Agreement and Plan of Merger - Lycos Inc. and Gamesville.com Inc.
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
Among
LYCOS, INC.
BARBADOS ACQUISITION CORP.
and
GAMESVILLE.COM, INC.
Dated as of November 22, 1999
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TABLE OF CONTENTS
Page
ARTICLE I
The Merger
SECTION 1.01. Effective Time of the Merger...................................2
SECTION 1.02. Closing........................................................2
SECTION 1.03. Effect of the Merger...........................................3
SECTION 1.04. Certificate of Incorporation and By-laws.......................3
SECTION 1.05. Directors......................................................3
SECTION 1.06. Officers.......................................................3
ARTICLE II
Conversion of Securities
SECTION 2.01. Conversion of Capital Stock.....................................3
SECTION 2.02. Exchange of Certificates........................................5
ARTICLE III
Representations and Warranties
of the Company
SECTION 3.01. Organization and Standing of the Company.......................9
SECTION 3.02. Authority; Noncontravention...................................10
SECTION 3.03. Capital Stock of the Company...................................11
SECTION 3.04. Equity Interests...............................................13
SECTION 3.05. Financial Statements...........................................13
SECTION 3.06. Undisclosed Liabilities........................................14
SECTION 3.07. Taxes..........................................................14
SECTION 3.08. Assets.........................................................18
SECTION 3.09. Intellectual Property, Etc.....................................18
SECTION 3.10. Contracts......................................................21
SECTION 3.11. Litigation; Decrees............................................25
SECTION 3.12. Operation of the Business; Absence of Changes or Events........25
SECTION 3.13. Compliance with Applicable Laws................................27
SECTION 3.14. Certain Employee Matters.......................................27
SECTION 3.15. Benefit Plans..................................................30
SECTION 3.16. Insurance......................................................32
SECTION 3.17. Customers; Effect of Transaction...............................33
SECTION 3.18. Disclosure.....................................................34
SECTION 3.19. Information Supplied...........................................34
SECTION 3.20. Consent Solicitation; Voting Requirements......................35
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Page
SECTION 3.21. Brokers........................................................35
SECTION 3.22. State Takeover Statutes........................................35
SECTION 3.23. Year 2000 Compliance...........................................36
SECTION 3.24. Customer Accounts Receivable...................................36
SECTION 3.25. Corporate Name.................................................36
SECTION 3.26. Accounts; Safe Deposit Boxes; Powers of Attorney; Officers
and Directors..................................................37
SECTION 3.27. Traffic........................................................37
SECTION 3.28. Underdeliveries under Advertising Contracts....................37
ARTICLE IV
Representations and Warranties of Parent and Sub
SECTION 4.01. Organization...................................................38
SECTION 4.02. Authority; Noncontravention....................................38
SECTION 4.03. Capital Stock of Parent........................................39
SECTION 4.04. Parent SEC Documents...........................................40
SECTION 4.05. Absence of Certain Changes or Events...........................40
SECTION 4.06. Litigation.....................................................40
SECTION 4.07. Taxes..........................................................40
SECTION 4.08. Interim Operations of Sub......................................41
SECTION 4.09. Information Supplied...........................................41
SECTION 4.10. Brokers........................................................41
ARTICLE V
Covenants
SECTION 5.01. Covenants of the Company.......................................41
SECTION 5.02. No Solicitation................................................46
SECTION 5.03. Other Actions..................................................47
ARTICLE VI
Additional Agreements
SECTION 6.01. Access to Information..........................................47
SECTION 6.02. Legal Conditions to Merger.....................................48
SECTION 6.03. Stock Options; Warrants........................................48
SECTION 6.04. Fees and Expenses..............................................50
SECTION 6.05. Additional Agreements..........................................51
SECTION 6.06. Indemnification................................................51
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Page
SECTION 6.07. Litigation.....................................................51
SECTION 6.08. Tax Treatment..................................................51
SECTION 6.09. Letter of the Company's Accountants............................51
SECTION 6.10. Letter of Parent's Accountants.................................52
SECTION 6.11. Affiliates.....................................................52
SECTION 6.12. Employee Benefits..............................................52
ARTICLE VII
Conditions
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger.....53
SECTION 7.02. Conditions of Obligations of Parent and Sub....................53
SECTION 7.03. Conditions of Obligations of the Company.......................55
SECTION 7.04. Frustration of Closing Conditions..............................56
ARTICLE VIII
Termination and Amendment
SECTION 8.01. Termination....................................................56
SECTION 8.02. Effect of Termination..........................................57
SECTION 8.03. Amendment......................................................57
SECTION 8.04. Extension; Waiver..............................................57
ARTICLE IX
Miscellaneous
SECTION 9.01. Survival of Representations, Warranties and Covenants..........58
SECTION 9.02. Notices........................................................58
SECTION 9.03. Definitions....................................................59
SECTION 9.04. Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership......................................................60
SECTION 9.05. GOVERNING LAW..................................................60
SECTION 9.06. Publicity......................................................60
SECTION 9.07. Assignment.....................................................60
SECTION 9.08. Counterparts...................................................61
SECTION 9.09. Exhibits and Schedules; Interpretation.........................61
SECTION 9.10. Consent to Jurisdiction........................................61
SECTION 9.11. Waiver of Jury Trial...........................................62
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SECTION 9.12. Enforcement....................................................62
Exhibit A Form of Proprietary Information and Inventions Assignment Agreement
Exhibit B Form of Letter
Exhibit C Form of Affiliate Letter
Exhibit D Form of Indemnification and Escrow Agreement
Exhibit E Form of Company Representation Letter
Exhibit F Form of Parent Representation Letter
Exhibit G Form of Registration Rights Agreement
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AGREEMENT AND PLAN OF MERGER dated as of
November 22, 1999 (this "Agreement"), by and among
LYCOS, INC., a Delaware corporation ("Parent"),
BARBADOS ACQUISITION CORP., a Delaware corporation
and a wholly owned subsidiary of Parent ("Sub"), and
GAMESVILLE.COM, INC., a Delaware corporation (the
"Company").
WHEREAS the respective Boards of Directors of Parent, Sub and the
Company have approved and declared advisable this Agreement and the merger (the
"Merger"), upon the terms and subject to the conditions set forth herein, of Sub
with and into the Company, all in accordance with the General Corporation Law of
the State of Delaware (the "DGCL");
WHEREAS, for Federal income tax purposes, it is intended that (a) the
Merger will qualify as a reorgani zation under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code"), (b) this Agreement constitutes a plan of
reorganization and (c) Parent, Sub and the Company will each be a party to such
reorganization within the meaning of Section 368(b) of the Code;
WHEREAS, for financial accounting purposes, it is intended that the
Merger will be accounted for as a pooling of interests transaction;
WHEREAS, contemporaneously with the execution hereof, (a) holders of
100% of the shares of Series A Convertible Preferred Stock, par value $0.01 per
share, of the Company (the "Company Series A Preferred Stock") issued and
outstanding as of the date hereof (the "Record Date") have delivered to the
Secretary of the Company written consents (the "Preferred Stock Consents") with
respect to all such shares approving the execution and delivery of this
Agreement by the Company and (b) holders of (i) 100% of the shares of Class A
Common Stock, par value $0.01 per share, of the Company (the "Company Class A
Common Stock") and (ii) 100% of the shares of Company Series A Preferred Stock,
in each case issued and outstanding as of the Record Date, have delivered to the
Secretary of the Company written consents (the "Stockholder Consents" and,
together with the Preferred Stock Consents, the "Consents") with respect to all
such shares adopting this Agreement, in each case in accordance with the Amended
and Restated Certificate of
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Incorporation of the Company, as amended to the date of this
Agreement, and the DGCL;
WHEREAS, concurrently with the execution of this Agreement and as a
condition to the willingness of Parent and Sub to enter into this Agreement,
Parent, the Stockholders, the Representative (as defined therein) and the Escrow
Agent named therein entered into an Indemnification and Escrow Agreement (the
"Escrow Agreement") pursuant to which, among other things, the holders of all
outstanding shares of Company Capital Stock (the "Stockholders") agreed to the
escrow of 10% of the aggregate Merger Consideration otherwise issuable hereunder
to secure certain indemnification obligations; and
WHEREAS, concurrently with the execution of this Agreement, Parent,
the Stockholders and the Representative entered into a Registration Rights
Agreement (the "Registration Rights Agreement") pursuant to which Parent has
agreed to provide to the Stockholders certain registration rights with respect
to shares of Parent Common Stock issued in the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
The Merger
SECTION 1.01. Effective Time of the Merger. Subject to the provisions
of this Agreement, as soon as practicable on the Closing Date, a certificate of
merger and all other appropriate documents (collectively, the "Certificate of
Merger") shall be duly prepared, executed, acknowledged and filed with the
Secretary of State of the State of Delaware by the parties hereto as provided in
the DGCL. The Merger shall become effective upon the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware or at such time
thereafter as is agreed upon by Parent and the Company and provided in the
Certificate of Merger (the "Effective Time").
SECTION 1.02. Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m., New York time, on a date to be specified by the
parties (the "Closing Date"), which shall be not later than the second business
day after satisfaction or waiver of the conditions set forth in Article VII
(other than those conditions that by their
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nature are to be satisfied at the Closing, but subject to the satisfaction or
waiver of those conditions), at the offices of Parent, unless another time, date
or place is agreed to in writing by the parties hereto.
SECTION 1.03. Effect of the Merger. At the Effective Time, Sub shall
be merged with and into the Company, and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). The Merger
shall have the effects set forth in Section 259 of the DGCL.
SECTION 1.04. Certificate of Incorporation and By-laws. (a) The
Certificate of Incorporation of Sub, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law, except that Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read in its entirety as follows: "The
name of the corporation is Gamesville.com, Inc."
(b) The By-laws of Sub as in effect immediately prior to the Effective
Time shall be the By-laws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
SECTION 1.05. Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.06. Officers. The officers of the Company immediately prior
to the Effective Time shall be the officers of the Surviving Corporation until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE II
Conversion of Securities
SECTION 2.01. Conversion of Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holder of any
shares of Company Class A Common Stock, Class B Common Stock, par value $0.01
per share, of the Company (the "Company Class B Common Stock" and, together with
the Company Class A Common Stock, the "Company Common Stock") or the Company
Series A
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Preferred Stock (together with the Company Common Stock, the "Company Capital
Stock") or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassess able share of common stock, par value $0.01 per share, of the
Surviving Corporation.
(b) Cancelation of Treasury Stock. All shares of Company Capital Stock
owned by the Company, as treasury stock, immediately prior to the Effective
Time shall automatically be canceled and retired and shall cease to exist
and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Sections 2.01(d),
2.01(e), 2.01(f) and 2.02(e), each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares to
be canceled in accordance with Section 2.01(b)) shall be converted into the
right to receive a number of fully paid and nonassessable shares of Common
Stock, par value $0.01 per share, of Parent ("Parent Common Stock") equal
to the Exchange Ratio (the "Merger Consideration"). For purposes of this
Agreement, (i) "Exchange Ratio" means the number of shares of Parent Common
Stock obtained by dividing (x) the Merger Shares by (y) the sum of (A) the
aggregate number of shares of Company Common Stock issued and outstanding
and (B) the aggregate number of shares of Company Common Stock subject to
Stock Options and Warrants, in each case as of the Effective Time and (ii)
"Merger Shares" means a number of shares of Parent Common Stock obtained by
dividing (x) the sum of (A) $232,000,000 minus (B) the aggregate amount of
(1) fees and expenses incurred by Company or any of its subsidiaries prior
to the Effective Time relating to the pursuit or consummation of the
Merger, including all attorneys' fees, brokers' fees, accountants' fees and
consultants' fees and (2) without duplication, fees and expenses required
to be paid by the Company to Advest, Inc. upon consummation of the Merger,
by (y) the average of the last quoted sale price per share of Parent Common
Stock on The Nasdaq National Market ("Nasdaq") (as reported in The Wall
Street Journal or, if not reported thereby, any other source to which the
Company and Parent may agree) for each of the 20 consecutive trading days
ending on and including November 30, 1999 (the "Closing Date Average
Closing Price"), provided that the Closing Date Average Closing Price shall
not be less than $44.00 or greater than
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$66.00. As of the Effective Time, all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be canceled
and shall cease to exist, and each holder of a certificate that immediately
prior to the Effective Time represented any such shares (a "Certificate")
shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration with respect thereto and any cash in lieu
of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance
with Section 2.02 (subject, in the case of such shares, to the terms of the
Escrow Agreement), without interest.
(d) Escrow of Merger Shares. At the Closing, on behalf of the
Stockholders and pursuant to the terms of the Escrow Agreement, Parent will
deposit with the Escrow Agent that number of shares of Parent Common Stock
equal to 10% of the total number of shares of Parent Common Stock issuable
to the Stockholders pursuant to Section 2.01(c). Such deposit shall be on
behalf of the Stockholders and with the same effect as if Parent had
delivered such shares to the Stockholders and the Stockholders had
delivered such shares to the Escrow Agent.
(e) Anti-Dilution Provisions. In the event Parent changes (or
establishes a record date for changing) the number of shares of Parent
Common Stock issued and outstanding prior to the Effective Time as a result
of a stock split, stock dividend, recapitalization, subdivision,
reclassification, combination, exchange of shares or similar transaction
with respect to the outstanding Parent Common Stock and the record date
therefor shall be prior to the Effective Time, the number of Merger Shares
shall be appropriately adjusted to reflect such stock split, stock
dividend, recapitalization, subdivision, reclassification, combination,
exchange of shares or similar transaction.
