taxes, pay, discharge or satisfy, in an
amount in excess of $100,000 (in any one case) or $500,000 (in the aggregate),
any claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
liabilities in the ordinary course of business;
(xi) (a) Make or change any material election in respect of Taxes
relating to the operations of the Company or the Company Subsidiaries, (b) file
any amended Tax Return other than such amendments made in good faith in the
ordinary course of business or (c) adopt or change any accounting method in
respect of Taxes except as required by law;
(xii) Except as set forth in Section 4.1(a)(xii) of the Company
Disclosure Schedule, accelerate the vesting schedule of any of the outstanding
Company Options or Company Capital Stock;
(xiii) Hire any material number of employees or terminate any of
the Company's key employees, or encourage employees to resign, to the extent
costs associated with such termination or resignation would have a Material
Adverse Effect on the Company;
(xiv) Enter into any agreement which has a term greater than a
year, unless such agreement is terminable by the Company on no more than 90
days' prior notice without liability to the Company;
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(xv) Take, or agree to take, any of the actions described in the
foregoing clauses (i) to (xiv) or any other action that would prevent the
Company from performing or cause the Company not to perform its covenants
hereunder.
(b) Conduct of Business of the Internet Group.
Except as otherwise contemplated by this Agreement and the other
agreements by and between the Company and its affiliates, on the one hand,
and Parent and its affiliates, on the other hand, and the several transactions
contemplated hereby and thereby, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, Parent agrees (except to the extent that the Company
shall otherwise have previously consented in writing) to carry on the Internet
Group's business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted, to pay or perform other obligations when
due (unless such obligations are the subject of a dispute that the Internet
Group is reasonably and actively seeking to resolve), and, to the extent
consistent with such business, use its reasonable efforts consistent with past
practice and policies to preserve intact the Internet Group's present business
organizations, keep available the services of the Internet Group's present
officers and key employees and preserve the Internet Group's relationship with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, all with the goal of preserving the Internet Group's
goodwill and ongoing business at the Effective Time, and to refrain from taking
any action that would cause any of the conditions contained in Article VI hereof
not to be satisfied; provided, however, that Parent shall not be deemed in
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breach of this Section 4.1(b) because of attrition, if any, among the Internet
Group employees which may occur as a result of the transactions contemplated
hereby, so long as Parent uses all reasonable efforts to retain such employees.
Except as expressly contemplated by this Agreement or as set forth in Section
4.1(b) of the Parent Disclosure Schedule, neither Parent nor any Internet Group
Company shall, without the prior written consent of the Company pursuant to a
request made in accordance with the notice provisions set forth in Section 9.1
of this Agreement (which written consent will be granted or denied within
seventy-two (72) hours of receipt of such notice by the Company, provided that
any failure to reply within such time period will be deemed as non-consent, and
which consent will not be unreasonably withheld):
(i) Other than in the ordinary course of business consistent with
past practices, or as permitted by Section 4.1(b)(iv) hereof, sell or transfer
to any person or entity any material rights to the Internet Group Intellectual
Property or buy any material rights to Intellectual Property or enter into any
material license agreement with any person or entity with respect to the
Internet Group Intellectual Property;
(ii) Other than in the ordinary course of business, consistent with
past practices, enter into any agreement, or materially amend any Internet Group
Contract, pursuant to which any other party is granted marketing or distribution
rights of any type or scope with respect to any material products or technology
of the Internet Group;
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(iii) Except as set forth in Section 4.1 (b)(iii) of the Parent
Disclosure Schedule, issue, grant, deliver or sell or authorize the issuance,
grant, delivery or sale of, or purchase any shares of Internet Group Common
Stock, or securities convertible into, or subscriptions, rights, warrants or
options to acquire, or other agreements or commitments of any character
obligating it to issue or purchase any such shares of Internet Group Common
Stock (other than issuances of, or agreements to issue, capital stock at fair
market value in connection with transactions permitted by Section 4.1(b)(iv)
hereof); provided that any agreements or commitments to grant options to
purchase shares of Internet Group Common Stock (as listed in Section 4.1(b)(iii)
of the Parent Disclosure Schedule) shall have an exercise price that either (i)
is equal to the fair market value of the Internet Group Common Stock at the date
of the grant or (ii) takes into account (in a manner determined by Parent) the
value of an existing option to purchase shares of Parent Common Stock that is
converted into an option to purchase shares of the Internet Group Common Stock;
provided further, that in no event shall there be any grant of options prior to
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the Effective Time;
(iv) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof relating to, or being attributed to, the
Internet Group, or except in the ordinary course otherwise acquire or agree to
acquire any assets relating to, or being attributed to, the Internet Group, in
each case involving an investment (including assumed liabilities) in excess of
$5,000,000 individually or $25,000,000 in the aggregate;
(v) Without limiting the provisions of Section 4(b)(i) above, sell,
lease, license or otherwise dispose of any of the properties or assets of the
Internet Group, except in the ordinary course of business and consistent with
past practices, and except in the case of properties or assets of less than
$1,000,000 individually or $5,000,000 in the aggregate;
(vi) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee any debt
securities of others as such indebtedness or guarantee that relates to, or is
being attributed to, the Internet Group except for obligations (A) not exceeding
$1,000,000 individually or $5,000,000 in the aggregate, other than in the
ordinary course in connection with lease obligations or (B) incurred in
connection with transactions permitted by Section 4.1(b)(iv) hereof;
(vii) Except as would not have a Material Adverse Effect on the
Internet Group, grant any severance, retention, or termination pay to any
director, officer or employee of the Internet Group Companies except in each
case payments made pursuant to the existing terms of any employee agreement
outstanding on the date hereof and disclosed in the Parent Disclosure Schedule;
(viii) Terminate any of Internet Group's key employees, or
encourage employees to resign, to the extent costs associated with such
termination or resignation would have a Material Adverse Effect on the Internet
Group;
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(ix) Take, or agree to take, any of the actions described in the
foregoing clauses (i) to (viii) that would prevent Parent from performing or
cause Parent not to perform its covenants under Section 4.1(b).
