Agreement and Plan of Reorganization - USA Networks Inc., Ticketmaster Online-Citysearch Inc., Lycos Inc. and USA Interactive Inc.
AGREEMENT AND PLAN OF REORGANIZATION
by and among
USA NETWORKS, INC.,
TICKETMASTER ONLINE-CITYSEARCH, INC.,
LYCOS, INC.,
USA INTERACTIVE INC.,
(TO BE RENAMED USA/LYCOS INTERACTIVE NETWORKS, INC.)
LEMMA, INC.
AND
TYCHO, INC.
________
DATED AS OF FEBRUARY 8, 1999
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TABLE OF CONTENTS
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AGREEMENT AND PLAN OF REORGANIZATION
ARTICLE I
THE MERGERS; CLOSING
1.1 The Mergers..................................................... 2
1.2 The Closing..................................................... 2
ARTICLE II
DIRECTORS AND OFFICERS, CERTIFICATES OF INCORPORATION AND CERTAIN OTHER MATTERS
2.1 Directors....................................................... 3
2.2 Officers........................................................ 3
2.3 Certificate of Incorporation and By-Laws........................ 3
ARTICLE III
EFFECT OF THE REORGANIZATION ON THE SECURITIES
OF LYCOS, TMCS AND THE MERGER SUBSIDIARIES
3.1 Conversion of Common Stock...................................... 4
3.2 Cancellation of Newco Stock..................................... 6
3.3 Merger Subs Stock............................................... 6
3.4 Lycos Options................................................... 7
3.5 TMCS Class B Options............................................ 8
3.6 TMCS Class A Options............................................ 8
3.7 Tax Consequences................................................ 9
ARTICLE IV
EXCHANGE OF SHARES
4.1 Newco to Make Shares Available.................................. 9
4.2 Exchange of Shares.............................................. 10
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TMCS
5.1 Corporate Organization.......................................... 13
5.2 Capitalization.................................................. 13
5.3 Authority; No Violation......................................... 14
5.4 Consents and Approvals.......................................... 15
5.5 Financial Statements............................................ 16
5.6 Broker's Fees................................................... 17
5.7 Absence of Certain Changes or Events............................ 17
5.8 Legal Proceedings............................................... 17
5.9 Taxes and Tax Returns........................................... 17
5.10 Employees....................................................... 18
5.11 SEC Reports..................................................... 20
5.12 Compliance with Applicable Law.................................. 20
5.13 Intellectual Property; Proprietary Rights; Employee Restrictions 20
5.14 Certain Contracts............................................... 22
5.15 Undisclosed Liabilities......................................... 22
5.16 Insurance....................................................... 22
5.17 Environmental Liability......................................... 23
5.18 State Takeover Laws............................................. 23
5.19 Year 2000 Compliance............................................ 23
5.20 Certain Tax Matters............................................. 23
5.21 Registration Statement.......................................... 23
5.22 Ownership of Lycos Capital Stock................................ 24
5.23 Opinion of Financial Advisors................................... 24
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF LYCOS
6.1 Corporate Organization.......................................... 24
6.2 Capitalization.................................................. 25
6.3 Authority; No Violation......................................... 25
6.4 Consents and Approvals.......................................... 26
6.5 Financial Statements............................................ 27
6.6 Broker's Fees................................................... 27
6.7 Absence of Certain Changes or Events............................ 27
6.8 Legal Proceedings............................................... 28
6.9 Taxes and Tax Returns........................................... 28
6.10 Employees....................................................... 29
6.11 SEC Reports..................................................... 30
6.12 Compliance with Applicable Law.................................. 31
6.13 Intellectual Property; Proprietary Rights; Employee Restrictions 31
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6.14 Certain Contracts............................................... 32
6.15 Undisclosed Liabilities......................................... 33
6.16 Insurance....................................................... 33
6.17 Environmental Liability......................................... 33
6.18 State Takeover Laws............................................. 33
6.19 Year 2000 Compliance............................................ 33
6.20 Certain Tax Matters............................................. 34
6.21 Registration Statement.......................................... 34
6.22 Ownership of TMCS Capital Stock................................. 34
6.23 Opinion of Financial Advisors................................... 34
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PARENT, NEWCO, L MERGER SUB AND T MERGER SUB
7.1 Representations and Warranties of Parent and Newco.............. 34
7.2 Corporate Organization of Merger Subs........................... 35
7.3 Capitalization.................................................. 35
7.4 Authority; No Violation......................................... 35
7.5 Conduct of Business............................................. 36
7.6 Broker's Fees................................................... 36
ARTICLE VIII
COVENANTS RELATING TO CONDUCT OF BUSINESS
8.1 Conduct of Businesses Prior to the Effective Time............... 36
8.2 Forbearances.................................................... 36
ARTICLE IX
ADDITIONAL AGREEMENTS
9.1 Regulatory Matters.............................................. 39
9.2 Access to Information........................................... 40
9.3 No Solicitation................................................. 41
9.4 Stockholders' Approvals......................................... 41
9.5 Legal Conditions to Merger...................................... 41
9.6 Affiliates...................................................... 42
9.7 Nasdaq Quotation................................................ 42
9.8 Employee Benefit Plans.......................................... 42
9.9 Indemnification; Directors' and Officers' Insurance............. 43
9.10 Additional Agreements........................................... 44
9.11 Advice of Changes............................................... 44
9.12 Section 16...................................................... 44
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9.13 Contribution Agreement.......................................... 44
9.14 Other Businesses................................................ 45
9.15 Affiliate Sales Agreement....................................... 45
9.16 Limitations on Sale of Parent Shares............................ 46
9.17 Promotion....................................................... 46
ARTICLE X
CONDITIONS PRECEDENT
10.1 Conditions to Each Party's Obligation to Effect the Mergers..... 46
10.2 Conditions to Obligations of Lycos.............................. 47
10.3 Conditions to Obligations of TMCS and Newco..................... 48
ARTICLE XI
TERMINATION AND AMENDMENT
11.1 Termination..................................................... 48
11.2 Effect of Termination........................................... 49
11.3 Amendment....................................................... 49
11.4 Extension; Waiver............................................... 50
ARTICLE XII
GENERAL PROVISIONS
12.1 Nonsurvival of Representations, Warranties and Agreements....... 50
12.2 Expenses........................................................ 50
12.3 Notices......................................................... 50
12.4 Interpretation.................................................. 52
12.5 Counterparts.................................................... 52
12.6 Entire Agreement................................................ 52
12.7 Governing Law................................................... 52
12.8 Publicity....................................................... 52
12.9 Assignment; Third Party Beneficiaries........................... 52
12.10 Standards; Disclosure Schedules................................. 53
Exhibit A - Form of Option Agreements
Exhibit B - Form of Certificate of Designations for Series A Convertible
Redeemable Preferred Stock
Exhibit 9.6(a) - Form of Affiliate Letter from Lycos Affiliates
Exhibit 9.6(b) - Form of Affiliate Letter from TMCS Affiliates
Ticketmaster Online-CitySearch, Inc. Disclosure Schedule
Lycos, Inc. Disclosure Schedule
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INDEX OF DEFINED TERMS
Section Page No.