(f) Appraisal Rights. Notwithstanding anything in this Agreement to
the contrary, shares (the "Appraisal Shares") of Company Common Stock
issued and outstanding immediately prior to the Effective Time that are
held by any holder who properly demands appraisal of such Appraisal Shares
pursuant to, and who complies in all respects with, the provisions of
Section 262 of the DGCL ("Section 262") shall not be converted into the
right to receive the Merger Consideration as provided in Section 2.01(c),
but instead the holders of Appraisal Shares shall be
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entitled to payment of the fair value of such Appraisal Shares in
accordance with the provisions of Section 262; provided, however, that if
any such holder shall fail to perfect or otherwise shall waive, withdraw or
lose the right to appraisal under Section 262 or a court of competent
jurisdiction shall determine that such holder is not entitled to the relief
provided by Section 262, then the right of such holder to be paid the fair
value of such holder's Appraisal Shares under Section 262 shall cease and
such Appraisal Shares shall be deemed to have been converted at the
Effective Time into, and shall have become, the right to receive the Merger
Consideration as provided in Section 2.01(c). The Company shall serve
prompt notice to Parent of any demands for appraisal of any shares of
Company Common Stock, and Parent shall have the right to participate in and
direct all negotiations and proceedings with respect to such demands. Prior
to the Effective Time, the Company shall not, without the prior written
consent of Parent, make any payment with respect to, or settle or offer to
settle, any such demands, or agree to do any of the foregoing.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. As of the
Effective Time, Parent shall enter into an agreement with a bank or trust
company designated by Parent and reasonably acceptable to the Company (the
"Exchange Agent"), which shall provide that Parent shall, subject to Section
2.01(d), deposit with the Exchange Agent as of the Effective Time, for the
benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article II, through the Exchange Agent, certificates
representing the shares of Parent Common Stock issuable pursuant to Section 2.01
in exchange for outstanding shares of Company Common Stock. Parent shall make
available to the Exchange Agent from time to time as requested after the
Effective Time cash necessary to pay dividends and other distributions in
accordance with Section 2.02(c) and to make payments in lieu of any fractional
shares of Parent Common Stock in accordance with Section 2.02(e).
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate whose shares were converted into the right to receive the Merger
Consideration with respect thereto pursuant to Section 2.01 (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 be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in
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surrendering the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancelation to the Exchange
Agent, together with such letter of transmittal, duly completed and validly
executed, and such other documents as may reasonably be required by the Exchange
Agent, the holder of such Certificate shall receive, subject to Section 2.01(d),
in exchange therefor a certificate representing that number of whole shares of
Parent Common Stock which such holder has the right to receive pursuant to the
provisions of this Article II, certain dividends or other distributions as and
to the extent specified in Section 2.02(c) and cash in lieu of any fractional
share of Parent Common Stock as and to the extent specified in Section 2.02(e),
and the Certificate so surrendered shall forthwith be canceled. In the event of
a transfer of ownership of Company Common Stock which is not registered in the
transfer books of the Company, a certificate representing the proper number of
shares of Parent Common Stock may be issued to a person other than the person in
whose name the Certificate so surrendered is registered if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such issuance shall pay any transfer or other taxes required
by reason of the issuance of shares of Parent Common Stock to a person other
than the registered holder of such Certificate or establish to the satisfaction
of Parent that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.02(b), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration with respect thereto, certain dividends or
distributions as and to the extent specified in Section 2.02(c) and any cash in
lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate as and to the extent
specified in Section 2.02(e). No interest shall be paid or will accrue on any
cash payable to holders of Certificates pursuant to the provisions of this
Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of fractional shares of Parent Common Stock shall be paid
to any such holder pursuant to Section 2.02(e), in each case until the surrender
of such Certificate in accordance with this Article II. Subject to the effect of
applicable escheat or similar laws, following surrender of any such Certificate
there shall be paid to the holder of the certificate representing whole shares
of Parent Common Stock
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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 paid with respect to such whole shares of
Parent Common Stock, and the amount of any cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled as and to the
extent specified in Section 2.02(e) 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 such surrender and with a payment date subsequent to
such surrender payable with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Capital Stock. Subject to
Section 2.01(d), all shares of Parent Common Stock issued upon the surrender for
exchange of Certificates in accordance with the terms of this Article II
(including any cash paid pursuant to this Article II) shall be deemed to have
been issued (and paid) in full satisfaction of all rights pertaining to the
shares of Company Common Stock theretofore represented by such Certificates, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Exchange
Agent for any reason, they shall be canceled and exchanged as provided in this
Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution of Parent shall relate to
such fractional share interests and such fractional share interests will not
entitle the owner thereof to the right to vote or to any other rights of a
stockholder of Parent.
(ii) In lieu of such fractional share interests, Parent shall pay to
each former holder of Company Common Stock an amount in cash equal to the
product obtained by multiplying (A) the fractional share interest to which
such former holder (after taking into account all shares of Company Common
Stock held at the Effective Time by such holder) would otherwise be
entitled by (B) the last quoted sale price for a share of Parent Common
Stock on Nasdaq (as reported in The Wall Street Journal, or, if not
reported thereby, any other authoritative source) on the Closing Date.
(f) No Liability. None of Parent, Sub, the Company or the Exchange
Agent shall be liable to any person
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in respect of any shares of Parent Common Stock, any dividends or distributions
with respect thereto or any cash in lieu of fractional shares of Parent Common
Stock, in each case delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such 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 Certificate, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Certificate the Merger Consideration with respect
thereto and, if applicable, any unpaid dividends and distributions on shares of
Parent Common Stock deliverable in respect thereof and any cash in lieu of
fractional shares, in each case pursuant to this Agreement.
(h) Withholding Rights. The Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable to any holder of Company
Common Stock pursuant to this Agreement such amounts as may be required to be
deducted and withheld with respect to the making of such payment under the Code,
or under any provision of state, local or foreign Tax law. To the extent that
amounts are so withheld and paid over to the appropriate Taxing Authority, the
Exchange Agent will be treated as though it withheld an appropriate amount of
the type of consideration otherwise payable pursuant to this Agreement to any
holder of Company Common Stock, sold such consideration for an amount of cash
equal to the fair market value of such consideration at the time of such deemed
sale and paid such cash proceeds to the appropriate Taxing Authority.
ARTICLE III
Representations and Warranties
of the Company
Except for items disclosed on the disclosure schedule (with specific
reference to the Section of this Agreement to which the information stated in
such disclosure relates, provided that an item included on the disclosure
schedule with respect to any Section of this Agreement shall be deemed to relate
to each other Section of this Agreement to the extent such relationship is
obvious) delivered by the Company to Parent prior to the execution and delivery
of this Agreement (the "Company Disclosure Schedule"), the Company represents
and warrants to Parent as follows:
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SECTION 3.01. Organization and Standing of the Company. Each of the
Company and its subsidiaries is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of the
Company and its subsidiaries has all requisite corporate or other power and
authority necessary to enable it to use its corporate name and to own, lease or
otherwise hold and operate its properties or assets and to carry on its business
as now being conducted and proposed to be conducted. Each of the Company and its
subsidiaries is duly qualified or licensed to do business as a foreign
corporation in each jurisdiction in which the nature of its business, or the
ownership, leasing or operation of its properties or assets, requires such
qualification or licensing, except where the failure to be so qualified is not
reasonably more likely than not to have a material adverse effect on the
Company. The Company has delivered to Parent true and complete copies of its
Amended and Restated Certificate of Incorporation and By-laws, and the
certificates of incorporation and by-laws or other similar organizational
documents of each of its subsidiaries, in each case as amended to the date
hereof. The respective certificates of incorporation and by-laws or other
similar organizational documents of the subsidiaries of the Company do not
contain any provision limiting or otherwise restricting the ability of (i) the
Company to control such subsidiaries or (ii) the Company or any of its
subsidiaries to engage in any lawful business or activity. The share certificate
and transfer books and the minute books of the Company and each of its
subsidiaries, which have been made available to Parent and its representatives,
are true and complete in all material respects.
SECTION 3.02. Authority; Noncontravention. The Company has the
requisite corporate or other power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and, when executed and delivered by Parent
and Sub, will constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bank ruptcy, insolvency, reorganization, fraudulent transfer and
similar laws of general application relating to or affecting creditors rights
and to general equitable principles or public policy. The execution and delivery
of this Agreement do not, and the consummation of the transactions
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contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancelation or acceleration of any obligation or to loss
of a material benefit under, or result in the creation of any pledge, claim,
lien, charge, encumbrance or security interest of any kind or nature whatsoever
(a "Lien") in or upon any of the properties or assets of the Company or any of
its subsidiaries under, any provision of (i) the Amended and Restated
Certificate of Incorporation or the By-laws of the Company or the certificates
of incorporation or by-laws or other similar organizational documents of any of
its subsidiaries, in each case as amended to the date hereof, (ii) any loan or
credit agreement, bond, debenture, note, mortgage, indenture, lease or other
contract, commitment, agreement, arrangement, obligation, undertaking,
instrument, permit, concession, franchise or license (each a "Contract") to
which the Company or any of its subsidiaries is a party or any of their
respective properties or assets is subject or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any (A)
statute, law, ordinance, rule or regulation (a "Law") or (B) order, writ,
injunction, decree, judgment or stipulation (an "Order"), in each case,
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, violations, defaults, rights, losses or Liens that individually
or in the aggregate are not reasonably more likely than not to (x) have a
material adverse effect on the Company or affect Parent in a material and
adverse way, (y) impair in any material respect the ability of the Company to
perform its obligations under this Agreement or (z) prevent or materially delay
the consummation of any of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Federal, state or local, domestic or foreign, government or any
court, administrative agency or commission or other governmental authority or
agency, domestic or foreign (a "Governmental Entity"), is required by or with
respect to the Company or any of its subsidiaries in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the Merger or the other transactions contemplated by this
Agreement, except for (1) the filing of a premerger notification and report form
by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (2) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and the filing of appropriate
documents with the relevant authorities of other states in which the Company or
any of its subsidiaries
<PAGE>
is qualified to do business and (3) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made individually or in the aggregate are not reasonably more
likely than not to (x) have a material adverse effect on the Company, (y) impair
in any material respect the ability of the Company to perform its obligations
under this Agreement or (z) prevent or materially delay the consummation of any
of the transactions contemplated by this Agreement.
SECTION 3.03. Capital Stock of the Company. The authorized capital
stock of the Company consists of 23,236,610 shares of Company Common Stock, of
which (x) 19,372,776 shares have been designated as Company Class A Common Stock
and (y) 3,863,834 shares have been designated as Company Class B Common Stock,
and 6,564,610 shares of Convertible Preferred Stock, par value $0.01 per share
(the "Company Convertible Preferred Stock"), all of which have been designated
as Company Series A Preferred Stock. As of the date hereof (i) 12,500,000 shares
of Company Class A Common Stock (excluding treasury shares) were issued and
outstanding, (ii) no shares of Company Class A Common Stock were held by the
Company in its treasury, (iii) 720,000 shares of Company Class B Common Stock
(excluding treasury shares) were issued and outstanding, (iv) no shares of
Company Class B Common Stock were held by the Company in its treasury, (v)
6,564,610 shares of Company Series A Preferred Stock (excluding treasury shares)
were issued and outstanding, (vi) no shares of Company Series A Preferred Stock
were held by the Company in its treasury, (vii) warrants to acquire 39,070
shares of Company Class B Common Stock from the Company pursuant to the warrant
agreements set forth on Section 3.03(a) of the Company Disclosure Schedule (the
"Warrants") were outstanding and (viii) options to acquire 2,282,929 shares of
Company Class B Common Stock from the Company pursuant to the 1997 Stock Option
Plan and the 1999 Stock Option Plan (such plans, collectively, the "Company
Stock Plans") were issued and outstanding. Except as set forth above, as of the
date of this Agreement no shares of capital stock or other voting securities of
the Company or options, warrants or other rights to acquire any such stock or
securities were issued, reserved for issuance or outstanding. There are no
outstanding stock appreciation rights with respect to shares of Company Capital
Stock. There are no bonds, debentures, notes or other indebtedness of the
Company or any of its subsidiaries having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which stockholders of the Company may vote. Except as set forth above and
except as expressly permitted by Section 5.01(a)(ii), there are no securities,
options, warrants, calls, rights or Contracts of any kind to which
<PAGE>
the Company or any of its subsidiaries are a party, or by which the Company or
any of its subsidiaries is bound, obligating the Company or any of its
subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, shares of capital stock or other securities of the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right or
Contract. There are not any outstanding contractual or other obligations of the
Company or any of its subsidiaries to (i) repurchase, redeem or otherwise
acquire any shares of capital stock or other securities of the Company or (ii)
vote or to dispose of any shares of capital stock or other securities of any of
its subsidiaries. Section 3.03(b) of the Company Disclosure Schedule sets forth
a true and complete list, as of the date hereof, of all outstanding stock
options granted under the Company Stock Plans (collectively, the "Stock
Options") and the Warrants, the number of shares subject to each such Stock
Option or Warrant, the grant dates, exercise prices and vesting periods of each
such Stock Option and Warrant and the names of the holders thereof. Section
3.03(c) of the Company Disclosure Schedule sets forth a true and complete list,
as of the date hereof, of the identify of each holder of shares of Company
Capital Stock and the number of shares of each class of Company Common Stock
owned of record by such holder. All outstanding shares of Company Capital Stock
are, and all shares that may be issued pursuant to the Company Stock Plans and
the Warrants will be, when issued in accordance with the terms thereof, duly
authorized, validly issued, fully paid and nonassessable. All the outstanding
indebtedness for borrowed money of the Company or its subsidiaries is prepayable
without prepayment penalty or premium (other than the payment of customary LIBOR
breakage costs), and no indebtedness for borrowed money of the Company or its
subsidiaries contains any restriction upon the incurrence of indebtedness for
borrowed money by the Company or any of its subsidiaries or restricts the
ability of the Company or any of its subsidiaries to grant any Liens on its
properties or assets. The Company has outstanding Indebtedness (as defined in
Section 3.10) (the "Company Indebtedness") in the aggregate principal amount of
$1,101,852.55 as of the date of this Agreement.