4.2 No Solicitation.
(a) From and after the date hereof and until the earlier of the
Effective Time or the termination of this Agreement, the Company shall not, and
shall not authorize or permit any of the Company Subsidiaries or its officers,
directors, employees, accountants, counsel, investment bankers, financial
advisors and other representatives (collectively, its "Representatives") to,
directly or indirectly, solicit, initiate or encourage (including by way of
furnishing non-public information) or take any other action to facilitate
knowingly any inquiries or the making of any proposal which constitutes or may
reasonably be expected to lead to an Acquisition Proposal (as defined below) in
respect of the Company or any of the Company Subsidiaries from any person or
entity, or engage in any discussion or negotiations relating thereto or enter
into any agreement with any person providing for or contemplating any
Acquisition Proposal; provided, however, that notwithstanding any other
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provision hereof, the Company may (1) comply with applicable securities laws and
regulations, including, without limitation, the Exchange Act (and Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer)
and (2) prior to the time its stockholders shall have voted whether to approve
this Agreement, the Company may:
(i) engage in discussions or negotiations with a third party who
(without any solicitation, initiation or encouragement, directly or indirectly,
by the Company or its Representatives after the date hereof) seeks to initiate
such discussions or negotiations, and may furnish such third party information
concerning the Company and its business, properties and assets if and only to
the extent that:
(1) (a) the third party has first made an Acquisition
Proposal to acquire at least 100% of the consolidated assets or outstanding
voting power of the Company's securities that is financially superior to the
Merger and the transactions contemplated in connection with the Merger and not
subject to any financing condition, as determined in good faith in each case by
the Company's Board of Directors after consultation with its financial advisors
(a "Company Superior Proposal") and (b) the Company's Board of Directors shall
conclude in good faith, after considering applicable provisions of state law and
after consultation with outside counsel, that such action is necessary for the
board of directors to act in a manner consistent with its fiduciary duties under
applicable law; and
(2) prior to furnishing such information to or entering
into discussions or negotiations with such person or entity, the Company (y)
provides Parent with prompt notice of an Acquisition Proposal (which shall mean
within 24 hours after receipt of an Acquisition Proposal) and (z) receives from
such person or entity an executed confidentiality agreement in reasonably
customary form on terms no more favorable to such person or entity than those
contained in the Confidentiality Agreement (as defined in Section 5.4); and/or
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(ii) recommend to its stockholders that they accept a Company
Superior Proposal from a third party; provided that the conditions set forth in
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clauses 4.2(a)(i)(1) and 4.2(a)(i)(2) above have been satisfied and, prior to
entering into a definitive agreement providing for a Company Superior Proposal,
this Agreement is terminated pursuant to Section 8.1(g) or 8.1(h), as
applicable.
(b) The Company shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any party or parties conducted heretofore by the Company or its
Representatives with respect to any Acquisition Proposal. The Company shall
notify Parent orally and in writing of any Acquisition Proposal with respect to
the Company or any other transaction, the consummation of which would reasonably
be expected to prevent or materially interfere with or materially delay the
Merger (including the material terms and conditions of any such Acquisition
Proposal and the identity of the person making it), promptly, but in any event
within 72 hours, after actual knowledge thereof by the Company's directors,
executive officers, counsel or individuals representing it as its investment
bankers or financial advisors.
(c) As used in this Section 4.2, "Acquisition Proposal" shall mean:
(i) a bona fide proposal or offer (other than by another party
hereto) for a tender or exchange offer for the securities of the Company; or
(ii) a bona fide proposal or offer (other than by another party
hereto) for a merger, consolidation or other business combination involving an
acquisition of the Company or any material subsidiary of the Company; or
(iii) any proposal to acquire in any manner a substantial equity
interest in or a substantial portion of the assets of the Company or any
material subsidiary of the Company.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Registration Statement; Proxy Statement.
(a) As soon as practicable after the execution of this Agreement,
Parent shall, with the assistance and cooperation of the Company, prepare and
cause to be filed with the SEC the Joint Proxy Statement and the Form S-4
Registration Statement. The Parent Common Stock Policies shall be set forth and
described in detail in the Joint Proxy Statement and the Form S-4 Registration
Statement. Each of Parent and the Company shall use all reasonable efforts to
cause the Form S-4 Registration Statement and the Joint Proxy Statement to
comply with applicable law and the rules and regulations promulgated by the SEC,
to respond promptly to any comments of the SEC or its staff and to have the Form
S-4 Registration Statement declared effective under the Securities Act as
promptly as practicable after it is filed with the SEC, and Parent and the
Company
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shall use all reasonable efforts to cause the Joint Proxy Statement to be mailed
to their respective stockholders as promptly as practicable after the Form S-4
Registration Statement is declared effective under the Securities Act. Each of
the parties hereto shall promptly furnish to the other party all information
concerning itself, its stockholders and its affiliates that may be required or
reasonably requested in connection with any action contemplated by this Section
5.1. If any event relating to Parent or the Company occurs, or if Parent or the
Company becomes aware of any information, that should be disclosed in an
amendment or supplement to the Form S-4 Registration Statement or the Joint
Proxy Statement, then Parent or the Company, as applicable, shall inform the
other thereof and shall cooperate with each other in filing such amendment or
supplement with the SEC and, if appropriate, in mailing such amendment or
supplement to the stockholders of Parent and the Company. Each of Parent and the
Company will notify the other promptly upon the receipt of any comments from the
SEC or its staff or any other government officials and of any request by the SEC
or its staff or any other government officials for amendments or supplements to
the Form S-4 Registration Statement or the Joint Proxy Statement or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Form S-4 Registration Statement, the Joint Proxy
Statement or the Merger. The Joint Proxy Statement shall include (i) the
recommendation of the Board of Directors of the Company in favor of this
Agreement, the Merger and the transactions contemplated hereby; provided that
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such recommendation may not be included or may be withdrawn if the Company's
Board of Directors has recommended a Company Superior Proposal in accordance
with the terms of Section 4.2, and (ii) the recommendation of the Board of
Directors of Parent in favor of approval of the issuance of shares of Internet
Group Common Stock in the Merger and the Parent Charter Amendment and Parent
shall not take any action inconsistent with such recommendation.
(b) Prior to the Effective Time, Parent shall use reasonable efforts to
obtain all regulatory or other approvals needed to ensure that the Internet
Group Common Stock to be issued in the Merger: (i) will be registered or
qualified under the securities law of every jurisdiction of the United States in
which any registered holder of Company Common Stock who is receiving shares of
registered Internet Group Common Stock has an address of record or be exempt
from such registration and (ii) will be approved for quotation at the Effective
Time on the Nasdaq National Market or will be approved for listing at the
Effective Time on the New York Stock Exchange, in each case subject to official
notice of issuance; provided, however, that Parent shall not, pursuant to the
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foregoing, be required (A) to qualify to do business as a foreign corporation in
any jurisdiction in which it is not now qualified or (B) to file a general
consent to service of process in any jurisdiction with respect to matters
unrelated to the issuance of Internet Group Common Stock pursuant hereto.
(c) Each of Parent and the Company (in respect of the information
respectively supplied by it) agrees that: (i) none of the information to be
supplied by it or its affiliates for inclusion in the Form S-4 Registration
Statement will, at the time the Form S-4 Registration Statement 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
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therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; (ii) none of the
information to be supplied by it or its affiliates for inclusion in the Joint
Proxy Statement will, at the time the Company's Proxy Statement is mailed to the
stockholders of the Company or as of the Effective Time, 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 were made, not misleading and (iii) as to
matters respecting it, the Joint Proxy Statement and the Form S-4 Registration
Statement will comply as to form in all material respects with the provisions of
the Securities Act and the Exchange Act, as applicable, and the rules and
regulations promulgated by the SEC thereunder, except that no covenant,
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent for inclusion or incorporation by reference therein and no covenant,
representation or warranty is made by Parent with respect to statements made or
incorporated by reference therein based on information supplied by the Company
for inclusion or incorporation by reference therein.