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Agreement............................... Preamble.......................... 1
CERCLA.................................. 5.17.............................. 23
Class A Exchange Ratio.................. 3.1(b)............................ 4
Class B Exchange Ratio.................. 3.1(c)............................ 4
Closing................................. 1.2............................... 2
Closing Date............................ 1.2............................... 2
Code.................................... 3.4(b) ........................... 7
Confidentiality Agreement............... 9.2(b) ........................... 40
Contribution............................ Recitals.......................... 1
Contribution Agreement.................. Recitals.......................... 1
DGCL.................................... 1.1(a) ........................... 2
Dissenting Share........................ 3.1(h) ........................... 6
Effective Time.......................... 1.1(c) ........................... 2
ERISA................................... 5.10(a) .......................... 19
Excess Class B Shares................... 4.2(e)............................ 11
Excess Common Shares.................... 4.2(e)............................ 11
Excess Shares........................... 4.2(e)............................ 11
Exchange Act............................ 5.11.............................. 20
Exchange Agent.......................... 4.1............................... 9
Exchange Fund........................... 4.1............................... 9
GAAP.................................... 5.5............................... 15
Goldman Sachs........................... 5.6............................... 17
Government Approvals.................... 5.4............................... 15
Governmental Entity..................... 5.4............................... 16
HSN..................................... 9.15.............................. 45
HSR Act................................. 5.4............................... 15
Indemnified Parties..................... 9.9(a) ........................... 43
Injunction.............................. 10.1(e) .......................... 47
Intellectual Property Rights............ 5.13(a) .......................... 20
IRS..................................... 5.9(a) ........................... 18
L Merger Sub............................ Preamble ......................... 1
Liens................................... 5.2(b)............................ 14
LLC..................................... Recitals ......................... 1
Lycos................................... Recitals.......................... 1
Lycos 10-K.............................. 6.5............................... 27
Lycos Benefit Plans..................... 6.10(a) .......................... 29
Lycos Bylaws............................ 6.1(a) ........................... 24
Lycos Capital Stock..................... 6.2(a)............................ 25
Lycos Certificate....................... 3.1(d)............................ 4
Lycos Charter........................... 6.1(a) ........................... 24
Lycos Common Exchange Ratio............. 3.1(a)............................ 4
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Section Page No.
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Lycos Common Stock...................... 3.1(a) ........................... 4
Lycos Contract.......................... 6.14(a)........................... 32
Lycos Disclosure Schedule............... Article VI........................ 24
Lycos ERISA Affiliate................... 6.10(a) .......................... 29
Lycos Merger............................ Recitals.......................... 1
Lycos Preferred Exchange Ratio.......... 3.1(a) ........................... 4
Lycos Preferred Stock................... 6.2(a) ........................... 25
Lycos Reports........................... 6.11 ............................. 30
Lycos Stock Plans....................... 6.2(a) ........................... 25
Material Adverse Effect................. 5.1(a) ........................... 13
Merger Subs............................. Preamble.......................... 1
Mergers................................. 1.1(b) ........................... 2
NASD.................................... 4.2(e)............................ 11
Nasdaq.................................. 4.2(e)............................ 11
New Benefit Plans....................... 9.8(a) ........................... 42
Newco................................... Preamble.......................... 1
Newco Capital Stock..................... 3.1(b)............................ 4
Newco Class B Common Stock.............. 3.1(b)............................ 4
Newco Common Stock...................... 3.1(a)............................ 4
Newco Convertible Preferred Stock....... 3.1(a)............................ 4
Option Agreements....................... Recitals.......................... 1
Parent.................................. Preamble.......................... 1
Parent Sunset Threshold................. 9.14(b)........................... 45
Proxy/Information Statement............. 5.4............................... 15
Requisite Regulatory Approvals.......... 10.1(c) .......................... 46
Reorganization.......................... Recitals.......................... 1
S-4..................................... 5.4............................... 15
SEC..................................... 5.4............................... 15
Securities Act.......................... 5.11.............................. 20
Section 16 Securities................... 9.12.............................. 44
Shares Trust............................ 4.2(e)............................ 12
Subsidiary.............................. 5.1(a)............................ 13
Surviving Corporation................... Recitals.......................... 1
T Merger Sub............................ Preamble ......................... 1
Tax(es)................................. 5.9(b) ........................... 18
TMCS.................................... Preamble.......................... 1
TMCS Balance Sheet...................... 5.5............................... 16
TMCS Benefit Plans...................... 5.10(a) .......................... 18
TMCS Bylaws............................. 5.1(a) ........................... 13
TMCS Capital Stock...................... 5.2(a) ........................... 14
TMCS Charter............................ 5.1(a) ........................... 13
TMCS Class A Certificate................ 3.1(f) ........................... 5
TMCS Class A Common Stock............... 3.1(b) ........................... 4
TMCS Class B Certificate................ 3.1(e) ........................... 5
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Section Page No.