SECTION 3.04. Equity Interests. Section 3.04 of the Company Disclosure
Schedule lists each subsidiary of the Company. All the outstanding shares of
capital stock or other voting or equity interests of each subsidiary of the
Company are owned by the Company, by another wholly owned subsidiary of the
Company or by the Company and another wholly owned subsidiary of the Company,
free and clear of all Liens, and are duly authorized, validly issued, fully paid
and nonassessable. Except for the capital stock of its
<PAGE>
subsidiaries, the Company does not own, directly or indirectly, any capital
stock or other ownership interest in any person.
SECTION 3.05. Financial Statements. The Company has delivered to
Parent the audited balance sheet of the Company as of December 31, 1998, and the
related audited statement of income, statement of stockholders' deficit and
statement of cash-flows of the Company and its consolidated subsidiaries for the
fiscal year ended on such date (the financial statements described above are
collectively referred to as the "Financial Statements"). The Financial
Statements were derived from and are in accordance in all material respects with
the books and records of the Company and its consolidated subsidiaries, have
been prepared in conformity with generally accepted accounting principles
("GAAP") consistently applied and fairly present the financial condition of the
Company and its subsidiaries as of the dates thereof and the results of
operations of the Company and its subsidiaries for the periods then ended.
The Company has also delivered to Parent unaudited balance sheets and
related unaudited income statements of income and statements of cash-flows of
the Company and its consolidated subsidiaries as of and for the three-month
periods ended March 31, June 30 and September 30, 1999 (collectively, the
"Unaudited Statements"). The Unaudited Statements have been prepared in
accordance in all material respects with GAAP and on a consistent basis with the
Financial Statements (except that they do not contain footnotes and are subject
to normal recurring year-end audit adjustments). There were no changes in the
method of application of the Company's accounting policies or changes in the
method of applying the Company's use of estimates in the preparation of the
Unaudited Statements as compared with the Financial Statements. Section 3.05 of
the Company Disclosure Schedule sets forth, for each fiscal period indicated,
the barter revenues generated by the Company and its consolidated subsidiaries
during such period.
SECTION 3.06. Undisclosed Liabilities. Except as set forth or
reflected on the Financial Statements or the Unaudited Statements (or
specifically described in the notes thereto), none of the Company or its
subsidiaries has any material liabilities or obligations of any nature (whether
accrued, absolute, contingent, unasserted or otherwise) except for liabilities
and obligations incurred since the date of the most recent balance sheet
included in the Unaudited Statements in the ordinary course of business.
SECTION 3.07. Taxes. (a) As used in this Agreement, (i) "Taxes" shall
mean all Federal, state and local, domestic and foreign, income, franchise,
property,
<PAGE>
sales, excise, employment, payroll, social security, value-added, ad valorem,
transfer, withholding and other taxes, including taxes based on or measured by
gross receipts, profits, sales, use or occupation, tariffs, levies, impositions,
assessments or other governmental charges of any nature, including any interest,
penalties or additions with respect thereto and any obligations under any
agreements or arrangements with any other person with respect to such amounts;
(ii) "Taxing Authority" shall mean any domestic, foreign, federal, national,
state, county or municipal or other local governmental body (including any
subdivision, agency or commission thereof), or any quasi-governmental body, in
each case, exercising regulatory authority in respect of Taxes; and (iii) "Tax
Return" shall mean all returns, reports and forms, including information
returns, with respect to Taxes.
(b) The Company and each of its subsidiaries, and any affiliated group
(within the meaning of Section 1504 of the Code) of which the Company or any of
its subsidiaries is or has ever been a member or any group of corporations with
which the Company or any of its subsidiaries files, has filed or is or was
required to file an affiliated, consolidated, combined, unitary or aggregate Tax
Return (each such group, a "Company Consolidated Group"), has timely filed or
caused to be filed all income and franchise Tax Returns and all other material
Tax Returns required to be filed by each such entity. All such Tax Returns are
true and complete in all material respects. The Company, each of its
subsidiaries and each Company Consolidated Group has timely paid or caused to be
timely paid (or the Company has timely paid on its subsidiaries' behalf) all
Taxes due from it or them with respect to the taxable periods covered by such
Tax Returns, and, in accordance with GAAP, the balance sheet of the Company as
of December 31, 1998, reflects an adequate reserve for all Taxes payable by the
Company and each of its subsidiaries for all taxable periods and portions
thereof through its date. None of the Company, any of its subsidiaries or any
Company Consolidated Group has requested any extension of time within which to
file any Tax Return which Tax Return has not yet been filed.
(c) No income or franchise or other material Tax Return of the
Company, any of its subsidiaries or any Company Consolidated Group is or has
ever been under audit or examination by any Taxing Authority, and no written or
unwritten notice of such an audit or examination has been received by the
Company, any of its subsidiaries or any Company Consolidated Group. Each
material deficiency, if any, resulting from any audit or examination relating to
Taxes by any Taxing Authority has been timely paid. The Company has not received
notice of any material issues relating to Taxes from the relevant Taxing
Authority during
<PAGE>
any presently pending audit or examination, nor has the Company received notice
of any material issues relating to Taxes from the relevant Taxing Authority in
any completed audit or examination that can reasonably be expected to recur in a
later taxable period. The relevant statute of limitations is open with respect
to all Federal income Tax Returns of the Company and each of its subsidiaries.
The Company has made available to Parent documents, if any, setting forth the
years in which the statute of limitations has not yet expired for the income,
franchise and other material Tax Returns of the Company, any of its subsidiaries
or any Company Consolidated Group and listing the last year in which the
Company, any of its subsidiaries or any Company Consolidated Group is subject to
audit with respect to all income, franchise and other material Tax Returns.
(d) There is no currently effective agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any Taxes and no power of attorney with respect to any Taxes has
been executed or filed with any Taxing Authority.
(e) No material Liens for Taxes exist with respect to any assets or
properties of the Company or any of its subsidiaries, except for statutory Liens
for Taxes not yet due.
(f) None of the Company or any of its subsidiaries is a party to or
bound by any Tax sharing agreement, Tax indemnity obligation or similar
agreement, arrangement or practice with respect to Taxes (including any advance
pricing agreement, closing agreement or other agreement relating to Taxes with
any Taxing Authority).
(g) None of the Company or any of its subsidi aries will be required
to include in a taxable period ending after the Effective Time taxable income
attributable to income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the installment method of
accounting, the completed contract method of accounting, the long-term contract
method of accounting, the cash method of accounting or Section 481 of the Code
or any comparable provision of any other Tax law or for any other reason.
(h) No amount or other entitlement that could be received (whether in
cash or property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any officer, director or employee
of the Company or its subsidiaries who is a "disqualified individual" (as such
term is defined in proposed Treasury Regulation Section 1.280G-1) would be
characterized as an "excess parachute payment" or a
<PAGE>
"parachute payment" (as such terms are defined in
Section 280G(b)(1) of the Code).
(i) Each of the Company and its subsidiaries has complied in all
material respects with all applicable laws relating to the payment and
withholding of Taxes (including withholding of Taxes pursuant to Sections 1441,
1442, 3121 and 3402 of the Code or similar provisions of state, local, domestic
or foreign Tax law) and has, within the time and the manner prescribed by law,
withheld from and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under applicable laws.
(j) No consent under Section 341(f) of the Code has been filed with
respect to the Company or any of its subsidiaries.
(k) None of the Company or any of its subsidiaries has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(l) No property owned by the Company or any of its subsidiaries (i)
constitutes "tax exempt use property" within the meaning of Section 168(h)(1) of
the Code or (ii) is tax exempt bond financed property within the meaning of
Section 168(g) of the Code.
(m) None of the Company or any of its subsidi aries has ever (i) made
an election under Section 1362 of the Code to be treated as an S corporation for
Federal income tax purposes or (ii) made a similar election under any comparable
provision of any state, local or foreign Tax law.
(n) None of the Company or any of its subsidi aries is or ever has
been a personal holding company within the meaning of Section 542 of the Code.
(o) Section 3.07(o) of the Company Disclosure Schedule sets forth each
state, county, local, municipal or foreign jurisdiction in which the Company and
each of its subsidiaries files, is required or has been required to file a Tax
Return relating to state and local income, franchise, license, excise, net worth
property and sales and use Taxes except in a case where the Company or any of
its subsidiaries is or has been required to file such a Tax Return and such
failure to file is not reasonably more likely than not to have a material
adverse effect on the Company or any of its subsidiaries. No claim has ever been
made by a Taxing Authority in a jurisdiction where any of the Company and each
of its subsidiaries does not file a Tax
<PAGE>
Return that it is, or may be subject to, taxation in that jurisdiction.
(p) None of the Company or any of its subsidi aries has constituted
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in any distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (i) within the
two-year period ending on the date of this Agreement or (ii) in a distribution
which could otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in conjunction
with the purchase of Company Capital Stock contemplated by this Agreement.
(q) None of the Company or any of its subsidi aries has taken or
agreed to take any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.
SECTION 3.08. Assets. (a) Each of the Company and its subsidiaries has
good and marketable title to, or good and valid leasehold interests in, all of
its material personal properties and assets (including with respect to all real
property and interests in real property leased by it), in each case, free and
clear of any Liens, except for such property and assets as are no longer used or
useful in the conduct of its businesses and except for defects in title,
easements, restrictive covenants and similar encumbrances that individually or
in the aggregate could not reasonably be expected to materially affect the
ability of the Company and its subsidiaries to use such property or assets in
their intended manner.
(b) Each of the Company and its subsidiaries has complied in all
material respects with the terms of all material leases to which it is a party
and under which it is in occupancy, and all such leases are in full force and
effect, except for such noncompliance or failure to be in full force and effect
as could not reasonably be expected to materially affect the ability of the
Company to obtain the benefit of such leases. Each of the Company and its
subsidiaries enjoys peaceful and undisturbed possession in all material respects
under all material real property leases to which it is a party.
(c) None of the Company or any of its subsidi aries holds any fee or
other ownership interest in any real property. Section 3.08 of the Company
Disclosure Schedule sets forth a complete list of all real property and
interests in real property leased by the Company.
<PAGE>
SECTION 3.09. Intellectual Property, Etc. (a) Section 3.09(a) of the
Company Disclosure Schedule sets forth a true and complete list of all patents,
patent applications, trademark applications and registrations, trade names,
service marks, domain names and registered copyrights and mask work rights and
applications therefor, if any, owned by or licensed to the Company or any of its
subsidiaries. All patents, patent applications, trademarks, service marks,
copyrights and mask work rights of the Company or any of its subsidiaries have
been duly registered and/or filed with or issued by each appropriate
Governmental Entity in the jurisdictions indicated in Section 3.09(a) of the
Company Disclosure Schedule, all necessary affidavits of continuing use have
been filed, and all necessary mainte nance fees have been paid to continue all
such rights in effect. Each of the Company and each of its subsidiaries owns or
is licensed or otherwise has the right to use, without payment to any other
person except for fees set forth in Section 3.09(b) of the Company Disclosure
Schedule, all Intellectual Property used in or necessary for the conduct of its
business as presently conducted or as proposed to be conducted by the Company in
accordance with its business plan dated February 1999, a true and complete copy
of which has been provided to Parent prior to the date of this Agreement (the
"Business Plan"), in each case free and clear of all Liens. The conduct of the
Company's business, as presently conducted and as proposed to be conducted by
the Company in accordance with the Business Plan, does not in any material
respect conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancelation or acceleration of any obligation or loss of a material benefit
under, or result in the creation of any Lien in or upon any of the properties or
assets of the Company or any of its subsidiaries under, any Contract between the
Company or any of its subsidiaries and any person or any other Intellectual
Property rights of any other person.
(b) Section 3.09(b) of the Company Disclosure Schedule sets forth a
true and complete list of all options, rights, licenses or interests of any kind
relating to Intellectual Property granted to the Company or any of its
subsidiaries, other than software licenses for generally available software
(such as Lotus 1-2-3, WordPerfect and the like) and generally available system
development tools, or granted by the Company to any other person.
(c) All software, other than generally available software (such as
Lotus 1-2-3, WordPerfect and the like) and generally available system
development tools, that is either marketed to customers of the Company or any of
its subsidiaries as a program or as part of a product or service
<PAGE>
or is used by the Company or any of its subsidiaries to
support its business:
(i) is owned by the Company or any of its subsidiaries or the Company
or any of its subsidiaries has the right to use, modify, copy, sell,
distribute, sublicense and make Derivative Works from such software, free
and clear of any limitations or Liens; and
(ii) is free from any interest of any former or present employees of,
or contractors or consultants to, the Company or any of its subsidiaries.
(d) To the extent third party software is marketed to customers of the
Company or any of its subsidiaries together with the Intellectual Property of
the Company or any of its subsidiaries, (i) the third party rights have been
identified in Section 3.09(d) of the Company Disclosure Schedule, (ii) all
necessary licenses have been obtained and (iii) no royalties or payments are due
other than the royalties and payments that are identified in Section 3.09(d) of
the Company Disclosure Schedule.
(e) No material trade secret of the Company or any of its subsidiaries
has been published or disclosed by the Company or any of its subsidiaries or, to
the knowledge of the Company or any of its subsidiaries, by any other person to
any person except pursuant to licenses or Contracts requiring such other persons
to keep such trade secrets confidential.
(f) None of the Company and its subsidiaries is, and to the knowledge
of the Company, no other party to any licensing, distributorship or other
similar arrangements with the Company or any of its subsidiaries relating to
Intellectual Property is, in breach of or default under its obligations under
such arrangements in any material respect.
(g) No person has any marketing rights to the Intellectual Property of
the Company or any of its subsidiaries pursuant to a written agreement.
(h) None of the Company or any of its subsidi aries has received any
written communications, and no executive officer of the Company has received any
oral communication, alleging the Company or any of its subsidiaries has
infringed or violated or, by conducting its businesses as presently conducted
and as proposed to be conducted by the Company in accordance with the Business
Plan by the Company or any of its subsidiaries, would
<PAGE>
infringe or violate any of the Intellectual Property of any
other person.