5.2 Stockholder Meetings.
(a) The Company shall promptly after the date hereof take all action
necessary in accordance with applicable law and its Amended and Restated
Certificate of Incorporation and Bylaws to hold and convene a meeting of the
Company's stockholders (the "Company Stockholders Meeting") as soon as
practicable following the date the Registration Statement is declared effective
by the SEC. Except as required by the SEC or applicable court order and except
as may be required in order to amend or supplement the Registration Statement or
Joint Proxy Statement, the Company shall not postpone or adjourn (other than for
the absence of a quorum) the Company Stockholders Meeting without the consent of
Parent. The Company shall not in any way challenge the validity, enforceability
or effectiveness of the voting agreements entered into by certain stockholders
of the Company in connection with the Merger. Subject to the provisions of the
penultimate clause of Section 5.1(a) and Section 4.2(a)(ii), the Company shall
take all other action necessary or advisable to secure the vote or consent of
its stockholders required by applicable law and contract (which consent must
include approval by more than 50% of the Company's total current voting power
held by stockholders of the Company other than Parent and its subsidiaries) to
effect the Merger and the transactions contemplated hereby (the "Required
Company Stockholder Vote").
(b) Parent shall promptly after the date hereof take all action
necessary in accordance with applicable law and its Restated Certificate of
Incorporation and Bylaws to hold and convene a meeting of Parent's stockholders
(the "Parent Stockholders Meeting"). Except as required by the SEC or applicable
court order, Parent shall not postpone or adjourn (other than for the absence of
a quorum) the Parent Stockholders Meeting without the consent of the Company.
Subject to Section 5.1(a), Parent shall take all other action necessary or
advisable to secure the vote or consent of its stockholders required by
applicable law to effect the issuance of shares of Internet Group Common Stock
in the Merger and the Parent Charter Amendment (the "Required Parent Stockholder
Vote").
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5.3 Cooperation; Access to Information.
Upon reasonable prior notice, the Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to all of its
properties, books, contracts, commitments and records, all other information
concerning its business, properties and personnel (subject to restrictions
imposed by applicable law) as Parent may reasonably request and all its key
employees. Upon reasonable prior notice, the Company agrees to provide Parent
and its accountants, counsel and other representatives copies of internal
financial statements (including Tax Returns and supporting documentation)
promptly upon request. No information or knowledge obtained in any investigation
pursuant to this Section 5.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.4 Confidentiality.
Each of the parties hereto hereby agrees that the information obtained in
any investigation pursuant to Section 5.3, or pursuant to the negotiation and
execution of this Agreement or the effectuation of the transactions contemplated
hereby, shall be governed by the terms of the Confidentiality Agreement
effective as of March 1, 1999 (the "Confidentiality Agreement").
5.5 Expenses.
Except as set forth in Section 8.3, whether or not the Merger is
consummated, all fees and expenses incurred in connection with the Merger,
including, without limitation, all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties ("Third Party
Expenses") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party incurring
such fees and expenses; provided, however, that Parent and the Company shall
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share equally in all fees and expenses, other than Third Party Expenses,
incurred in relation to the filing and printing of Parent's Form S-4
Registration Statement and the Joint Proxy Statement (including any preliminary
materials related thereto); provided, further, that Parent shall not after the
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Effective Time allocate to the Internet Group such Third Party Expenses incurred
by Parent in excess of the Third Party Expenses incurred by the Company in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby. Without limiting the
foregoing, the Company agrees to pay the fees and expenses of the Company
Financial Advisor in connection with the transactions contemplated hereby.
5.6 Public Disclosure.
Parent and the Company shall consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement or the Merger or the transactions contemplated hereby or thereby and
shall not issue any such
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press release or make any such public statement prior to such consultation,
except as may be required by law, The Nasdaq Stock Market, The New York Stock
Exchange or any listing agreement with a national securities exchange. At any
time after the date hereof, the Company may file with the SEC a report on Form
8-K with respect to this Agreement and may file a copy of this Agreement and any
related agreements as an exhibit to such report, provided that Parent shall have
a reasonable opportunity to review such report prior to filing. The parties have
agreed to the text of the joint press release announcing the signing of this
Agreement.
5.7 Consents.
The Company and Parent shall use their best efforts to obtain the
consents, waivers, assignments and approvals under any of their respective
material contracts as may be required in connection with the Merger so as to
preserve all rights of, and benefits to, the Company and Parent thereunder.
5.8 Reasonable Efforts.
Subject to the terms and conditions provided in this Agreement, each of
the parties hereto shall use commercially reasonable efforts to take promptly,
or cause to be taken, all actions, and to do promptly, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents, tax opinions and approvals and to effect all
necessary registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement.
Notwithstanding the foregoing, (A) none of Parent, the Company or any of their
respective subsidiaries shall be required to agree to any divestiture or hold
separate or similar transaction by it or any of its subsidiaries or affiliates
of shares of capital stock or of any business, assets or property of any of them
or any of their subsidiaries or affiliates, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to own
or exercise control of such assets, properties and stock and (B) the Company
shall not, without Parent's prior written consent, commit to any divestiture or
hold separate or similar transaction by it or any of its subsidiaries or
affiliates of shares of capital stock or of any business, assets or property of
any of them or any of their subsidiaries or affiliates, or the imposition of any
material limitation on the ability of any of them to conduct their businesses or
to own or exercise control of such assets, properties and stock.
5.9 Notification of Certain Matters.
Each of the Company and Parent shall give prompt notice to the other
party of (i) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely to cause any representation or warranty of any
party contained in this Agreement to be untrue or inaccurate at or prior to the
Effective Time such that the conditions set forth in Section 6.2(b) or 6.3(b)
would not be satisfied and (ii) any failure
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of Parent or the Company, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder which is likely to cause any condition set in Article VI hereof not to
be satisfied); provided, however, that the delivery of any notice pursuant to
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this Section 5.9 shall not limit or otherwise affect any remedies available to
the party receiving such notice and no disclosure by Parent or the Company,
pursuant to this Section 5.9 shall be deemed to amend or supplement the Parent
Disclosure Schedule or the Company Disclosure Schedule, respectively, or prevent
or cure any misrepresentations, breach of warranty or breach of covenant.
5.10 Support Agreements.
Certain stockholders of the Company have delivered to Parent,
concurrently with the execution of this Agreement, executed Support Agreements,
copies of which are attached hereto as Exhibits E-1 and E-2, and such agreements
are in full force and effect in accordance with their terms.