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TMCS Class B Common Stock............... 3.1(c) ........................... 4
TMCS Contract........................... 5.14(a)........................... 22
TMCS Disclosure Schedule................ ArticleV.......................... 13
TMCS ERISA Affiliate.................... 5.10(a)........................... 19
TMCS Merger............................. Recitals.......................... 1
TMCS Preferred Exchange Ratio........... 3.1(c)............................ 4
TMCS Preferred Stock.................... 5.2(a) ........................... 13
TMCS Prospectus......................... 5.5............................... 16
TMCS Reports............................ 5.11.............................. 20
TMCS Stock Plans........................ 5.2(a) ........................... 14
Transactions............................ Recitals.......................... 1
Wasserstein Perella..................... 6.6............................... 27
Wired Merger Agreement.................. 6.2(a) ........................... 25
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of February 8, 1999
(this "Agreement"), by and among USA Networks, Inc., a Delaware corporation
("Parent"), Ticketmaster Online-CitySearch, Inc., a Delaware corporation
("TMCS"), Lycos, Inc., a Delaware corporation ("Lycos") , USA Interactive Inc.,
a Delaware corporation ("Newco"), Lemma, Inc., a Delaware corporation ("L Merger
Sub"), and Tycho, Inc., a Delaware corporation ("T Merger Sub" and together with
L Merger Sub, the "Merger Subs").
W I T N E S S E T H :
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WHEREAS, the Boards of Directors of Parent, Lycos, Newco, L Merger Sub
and T Merger Sub have determined that it is in the best interests of their
respective companies and their stockholders to consummate the strategic business
combination transaction provided for herein in which (i) T Merger Sub, a wholly
owned subsidiary of Newco, will, subject to the terms and conditions set forth
herein, merge with and into TMCS (the "TMCS Merger"), so that TMCS is the
surviving corporation in the TMCS Merger, and (ii) L Merger Sub will, subject to
the terms and conditions set forth herein, merge with and into Lycos (the "Lycos
Merger" and, together with the TMCS Merger, the "Reorganization"), so that Lycos
is the surviving corporation in the Lycos Merger (each of Lycos and TMCS herein
sometimes referred to in its capacity as the surviving corporation in the Lycos
Merger and the TMCS Merger, respectively, the "Surviving Corporation"); and
WHEREAS, as a condition to, and simultaneously with, the execution of
this Agreement, Parent, Newco and USANi LLC, a Delaware limited liability
company ("LLC"), are entering into a contribution agreement (the "Contribution
Agreement") that provides for the contribution of certain businesses of Parent
and its Subsidiaries to Newco (the "Contribution" and, together with the
Reorganization, the "Transactions"); and
WHEREAS, as a condition to, and simultaneously with, the execution of
this Agreement, Parent and TMCS are each entering into a stock option agreement
with Lycos with respect to shares of common stock of Lycos in the forms attached
hereto as Exhibit A (the "Option Agreements"); and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Mergers and also to prescribe certain
conditions to the Mergers.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
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ARTICLE I
THE MERGERS; CLOSING
1.1 The Mergers. Subject to the terms and conditions of this Agreement,
at the Effective Time:
(a) L Merger Sub shall be merged with and into Lycos in accordance with
the applicable provisions of the General Corporation Law of the State of
Delaware (the "DGCL"). Lycos shall be the surviving corporation in the Lycos
Merger and shall continue its corporate existence under the laws of the State of
Delaware. As a result of the Lycos Merger, Lycos shall become a wholly owned
Subsidiary of Newco and the separate corporate existence of L Merger Sub shall
terminate. The Lycos Merger shall have the effects and consequences specified in
Sections 259 and 261 of the DGCL .
(b) T Merger Sub will be merged with and into TMCS in accordance with
the applicable provisions of the DGCL. TMCS shall be the surviving corporation
in the TMCS Merger and shall continue its corporate existence under the laws of
the State of Delaware. As a result of the TMCS Merger, TMCS shall become a
wholly owned Subsidiary of Newco and the separate corporate existence of T
Merger Sub shall terminate. The TMCS Merger shall have the effects and
consequences specified in Sections 259 and 261 of the DGCL. The term "Mergers"
shall mean the Lycos Merger and the TMCS Merger.
(c) The term "Effective Time" shall mean the time and date which is the
later of (i) the date and time of the filing of the certificate of merger
relating to the Lycos Merger with the Secretary of State of the State of
Delaware (or such other date and time as may be specified in such certificate as
may be permitted by Delaware law) and (ii) the date and time of the filing of a
certificate of merger with the Secretary of State of the State of Delaware with
respect to the TMCS Merger (or such other date and time as may be specified in
such certificate as may be permitted by Delaware law).
1.2 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall take place (a) at the offices of Wachtell, Lipton, Rosen & Katz, 51 West
52nd Street, New York, New York, at 10:00 a.m., local time, on the third
business day following the day on which the last to be fulfilled or waived of
the conditions set forth in Article X shall be fulfilled or waived in accordance
herewith or (b) at such other time, date or place as Parent, Lycos and TMCS may
agree. The date on which the Closing occurs is hereinafter referred to as the
"Closing Date."
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ARTICLE II
DIRECTORS AND OFFICERS, CERTIFICATES OF INCORPORATION
AND CERTAIN OTHER MATTERS
2.1 Directors. The Board of Directors of Newco at the Effective Time
shall consist of a majority of directors appointed by Parent, the Chief
Executive Officer of Lycos, the Chief Financial Officer of Lycos and one
additional director, who shall serve for at least a one-year term, to be
selected prior to the Closing by the mutual agreement of Lycos and Parent, such
agreement not to be unreasonably withheld. The directors of Lycos Merger Sub
immediately prior to the Effective Time shall be the directors of the surviving
corporation of the Lycos Merger as of the Effective Time and until their
successors are duly appointed or elected in accordance with applicable law. The
directors of T Merger Sub immediately prior to the Effective Time shall be the
directors of the surviving corporation of the TMCS Merger as of the Effective
Time and until their successors are duly appointed or elected in accordance with
applicable law.