(i) To the knowledge of the Company, no person is infringing on or
otherwise violating any right of the Company or any of its subsidiaries in any
material respect with respect to any material Intellectual Property owned by or
licensed to the Company or any of its subsidiaries.
(j) Each of the Company and its subsidiaries has taken reasonable
steps to protect its Intellectual Property consistent with industry practice.
(k) No licenses or rights have been granted to distribute the source
code of, or to use source code to create Derivative Works of, any product
currently marketed by, commercially available from or under development by the
Company or any of its subsidiaries for which the Company or any of its
subsidiaries possesses the source code. As used herein, "Derivative Work" shall
mean a work that is based upon one or more preexisting works, such as a
revision, enhancement, modification, abridgement, condensation, expansion or any
other form in which such preexisting works may be recast, transformed or
adapted, and which, if prepared without authorization of the owner of the
copyright in such preexisting work, would constitute a copyright infringement.
For purposes hereof, a Derivative Work shall also include any compilation that
incorporates such a preexisting work as well as translations from one human
language to another and from one type of code to another.
(l) None of the Company or any of its subsidi aries has assigned, sold
or otherwise transferred ownership of any Intellectual Property owned by the
Company.
(m) For purposes of this Agreement, "Intellectual Property" shall mean
patents, trademarks (registered or unregistered), service marks, brand names,
trade dress, trade names, copyrights, the goodwill associated with the foregoing
and registrations in any jurisdiction of, and applications in any jurisdiction
to register, the foregoing, including any extension, modification or renewal of
any such registration or application; inventions, whether patented, patentable
or not patentable in any jurisdiction; mask works, trade secrets and
confidential proprietary information and rights in any jurisdiction to limit the
use or disclosure thereof by any person; writings and other works of commercial
value, whether copyrighted, copyrightable or not copyrightable in any
jurisdiction; registration or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof; any similar intellectual
property or proprietary rights; any computer programs or software (including
source code, object
<PAGE>
code and data), other than commercially available computer programs and
software; and licenses relating to the foregoing.
SECTION 3.10. Contracts. None of the Company or any of its
subsidiaries is a party to or bound by, and none of their properties or assets
are bound by or subject to, any written or oral:
(a) Contract not made in the ordinary course of business;
(b) employment agreement or employment Contract that is not terminable
at will by the Company or such subsidiary both without any penalty and
without any obligation of the Company or any of its subsidiaries to pay
severance or other amounts (including any bonus) other than base salary,
accrued commissions, vacation pay and legally mandated benefits;
(c)(i) employee collective bargaining agreement or other Contract with
any labor union, (ii) plan, program or Contract that provides for the
payment of bonus, severance, termination or similar type of compensation or
benefits upon the termination or resignation of any employee of the Company
or such subsidiary or (iii) plan, program or Contract that provides for
medical or life insurance benefits for former employees of the Company or
such subsidiary or for current employees of the Company or such subsidiary
upon their retirement from, or termination of employment with, the Company
or such subsidiary (other than health coverage continuation provided under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended);
(d) Contract pursuant to which the Company or any of its subsidiaries
has agreed not to compete with any person or to engage in any activity or
business, or pursuant to which any benefit is required to be given or lost
as a result of so competing or engaging;
(e) Contract with (i) any stockholder of the Company or any of its
subsidiaries, (ii) any affiliate of the Company or any of its subsidiaries
or of any stockholder of the Company or any of its subsidiaries or (iii)
any director, officer or employee of the Company or any of its subsidiaries
or of any affiliate of the Company or any of its subsidiaries (other than
employment agreements covered by clause (b) above);
(f) license or franchise pursuant to which the Company or any such
subsidiary has agreed to refrain
<PAGE>
from granting license or franchise rights to any other person;
(g) Contract under which the Company or such subsidiary has (i)
incurred any Indebtedness that is currently owing or (ii) given any
Guarantee;
(h) Contract expressly creating or granting a Lien (including Liens
upon properties acquired under conditional sales, capital leases or other
title retention or security devices);
(i) Contract providing for future performance by the Company or such
subsidiary in consideration of amounts previously paid in excess of $50,000
(including any provision requiring "make good" or recovery of advertising
shortfall (including advertising banners, buttons or account e-mercials));
(j) Contract providing for payments of royalties to third parties;
(k) Contract granting a third party any license to Intellectual
Property that is not limited to the internal use of such third party;
(l) Contract providing confidential treatment by the Company or such
subsidiary of material third party information;
(m) Contract which is material in any respect containing (whether in
the Contract itself or by operation of law) any provisions dealing with a
"change of control" or similar event with respect to the Company or such
subsidiary;
(n) Contract granting the other party or any third person "most
favored nation" status;
(o) Contract providing for monetary liquidated damages (but not
including other kinds of provisions that provide for limiting the maximum
amounts payable or for refunds of amounts in the event of a breach or
termination of the Contract);
(p) Contract that expressly guarantees that the materials and/or
services to be provided under the Contract will be Year 2000 Ready (as
defined in Section 3.22);
(q) Contract pursuant to which the Company or any of its subsidiaries
is restricted in any material respect in the development, marketing or
distribution
<PAGE>
of their respective products or services in competition with that of
another;
(r) Contract which (i) has aggregate future sums due from the Company
or such subsidiary in excess of $25,000 and is not terminable by the
Company or such subsidiary for a cost of less than $25,000 or (ii) is
otherwise material to the business of the Company or such subsidiary as
presently conducted or as proposed to be conducted by the Company in
accordance with the Business Plan; and
(s) Contract providing for future performance by the Company or such
subsidiary with less than the standard Company or subsidiary charges to be
due for such performance.
Each material Contract of the Company and each of its subsidiaries is in full
force and effect and is a legal, valid and binding agreement of the Company or
such subsidiary and, to the knowledge of the Company or such subsidiary, of each
other party thereto, enforceable against the Company or any of its subsidiaries,
as the case may be, and, to the knowledge of the Company, against the other
party or parties thereto, in each case, in accordance with its terms. The
Company and each of its subsidiaries has performed or is performing all material
obligations required to be performed by it under each of its Contracts and is
not (with or without notice or lapse of time or both) in breach or default in
any material respect thereunder; and, to the knowledge of the Company or such
subsidiary, no other party to any of its Contracts is (with or without notice or
lapse of time or both) in breach or default in any material respect thereunder.
Neither the Company nor any of its subsidiaries knows of any circumstances
existing on the date of this Agreement that is reasonably likely to (x) materi
ally adversely affect its ability to perform its obligations under any material
Contract or (y) require the Company to provide advertising or similar services
under any provision contained in any Contract requiring "make good" or recovery
of advertising shortfall (including advertising banners, buttons or account
e-mercials).
"Guarantee" of or by any person shall mean any obligation, contingent
or otherwise, of such person guaranteeing any indebtedness of any other person
(the "primary obligor") in any manner, whether directly or indirectly, and
including any obligation of such person, direct or indirect, (a) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
indebtedness or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such indebtedness, (b) to purchase property,
securities or
<PAGE>
services for the purpose of assuring the owner of such indebtedness of the
payment of such indebtedness or (c) to maintain working capital, equity capital
or other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such indebtedness; provided, however, that
the term Guarantee shall not include endorsements for collection or deposit, in
either case in the ordinary course of business.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such person
issued or assumed as the deferred purchase price of property or services, (f)
all indebtedness of others secured by (or for which the holder of such
indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (g) all guarantees by such
person, (h) all capital lease obligations of such person, (i) all obligations of
such person in respect of interest rate protection agreements, foreign currency
exchange agreements or other interest or exchange rate hedging arrangements and
(j) all obligations of such person as an account party in respect of letters of
credit and bankers' acceptances to the extent of any drawdowns thereon.
SECTION 3.11. Litigation; Decrees. There are no lawsuits, claims,
arbitration or other proceedings or, to the knowledge of the Company,
investigations ("Litigation") pending or threatened by or against or affecting
(other than litigation to which the Company or any of its subsidiaries is not a
party that may generally affect the lines of business in which the Company or
any of its subsidiaries operates) the Company or any of its subsidiaries, or any
of their respective properties or assets. There is no outstanding Order
applicable to the Company or any of its subsidiaries or any of their respective
properties, assets or businesses having, or that is reasonably more likely than
not to have, a material adverse effect on the Company. Section 3.11 of the
Company Disclosure Schedule sets forth a complete list of Litigation for which
legal process has been served upon the Company or any of its subsidiaries and
which has not been settled or disposed on the date hereof.
<PAGE>
SECTION 3.12. Operation of the Business; Absence of Changes or Events.
(a) Since December 31, 1998, the Company and each of its subsidiaries has
conducted its business only in the ordinary course and there has not been (i)
any state of facts, change, effect, condition, development, event or occurrence
that has had or is reason ably more likely than not to have a material adverse
effect with respect to the Company, (ii) any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of the Company's or any of its subsidiaries'
capital stock, or any purchase, redemption or other acquisition of any of the
Company's or any of its subsidiaries' capital stock or any other securities of
the Company or its subsidiaries or any options, warrants, calls or rights to
acquire any such shares or other securities, (iii) any split, combination or
reclassification of any of the Company's or any of its subsidiaries' capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of the
Company's or any of its subsidiaries' capital stock or other securities, (iv)
(A) any granting by the Company or any of its subsidiaries of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business, or any payment by (or entering
into of any obligation or Contract with respect to any payment by) the Company
or any of its subsidiaries of any bonus, except for bonuses made in the ordinary
course of business, in each case to any current or former director, officer,
employee or consultant, (B) any granting by the Company or any of its
subsidiaries to any current or former director, officer or employee of any
increase in severance or termination pay, (C) any entry by the Company or any of
its subsidiaries into, or any amendment of, (1) any currently effective
employment, severance, termination or indemnification or consulting agreement
with any current or former director, officer, employee or consultant, or (2) any
agreement with any current or former director, officer, employee or consultant
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company of the type
described in this Agreement, (D) any adoption of, or amendment to, a Benefit
Plan (other than amendments required by law or required to maintain the
qualified status of a Benefit Plan), (v) any damage, destruction or loss,
whether or not covered by insurance, that individually or in the aggregate is
reasonably more likely than not to have a material adverse effect on the
Company, (vi) any change in financial or tax accounting methods, principles or
practices by the Company or any of its subsidiaries, except insofar as may have
been required by a change in GAAP or applicable law, (vii) any Tax election that
individually or in the aggregate is reasonably more likely than not to have a
<PAGE>
material adverse effect on the Tax liabilities or Tax attributes of the Company
or any of its subsidiaries or any settlement or compromise with respect to any
material income Tax liability, (viii) any revaluation by the Company or any of
its subsidiaries of any of its material assets or (ix) any Contract with regard
to the acquisition or disposition of any material Intellectual Property or
rights thereto other than licenses in the ordinary course of business.
(b) Since December 31, 1998, except for transactions between the
Company and Parent, each of the Company and its subsidiaries has continued all
pricing, sales, receivables and payables production practices substantially in
accordance with the ordinary course of business and has not engaged in (i) any
trade loading practices or any other promotional sales or discount activity with
any customers or distributors with the effect of accelerating to pre-Closing
periods sales to the trade or otherwise that would otherwise be expected (based
on past practice) to occur in post-Closing periods, (ii) any practice which
would have the effect of accelerating to preClosing periods collections of
receivables that would otherwise be expected (based on past practice) to be made
in post-Closing periods, (iii) any practice which would have the effect of
postponing to post-Closing periods payments by the Company or any of its
subsidiaries that would otherwise be expected (based on past practice) to be
made in pre- Closing periods or (iv) any other promotional sales, discount
activity or inventory overstocking or understocking in a manner outside the
ordinary course of business.
SECTION 3.13. Compliance with Applicable Laws. (a) The Company and
each of its subsidiaries and their respective properties, assets, operations and
businesses have been and are being operated and have been and are in compliance
with all applicable Laws, except to the extent the failure to so comply is not
reasonably more likely than not to have a material adverse effect on the
Company.
(b) The Company and each of its subsidiaries has obtained all material
franchises, licenses, permits, authorizations and approvals ("Permits") that are
required with respect to the operation of its business and the ownership of its
assets under Federal, state, local and foreign Laws, including environmental,
health and safety laws and import/export laws, other than any Permits the
failure of which to obtain individually or in the aggregate are not reasonably
more likely than not to have a material adverse effect on the Company. The
Company and each of its subsidiaries is in compliance in all material respects
with all terms and conditions of such Permits.
<PAGE>
(c) There are no past or present conditions, circumstances,
activities, practices, incidents, actions or plans that are reasonably likely to
(i) interfere with or prevent compliance or continued compliance by the Company
or any of its subsidiaries with any environmental, health and safety laws
governing the Company's or any of its subsidiaries' present and currently
contemplated future operations or with any Law, Order, notice or demand letter
issued, entered, promulgated or approved thereunder or (ii) give rise to any
liability of the Company or any of its subsidiaries under any environmental,
health and safety law governing the Company's or any of its subsidiaries' past,
present and currently contemplated future operations, other than, in each case,
circumstances, activities, practices, incidents, actions or plans that are
reasonably more likely than not to have a material adverse effect on the
Company.
SECTION 3.14. Certain Employee Matters. (a) To the knowledge of the
Company, no director, officer or other employee of the Company or any of its
subsidiaries is a party to or bound by any Contract, or subject to any Order of
any Governmental Entity, that may interfere with the use of such director's,
officer's or other employee's best efforts to promote the interests of the
Company and its subsidiaries, conflict with the business of the Company or any
of its subsidiaries (as now conducted or as proposed to be conducted) or the
transactions contemplated by this Agreement or is reasonably more likely than
not to have a material adverse effect on the Company. To the knowledge of the
Company, no activity of any employee of the Company or any of its subsidiaries
as or while an employee of the Company or any such subsidiary has caused a
violation of any employment agreement, confidentiality agreement, patent
disclosure agreement or other Contract. To the knowledge of the Company, the
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancelation or acceleration of any obligation to or
loss of a material benefit under, any Contract under which any such employees
are now obligated.