5.11 Regulatory Filings; Reasonable Efforts.
As soon as may be reasonably practicable, Parent and the Company each
shall file with the United States Federal Trade Commission (the "FTC") and the
Antitrust Division of the United States Department of Justice ( the "DOJ")
Notification and Report Forms relating to the transactions contemplated herein
as required by the HSR Act, as well as comparable pre-merger notification forms
required by the merger notification or control laws and regulations of any
applicable jurisdiction, as agreed to by the parties. Parent and the Company
each shall promptly (a) supply the other with any information which may be
required in order to effectuate such filings and (b) supply any additional
information which reasonably may be required by the FTC, the DOJ or the
competition or merger control authorities of any other jurisdiction and which
the parties may reasonably deem appropriate.
5.12 Additional Documents and Further Assurances.
Each party hereto, at the request of another party hereto, shall execute
and deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
this Agreement, the Merger and the transactions contemplated hereby.
5.13 Assumption of Company Option Plans; Form S-8; Employee Plans.
(a) At the Effective Time, Parent shall assume all outstanding Company
Options (other than Unvested Non-Employee Director Options) under the Company
Option Plans (and shall assume the Company Option Plans) and agrees to file, no
later than five days after the Closing, a registration statement on Form S-8
covering the shares of Internet Group Common Stock issuable pursuant to
outstanding Company Options granted under the Company Option Plans. The Company
shall cooperate with and assist Parent in the preparation of such registration
statement.
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(b) Following the Effective Time, Parent shall cause each "employee
benefit plan" (as defined in Section 3(3) of ERISA) maintained by Parent or
affiliates of Parent that covers or will cover Employees of the Company or the
Company Subsidiaries who are active at the Effective Time (the "Company
Employees") to recognize all service, for purposes of eligibility and vesting of
benefits (but not for benefit accrual purposes), that is credited to Company
Employees for comparable purposes under the comparable benefit plans of the
Company or the Company Subsidiaries as of the Effective Time. Following the
Effective Time, Parent shall cause each "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) covering Company Employees (i) to reduce each
eligible employee's (and their eligible dependents') annual deductible limits
under such plans for the plan year in which the Effective Time occurs to the
extent deductible expenses were incurred and recognized for comparable purposes
under the comparable benefit plans covering the Company Employees immediately
prior to the Effective Time and (ii) to waive any pre-existing condition
limitations or exclusions that do not apply to Company Employees immediately
prior to the Effective Time.
5.14 Director Action with Respect to Company Option Plans and Stock Purchase
Plan.
Prior to the Effective Time, the Board of Directors of the Company shall
take such actions, including obtaining all necessary individual consents, as
shall ensure that (i) Company Options (other than Unvested Non-Employee Director
Options) outstanding under the Company Option Plans (and the Company Option
Plans) may be assumed by Parent in accordance with Section 1.7(c) hereof and
will not have their vesting accelerated as a result of the consummation of the
Merger and the transactions contemplated hereby and (ii) the Company's Employee
Stock Purchase Plan is terminated immediately prior to the Effective Time.
5.15 Officers' and Directors' Indemnification.
(a) From and after the Effective Time, Parent will indemnify each
officer and director of the Company as of the Effective Time (an "Indemnified
Party") to the fullest extent permitted under applicable law, the Amended and
Restated Certificate of Incorporation and Bylaws of the Company and any
agreement between the Indemnified Party and the Company, in each case as in
effect as of the date hereof with respect to any claim, liability, loss, damage,
judgment, fine, penalty, amount paid in settlement or compromise, cost or
expense based in whole or in part on, or arising in whole or in part out of, the
fact that the Indemnified Party was a director or officer of the Company at or
prior to the Effective Time. The rights under this Section 5.15 are contingent
upon the occurrence of, and will survive consummation of, the transactions
contemplated hereby and are expressly intended to benefit each Indemnified
Party.
(b) Without limiting the provisions of paragraph (a), after the
Effective Time Parent will indemnify and hold harmless each Indemnified Party
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative,
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to the extent arising out of or pertaining to any action or omission in his or
her capacity as a director or officer of the Company or any of the Company
Subsidiaries arising out of or pertaining to the transactions contemplated by
this Agreement (except in respect of actions or omissions that constitute bad
faith, willful misconduct or a breach of duty of loyalty) for a period of six
years after the Effective Time; provided, however, that if, at any time prior to
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the sixth anniversary of the Effective Time, any Indemnified Party delivers to
Parent a written notice asserting a claim for indemnification under this Section
5.15, then the claim asserted in such notice shall survive the sixth anniversary
of the Effective Time until such time as such claim is fully and finally
resolved. In the event of any such claim, action, suit, proceeding or
investigation Parent will pay the reasonable fees and expenses of counsel for
the Indemnified Party promptly after statements therefor are received (provided
that in the event that any Indemnified Party is not entitled to indemnification
hereunder, any amounts advanced on his or her behalf shall be remitted to
Parent); provided, however, that Parent will not be liable for any settlement
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effected without its express written consent. The Indemnified Parties as a group
may retain only one law firm (in addition to local counsel) to represent them
with respect to any single action unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more Indemnified Parties.
(c) Without limiting any of the obligations of Parent set forth
elsewhere in this Section 5.15, Parent shall maintain in effect, during the
three-year period commencing as of the Effective Time, a policy of directors'
and officers' liability insurance for the benefit of each of the Indemnified
Parties providing coverage and containing terms no less advantageous to the
Indemnified Parties than the coverage and terms of the Company's existing policy
of directors' and officers' liability insurance; provided, however, that Parent
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shall not be required to pay a per annum premium in excess of 150% of the per
annum premium that the Company currently pays for its existing policy of
directors' and officers' liability insurance (it being understood that, if the
premium required to be paid by Parent for such policy would exceed such 150%
amount, then the coverage of such policy shall be reduced to the maximum amount
that be obtained for a per annum premium in such 150% amount).
(d) This Section 5.15 will survive the consummation of the Merger, is
intended to benefit and may be enforced by each of the Indemnified Parties
following the Effective Time, and will be binding on all successors and assigns
of Parent.
5.16 Certain Tax Matters.
(a) Return Filing; Information Sharing. Until the Closing Date:
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(i) The Company shall prepare and file, or cause to be prepared and
filed, with the appropriate governmental authority all federal Tax Returns and
all material state, local and foreign Tax Returns required to be filed (with
extensions) by or with respect to the Company and the Company Subsidiaries on or
prior to the Closing Date;
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(ii) The Company agrees that it will, and will cause its affiliates
to, make available all such information, employees and records of or relating to
the Company and the Company Subsidiaries as Parent may request with respect to
matters relating to Taxes (including, without limitation, the right to make
copies of such information and records) and will cooperate with respect to all
matters relating to Taxes (including, without limitation, the filing of Tax
Returns, the filing of an amended Tax Return, audits, and proceedings); and
(iii) If any of the Company or any Company Subsidiary or affiliate
thereof receives any written notice from any Tax authority proposing any audit
or adjustment to any Tax relating to the Company or any Company Subsidiary or
affiliate thereof, Company or such Company Subsidiary or affiliate shall give
prompt written notice thereof to Parent, which notice shall describe in detail
each proposed adjustment.
(b) Certain Tax Opinions.