2.2 Officers. At the Effective Time, the Chief Executive Officer of
Parent shall be Chairman of the Board of Directors of Newco, the Chief Executive
Officer of Lycos shall be Chief Executive Officer of Newco and the Chief
Financial Officer of Lycos shall be Chief Financial Officer of Newco, in each
case, until their successors are duly appointed or elected in accordance with
applicable law. The officers of Lycos and TMCS immediately prior to the
Effective Time shall be the officers of the surviving corporations of the Lycos
Merger and the TMCS Merger, respectively, as of the Effective Time and until
their successors are duly appointed or elected in accordance with applicable
law.
2.3 Certificate of Incorporation and By-Laws. At the Effective Time,
the Certificate of Incorporation and By-Laws of Newco shall be amended to (a)
change the name of Newco to "USA/Lycos Interactive Networks, Inc." and (b) to
provide that at such time as Parent, the LLC and their respective Subsidiaries
no longer own a number of shares of Newco Common Stock or Newco Class B Common
Stock at least equal to the Parent Sunset Threshold, all shares of Newco Class B
Common Stock owned directly or indirectly by such entities shall be promptly
exchanged for an equal number of shares of Newco Common Stock pursuant to the
Newco Certificate of Incorporation, provided that any such exchange shall be
postponed in order to comply with applicable securities laws and not to cause
Parent, LLC or their respective Subsidiaries adverse tax consequences. Such
amendments shall be reasonably satisfactory to Parent, Lycos and TMCS. At the
Effective Time, the Certificate of Incorporation and By-Laws of the Surviving
Corporation in the Lycos Merger and the TMCS Merger, respectively, shall be
amended to provide for substantially identical terms as the Certificate of
Incorporation and By-Laws of L Merger Sub and T Merger Sub, respectively,
immediately prior to the Effective Time and such Certificates of Incorporation
and By-Laws of the Surviving Corporations, respectively, as so amended, shall be
the Certificate and By-Laws of the Surviving Corporation in the Lycos Merger and
the TMCS Merger, respectively, in each case, until thereafter amended in
accordance with applicable law.
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ARTICLE III
EFFECT OF THE REORGANIZATION ON THE SECURITIES
OF LYCOS, TMCS AND THE MERGER SUBSIDIARIES
3.1 Conversion of Common Stock. At the Effective Time, by virtue of the
Lycos Merger and the TMCS Merger and without any action on the part of Lycos,
TMCS, Newco or the holder of any of the following securities:
(a) Subject to Section 4.2(e), each share of common stock, par value
$.01 per share, of Lycos ("Lycos Common Stock") issued and outstanding
immediately prior to the Effective Time, except for shares of Lycos Common Stock
owned by Lycos as treasury stock or owned, directly or indirectly, by Lycos, L
Merger Sub, TMCS, T Merger Sub, Newco or any of their respective wholly owned
subsidiaries, shall be converted into the right to receive (i) 1.0 share (the
"Lycos Common Exchange Ratio") of common stock, par value $.01 per share, of
Newco ("Newco Common Stock") and (ii) 0.2963 of a share (the "Lycos Preferred
Exchange Ratio") of Series A Convertible Redeemable Preferred Stock, par value
$.01 per share, of Newco ("Newco Convertible Preferred Stock"), with the
designations, powers, preferences, rights and qualifications, limitations and
restrictions substantially as set forth in Exhibit B hereto.
(b) Subject to Section 4.2(e), each share of Class A common stock, par
value $.01 per share, of TMCS ("TMCS Class A Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive 0.4464 of a share (the "Class A Exchange Ratio") of Class B
common stock, par value $.01 per share, of Newco (the "Newco Class B Common
Stock" and together with Newco Common Stock and Newco Convertible Preferred
Stock, "Newco Capital Stock").
(c) Subject to Section 4.2(e), each share of the Class B common stock,
par value $.01 per share, of TMCS ("TMCS Class B Common Stock") issued and
outstanding immediately prior to the Effective Time, except for shares of TMCS
Class B Common Stock owned by TMCS as treasury stock or owned, directly or
indirectly, by TMCS, T Merger Sub, Lycos, L Merger Sub, Newco or any of their
respective wholly owned subsidiaries, shall be converted into the right to
receive (i) 0.4464 of a share (the "Class B Exchange Ratio") of Newco Common
Stock and (ii) 0.0584 of a share of Newco Convertible Preferred Stock (the "TMCS
Preferred Exchange Ratio").
(d) All of the shares of Lycos Common Stock converted into the right to
receive Newco Common Stock and Newco Convertible Preferred Stock pursuant to
this Article III shall no longer be outstanding and shall automatically be
cancelled and shall cease to exist as of the Effective Time, and each
certificate (each a "Lycos Certificate") previously representing any such shares
of Lycos Common Stock shall thereafter represent only the right to receive a
certificate representing the number of whole shares of Newco Common Stock, cash
in lieu of fractional shares and a certificate representing the number of shares
of Newco Convertible Preferred Stock into which the shares of Lycos Common Stock
represented by such Lycos Certificate have been converted pursuant to this
Section 3.1 and Section 4.2(e). Lycos Certificates previously repre-
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senting shares of Lycos Common Stock shall be exchanged for certificates
representing whole shares of Newco Common Stock, cash in lieu of fractional
shares and certificates representing shares of Newco Convertible Preferred Stock
issued in consideration therefor upon the surrender of such Lycos Certificates
in accordance with Section 4.2, without any interest thereon. If, prior to the
consummation of the Lycos Merger, the outstanding shares of Lycos Common Stock
shall have been increased, decreased, changed into or exchanged for a different
number or kind of shares or securities as a result of a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other similar change in capitalization, an appropriate and
proportionate adjustment shall be made to each of the Lycos Common Exchange
Ratio and the Lycos Preferred Exchange Ratio.