(b) All former and current employees, contractors and consultants of
the Company and each of its subsidiaries, including all employees, contractors
and consultants involved in the development of Intellectual Property of the
Company and each of its subsidiaries, have executed and delivered to the Company
a confidential information agreement that is substantially similar in content to
the form attached as Exhibit A hereto restricting such person's right to use and
disclose confidential information of the
<PAGE>
Company and its subsidiaries. All such persons have been party to a proprietary
rights agreement that is substantially similar in content to the form attached
as Exhibit A hereto with the Company or any of its subsidiaries, during the
entire term of each such person's employment with or retention by the Company or
by such subsidiary, pursuant to which either (i) in accordance with applicable
Federal, state and foreign law, the Company or such subsidiary has been accorded
full, effective, exclusive and original ownership of all material Intellectual
Property thereby arising or (ii) there has been conveyed to the Company or such
subsidiary by appropriately executed instruments of assignment full, effective
and exclusive ownership of all tangible and intangible property, including
inventions relating to the business of the Company and its subsidiaries and
thereby arising within the scope of their employment or engagement by or with
the Company or such subsidiary, copies of which agreements have been made
available to Parent prior to the date hereof. No employee, contractor or
consultant has made any material alteration or modification to the form of
agreement attached as Exhibit A hereto. No employee, contractor or consultant of
the Company who has contributed to, or participated in, the conception and
development of Intellectual Property for the Company or any of its subsidiaries
has asserted or threatened any claim against the Company or such subsidiary in
connection with such person's involvement in the conception and development of
such Intellectual Property and to the knowledge of the Company no such person
has a reasonable basis for any such claim.
(c) None of the officers, employees or (to the knowledge of the
Company) contractors or consultants of the Company or any of its subsidiaries
has any patents issued or applications pending for any device, process, method,
design or invention of any kind that was developed after the date on which such
person became an officer or employee of the Company or any of its subsidiaries
or, to the knowledge of the Company, prior to the date on which such person
became such an officer or employee, in each case that is now used or needed by
the Company or such subsidiary in the furtherance of its business operations as
presently conducted or as proposed to be conducted by the Company or such
subsidiary in accordance with the Business Plan, which patents or applications
have not been assigned to the Company or such subsidiary with such assignment
duly recorded in the United States Patent and Trademark Office or with the
applicable foreign Governmental Entity.
(d) None of the employees of the Company or any of its subsidiaries
are represented by any union with respect to their employment by the Company or
such subsidiary. Since the date of its incorporation, neither
<PAGE>
the Company nor any of its subsidiaries has experienced any labor disputes,
union organization attempts or work stoppage due to labor disagreements. Each of
the Company and its subsidiaries is in compliance in all material respects with
all applicable Laws respecting employment and employment practices, occupational
safety and health standards, terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice. The Company has not
received notice of any unfair labor practice charge or complaint against the
Company or any of its subsidiaries which is pending and, to the knowledge of the
Company, there is no unfair labor practice charge or complaint against the
Company threatened before the National Labor Relations Board or any comparable
state or foreign agency or authority. There is no labor strike, dispute, request
for representation, slowdown or stoppage actually pending or threatened against
or affecting the Company or any of its subsidiaries. No question concerning
representation has been raised or is, to the knowledge of the Company,
threatened respecting the employees of the Company or any of its subsidiaries.
No employment-related grievance which is reasonably more likely than not to have
a material adverse effect on the Company, nor any arbitration proceeding arising
out of collective bargaining agreements, is pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries.
(e) Section 3.14(e) of the Company Disclosure Schedule sets forth a
complete and accurate list of all current employees of the Company and each of
its subsidiaries, including their title, current compensation, bonus and
commission structure and whether any such employee was, to the knowledge of the
Company, formerly an employee of Parent.
(f) Section 3.14(f) of the Company Disclosure Schedule sets forth (i)
the name of each employee of the Company entitled to severance benefits payable
as of the Effective Time or upon termination of employment after the Effective
Time pursuant to any individual employment, severance, termination or change of
control agreement or arrangement between the Company or any of its subsidiaries
and such employee, (ii) the category or type of each such severance benefit to
which such employee is entitled, (iii) the aggregate value of each such
severance benefit payable as of the Effective Time and each such severance
benefit that would be payable upon termination of employment after the Effective
Time, other than the acceleration of Stock Options issued pursuant to the 1999
Stock Option Plan, and (iv) the aggregate value of severance that would be paid
to each employee set forth on Section 3.14(f) of the Company Disclosure Schedule
upon termination of employment based on the terms of any severance plan or plans
applicable to such
<PAGE>
employee in effect at the Effective Time other than the acceleration of Stock
Options issued pursuant to the 1999 Stock Option Plan, as described in Section
3.14(f) of the Company Disclosure Schedule.
SECTION 3.15. Benefit Plans. (a) Section 3.15(a) of the Company
Disclosure Schedule contains a list of each "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) (hereinafter a "Pension Plan"), "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA, hereinafter a "Welfare Plan"), stock
option, stock purchase, deferred compensation plan or arrangement, and other
employee fringe benefit plan or arrangement maintained, contributed to or
required to be maintained or contributed to by the Company and its subsidiaries
or any other person or entity that, together with the Company, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code (each a
"Commonly Controlled Entity") or any entity that is considered a co-employer
with the Company or any Commonly Controlled Entity for the benefit of any
present or former officers, employees, directors or independent contractors of
the Company or any of its subsidiaries (all the foregoing being herein called
"Benefit Plans"). The Company has delivered to Parent true and complete copies
of (1) each Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (2) the two most recent annual reports on Form 5500 filed
with the Internal Revenue Service with respect to each Benefit Plan (if any such
report was required by applicable law), (3) the most recent summary plan
description for each Benefit Plan for which such a summary plan description is
required by applicable law and (4) each trust agreement and insurance or annuity
contract relating to any Benefit Plan. No Benefit Plan is a defined benefit plan
(within the meaning of Section 3(35) of ERISA) or is subject to Title IV of
ERISA or the minimum funding requirements of Section 412 of the Code or Section
302 of ERISA.
(b) Each Benefit Plan has been administered in all material respects
in accordance with its terms. The Company, its subsidiaries and all the Benefit
Plans are in compliance in all material respects with the applicable provisions
of ERISA and the Code. All reports, returns and similar documents with respect
to the Benefit Plans required to be filed with any governmental agency or
distributed to any Benefit Plan participant have been duly and timely filed or
distributed. The Company has received no notice, and to the Company's knowledge,
there are no investigations by any governmental agency, termination proceedings
or other claims (except claims for benefits payable in the normal operation of
the Benefit Plans), suits or proceedings against or
<PAGE>
involving any Benefit Plan or asserting any rights or claims to benefits under
any Benefit Plan that could give rise to any material liability, and there are
not any facts that could give rise to any material liability in the event of any
such investigation, claim, suit or proceeding.
(c) All contributions to, and payments from, the Benefit Plans that
may have been required to be made in accordance with the terms of the Benefit
Plans and any applicable collective bargaining agreement have been timely made.
(d) Each Benefit Plan that is a Pension Plan (hereinafter, a "Company
Pension Plan") has been the subject of a determination letter from the Internal
Revenue Service to the effect that such Company Pension Plan, or the prototype
document on which it is based, is qualified and exempt from Federal income taxes
under Sections 401(a) and 501(a), respectively, of the Code; no such
determination letter has been revoked, and, to the knowledge of the Company,
revocation has not been threatened; and such Company Pension Plan has not been
amended since the effective date of its most recent determination letter in any
respect that might adversely affect its qualification, materially increase its
cost or require security under Section 307 of ERISA. The Company has delivered
to Parent a copy of the most recent determination letter received with respect
to each Company Pension Plan for which such a letter has been issued, as well as
a copy of any pending application for a determination letter. The Company has
also provided to Parent a list of all Company Pension Plan amendments as to
which a favorable determination letter has not yet been received. No event has
occurred that could subject any Company Pension Plan to tax under Section 511 of
the Code.
(e) With respect to each Benefit Plan, (i) there has not occurred any
prohibited transaction in which the Company or any of its employees has engaged
that could subject the Company or any of its employees, or, to the knowledge of
the Company, a trustee, administrator or other fiduciary of any trust created
under any Benefit Plan to the tax or penalty on prohibited transactions imposed
by Section 4975 of ERISA or the sanctions imposed under Title I of ERISA, and
(ii) neither the Company or, to the knowledge of the Company, any trustee,
administrator or other fiduciary of any Benefit Plan nor any agent of any of the
foregoing has engaged in any transaction or acted in a manner that could, or
failed to act so as to, subject the Company or, to the knowledge of the Company,
any trustee, administrator or other fiduciary to any liability for breach of
fiduciary duty under ERISA or any other applicable law.
<PAGE>
(f) The list of Welfare Plans in Section 3.15(f) of the Company
Disclosure Schedule discloses whether each Welfare Plan is (i) unfunded, (ii)
funded through a "welfare benefit fund", as such term is defined in Section
419(e) of the Code, or other funding mechanism or (iii) insured. Each such
Welfare Plan may be amended or terminated without material liability to the
Company at any time after the Closing Date. The Company and its subsidiaries
comply in all material respects with the applicable requirements of Section
4980B(f) of the Code with respect to each Benefit Plan that is a group health
plan, as such term is defined in Section 5000(b)(1) of the Code.
(g) No employee of the Company will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any Benefit Plan as a result of the transactions contemplated by this
Agreement.
SECTION 3.16. Insurance. Section 3.16 of the Company Disclosure
Schedule sets forth a complete and accurate list and description, including
annual premiums and deductibles, of all policies of fire, liability, product
liability, workmen's compensation, health and other forms of insurance presently
in effect on the date hereof with respect to the Company's and its subsidiaries'
business, true and complete copies of which have been delivered to, or made
available for review by, Parent. All such policies are valid, outstanding and
enforceable policies. The Company reasonably believes such policies are
sufficient to protect the properties, assets, operations and business of the
Company and each of its subsidiaries against the risks of the sort normally
insured by similar businesses. No notice of cancelation or termination has been
received with respect to any such policy.
SECTION 3.17. Customers; Effect of Transaction. (a) The Company does
not have any customer to whom it made more than 5% of its sales during its most
recent six-month period. During the past two years, the Company has received no
customer complaints concerning its products and services, nor has it had any of
its products returned by a purchaser thereof, other than complaints and returns
in the ordinary course of business.
(b) No creditor, supplier, employee, client or other customer or other
person having a material business relationship with the Company or any of its
subsidiaries has informed any officer of the Company or such subsidiary orally
or in writing or has informed the Company or such subsidiary in writing that
such person intends to materially change the relationship because of the
transactions contemplated by this Agreement.
<PAGE>
SECTION 3.18. Disclosure. Neither the Company nor any of its
subsidiaries has failed to disclose to Parent any fact that is reasonably more
likely than not to have a material adverse effect on the Company or any of its
subsidiaries or impede or impair the ability of the Company to perform its
obligations under this Agreement in any material respect. The representations or
warranties of the Company contained in this Agreement, together with the
statements contained in the Company Disclosure Schedule, and the certificates
and other documents or instruments delivered or to be delivered pursuant to this
Agreement by or on behalf of the Company or any of its subsidiaries to Parent or
any of its representatives, taken as a whole, do not contain any untrue
statement of a material fact, or omit to state any material fact necessary, in
light of the circumstances under which they were or will be made, in order to
make the statements herein or therein not misleading.
SECTION 3.19. Information Supplied. None of the information supplied
by the Company specifically for and delivered in connection with the
solicitation by the Company of the Consents (the "Consent Solicitation")
contained any untrue statement of a material fact or omitted to state any
material fact as of the date such information was given to the Stockholders
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, taken as a
whole, not misleading. Notwithstanding the foregoing, no representation or
warranty is made by the Company with respect to information supplied by Parent
specifically for and delivered in connection with the Consent Solicitation.
SECTION 3.20. Consent Solicitation; Voting Requirements. Section 3.20
of the Company Disclosure Schedule sets forth a list of the stockholders of the
Company who executed and delivered Consents, the number of shares of each class
of Company Capital Stock owned of record by each such stockholder on the Record
Date and the number of shares of each class of Company Capital Stock held of
record by such Stockholder on the Record Date with respect to which a Consent
was delivered to the Secretary of the Company. The affirmative vote or consent
of the holders of a majority of the outstanding shares of Company Series A
Preferred Stock, voting separately as a class (the "Preferred Stock Approval"),
is the only vote or consent of the holders of any class or series of Company
Capital Stock necessary to approve the execution and delivery of this Agreement
by the Company. The affirmative vote or consent of each of (a) the holders of a
majority of the outstanding shares of Company Series A Preferred Stock and (b)
the holders of a majority of the outstanding shares of Company Series A
Preferred Stock and Company Class A Common Stock,
<PAGE>
in each case voting as a class (the "Capital Stock Approval" and, together with
the Preferred Stock Approval, the "Stockholder Approval"), are the only votes or
consents of the holders of any class or series of Company Capital Stock
necessary to adopt this Agreement. As of the date hereof (x) holders
representing 100% of the shares of Company Series A Preferred Stock outstanding
as of the Record Date have delivered the Preferred Stock Consents to the
Secretary of the Company and (y) holders representing 100% of the shares of
Company Series A Preferred Stock and Company Class A Common Stock outstanding as
of the Record Date have delivered the Stockholder Consents to the Secretary of
the Company. The record date under the DGCL and the Amended and Restated
Certificate of Incorporation and the By-laws of the Company for purposes of
determining stockholders of the Company entitled to give consents with respect
to the Stockholder Approval is the Record Date. The Company has delivered to
each Stockholder a copy of the letter attached as Exhibit B hereto, together in
the same package with the form of written consent to be executed and delivered
by such person. The Consents were obtained in accordance with applicable Law and
the Stockholder Approval has been obtained.