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(i) Parent represents, warrants and covenants that it has received
an opinion of Dewey Ballantine LLP, counsel to Parent, issued for the sole
reliance of Parent, in form and substance satisfactory to Parent, that the
Merger, if consummated in accordance with this Agreement, and based upon the
Initial Tax Certificates (defined below), will qualify as a reorganization
within the meaning of Section 368(a) of the Code as in effect as of the date
hereof (the "DB Initial Tax Opinion").
(ii) The Company represents, warrants and covenants that it has
received an opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel to the Company (the "WSGR Initial Tax Opinion"), issued for
the sole reliance of the Company, in form and substance satisfactory to the
Company, that the Merger, if consummated in accordance with this Agreement, and
based upon the Initial Tax Certificates (defined below), will qualify as a
reorganization within the meaning of Section 368(a) of the Code as in effect as
of the date hereof.
(iii) In connection with the rendering of the Initial Tax Opinions,
Parent and the Company have furnished Dewey Ballantine LLP and Wilson Sonsini
Goodrich & Rosati, Professional Corporation with certificates signed by officers
having authority to sign such certificates (the "Initial Tax Certificate").
Parent and the Company agree that they will furnish certificates dated as of the
Closing Date in substantially the same form (updated as necessary) as the
Initial Tax Certificates (the "Closing Tax Certificates") in connection with the
issuance of the DB Closing Tax Opinion (as defined in Section 6.2(a) of this
Agreement) and the WSGR Closing Tax Opinion (as defined in Section 6.3(a) of
this Agreement).
(iv) Parent and the Company shall cooperate in causing the Merger
to qualify as a tax-free reorganization under Code Section 368(a) and shall
treat the Merger as such a reorganization in which no other property or money
(within the meaning of Code Section 356) is received by Company stockholders for
all Tax purposes, including the reporting of the Merger as qualifying as such a
reorganization on all relevant federal, state, local and foreign Tax Returns.
Parent and the Company covenant and agree that
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they each shall not take any position or action inconsistent with the Initial
Tax Certificates or the Closing Tax Certificates. Parent and the Company
covenant and agree to (and to cause any affiliate or successor to their assets
or business to) vigorously and in good faith defend all challenges to the tax-
free status of the Merger.
(v) It is understood and agreed that both Dewey Ballantine LLP and
Wilson Sonsini Goodrich & Rosati, Professional Corporation, shall issue to their
respective clients substantially identical opinions to the effect that the
Merger will qualify as a reorganization under Code Section 368(a) and related
matters for description, and inclusion as Exhibits, in the S-4 Registration
Statement and the Joint Proxy Statement.
(c) Tax Covenants.
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Parent and the Company covenant to each other that none of
Parent, the Company or any of their respective subsidiaries has taken (or will
take) any action, including, without limitation, any action inconsistent with
any representation, warranty, or covenant made or to be made in connection with
opinions to be delivered pursuant to Sections 6.2(a) or 6.3(a) hereof. In
addition, Parent and the Company each agree that in the event such party becomes
aware of any such fact or circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization described in section 368(a) of the
Code, it will promptly notify the other party in writing.
5.17 Working Capital Balance.
The Company shall deliver to Parent at least ten days prior to the
Closing Date, a consolidated balance sheet of the Company at October 2, 1999,
certified as to correctness by an officer of the Company (the "Closing Balance
Sheet"). Subject to adjustment as provided in Section 1.7(d) of this Agreement,
Parent agrees that a cash amount equal to the working capital (i.e., current
assets, including cash, minus current liabilities) reflected on the Closing
Balance Sheet less any amount paid by Parent pursuant to the Maintenance Rights
Letter Agreement, dated as of July 10, 1999, by and between the Company and
Parent shall be allocated to the Internet Group. Parent shall deliver to the
Company (i) at least ten days prior to the Closing Date, a consolidated balance
sheet of the Internet Group at October 2, 1999 and (ii) as soon as reasonably
practicable and in any event not later than forty-five days following June 30,
1999, an unaudited combined balance sheet of the Internet Group at June 30, 1999
and the related statements of operations and cash flow of the Internet Group for
the nine months ended June 30, 1999, each certified as to correctness by an
officer of Parent.
5.18 Undisclosed Liabilities.
Except (i) as reflected in the Current Balance Sheet, (ii) as set forth
in Section 5.18 of the Parent Disclosure Schedule or (iii) with respect to any
matter or matters arising since March 31, 1999, which in the aggregate
(excluding any liabilities incurred in connection with activities which are
expressly permitted by Section 4.1(b)(i) through (ix) hereof) shall not exceed
$10,000,000, any liability, indebtedness, obligation or claim of any type,
including any related to Taxes existing on or at the Effective Time, whether
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accrued, absolute, contingent, matured, unmatured or other relating to the
Internet Group, whether known or unknown, will not be attributed to the Internet
Group and shall be attributed to the Parent Group.
5.19 Governance Agreement
Solely with respect to the transactions contemplated by this Agreement
and the Support Agreement, the Company (with the approval of the Disinterested
Directors) hereby (i) waives the standstill obligations of Parent and DEI
contained in Section 2.1 of the Governance Agreement, dated June 18, 1998, by
and among the Company, Parent and DEI (the "Governance Agreement") so long as
this Agreement has not been terminated and remains in full force and effect and
(ii) agrees that the shares of Company Capital Stock that are subject to the
Support Agreement will be deemed to be shares held by Disinterested Shareholders
for purposes of the Governance Agreement. In addition, the Company and Parent
agree that the conversion of the shares of Company Capital Stock, pursuant to
Section 1.7(a) of this Agreement, in the Merger will be effective
notwithstanding, and will not violate, the Governance Agreement.
ARTICLE VI
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CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party.
The respective obligations of each party to this Agreement to consummate
and effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) No Injunctions or Restraints; Illegality.
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No temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation, injunction order or decree enacted,
entered, enforced, promulgated, issued or deemed applicable to the Merger which
makes the consummation of the Merger illegal. All waiting periods under the HSR
Act relating to the transactions hereby will have expired or terminated early.
(b) Stockholder Approvals.
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This Agreement shall have been approved and adopted, and the Merger
shall have been duly approved, by the requisite vote under applicable law and
the Governance Agreement of the stockholders of the Company and the Parent
Charter Amendment shall have been approved by the requisite vote under
applicable law, of the
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stockholders of Parent, and the Parent Charter Amendment shall have been filed
with the Secretary of State of Delaware.
(c) Listing.
The shares of Internet Group Common Stock to be issued in the
Merger to the stockholders of the Company shall have been approved for quotation
or listing (as the case may be), subject to official notice of issuance, on the
Nasdaq National Market or the New York Stock Exchange.
(d) Effectiveness of Registration Statement.
The Form S-4 Registration Statement shall have become effective
in accordance with the provisions of the Securities Act, and no stop order shall
have been issued by the SEC with respect thereto, and no similar proceeding in
respect of the Joint Proxy Statement shall have been initiated or threatened in
writing by the SEC.