(e) All of the shares of TMCS Class B Common Stock converted into the
right to receive Newco Common Stock and Newco Convertible Preferred Stock
pursuant to this Article III shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist as of the Effective Time,
and each certificate (each a "TMCS Class B Certificate") previously representing
any such shares of TMCS Class B Common Stock shall thereafter represent only the
right to receive a certificate representing the number of whole shares of Newco
Common Stock, cash in lieu of fractional shares of Newco Common Stock and a
certificate representing the number of shares of Newco Convertible Preferred
Stock into which the shares of TMCS Class B Common Stock represented by such
TMCS Class B Certificate have been converted pursuant to this Section 3.1 and
Section 4.2(e). TMCS Class B Certificates previously representing shares of TMCS
Class B Common Stock shall be exchanged for certificates representing whole
shares of Newco Common Stock, cash in lieu of fractional shares and certificates
representing shares of Newco Convertible Preferred Stock issued in consideration
therefor upon the surrender of such TMCS Class B Certificates in accordance with
Section 4.2, without any interest thereon. If, prior to the consummation of the
TMCS Merger, the outstanding shares of TMCS Class B Common Stock shall have been
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities as a result of a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
similar change in capitalization, an appropriate and proportionate adjustment
shall be made to each of the Class B Exchange Ratio and the TMCS Preferred
Exchange Ratio.
(f) All of the shares of TMCS Class A Common Stock converted into the
right to receive Newco Class B Common Stock pursuant to this Article III shall
no longer be outstanding and shall automatically be cancelled and shall cease to
exist as of the Effective Time, and each certificate (each a "TMCS Class A
Certificate") previously representing any such shares of TMCS Class A Common
Stock shall thereafter represent only the right to receive a certificate
representing the number of whole shares of Newco Class B Common Stock and cash
in lieu of fractional shares into which the shares of TMCS Class A Common Stock
represented by such TMCS Class A Certificate have been converted pursuant to
this Section 3.1 and Section 4.2(e). TMCS Class A Certificates previously
representing shares of TMCS Class A Common Stock shall be exchanged for
certificates representing whole shares of Newco Class B Common Stock and cash in
lieu of fractional shares issued in consideration therefor upon the surrender of
such TMCS Class A Certificates in accordance with Section 4.2, without any
interest thereon. If, prior to the consummation of the TMCS Merger, the
outstanding shares of TMCS Class A
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Common Stock shall have been increased, decreased, changed into or exchanged for
a different number or kind of shares or securities as a result of a
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other similar change in capitalization, an appropriate
and proportionate adjustment shall be made to the Class A Exchange Ratio.
(g) At the Effective Time, (i) all shares of Lycos Common Stock that
are owned, directly or indirectly, by Lycos, TMCS, T Merger Sub, Newco or any of
their respective wholly owned Subsidiaries (other than L Merger Sub) shall be
cancelled and shall cease to exist and no stock of Newco or other consideration
shall be delivered in exchange therefor and (ii) all shares of TMCS Class B
Common Stock that are owned, directly or indirectly, by Lycos, TMCS, L Merger
Sub or Newco or any of their respective wholly owned Subsidiaries (other than T
Merger Sub) shall be cancelled and shall cease to exist and no stock of Newco or
other consideration shall be delivered in exchange therefor. At the Effective
Time, (i) all shares of Lycos Common Stock that are owned by L Merger Sub or any
of its wholly owned Subsidiaries shall as of the Effective Time become treasury
shares of Lycos Common Stock and (ii) all shares of TMCS Class B Common Stock
that are owned by T Merger Sub or any of its wholly owned Subsidiaries shall as
of the Effective Time become treasury shares of TMCS Class B Common Stock.
(h) Notwithstanding anything in this Agreement to the contrary, with
respect to each share of TMCS Class A Common Stock as to which the holder
thereof shall have properly complied with the provisions of Section 262 of the
DGCL as to appraisal rights (each a "Dissenting Share"), such holder will be
entitled to payment, solely from the surviving corporation of the TMCS Merger,
of the appraised value of such Dissenting Shares to the extent permitted by and
in accordance with the provisions of Section 262 of the DGCL; provided, however,
that (i) if any holder of Dissenting Shares, under the circumstances permitted
by the DGCL, affirmatively withdraws his or her demand for appraisal of such
Dissenting Shares, (ii) if any holder fails to establish his or her entitlement
to rights to payment as provided in such Section 262, or (iii) if neither any
holder of Dissenting Shares nor the surviving corporation has filed a petition
demanding a determination of the value of all Dissenting Shares within the time
provided in such Section 262, such holder will forfeit such right to payment for
such Dissenting Shares pursuant to Section 262 and, as of the later of the
Effective Time or the occurrence of such event, such holder's TMCS Class A
Certificate will automatically be converted into and represent only the right to
receive the consideration to which such holder would have been entitled pursuant
to the TMCS Class A Exchange Ratio, without any interest thereon, upon surrender
of such TMCS Class A Certificate.
3.2 Cancellation of Newco Stock. At the Effective Time, each share of
the capital stock of Newco issued and outstanding immediately prior to the
Effective Time shall be cancelled and shall cease to exist.
3.3 Merger Subs Stock. At the Effective Time, each share of common
stock of L Merger Sub outstanding immediately prior to the Effective Time shall
be converted into and shall become one share of common stock of the Surviving
Corporation of the Lycos Merger. At the Effective Time, each share of common
stock of T Merger Sub outstanding immediately prior
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to the Effective Time shall be converted into and shall become one share of
common stock of the Surviving Corporation of the TMCS Merger.
3.4 Lycos Options. (a) At the Effective Time, each option granted by
Lycos to purchase shares of Lycos Common Stock which is outstanding and
unexercised immediately prior thereto shall cease to represent a right to
acquire shares of Lycos Common Stock and shall be converted automatically into
an option to purchase shares of Newco Common Stock and shares of Newco
Convertible Preferred Stock in an amount, at an exercise price and on the
vesting schedule determined as provided below (and otherwise subject to the
terms of the Lycos Stock Plans, as the case may be, and the agreements
evidencing grants thereunder):
(i) The number of shares of Newco Common Stock and of Newco
Convertible Preferred Stock, respectively, to be subject to the new
option shall be equal to (A) the product of the number of shares of
Lycos Common Stock subject to the original option and the Lycos Common
Exchange Ratio and (B) the product of the number of shares of Lycos
Common Stock subject to the original option and the Lycos Preferred
Exchange Ratio, provided that any fractional shares of Newco Common
Stock or Newco Convertible Preferred Stock resulting from such
calculations shall be rounded to the nearest whole share.