SECTION 3.21. Brokers. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of the Company.
SECTION 3.22. State Takeover Statutes. The Board of Directors of the
Company has approved the Merger and this Agreement and the other transactions
contemplated by this Agreement, and such approval is sufficient to render
inapplicable to the Merger and this Agreement and the other transactions
contemplated by this Agreement, any state takeover statute or similar Law that
would otherwise be applicable to the Merger and this Agreement and the other
transactions contemplated by this Agreement.
SECTION 3.23. Year 2000 Compliance. All computer and other systems,
software (whether embedded or otherwise), hardware and other products (other
than motherboards) owned or licensed by the Company or any of its subsidiaries
and used in connection with the services provided by the Company and, to the
Company's knowledge, all computer and other systems, software (whether embedded
or otherwise), hardware and other products (other than motherboards) produced by
any third party that are licensed by the Company or any of its subsidiaries
under a license that does not explicitly disclaim liability with respect to
failures of such products to be Year 2000 Ready, in each case have been written,
<PAGE>
manufactured and tested to be Year 2000 Ready, except where the failure to be
Year 2000 Ready individually or in the aggregate is not reasonably more likely
than not to have a material adverse effect on the Company. For purposes of this
Agreement, "Year 2000 Ready" shall mean, with respect to any system, software
(whether embedded or otherwise), product, equipment or facility, that such
system, product, equipment or facility is capable of correctly processing,
providing, receiving and manipulating date data within and between the twentieth
and twenty-first centuries, and its operation and functionality has not been
adversely affected and will not be adversely affected in any respect as a result
of the advent of the Year 2000.
SECTION 3.24. Customer Accounts Receivable. All customer accounts
receivable of the Company, whether reflected on the Unaudited Statements or
subsequently created, have arisen from bona fide transactions in the ordinary
course of business. The Company reasonably believes all such customer accounts
receivable are good and collectible at the aggregate recorded amounts thereof,
net of any applicable reserves for doubtful accounts reflected on the Unaudited
Statements. The Company has good and marketable title to its accounts
receivable, free and clear of all Liens. Since the September 30, 1999, there
have not been any write-offs as uncollectible of any accounts receivable of the
Company, except for write-offs in the ordinary course of business.
SECTION 3.25. Corporate Name. The Company (i) has the exclusive right
to use its name as the name of a corporation in any jurisdiction in which the
Company does business and (ii) has not received any notice of conflict during
the past two years with respect to the rights of others regarding the corporate
name of the Company. To the knowledge of the Company, no person is presently
authorized by the Company to use the name of the Company.
SECTION 3.26. Accounts; Safe Deposit Boxes; Powers of Attorney;
Officers and Directors. Section 3.26 of the Company Disclosure Schedule sets
forth (i) a true and correct list of all bank and savings accounts, certificates
of deposit and safe deposit boxes of the Company and its subsidiaries and those
persons authorized to sign thereon, (ii) a true and correct list of all powers
of attorney granted by the Company and its subsidiaries and those persons
authorized to act thereunder and (iii) a true and correct list of all officers
and directors of the Company and its subsidiaries.
SECTION 3.27. Traffic. Section 3.27 of the Company Disclosure Schedule
sets forth for each of August, September and October of 1999, true and complete
traffic
<PAGE>
metrics relating to (a) banner impressions in inventory,1 (b) paid pop-up
impressions,2 (c) e-mercial impressions in inventory, (d) sent Gamesville Times
newsletter e-mails and (e) game starts for each game. The Company has not paid
any third party any fee for traffic referrals.
SECTION 3.28. Underdeliveries under Advertising Contracts. The Company
has no underdelivered services in amounts in excess of 100,000 advertising
banners per month under any of its advertising Contracts during the six-month
period ended September 30, 1999.
ARTICLE IV
Representations and Warranties of Parent and Sub
Except for items disclosed on the disclosure schedule (with specific
reference to the SECTION of this Agreement to which the information stated in
such disclosure relates) delivered by Parent to the Company prior to the
execution and delivery of this Agreement (the "Parent Disclosure Schedule"),
Parent and Sub represent and warrant to the Company as follows:
SECTION 4.01. Organization. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite power and authority to own,
lease and otherwise hold and operate its assets and to carry on its business as
now being conducted.
SECTION 4.02. Authority; Noncontravention. Eachof Parent and Sub has
the requisite corporate power and authority to enter into this Agreement, the
Escrow Agreement and the Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement, the Escrow Agreement and the Registration Rights
Agreement and the consummation by Parent and Sub of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub and no other corporate
proceedings on the part of Parent and Sub are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. Each of this
Agreement, the Escrow Agreement and the Registration
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Rights Agreement has been duly executed and delivered by Parent and Sub and,
when executed and delivered by the Company, constitutes a legal, valid and
binding obligation of each of Parent and Sub, enforceable against Parent and Sub
in accordance with its terms. The execution and delivery of each of this
Agreement, the Escrow Agreement and the Registration Rights Agreement do not,
and the consummation of the transactions contemplated by this Agreement, the
Escrow Agreement and the Registration Rights Agreement and compliance with the
provisions hereof and thereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancelation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien, in or upon any of the properties or assets of Parent under, any
provision of (i) the certificate of incorporation or by-laws of Parent or Sub,
in each case as amended to the date hereof, (ii) any Contract applicable to
Parent or Sub or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any (A) Law or (B) Order, in each case, applicable to Parent or Sub or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate is not reasonably more likely than not to (x)
impair in any material respect the ability of Parent or Sub to perform its
obligations under this Agreement, (y) prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement or (z)
have a material adverse effect on Parent. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Parent or Sub in connection with the
execution and delivery of this Agreement, the Escrow Agreement or the
Registration Rights Agreement by Parent or Sub or the consummation by Parent or
Sub of the Merger or the other transactions contemplated by this Agreement,
except for (1) the filing by the Company of a premerger notification and report
form by Parent under the HSR Act, (2) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and (3) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings the failure of which to be obtained or made individually or in the
aggregate is not reasonably more likely than not to have a material adverse
effect on Parent or impair in any material respect the ability of Parent or Sub
to perform its obligations under this Agreement, the Escrow Agreement or the
Registration Rights Agreement or prevent or materially delay the consummation of
any of the transactions contemplated by this Agreement, the Escrow Agreement or
the Registration Rights Agreement.
<PAGE>
SECTION 4.03. Capital Stock of Parent. (a) The authorized capital
stock of Parent consists of 300,000,000 shares of Parent Common Stock, of which
96,323,590 shares were issued and outstanding on November 19, 1999, and
5,000,000 shares of Preferred Stock, par value $0.01 per share, none of which
were issued or outstanding on November 19, 1999. Except as set forth in Section
4.03 of the Parent Disclosure Schedule, all the issued and outstanding shares of
Parent Common Stock are (and all shares of Parent Common Stock to be issued in
connection with the Merger, including shares to be issued upon the exercise of
the Adjusted Options when issued in accordance with this Agreement, shall be)
duly authorized, validly issued, fully paid and nonassessable, and none of such
shares has been or will be issued in violation of any applicable preemptive
rights or applicable Federal securities laws.
(b) The authorized capital stock of Sub consists of 1,000 shares of
common stock, par value $0.01 per share, of which 1,000 shares are issued and
outstanding, all of which shares are owned beneficially and of record by Parent.
SECTION 4.04. Parent SEC Documents. Parent has filed with the
Securities and Exchange Commission (the "SEC") all reports, schedules, forms,
statements and other documents required to be filed with the SEC since August 1,
1998 (collectively, the "Parent SEC Documents"). Copies of all such documents
filed after November 12, 1999 shall be provided to the Company promptly
following the filing thereof. As of their respective dates, the Parent SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Parent SEC
Documents, and none of the Parent SEC Documents at the time they were filed and
as of the date hereof contained or contain any untrue statement of a material
fact or omitted or omit to state a 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. The financial
statements of Parent included in the Parent SEC Documents complied, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented in all material respects
the consolidated financial position of Parent and its consolidated subsidiaries
as of the dates thereof and the
<PAGE>
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments and the absence of footnotes).
SECTION 4.05. Absence of Certain Changes or Events. Except for its
obligations under this Agreement or the transactions contemplated hereby and
except as disclosed in the Parent SEC Documents filed and publicly available
prior to the date of this Agreement (the "Parent Filed SEC Documents"), since
the date of the most recent audited financial statements included in the Parent
Filed SEC Documents, Parent has conducted its business only in the ordinary
course and there has not been any material adverse change with respect to
Parent.
SECTION 4.06. Litigation. There is no Litigation pending, threatened
or to the knowledge of Parent investigation pending or threatened nor has Parent
nor any of its subsidiaries received any notice that in any manner challenges or
seeks to prevent, enjoin, alter or delay the Merger.
SECTION 4.07. Taxes. Neither Parent nor any of its subsidiaries has
taken or agreed to take any action or knows of any fact, agreement, plan or
other circumstance that is likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
SECTION 4.08. Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
SECTION 4.09. Information Supplied. None of the information supplied
by Parent or Sub in writing specifically for and delivered in connection with
the Consent Solicitation contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
SECTION 4.10. Brokers. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission, in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or Sub.
<PAGE>
ARTICLE V
Covenants
SECTION 5.01. Covenants of the Company. (a) During the period from the
date of this Agreement to the Effective Time, except as consented to in writing
by Parent or as specifically contemplated by this Agreement, the Company shall,
and shall cause its subsidiaries to, carry on their respective businesses in the
ordinary course consistent with past practice and use their commercially
reasonable efforts to comply with all applicable Laws and, to the extent
consistent therewith, use their commercially reasonable efforts to preserve
their assets and technology and preserve their relationships with material
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the Effective Time, except
as consented to in writing by Parent or as specifically contemplated by this
Agreement, the Company shall not, and shall not permit any of its subsidiaries
to:
(i) (x) declare, set aside or pay any dividends on, or make other
distributions in respect of, any of its capital stock, (y) split, combine
or reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (z) purchase, redeem or
otherwise acquire any shares of capital stock or any other securities of
the Company or any of its subsidiaries, or any options, warrants, calls or
rights to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber, or authorize
or propose the issuance, delivery, sale, pledge or other encumbrance of,
any shares of its capital stock, or any other securities of any class or
any securities convertible into, or any options, warrants, calls or rights
to acquire, any such shares or convertible securities, other than (x) the
conversion of shares of Company Series A Preferred Stock in accordance with
their terms as of the date of this Agreement and (y) the issuance of
Company Class B Common Stock upon the exercise of Stock Options and
Warrants in accordance with their respective terms as of the date of this
Agreement.
(iii) amend or propose to amend its certificate of incorporation or
by-laws or similar organizational documents;
<PAGE>
(iv) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other entity or division thereof or (y) any assets which, in
the aggregate, are in excess of $10,000;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets, except
sales of obsolete equipment in the ordinary course of business consistent
with past practice;
(vi) repurchase, prepay or incur any Indebtedness or Guarantee any
such Indebtedness of another person, issue or sell any options, warrants,
calls or other rights to acquire any Indebtedness of the Company or any of
its subsidiaries, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, or make any
loans, advances or capital contributions to, or investments in, any other
person;
(vii) make or agree to make any new capital expenditure or
expenditures which, in the aggregate, are in excess of $10,000;
(viii) (A) pay, discharge, settle or satisfy any claims, liabilities
or obligations (whether absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
(x) of all amounts outstanding under the Loan and Security Agreement by and
between the Company and the Silicon Valley Bank dated as of October 8, 1999
(the "Loan and Security Agreement") and (y) in the ordinary course of
business or in accordance with their terms as of the date hereof, of
claims, liabilities or obligations reflected or reserved against on the
balance sheet of the Company as of September 30, 1999 (for amounts not in
excess of such reserves), or incurred since September 30, 1999, in the
ordinary course of business consistent with past practice, (B) waive,
release, grant or transfer any right of material value outside the ordinary
course of business consistent with past practice or (C) waive any material
benefits of, or agree to modify in any adverse respect, or fail to enforce,
any confidentiality, standstill or similar agreement to which the Company
or any of its subsidiaries is a party;
<PAGE>
(ix) modify, amend or terminate any material Contract to which the
Company or such subsidiary is a party or waive, release or assign any
material rights or claims thereunder other than the Contracts set forth on
Schedule 5.01;
(x) enter into any material Contracts, including any Contracts
relating to any material Intellectual Property;
(xi) except as otherwise contemplated by this Agreement or as required
to comply with applicable law or agreements, plans or arrangements existing
on the date hereof, (A) terminate, adopt, enter into or amend any
collective bargaining agreement or Benefit Plan, (B) increase in any manner
the compensation or fringe benefits of, or pay any bonus to, any director,
officer, employee or consultant, (C) pay any material benefit not provided
for under any Benefit Plan, (D) increase in any manner the severance or
termination pay of any director, officer or employee, (E) enter into (I)
any employment, severance, termination or indemnification agreement, or
consulting agreement (other than in the ordinary course of business), with
any current or former director, officer, employee or consultant or (II) any
agreements with any current or former director, officer, employee or
consultant the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the
Company or any of its subsidiaries of the nature contemplated by this
Agreement, (F) grant any awards under any Benefit Plan (including the grant
of Stock Options, stock appreciation rights, stock based or stock related
awards, performance units or restricted stock or the removal of existing
restrictions in any Benefit Plans or agreements or awards made thereunder),
(G) take any action to fund or in any other way secure the payment of
compensation or benefits under any employee plan, contract, agreement or
arrangement or Benefit Plan or (H) take any action to accelerate the
vesting or payment of any compensation or benefit under any Benefit Plan;
(xii) revalue any of its material assets or, except as required by
GAAP, make any change in accounting methods, principles or practices;
(xiii) commence any Litigation (other than Litigation relative to
collections of accounts receivable Litigation commenced in order to comply
with Section 5.01(a)(viii) hereof or as a result of
<PAGE>
Litigation commenced against the Company or any of its subsidiaries);
(xiv) hire any employees; and
(xv) authorize any of, or commit, resolve or agree to take any of, the
actions prohibited by clauses (i) through (xiv) above.