6.2 Conditions to Obligations of Parent.
The obligations of Parent to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Tax Opinion.
Parent shall have received the opinion of Dewey Ballantine LLP,
counsel to Parent (the "DB Closing Tax Opinion"), based upon the Closing Tax
Certificates, which opinion shall be satisfactory to Parent in its reasonable
discretion, to the effect that the Merger will be treated as a reorganization
described in Section 368(a) of the Code, and neither Parent nor any of its
subsidiaries will recognize gain or loss by reason of the issuance of the
Internet Group Common Stock, in each case under the law in effect as of the
Closing Date. The parties to this Agreement agree to make such other reasonable
representations as requested by such counsel for the purpose of rendering any
such opinion.
(b) Representations, Warranties and Covenants.
The representations and warranties of the Company in this
Agreement shall be true and correct in all respects on and as of the Effective
Time as though such representations and warranties were made on and as of such
time, except for those representations and warranties which address matters only
as of a particular date (which shall be true and correct only as of such date)
and such inaccuracies as individually or in the aggregate would not have a
Material Adverse Effect on the Company, and the Company shall have performed and
complied in all material respects with all covenants and obligations of this
Agreement required to be performed and complied with by the Company as of the
Effective Time.
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(c) No Material Adverse Effect.
No Material Adverse Effect with respect to the Company shall
have occurred since the date of this Agreement and no events or circumstances
shall have occurred since the date hereof that would have a Material Adverse
Effect on the Company (except for any Material Adverse Effect that shall have
been cured without such cure resulting or reasonably being expected to result in
a Material Adverse Effect on the Company).
(d) Material Adverse Tax Consequence.
There shall not have been a Change of Law (as defined below)
that, in the good faith judgment of Parent after consultation with its external
advisors, could, if adopted, be reasonably likely to have a material adverse tax
consequence to Parent, the Company and/or their respective shareholders, arising
from the transactions contemplated by this Agreement. For purposes of this
Agreement, a "Change of Law" means (i) a published Treasury Regulation
(including a proposed or final regulation, Revenue Ruling, Revenue Procedure, or
notice of intention to issue a regulation), (ii) administrative or judicial
pronouncement (including a private letter ruling, case, technical advice
memorandum, or other form of notice), (iii) proposal made by or on behalf of any
United States Congressional tax writing committee (or any chair thereof), or
(iv) legislation introduced in either house of United States Congress (including
any committee thereof).
(e) Third Party Consents.
Any and all consents, waivers, assignments and approvals listed in
Section 3.3 of the Company Disclosure Schedule (other than those whose failure
to obtain, individually or in the aggregate, would not have a Material Adverse
Effect on the Company or Internet Group) shall have been obtained.
(f) Certificate of the Company.
Parent shall have been provided with a certificate executed on
behalf of the Company by its President and Chief Executive Officer, its Chief
Operating Officer or its Chief Financial Officer to the effect that, as of the
Effective Time, the conditions set forth in Sections 6.2(b) and (c) and 6.3(a)
and (d) have been met.
6.3 Conditions to the Obligations of the Company.
The obligations of the Company to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by the Company:
(a) Tax Opinion.
The Company shall have received the opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, counsel to the Company (the "WSGR
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Closing Tax Opinion"), based upon the Closing Tax Certificates, which opinion
shall be satisfactory to the Company in its reasonable discretion, to the effect
that the Merger will be treated as a reorganization described in Section 368(a)
of the Code under the law in effect as of the Closing Date. The parties to this
Agreement agree to make such other reasonable representations as requested by
such counsel for the purpose of rendering any such opinion.
(b) Representations, Warranties and Covenants.
The representations and warranties of Parent in this Agreement
shall be true and correct in all respects on and as of the Effective Time as
though such representations and warranties were made on and as of the Effective
Time, except for those representations and warranties which address matters only
as of a particular date (which shall be true and correct only as of such date)
and such inaccuracies as individually or in the aggregate would not have a
Material Adverse Effect on Parent or the Internet Group, and Parent shall have
performed and complied in all material respects with all covenants and
obligations of this Agreement required to be performed and complied with by them
as of the Effective Time.
(c) No Material Adverse Effect.
No Material Adverse Effect with respect to the Internet Group
shall have occurred since the date of this Agreement and no events or
circumstances shall have occurred since the date hereof that would have a
Material Adverse Effect on the Internet Group (except for any Material Adverse
Effect that shall have been cured without such cure resulting or reasonably
being expected to result in a Material Adverse Effect on the Internet Group).
(d) Material Adverse Tax Consequence.
There shall not have been a Change of Law that, in the good
faith judgment of the Company after consultation with its external advisors,
could, if adopted, be reasonably likely to have a material adverse tax
consequence to the Company, Parent and/or their respective shareholders, arising
from the transactions contemplated by this Agreement.
(e) Third Party Consents.
Any and all consents, waivers, assignments and approvals
listed in Sections 2.5 and 2.6 of the Parent Disclosure Schedule (other than
those whose failure to obtain, individually or in the aggregate, would not have
a Material Adverse Effect on the Internet Group's business) shall have been
obtained.
(f) The Walt Disney Catalog Working Capital Balance.
At the Effective Time, The Walt Disney Catalog, Inc. shall have
positive working capital (i.e., current assets, including cash, exceeds current
liabilities).
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(g) Certificate of Parent.
The Company shall have been provided with a certificate executed
on behalf of Parent by officers with titles of Senior Vice President or above to
the effect that, as of the Effective Time, the conditions set forth in Sections
6.2(a) and (d) and 6.3 (b) and (c) have been met.
ARTICLE VII
NON-SURVIVAL OF REPRESENTATIONS
7.1 No Survival.
Except as set forth in Section 8.2 hereof, the representations,
warranties, covenants and other agreements made by Parent and the Company
contained herein or in any instrument delivered pursuant to this Agreement shall
terminate and be of no further force or effect at the Effective Time.
Notwithstanding the foregoing, the covenants made by Parent set forth in
Sections 5.4, 5.5, 5.13, 5.15, 5.16, 5.17 and 5.18 hereof shall remain in force
and effect following the Effective Time.
7.2 Disclaimer of Other Representations and Warranties.
No party hereto makes any representation or warranty other than those
representations and warranties set forth in this Agreement (including Exhibits
and Schedules hereto).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination.
This Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) by mutual consent of Parent and the Company;
(b) by the Company or Parent if: (i) the Effective Time has not
occurred by February 29, 2000; provided, however, that the right to terminate
-------- -------
this Agreement under this Section 8.1(b)(i) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a material breach of this Agreement; provided, further, that
-------- -------
any party terminating this Agreement pursuant to this Section 8.1(b)(i) shall
provide the other party with written notice of such termination, which notice
(or Parent's response notice in Section 8.3(c)(ii)(B)) shall set forth those
conditions to such party's obligations hereunder that have not been satisfied as
of such date; (ii) there shall be a final nonappealable order of a federal or
state court in effect
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preventing consummation of the Merger; or (iii) there shall be any statute,
rule, regulation, injunction, order or decree enacted, entered, enforced,
promulgated, issued or deemed applicable to the Merger which makes consummation
of the Merger illegal.