(ii) The exercise price for the combination of one share of
Newco Common Stock and a number of shares of Newco Convertible
Preferred Stock equal to the ratio of the Lycos Preferred Exchange
Ratio to the Lycos Common Exchange Ratio under the new option shall be
equal to the exercise price per share of Lycos Common Stock under the
original option divided by the Lycos Common Exchange Ratio, provided
that such exercise price shall be rounded to the nearest whole cent.
(iii) Each vesting date with respect to any such option or
portion thereof (other than those held by the Chief Executive Officer
of Lycos and the Chief Financial Officer of Lycos pursuant to
employment agreements dated as of the date hereof), to the extent such
date has not occurred prior to the Effective Time, shall be deemed to
be a date that is six months earlier than the original vesting date for
such option or portion thereof.
(b) The adjustment provided herein with respect to any options which
are "incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")), shall be and is intended to be effected
in a manner which is consistent with Section 424(a) of the Code. The duration
and other terms of the new option shall be the same as the original option
except that all references to Lycos shall be deemed to be references to Newco.
(c) Notwithstanding anything to the contrary in this Section 3.4, each
of Lycos and Newco agrees to cooperate from and after the date hereof and before
the Effective Time to effect such amendments to the Lycos Stock Plans and the
agreements evidencing options thereunder so that each option converted pursuant
to this Section 3.4 shall be, if exercised following the period for conversion
of the Newco Convertible Preferred Stock, exercisable for such additional shares
of Newco Common Stock as the holder thereof would have been entitled to receive
in respect of a share of Newco Convertible Preferred Stock covered by such
option had such option been ex-
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ercised and such share of Newco Convertible Preferred Stock converted during
such period for conversion.
3.5 TMCS Class B Options. (a) At the Effective Time, each option
granted by TMCS to purchase shares of TMCS Class B Common Stock which is
outstanding and unexercised immediately prior thereto shall cease to represent a
right to acquire shares of TMCS Class B Common Stock and shall be converted
automatically into an option to purchase shares of Newco Common Stock and of
Newco Convertible Preferred Stock in an amount and at an exercise price
determined as provided below (and otherwise subject to the terms of the TMCS
Stock Plans, as the case may be, and the agreements evidencing grants
thereunder):
(i) The number of shares of Newco Common Stock and of Newco
Convertible Preferred Stock, respectively, to be subject to the new
option shall be equal to (A) the product of the number of shares of
TMCS Class B Common Stock subject to the original option and the Class
B Exchange Ratio and (B) the product of the number of shares of TMCS
Class B Common Stock subject to the original option and the TMCS
Preferred Exchange Ratio, provided that any fractional shares of Newco
Common Stock or of Newco Convertible Preferred Stock resulting from
such calculations shall be rounded to the nearest whole share; and
(ii) The exercise price for the combination of one share of
Newco Common Stock and a number of shares of Newco Convertible
Preferred Stock equal to the ratio of the TMCS Preferred Exchange Ratio
to the Class B Exchange Ratio under the new option shall be equal to
the exercise price per share of TMCS Class B Common Stock under the
original option divided by the TMCS Common Exchange Ratio, provided
that such exercise price shall be rounded to the nearest whole cent.
(b) The adjustment provided herein with respect to any options which
are "incentive stock options" shall be and is intended to be effected in a
manner which is consistent with Section 424(a) of the Code. The duration and
other terms of the new option shall be the same as the original option except
that all references to TMCS shall be deemed to be references to Newco.
(c) Notwithstanding anything to the contrary in Section 3.5(a) or
3.6(a), each of Newco and TMCS agrees to cooperate from and after the date
hereof and before the Effective Time to effect such amendments to the TMCS Stock
Plans and the agreements evidencing options thereunder so that each option to
purchase TMCS Class B Common Stock or TMCS Class A Common Stock converted
pursuant to Section 3.5(a) or 3.6(a) shall be, if exercised following the period
for conversion of the Newco Convertible Preferred Stock, exercisable for such
additional shares of Newco Common Stock as the holder thereof would have been
entitled to receive in respect of a share of Newco Convertible Preferred Stock
covered by such option had such option been exercised and such share of Newco
Convertible Preferred Stock converted on the Conversion Date (as such term is
defined in Exhibit B hereto).
3.6 TMCS Class A Options. (a) At the Effective Time, each option
granted by TMCS to purchase shares of TMCS Class A Common Stock which is
outstanding and unexer-
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cised immediately prior thereto shall cease to represent a right to acquire
shares of TMCS Class A Common Stock and shall be converted automatically into an
option to purchase shares of Newco Common Stock and Newco Convertible Preferred
Stock in an amount and at an exercise price determined as provided below (and
otherwise subject to the terms of the TMCS Stock Plans, as the case may be, and
the agreements evidencing grants thereunder):
(i) The number of shares of Newco Common Stock and Newco
Convertible Preferred Stock, respectively, to be subject to the new
option shall be equal to (A) the product of the number of shares of
TMCS Class A Common Stock subject to the original option and the Class
B Exchange Ratio and (B) the product of the number of shares of TMCS
Class A Common Stock subject to the original option and the TMCS
Preferred Exchange Ratio, provided that any fractional shares of Newco
Common Stock and Newco Convertible Preferred Stock resulting from such
calculations shall be rounded to the nearest whole share; and
(ii) The exercise price for the combination of one share of
Newco Common Stock and a number of shares of Newco Convertible
Preferred Stock equal to the ratio of the TMCS Preferred Exchange Ratio
to the Class B Exchange Ratio under the new option shall be equal to
the exercise price per share of TMCS Class A Common Stock under the
original option divided by the Class B Exchange Ratio, provided that
such exercise price shall be rounded to the nearest whole cent.
(b) The adjustment provided herein with respect to any options which
are "incentive stock options" shall be and is intended to be effected in a
manner which is consistent with Section 424(a) of the Code. The duration and
other terms of the new option shall be the same as the original option except
that all references to TMCS shall be deemed to be references to Newco.