(b) Certain Tax Matters. (i) Tax Returns. (A) During the period from
the date of this Agreement to the Effective Time, each of the Company, its
subsidiaries and Company Consolidated Groups shall timely file or cause to be
timely filed all Tax Returns ("Post-Signing Returns") required to be filed by it
(after taking into account any applicable extensions) and may file a Tax Return
that is a short period S corporation return for the period from January 1, 1999
to May 25, 1999 (in each case, at the Company's own cost and expense and in a
manner that is consistent with past practice and that is not reasonably likely
to defer income to a taxable period that ends after the Closing Date or to
accelerate deductions to a taxable period that ends on or before the Closing
Date; provided, however, that use of the cash method of accounting will be
deemed not to be reasonably likely to defer income to a taxable period that ends
after the Closing date or to accelerate deductions to a taxable period that ends
on or before the Closing Date).
(B) The Company and each of its subsidiaries shall timely pay all
Taxes due and payable in respect of such Post-Signing Returns that are filed
pursuant to Section 5.01(b)(i)(A) of this Agreement.
(ii) Company Covenants. (A) The Company shall accrue a reserve in its
books and records and financial statements in accordance with past practice
for all Taxes payable by the Company and each of its subsidiaries for which
no Post-Signing Return is due prior to the Effective Time.
(B) Prior to the Effective Time, the Company and each of its
subsidiaries shall promptly notify Parent of any suit, claim, action,
investigation, proceeding or audit (collectively, "Actions") pending
against or with respect to the Company or any of its subsidiaries in
respect of any Tax. None of the Company or any of its subsidiaries
shall settle or compromise any such Action without Parent's prior
written consent.
(C) Prior to the Effective Time, none of the Company or any of
its subsidiaries shall make or
<PAGE>
change any material Tax election, amend any Tax Return or take
any other action (or fail to take any other action) in respect of
Taxes, in each case, if such action (or failure to take action) could
reasonably be expected to have the effect of increasing the Tax
liability of Parent or any of its affiliates (including, after the
Closing Date, the Company and its subsidiaries) with respect to a
taxable period that ends after the Closing Date.
(iii) Additional Tax Matters. (A) Any and all existing Tax sharing
agreements or arrangements between the Company and/or any subsidiary, on
the one hand, and any other party, on the other hand, shall be terminated
as of the Closing Date. After such date, none of the Company or any of its
subsidiaries shall have any obligations thereunder.
(B) All stock transfer, real property transfer, documentary,
sales, use, registration, value-added and other similar Taxes
(including interest, penalties and additions thereto) incurred in
connection with the transactions contemplated by the Agreement shall
be borne by the Company, and the Company shall indemnify Parent or any
of its affiliates for any such Taxes incurred as a result of the
Company's failure timely to pay such Taxes.
(C) The Company shall deliver to Parent at or prior to the
Closing a certificate, in form and substance reasonably satisfactory
to Parent and the Company, certifying that the transactions
contemplated by this Agreement are not subject to the Foreign
Investment in Real Property Tax Act.
(c) Advice of Changes; Filings. The Company and each of its
subsidiaries shall (i) confer on a regular and frequent basis with Parent to
report on operational matters and other matters requested by Parent and (ii)
promptly advise Parent orally and in writing of any change or event which is
reasonably more likely than not to have a material adverse effect on the
Company. The Company and Parent shall promptly provide the other copies of all
filings made by such party with any Federal, state, local or foreign
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby, other than the portions of such filings that include
confidential information not directly related to the transactions contemplated
by this Agreement.
SECTION 5.02. Other Actions. The Company shall not, nor shall it
permit any of its subsidiaries to, take
<PAGE>
any action that would, or that could reasonably be expected to, result in (i)
any of the representations and warranties of the Company set forth in this
Agreement that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions set forth in Article VII not
being satisfied.
ARTICLE VI
Additional Agreements
SECTION 6.01. Access to Information. Upon reasonable notice, the
Company shall, and shall cause each of its subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of Parent,
reasonable access, during normal business hours during the period prior to the
Effective Time, to all its employees, properties, books, contracts, commitments
and records and, during such period, the Company shall, and shall cause each of
its subsidiaries, accountants, counsel and other advisors to, furnish promptly
to Parent all information concerning its business, properties and personnel as
Parent may reasonably request. Parent will treat any such information which is
nonpublic as "Proprietary Information" in accordance with the terms of the
Confidentiality and Nondisclosure Agreement dated as of October 22, 1999 (the
"Confidentiality Agreement"), between Parent and the Company and in the event of
termination of this Agreement for any reason Parent shall promptly upon request
return or destroy all nonpublic documents obtained from the Company, and any
copies made of such documents, to the Company.
SECTION 6.02. Legal Conditions to Merger. Each of the Company, Parent
and Sub will use reasonable efforts to take, and will cause each of its
subsidiaries to use reasonable efforts to take, all actions and to do, or cause
to be done, all things necessary, proper and advisable under applicable laws and
regulations promptly to consummate and make effective the transactions
contemplated by this Agreement (including cooperating fully with the other
parties hereto, furnishing all information to each other in connection with any
requirements imposed upon any party in connection with the Merger). Each of the
Company, Parent and Sub will, and will cause each of its subsidiaries to, take
all reasonable actions necessary to obtain (and will cooperate with each other
in obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party, required to
be obtained or made by Parent or the Company in connection with the Merger or
the taking of any
<PAGE>
action contemplated thereby or by this Agreement, except that no party need
waive any substantial rights or agree to any substantial limitation on its
operations or to dispose of, or enter into any licensing or similar arrangement
with respect to, any material assets.
SECTION 6.03. Stock Options; Warrants. (a) As soon as practicable
following the date of this Agreement, the Board of Directors of the Company (or,
if appropriate, any committee administering the Company Stock Plans) shall adopt
such resolutions or take such other actions (if any) as may be required to
effect the following:
(i) adjust the terms of all outstanding Stock Options granted under
the Company Stock Plans, whether vested or unvested, as necessary to
provide that, at the Effective Time, each such Stock Option outstanding
immediately prior to the Effective Time shall be converted into an option
to acquire, on the same terms and conditions as were applicable under such
Stock Option, the number of shares of Parent Common Stock (rounded down to
the nearest whole share), determined by multiplying the number of shares of
Company Class B Common Stock subject to such Stock Option by the Exchange
Ratio, at an exercise price per share of Parent Common Stock equal to (1)
the per share exercise price for the shares of Company Class B Common Stock
otherwise purchasable pursuant to such Stock Option divided by (2) the
Exchange Ratio (each, as so adjusted, an "Adjusted Option"), provided that
such exercise price shall be rounded up to the nearest whole cent; and
(ii) make such other changes to the Company Stock Plans as Parent and
the Company may agree are appropriate to give effect to the Merger.
(b) The adjustments provided herein with respect to any Stock Options
that are "incentive stock options" as defined in Section 422 of the Code shall
be and are intended to be effected in a manner which is consistent with Section
424(a) of the Code.
(c) At the Effective Time, by virtue of the Merger and without the
need of any further corporate action, Parent shall assume the Company Stock
Plans, with the result that all obligations of the Company under the Company
Stock Plans, including with respect to Stock Options outstanding at the
Effective Time, shall be obligations of Parent following the Effective Time.
(d) Prior to the Effective Time, Parent shall prepare and file with
the SEC a registration statement on
<PAGE>
Form S-8 (or another appropriate form) registering a number of shares of Parent
Common Stock equal to the number of shares subject to the Adjusted Options. Such
registration statement shall be kept effective (and the current status of the
prospectus or prospectuses required thereby shall be maintained) as long as any
Adjusted Options may remain outstanding.
(e) As soon as practicable and in any event within 30 days after the
Effective Time, Parent shall deliver to the holders of unvested Stock Options
appropriate notices setting forth such holders' rights pursuant to the
respective Company Stock Plan and the agreements evidencing the grants of such
Stock Options and that such Stock Options and agreements have been assumed by
Parent and shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 6.03 after giving effect to the
Merger).
(f) A holder of an Adjusted Option may exercise such Adjusted Option
in whole or in part in accordance with its terms by delivering a properly
executed notice of exercise to Parent, together with the consideration therefor
and the Federal withholding tax information, if any, required in accordance with
the related Company Stock Plan.
(g) Except as otherwise contemplated by this Section 6.03 and except
to the extent required under the respective terms of the Stock Options or
Company Stock Plans, all restrictions or limitations on transfer with respect to
Stock Options awarded under the Company Stock Plans or any other plan, program
or arrangement of the Company, to the extent that such restrictions or
limitations shall not have already lapsed, shall remain in full force and effect
with respect to such options after giving effect to the Merger and the
assumption by Parent as set forth above.
(h) At the Effective Time, by virtue of the Merger and without the
need for any further corporate action, each Warrant outstanding immediately
prior to the Effective Time shall be automatically converted into a warrant to
acquire, on the same terms and conditions as were applicable under such Warrant,
the number of shares of Parent Common Stock (rounded down to the nearest whole
share) determined by multiplying the number of shares of Company Class B Common
Stock subject to such Warrant by the Exchange Ratio, at a price per share of
Parent Common Stock equal to (A) the per share exercise price for the shares of
Company Class B Common Stock otherwise purchasable pursuant to such Warrant
divided by (B) the Exchange Ratio; provided, however, that such exercise price
shall be rounded up to the nearest whole cent.
<PAGE>
(i) This Section 6.03 shall survive the consummation of the Merger, is
intended to benefit the holders of the Stock Options and Warrants and shall be
enforceable by such persons.
SECTION 6.04. Fees and Expenses. Except as provided in Section
5.01(b), all fees and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated; provided, however, that such attorneys' fees, brokers' fees,
accountants' fees and consultants' fees incurred by the Company in excess of any
amount deducted from the aggregate purchase price pursuant to Section 2.01(c)
shall be paid by the Stockholders.
SECTION 6.05. Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
either the Company or Sub, the proper officers and directors of each party to
this Agreement shall take all such necessary action.
SECTION 6.06. Indemnification. From and after the Effective Time,
Parent shall cause the Surviving Corporation to (and, in the event of the
liquidation, dissolution or winding up of the Surviving Corporation, Parent
shall) fulfill and honor in all respects any indemnification obligations of the
Company owed to each person who is or was a director or officer of the Company
at or prior to the Effective Time (the "Indemnified Parties") under the
Company's Amended and Restated Certificate of Incorporation and By-laws as in
effect on the date hereof. The Certificate of Incorporation and By-laws of the
Surviving Corporation will at all times during a period of not fewer than six
years following the Effective Time, contain provisions with respect to
exculpation and indemnification that are at least as favorable to the
Indemnified Parties as those contained in the Amended and Restated Certificate
of Incorporation and Bylaws of the Company as in effect on the date hereof. This
Section 6.06 shall survive the consummation of the Merger, is intended to
benefit each Indemnified Party, shall be binding upon the successors and assigns
of Parent and the Surviving Corporation, and shall be enforceable by the
Indemnified Parties.
SECTION 6.07. Litigation. The Company shall give Parent the
opportunity to participate in the defense of any litigation against the Company
and/or its directors relating to the transactions contemplated by this
Agreement.
<PAGE>
SECTION 6.08. Tax Treatment. Each of Parent, Sub and the Company shall
use reasonable efforts to cause the Merger to qualify as a reorganization under
the provisions of Section 368 of the Code and the Company shall use reasonable
efforts to obtain the opinion of counsel referred to in Section 7.03(c),
including the execution of the letters of representation referred to therein.
SECTION 6.09. Letter of the Company's Accountants. The Company shall
use its reasonable efforts to cause to be delivered to Parent a letter from
Arthur Andersen LLP, addressed to Parent and the Company, dated as of the
Closing Date, stating that (i) Arthur Andersen LLP concurs with the conclusion
of the Company's management that, subject to customary qualifications, the
Company meets the requirements to be a party to a pooling of interests
transaction for financial reporting purposes under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations and (ii) the basis for
such concurrence is Arthur Andersen LLP's belief that the criteria for such
accounting treatment have been met.
SECTION 6.10. Letter of Parent's Accountants. Parent shall use its
reasonable efforts to cause to be delivered to the Company a letter from KPMG
LLP, addressed to the Company and Parent dated as of the Closing Date, stating
that (i) KPMG LLP concurs with the conclusion of Parent's management that,
subject to customary qualifications, the Merger qualifies for pooling of
interests treatment for financial reporting purposes under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations and (ii)
the basis for such concurrence is KPMG LLP's belief that the criteria for such
accounting treatment have been met.
SECTION 6.11. Affiliates. Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying all persons who may be deemed, in the
Company's reasonable judgment, at the time this Agreement is submitted for
approval and adoption to the stockholders of the Company, "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The Company shall use
its reasonable efforts to cause each such person to deliver to Parent as
promptly as practicable after the date of this Agreement a written agreement
substantially in the form attached as Exhibit C hereto.