(c) by the Company or Parent if (i) the Company Stockholders Meeting
(including any adjournments or postponements thereof) shall have been held and
completed and the Company's stockholders shall have taken a final vote on the
matters set forth in Section 5.2 hereof, and such matters shall not have been
approved at such meeting by the Required Company Stockholder Vote (provided,
--------
further, that the right to terminate this Agreement under this Section 8.1(c)
-------
shall not be available to the Company or Parent where the failure to obtain the
Required Company Stockholder Vote shall have been caused by the action or
failure to act of such party and such action or failure to act constitutes a
material breach by such party of this Agreement) or (ii) the Parent Stockholders
Meeting (including any adjournments or postponements thereof) shall have been
held and completed and Parent's stockholders shall have taken a final vote on
the matters set forth in Section 5.2 hereof, and such matters shall not have
been approved at such meeting by the Required Parent Stockholder Vote (provided,
--------
further, that the right to terminate this Agreement under Section 8.1(c) shall
-------
not be available to Parent or the Company where the failure to obtain the
required Parent Stockholder Vote shall have been caused by the action or failure
to act of such party and such action or failure to act constitutes a material
breach by such party of this Agreement);
(d) by Parent or the Company if there shall be any governmental action
taken, or any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Merger by any Governmental Body, which would: (i)
prohibit Parent's ownership or operation of any material portion of the business
of the Company or the Internet Group or (ii) compel Parent or the Company to
dispose of or hold separate all or a material portion of the business assets of
the Company or the Internet Group as a result of the Merger;
(e) by the Company if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation, warranty
or covenant contained in this Agreement on the part of Parent, or if any
representation or warranty on the part of Parent shall have become untrue
(except for those representations and warranties which address matters only as
of a particular date, which shall be true and correct only as of such date), and
such inaccuracy in such representation or warranty or breach shall not have been
cured within thirty (30) calendar days after written notice to Parent, except
for such breaches and inaccuracies as individually or in the aggregate would not
have a Material Adverse Effect on the Internet Group; provided, however, that no
-------- -------
cure period shall be required for a breach which by its nature cannot be cured;
(f) by Parent if it is not in material breach of its obligations under
this Agreement and there has been a breach of any representation, warranty or
covenant contained in this Agreement on the part of the Company, or if any
representation or warranty of the Company shall have become untrue (except for
those representations and warranties which address matters only as of a
particular date, which shall be true and correct only as of such date) and such
inaccuracy in such representations and warranties
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or such breach shall not have been cured within thirty (30) calendar days after
written notice to the Company, except for such breaches and inaccuracies as
individually or in the aggregate would not have a Material Adverse Effect on the
Company; provided, however, that no cure period shall be required for a breach
-------- -------
which by its nature cannot be cured;
(g) by Parent, prior to the Company's obtaining the Required Company
Stockholder Vote and after receipt by the Company of an Acquisition Proposal, if
(x) by the end of the tenth business day following (but not including) the day
Parent notifies the Company that it wishes the Board of Directors of the Company
to publicly reaffirm its recommendation to the Company's stockholders to vote
for the Merger, the Board of Directors of the Company fails to so publicly
reaffirm; or (y) by the later of the end of (A) the tenth business day following
the public announcement of an Acquisition Proposal or (B) the third business day
following (but not including) the day Parent notifies the Company that it wishes
the Board of Directors of the Company to publicly reject such publicly announced
Acquisition Proposal, the Board of Directors of the Company fails to publicly
reject such Acquisition Proposal; or (z) the Board of Directors of the Company
shall have changed its recommendation to the Company's stockholders to vote in
favor of approval of the transactions contemplated hereby;
(h) by the Company, prior to obtaining the Required Company Stockholder
Vote, upon five days' prior notice to Parent (the "Company Superior Proposal
Notice"), if, as a result of a Company Superior Proposal by a party other than
Parent or any of its respective affiliates, the Board of Directors of the
Company determines in good faith, after considering applicable provisions of
state law and after consultation with outside counsel, that acceptance of the
Company Superior Proposal is necessary for the Company's Board of Directors to
act in a manner consistent with its fiduciary duties under applicable law;
provided, however, that the Company's Board of Directors, in making any such
-------- -------
determination, shall have considered all concessions which have then been
offered by Parent (it being understood that prior to any such termination the
Company shall, and shall cause its respective financial and legal advisors to,
negotiate with Parent to make such adjustments in the terms and conditions of
this Agreement in favor of the Company as would induce the Company to proceed
with a transaction with Parent rather than consummation of a Company Superior
Proposal made by a third party). Notwithstanding the foregoing, prior to or
contemporaneous with any termination under this Section 8.1(h), the Company must
pay to Parent in immediately available funds the fees required to be paid
pursuant to Section 8.3(a) hereof.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors of the party taking such action.
8.2 Effect of Termination.
In the event of termination of this Agreement as provided in Section 8.1
and subject to the payment of any amounts due under Section 8.3, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of Parent,
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Acquisition Company or the Company, or their respective officers, directors or
stockholders, provided that each party shall remain liable for any willful
breaches of such party's covenants hereunder or intentional or willful breaches
of such party's representations and warranties hereunder prior to its
termination; provided, further, that the provisions of Sections 5.4, 5.5 and 8.3
-------- -------
of this Agreement shall remain in full force and effect and survive any
termination of this Agreement.
8.3 Termination Fees and other Events.
(a) If this Agreement is terminated by (i) Parent as a result of a
breach of Section 4.2 by the Company, or (ii) by Parent pursuant to its rights
under Section 8.1(g), or (iii) by the Company pursuant to its rights under
Section 8.1(h), then (A) the Company shall pay to Parent a fee of $75 million in
cash minus any amounts as may have been previously paid by such party pursuant
to this Section 8.3 and (B) if, within 12 months of any such termination
described in clauses (a)(i) through (iii) above, the Company becomes a majority
owned subsidiary of another person or entity or consummates an Acquisition
Proposal with another person or entity which would result in the acquisition of
50% or more of the voting power of the Company (a "Majority Acquisition
Proposal"), the agreements between Parent and/or certain of its subsidiaries and
affiliates and the Company set forth on Exhibit F hereto shall be terminated.
(b) If:
(i) this Agreement is terminated by a party pursuant to Section
8.1(c) following a failure of the Company's stockholders to grant the Required
Company Stockholder Approval; and
(ii) prior to such meeting of the Company's stockholders (and
following the date hereof), there shall have been publicly announced an
Acquisition Proposal (whether or not such Acquisition Proposal shall have been
rejected or shall have been withdrawn prior to the time of such termination or
of the Company Stockholders Meeting); and
(iii) within 12 months of any such termination described in clause
(b)(i) above, the Company becomes a majority-owned subsidiary of another person
or entity or accepts a written offer to consummate or consummates a Majority
Acquisition Proposal upon the signing of a definitive agreement relating to such
Majority Acquisition Proposal, or, if no such agreement is signed, then at the
closing (and as a condition of the closing) of the Company becoming such a
subsidiary or of such Majority Acquisition Proposal, (A) the Company shall pay
to Parent a fee of $75 million in cash, minus any amounts as may have been
previously paid by such party pursuant to this Section 8.3 and (B) the
agreements set forth in Exhibit F hereto shall be terminated.