3.7 Tax Consequences. It is intended that each of the Lycos Merger and
the TMCS Merger shall constitute a "reorganization" within the meaning of
Section 368(a) of the Code, that this Agreement shall constitute a "plan of
reorganization" for the purposes of Sections 354 and 361 of the Code and that
the Reorganization and the Contribution, taken together, shall constitute an
exchange of the kind described in Section 351 of the Code.
ARTICLE IV
EXCHANGE OF SHARES
4.1 Newco to Make Shares Available. At or prior to the Effective Time,
Newco shall deposit, or shall cause to be deposited, with a bank or trust
company designated by Newco and reasonably acceptable to Lycos and TMCS (the
"Exchange Agent"), for the benefit of the holders of Lycos Certificates, TMCS
Class A Certificates and TMCS Class B Certificates, for exchange in accordance
with this Article IV, certificates representing the shares of Newco Common
Stock, Newco Class B Common Stock, and Newco Convertible Preferred Stock (such
certificates, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund"), to be issued pursuant to
Section 3.1 and paid pursuant to Section 4.2(a) in
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exchange for outstanding shares of Lycos Common Stock, TMCS Class A Common Stock
and TMCS Class B Common Stock, as the case may be.
4.2 Exchange of Shares. (a) As soon as practicable after the Effective
Time, and in no event later than five business days thereafter, the Exchange
Agent shall mail to each holder of record of one or more Lycos Certificates,
TMCS Class A Certificates and TMCS Class B Certificates a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to such certificates shall pass, only upon delivery of the certificates to the
Exchange Agent) and instructions for use in effecting the surrender of such
certificates in exchange for certificates representing the shares of Newco
Common Stock, Newco Class B Common Stock, Newco Convertible Preferred Stock, as
the case may be, and any cash in lieu of fractional shares into which the shares
represented by such certificate or certificates shall have been converted
pursuant to this Agreement. Upon proper surrender of a Lycos Certificate, TMCS
Class A Certificate or TMCS Class B Certificate or Certificates, as the case may
be, for exchange and cancellation to the Exchange Agent, together with such
properly completed letter of transmittal, duly executed, and any other required
documents the holder of such certificate or certificates shall be entitled to
receive in exchange therefor, as applicable, (i) a certificate representing that
number of whole shares of Newco Common Stock and a certificate representing that
number of shares of Newco Convertible Preferred Stock, in the case of a holder
of Lycos Common Stock or a holder of TMCS Class B Common Stock, or a certificate
representing that number of whole shares of Newco Class B Common Stock, in the
case of a holder of TMCS Class A Common Stock, in each case, to which such
holder shall have become entitled pursuant to the provisions of Article III and
(ii) a check representing the amount of any cash in lieu of fractional shares
which such holder has the right to receive in respect of the certificate or
certificates surrendered pursuant to the provisions of this Article IV, and the
certificate or certificates so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on any cash in lieu of fractional shares or on
any unpaid dividends and distributions payable to holders of such certificates.
(b) No dividends or other distributions declared with respect to Newco
Common Stock, Newco Class B Common Stock or Newco Convertible Preferred Stock
and payable to holders of record thereof after the Effective Time shall be paid
to the holder of any unsurrendered Lycos Certificate, TMCS Class A Certificate
or TMCS Class B Certificate until the holder thereof shall surrender such
certificate in accordance with this Article IV. After the surrender of such a
certificate in accordance with this Article IV, the record holder thereof shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
Newco Common Stock, Newco Class B Common Stock and Newco Convertible Preferred
Stock represented by such certificate.
(c) If any certificate representing shares of Newco Common Stock, Newco
Class B Common Stock or Newco Convertible Preferred Stock is to be issued in a
name other than that in which the certificate or certificates surrendered in
exchange therefor is or are registered, it shall be a condition of the issuance
thereof that the certificate or certificates so surrendered shall be properly
endorsed (or accompanied by an appropriate instrument of transfer) and otherwise
in proper form for transfer, and that the person requesting such exchange shall
pay to the Exchange Agent in advance any transfer or other taxes required by
reason of the issuance of a certificate
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representing shares of Newco Common Stock, Newco Class B Common Stock or Newco
Convertible Preferred Stock in any name other than that of the registered holder
of the certificate or certificates surrendered, or required for any other
reason, or shall establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of Lycos of the shares of Lycos Common Stock, or on the stock
transfer books of TMCS of shares of TMCS Class A Common Stock or TMCS Class B
Common Stock, in each case, that were issued and outstanding immediately prior
to the Effective Time. If, after the Effective Time, certificates representing
such shares are presented for transfer to the Exchange Agent, they shall be
cancelled and exchanged for certificates representing shares of Newco Common
Stock, or Newco Class B Common Stock and Newco Convertible Preferred Stock, in
each case, as provided in this Article IV.
(e) No Issuance of Fractional Shares
(i) No certificates or scrip for fractional shares of Newco
Common Stock or Newco Class B Common Stock shall be issued upon the
surrender for exchange of Lycos Certificates, TMCS Class A Certificates
or TMCS Class B Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to any rights as a stockholder
of Newco.
(ii) As promptly as practicable following the Effective Time,
the Exchange Agent shall determine (A) the excess of the number of full
shares of Newco Common Stock delivered to the Exchange Agent by Newco
pursuant to Section 4.1 over the aggregate number of full shares of
Newco Common Stock to be distributed to holders of Lycos Common Stock
and TMCS Class B Common Stock pursuant to Section 4.2(a) (such excess
being herein called the "Excess Common Shares") and (B) the excess of
the number of full shares of Newco Class B Common Stock delivered to
the Exchange Agent by Newco pursuant to Section 4.1 over the aggregate
number of full shares of Newco Class B Common Stock to be distributed
to holders of TMCS Class A Common Stock pursuant to Section 4.2(a)
(such excess being herein called the "Excess Class B Shares" and,
together with the Excess Common Shares, the "Excess Shares"). As soon
after the Effective Time as practicable, the Exchange Agent, as agent
for the holders of Newco Common Stock and Newco Class B Common Stock,
as the case may be, shall sell the Excess Common Shares and Excess
Class B Shares at then prevailing prices for Newco Common Stock (it
being understood that the Excess Class B Shares shall first be
converted pursuant to their terms to shares of Newco Common Stock prior
to such sale) on the Nasdaq National Market tier of The Nasdaq Stock
Market ("Nasdaq"), all in the manner provided in paragraph (iii) of
this Section 4.2(e).