SECTION 6.12. Employee Benefits. (a) During the six-month period
following the Effective Time (the "Transition Period"), Parent shall cause the
Surviving Corporation to either maintain the benefit programs provided by the
Company and its subsidiaries in effect immediately prior to the Effective Time
or replace all or any such
<PAGE>
programs with programs maintained for similarly situated employees of Parent,
provided that the aggregate level of benefits provided during the Transition
Period shall be substantially similar to the aggregate level of benefits
provided by the Company and its subsidiaries before the Effective Time. To the
extent that any plan of Parent or any of its affiliates (a "Parent Plan")
becomes applicable to any employee or former employee of the Company or its
subsidiaries, Parent shall grant, or cause to be granted, to such employees or
former employees credit for their service with the Company and its subsidiaries
for the purpose of determining eligibility to participate and nonforfeitability
of benefits under such Parent Plan and for purposes of benefit accrual under
vacation and severance pay plans (but only to the extent such service was
credited under similar plans of the Company and its subsidiaries).
(b) With respect to any welfare benefit plan of Parent or its
affiliates made available to individuals who immediately prior to the Closing
Date were employees of the Company or any of its Subsidiaries, Parent shall, or
shall cause the Surviving Corporation to, waive any waiting periods,
pre-existing condition exclusions and actively-at- work requirements to the
extent such provisions were inapplicable under the Company Plans immediately
before such plan of Parent was made available and provide that any expenses
incurred on or before the date such plan was made available by any such
individual or such individual's covered dependents shall be taken into account
for purposes of satisfying applicable deductible, coinsurance and maximum
out-of-pocket provisions.
SECTION 6.13. Indemnity Insurance. Parent and the Company shall
discuss the merits of substituting, in lieu of the Escrow Fund, an insurance
policy insuring the obligations of the Stockholders under the Escrow Agreement
for the benefit of the Parent and the other Indemnitees thereunder. This Section
does not create any obligation of either party to obtain any such insurance.
ARTICLE VII
Conditions
SECTION 7.01. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party hereto to effect the Merger
shall be subject
<PAGE>
to the satisfaction on or prior to the Closing Date of the
following conditions:
(a) HSR Act. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or expired.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any court of
competent jurisdiction or other legal restraint or prohibition
(collectively, "Legal Restraints") preventing the consummation of the
Merger shall be in effect.
(c) Pooling Letters. Parent and the Company shall have received
letters from KPMG LLP and Arthur Andersen LLP, in each case dated as of the
Closing Date, addressed to Parent and the Company, stating in substance the
matters to be stated by KPMG LLP and Arthur Andersen LLP, pursuant to
Sections 6.09 and 6.10, respectively.
SECTION 7.02. Conditions of Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions unless
waived by Parent and Sub:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement shall be true and correct as of
the date of this Agreement and as of the Closing Date with the same effect
as though made as of the Closing Date (except that the accuracy of
representations and warranties that by their terms speak as of a specified
date will be determined as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "material adverse effect"
set forth herein) does not have, and is not reasonably more likely than not
to have, individually or in the aggregate, a material adverse effect on the
Company. Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date. Parent shall
have received a certificate signed on behalf of the Company by the chief
executive officer of the Company to such effect.
<PAGE>
(c) No Litigation. There shall not be pending or threatened any suit,
action or proceeding brought by any Governmental Entity, or any suit,
action or proceeding with a reasonable probability of success brought by
any other third party, (i) seeking to restrain or prohibit the consummation
of the Merger; (ii) seeking to prohibit or limit in any material respect
the ownership or operation by the Company, Parent or any of their
respective affiliates of a material portion of the business or assets of
the Company and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, or to require any such person to dispose of
or hold separate any material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, as a result of the Merger; or (iii) seeking
to prohibit Parent or any of its affiliates from effectively controlling in
any material respect a substantial portion of the business or operations of
the Company or its subsidiaries.
(d) Legal Restraint. No Legal Restraint that could reasonably be
expected to result, directly or indirectly, in any of the effects referred
to in clauses (i) through (iii) of paragraph (c) of this Section 7.02 shall
be in effect.
(e) Appraisal Shares. No more than five percent of the shares of
Company Capital Stock outstanding immediately prior to the Effective Time
shall be Appraisal Shares.
(f) Indemnification and Escrow Agreement. The Indemnification and
Escrow Agreement in the form attached hereto as Exhibit E shall be in full
force and effect.
(g) Termination of Loan and Security Agreement. All amounts due and
owing under the Loan and Security Agreement shall have been repaid in full
and the Loan and Security Agreement shall have been terminated and all
Liens related thereto shall have been released.
(h) Termination of Founder's Agreements. The Founder's Agreements
between the Company and each of Steven N. Kane, Stuart Roseman and John L.
Furse shall have been terminated.
SECTION 7.03. Conditions of Obligations of the Company. The obligation
of the Company to effect the Merger shall be subject to the satisfaction on or
prior to the
<PAGE>
Closing Date of the following conditions unless waived by the Company:
(a) Representations and Warranties. The representations and warranties
of Parent contained in this Agreement shall be true and correct as of the
date of this Agreement and as of the Closing Date with the same effect as
though made as of the Closing Date (except that the accuracy of
representations and warranties that by their terms speak as of a specified
date will be determined as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "material adverse effect"
set forth therein) does not have, and is not reasonably more likely than
not to have, individually or in the aggregate, a material adverse effect on
Parent. The Company shall have received a certificate signed on behalf of
Parent by an authorized signatory of Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior the Closing Date. The
Company shall have received a certificate signed on behalf of Parent by an
authorized signatory of Parent to such effect.
(c) Tax Opinion. The Stockholders shall have received from Testa,
Hurwitz & Thibeault, LLP, counsel to the Company, on the Closing Date, an
opinion, dated as of such date and stating that the Merger qualifies for
Federal income tax purposes as a "reorganization" within the meaning of
Section 368(a) of the Code and that Parent, Sub and the Company will each
be a party to that reorganization within the meaning of Section 368(b) of
the Code. The issuance of such opinion shall be conditioned upon the
receipt by such counsel of customary representation letters from each of
the Company and Parent, which shall be in substantially the same form as
Exhibits F and G, respectively, with such changes as such counsel may
reasonably request.
SECTION 7.04. Frustration of Closing Conditions. None of the Company,
Parent or Sub may rely on the failure of any condition set forth in Section
7.01, 7.02 or 7.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to use reasonable efforts to consummate the
merger and the other transactions contemplated by this Agreement, as required by
and subject to Section 7.03.
<PAGE>
ARTICLE VIII
Termination and Amendment
SECTION 8.01. Termination. (a) This Agreement may be terminated at any
time prior to the Effective Time:
(i) by mutual consent of Parent and the Company;
(ii) by either Parent or the Company if the other party shall have
breached any of its representations, warranties, covenants or agreements
set forth in this Agreement, which breach (i) would give rise to the
failure of a condition to the obligation of such party set forth in Article
VII of this Agreement and (ii) has not been, or is incapable of being,
cured by such other party within 30 calendar days after such other party
receives written notice of such breach from Parent or the Company, as the
case may be;
(iii) by either Parent or the Company if any Legal Restraint
preventing the consummation of the Merger shall have become final and
nonappealable;
(iv) by either Parent or the Company if the Merger shall not have been
consummated on or before December 31, 1999; provided, however, that the
right to terminate this Agreement pursuant to this Section 8.01(d) shall
not be available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of the Merger to be
consummated by such time; and
(b) This Agreement may be terminated by the Company within five days
after Parent enters into a definitive acquisition agreement, merger agreement or
similar agreement that provides for the sale or transfer to any person of all or
substantially all the assets or capital stock of Parent.
SECTION 8.02. Effect of Termination. In the event of a termination of
this Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except with respect to any wilful breach of any
representation, warranty, covenant or agreement contained in this Agreement
prior to such termination; and except that Section 6.04, this Section 8.02,
Article IX and the last sentence of Section 6.01 shall continue in effect.
<PAGE>
SECTION 8.03. Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors
prior to the Effective Time, but no amendment shall be made which by law
requires further approval by the stockholders of the Company without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 8.04. Extension; Waiver. At any time prior to the Effective
Time, each of the parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance of the other party with any of the
agreements or conditions to its obligations contained herein. Any agreement on
the part of the party hereto to any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such party.
ARTICLE IX
Miscellaneous
SECTION 9.01. Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants of the Company in this Agreement
and in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, for a period of one year after the Effective Time, for purposes
of the Escrow Agreement. The covenant of Parent set forth in Section 6.03 shall
survive the Effective Time for a period of one year after the Effective Time.
SECTION 9.02. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties to this Agreement at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02451
Attention: Jeffrey M. Snider
<PAGE>
Telecopy No.: (781) 370-2600
with a copy to
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attention: Robert A. Kindler, Esq.
Telecopy: (212) 474-3700
(b) if to the Company, to
Gamesville.com, Inc.
One Arsenal Marketplace
Watertown, MA 02472
Attention: Steven N. Kane
Telecopy: (617) 673-1199
with a copy to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Oliver Street Tower
Boston, MA 02110
Attention: Michael Conza, Esq.
Telecopy: (617) 248-7100
SECTION 9.03. Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person and, for purposes of
Section 3.10(e) only, shall include (i) any director or officer of such
person and (ii) any person owning 5% or more of the voting securities of
such person;
(b) "executive officers" has the meaning ascribed to it in the
Exchange Act and, in any event, shall include Steven Kane, Stuart Roseman,
Jon Furse, Mark Herrmann, Paul La Rocca and Jasan Yanowitz.
(c) "knowledge" of any person which is not an individual means the
knowledge of such person's executive officers after reasonable inquiry and
investigation.
(d) "material adverse effect" means, when used in connection with the
Company or Parent, any state of
<PAGE>
facts, change, effect, condition, development, event or occurrence
that has been, is or is reasonably more likely than not to be materially
adverse to the business, assets, financial condition or results of
operations of such party and its subsidiaries, taken as a whole, other than
(i) any state of facts, change, effect, condition, development, event or
occurrence (A) arising directly as a result of (1) material changes in (x)
general economic or business conditions in the internet or media market or
(y) international or domestic economic conditions or (2) any political,
economic or social instability or (B) resulting from the announcement of
this Agreement or the effects of the pendency of the transactions
contemplated by this Agreement, including (1) any attrition of the
Company's employees, (2) any termination or modification of any existing
Contract between the Company and any of its customers or (3) any refusal of
any of the Company's suppliers to continue to do business with the Company
or (ii) in the case of Parent, any decrease in the price per share of
Parent Common Stock;
(e) "person" means an individual, corporation, company, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity; and
(f) a "subsidiary" of any person means another person, an amount of
the voting securities or other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board
of Directors or other governing body (or, if there are no such voting
interests, more than 50% of the equity interests of which) is owned
directly or indirectly by such first person.
SECTION 9.04. Entire Agreement; No Third Party Beneficiaries; Rights
of Ownership. This Agreement and the Confidentiality Agreement (including the
documents and the instruments referred to herein) (a) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and (b)
except as expressly set forth in Sections 6.03 and 6.06 of this Agreement, are
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
SECTION 9.05. 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.
<PAGE>
SECTION 9.06. Publicity. Except as otherwise required by law or the
rules of Nasdaq, for so long as this Agreement is in effect, neither the Company
nor Parent shall issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld. The parties hereto have agreed upon the form of a joint
press release announcing the execution of this Agreement and the transactions
contemplated hereby.
SECTION 9.07. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties, except
that Sub may assign, in its sole discretion, any or all of its rights, interests
and obligations hereunder to Parent or to any direct or indirect wholly owned
subsidiary of Parent. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
SECTION 9.08. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be a single agreement.
SECTION 9.09. Exhibits and Schedules; Interpretation. The headings
contained in this Agreement or in any Exhibit or Schedule hereto and in the
table of contents to this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. All
Exhibits and Schedules annexed to this Agreement or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein. Any capitalized terms used in any Schedule or Exhibit to this Agreement
but not otherwise defined herein, shall have the meaning as defined in this
Agreement. When a reference is made in this Agreement to a Section, Article,
Exhibit or Schedule, this reference shall be to a Section or Article of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. For all
purposes hereof, (a) the words "include", "includes" and "including" shall be
deemed followed by the words "without limitation" and (b) the words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement.
SECTION 9.10. Consent to Jurisdiction. Each of the parties hereto
irrevocably and unconditionally submits to the exclusive jurisdiction of (a) any
Delaware State court and (b) any Federal court of the United States of
<PAGE>
America sitting in the State of Delaware, for the purposes of any suit, action
or other proceeding arising out of this Agreement or any transaction
contemplated hereby (and each agrees that no such action, suit or proceeding
relating to this Agreement shall be brought by it or any of its affiliates
except in such courts). Each of the parties hereto further agrees that service
of any process, summons, notice or document by U.S. registered mail to such
person's respective address set forth above shall be effective service of
process for any action, suit or proceeding in Delaware with respect to any
matters to which it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. Each of the parties hereto irrevocably and
unconditionally waives (and agrees not to plead or claim) any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (a) any Delaware State court or (b)
any Federal court of the United State of America sitting in the State of
Delaware, or that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
SECTION 9.11. Waiver of Jury Trial. Each party hereto hereby waives,
to the fullest extent permitted by applicable law, any right it may have to a
trial by jury in respect of any Litigation directly or indirectly arising out
of, under or in connection with this Agreement. Each party hereto (a) certifies
that no representative, agent or attorney of any other party has represented,
expressly or otherwise, that such party would not, in the event of Litigation,
seek to enforce the foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement, by, among other
things, the mutual waiver and certifications in this Section 9.11.
SECTION 9.12. Enforcement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties hereto shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any Federal
court sitting in the State of Delaware or in any Delaware State court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
LYCOS, INC.,
by /s/ Edward M. Philip
---------------------------------
Name: Edward M. Philip
Title: Chief Operating Officer,
Chief Financial Officer
BARBADOS ACQUISITION CORP.,
by /s/ Edward M. Philip
---------------------------------
Name: Edward M. Philip
Title: Chief Operating Officer,
Chief Financial Officer
GAMESVILLE.COM, INC.,
by
/s/ Steven N. Kane
---------------------------------
Name: Steven N. Kane
Title: CEO