(c) If this Agreement is terminated by (i) Parent pursuant to Section
8.1(b)(i) solely as a result of the failure of a condition set forth in Section
6.2(a) or (d) of this Agreement to be satisfied or (ii) by the Company pursuant
to Section 8.1(b)(i) and (A) the Company provides Parent with written notice
(the "Company Notice") to the
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effect that all of the conditions set forth in Sections 6.1 and 6.3 have been
satisfied or waived and (B) Parent notifies the Company in writing within ten
business days of the Company Notice that the basis for its failure to close is
solely due to the condition set forth in Section 6.2(a) or (d) not having been
satisfied (provided that Parent's failure to respond shall be deemed to be an
--------
admission of the failure of the condition in Section 6.2(a) or (d)), then Parent
shall purchase from the Company, at a price per share equal to the Termination
Share Price, a number of shares of Company Common Stock equal to $50,000,000
divided by the Termination Share Price. Such purchase and sale shall be effected
by Parent and the Company not later than five business days following the last
day of trading that is used in the calculation the Company Market Price as
described below. As used herein, the "Termination Share Price" means (i) if the
Company Market Price shall be $40.00 per share or more, then the Company Market
Price, or (ii) if the Company Market Price shall be less than $40.00 per share,
then 200% of the Company Market Price. As used herein, " Company Market Price"
means the average of the closing prices per share of Company Common Stock for
the ten trading days after the termination of this Agreement.
(d) If this Agreement is terminated by (i) Parent pursuant to its
rights under Section 8.1(c)(i) and the Required Parent Stockholder Vote is
obtained at the Parent Stockholders Meeting, then the Company shall pay Parent's
actual and documented fees and expenses, excluding any retainer or contingent,
success or similar fees up to $2,500,000 in cash in the aggregate and (ii) the
Company pursuant to pursuant to its rights under Section 8.1(c)(ii) and the
Required Company Stockholder Vote is obtained at the Company Stockholders
Meeting, then Parent shall pay the Company's actual and documented fees and
expenses, excluding any retainer or contingent, success or similar fees up to
$2,500,000 in cash in the aggregate.
(e) The Company acknowledges and agrees that the agreements contained
in this Section 8.3 are an integral part of the transactions contemplated by
this Agreement. No termination by the Company of this Agreement under this
Article VIII shall be effective unless and until all fees required to be then
paid by the Company pursuant to Section 8.3 hereof shall have been received in
immediately available funds by Parent. Notwithstanding anything to the contrary
contained in this Section 8.3, if the Company fails to pay Parent any fees or
expenses due under Section 8.3(a), (b), (c) or (d) within the time required
under this Agreement or, if no time period is specified, within 5 business days
of the event giving rise to the payment of such fees and expenses, in addition
to any other amounts paid or payable pursuant to this Agreement, the Company
shall pay the out-of-pocket costs and expenses (including reasonable legal fees
and expenses) in connection with any action, including the filing of any lawsuit
or other legal action, taken to collect payment together with interest on the
amount of any unpaid fees and expenses at the publicly announced prime rate of
Citibank N.A. from the date such fees and expenses were required to be paid. The
fees and expenses set forth in this Section 8.3 shall not be the exclusive
remedy available against either party if such party willfully breaches this
Agreement.
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8.4 Amendment.
This Agreement may be amended by the parties hereto at any time by
execution of an instrument in writing signed on behalf of Parent, Acquisition
Company and the Company.
8.5 Extension; Waiver.
At any time prior to the Effective Time, Parent and the Company may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial messenger or
courier service, or mailed by registered or certified (return receipt requested)
or overnight mail or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice); provided, however,
-------- -------
that notices sent by mail will not be deemed given until received:
(a) if to the Company:
Infoseek Corporation
1399 Moffett Park Drive
Sunnydale, California 94089
Attention: Harry M. Motro, President
Telephone No: (408) 543-6000
Facsimile No: (408) 734-9350
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with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: David J. Segre, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(b) if to Parent or Acquisition Company:
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Attention: Thomas O. Staggs, Chief Financial Officer
Telephone No.: (818) 560-1000
Facsimile No.: (818) 556-3889
with copies to:
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Attention: David K. Thompson, Esq.
Telephone No.: (818) 560-1000
Facsimile No.: (818) 563-4160
and
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Morton A. Pierce, Esq.
Telephone No.: (212) 259-6640
Facsimile No.: (212) 259-6333
9.2 Interpretation.
The words "include," "includes" and "including" when used herein shall be
deemed in each case to be followed by the words "without limitation." The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
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9.3 Counterparts.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all parties need not sign
the same counterpart.
9.4 Entire Agreement; Assignment.
This Agreement, the Exhibits hereto the Confidentiality Agreement, and
the documents and instruments and other agreements among the parties and/or
their affiliates hereto referenced herein or entered into in connection
herewith: (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings
both written and oral, among the parties with respect to the subject matter
hereof; and (b) shall not be assigned (other than by operation of law) without
the written consent of the other party. The obligations of the parties hereto
shall be binding on the respective legal successor and assigns to the parties
and the successors in interest of all or substantially all of the business of
the respective parties.
9.5 Severability.
In the event that any provision of this Agreement or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
9.6 Other Remedies.
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
9.8 Rules of Construction.
The parties hereto agree that they have been represented by counsel
during the negotiation and execution of this Agreement and, therefor, waive the
application of any
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law, regulation, holding or rule of construction providing that ambiguities in
an agreement or other document will be construed against the party drafting such
agreement or document.
9.9 Specific Performance.
The parties hereto agree that irreparable damage could occur in the
event any provision of this Agreement was not performed in accordance with the
terms hereof and that the parties will be entitled to the remedy of specific
performance of the terms hereof, in addition to any other right or remedy any
person hereto may have at law or in equity.
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IN WITNESS WHEREOF, Parent, Acquisition Company and the Company have
caused this Agreement to be signed, all as of the date first written above.
THE WALT DISNEY COMPANY
By: /s/ Thomas O. Staggs
---------------------
Name: Thomas O. Staggs
Title: Executive Vice-President
and Chief Financial Officer
BINGO ACQUISITION CORP.
By: /s/ John Ball
--------------
Name: John Ball
Title: Vice-President
INFOSEEK CORPORATION
By: /s/ Harry M. Motro
--------------------
Name: Harry M. Motro
Title: President and Chief
Executive Officer
[SIGNATURE PAGE TO REORGANIZATION AGREEMENT]
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