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on Nasdaq by one or more member firms of the National
Association of Securities Dealers, Inc. (the "NASD") and shall be
executed in round lots to the extent practicable. Until the net
proceeds of such sale or sales have been distributed to the holders of
Newco
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Common Stock or Newco Class B Common Stock, as the case may be, the
Exchange Agent shall hold such proceeds in trust for the holders of
such stock (the "Shares Trust"). Newco shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs, including the
expenses and compensation of the Exchange Agent incurred in connection
with such sale of the Excess Shares. The Exchange Agent shall determine
the portion of the Shares Trust to which each holder of Newco Common
Stock or Newco Class B Common Stock shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the
Shares Trust by a fraction, the numerator of which is the amount of the
fractional share interest to which such holder of Newco Common Stock or
Newco Class B Common Stock, as applicable, is entitled and the
denominator of which is the aggregate amount of fractional share
interests to which all holders of Newco Common Stock or Newco Class B
Common Stock, as applicable, are entitled.
(iv) As soon as practicable after the determination of the
amount of cash, if any, to be paid to the holders of Newco Common Stock
and Newco Class B Common Stock, as the case may be, in lieu of
fractional share interests, the Exchange Agent shall make available
such amounts to such holders, net of any applicable withholding tax.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Lycos or TMCS for 12 months after the Effective Time shall be
paid to Newco. Any former stockholders of Lycos or TMCS who have not theretofore
complied with this Article IV shall thereafter look only to Newco for payment of
the shares of Newco Common Stock, Newco Class B Common Stock, Newco Convertible
Preferred Stock, cash in lieu of any fractional shares and any unpaid dividends
and distributions on Newco Common Stock, Newco Class B Common Stock or Newco
Convertible Preferred Stock deliverable in respect of each share of Lycos Common
Stock, TMCS Class A Common Stock or TMCS Class B Common Stock, as the case may
be, such stockholder holds as determined pursuant to this Agreement, in each
case, without any interest thereon. Notwithstanding the foregoing, none of
Lycos, TMCS, Newco, the Exchange Agent or any other person shall be liable to
any former holder of shares of Lycos Common Stock, TMCS Class A Common Stock or
TMCS Class B Common Stock for any amount delivered in good faith to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Lycos Certificate, TMCS Class A Certificate or
TMCS Class B 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 reasonably required by Newco, the posting
by such person of a bond in such amount as Newco may determine is reasonably
necessary as indemnity against any claim that may be made against it with
respect to such certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed certificate the shares of Newco Common Stock, Newco
Class B Common Stock, Newco Convertible Preferred Stock and any cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Agreement.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TMCS
Except as disclosed in the TMCS disclosure schedule delivered to Lycos
and Newco concurrently herewith (the "TMCS Disclosure Schedule") and subject to
the standard set forth in Section 12.10, TMCS hereby represents and warrants to
Lycos and Newco as follows:
5.1 Corporate Organization. (a) TMCS is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
TMCS has the corporate power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not, either individually or in the aggregate, have a Material Adverse
Effect on TMCS. As used in this Agreement, the term "Material Adverse Effect"
means, with respect to Lycos or TMCS, as the case may be, a material adverse
effect on (i) the business, operations, results of operations or financial
condition of such party and its Subsidiaries taken as a whole or (ii) the
ability of such party to timely consummate the transactions contemplated hereby.
As used in this Agreement, the word "Subsidiary" when used with respect to any
party, means any corporation, partnership, limited liability company, or other
organization, whether incorporated or unincorporated, which is consolidated with
such party for financial reporting purposes. True and complete copies of the
Amended and Restated Certificate of Incorporation of TMCS ( the "TMCS Charter")
and Amended and Restated By-Laws of TMCS (the "TMCS Bylaws"), as in effect as of
the date of this Agreement, have previously been made available by TMCS to Newco
and Lycos.
(b) Each TMCS Subsidiary (i) is duly organized and validly existing
under the laws of its jurisdiction of organization, (ii) is duly qualified to do
business and, if applicable, in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and in which the
failure to be so qualified would have a Material Adverse Effect on TMCS and
(iii) has all requisite corporate, partnership or similar power and authority to
own or lease its properties and assets and to carry on its business as now
conducted.
5.2 Capitalization. (a) The authorized capital stock of TMCS consists
of (i) 352,883,506 shares of TMCS Common Stock of which 100 million shares are
designated as shares of TMCS Class A Common Stock, 250 million shares are
designated as shares of TMCS Class B Common Stock and 2,883,506 shares are
designated as shares of TMCS Class C Common Stock, and (ii) 2 million shares of
preferred stock, par value $.01 per share, of TMCS ("TMCS Preferred Stock"). As
of February 5, 1999, 63,070,884 shares of TMCS Class A Common Stock were issued
and outstanding and no shares thereof were held in treasury, 8,392,109 shares of
TMCS Class B Common Stock were issued and outstanding and no shares thereof were
held in treasury, no shares of TMCS Class C Common Stock were issued and
outstanding or held in treasury, and no shares of TMCS Preferred Stock were
outstanding or held in treasury. All of
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the issued and outstanding shares of TMCS Common Stock (together with the TMCS
Preferred Stock, the "TMCS Capital Stock") have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date of this
Agreement, except pursuant to this Agreement, the outstanding TMCS Class A
Common Stock and the terms of stock options issued pursuant to the 1998 Employee
Stock Purchase Plan and the CitySearch, Inc. 1996 Stock Option Plan as in effect
as of the date hereof (the "TMCS Stock Plans"), TMCS does not have and is not
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of TMCS Capital Stock or any other equity securities of TMCS or any securities
representing the right to purchase or otherwise receive any shares of TMCS
Capital Stock. As of the date hereof, no shares of TMCS Capital Stock were
reserved for issuance, except for (i) shares of TMCS Class A Common Stock and,
as disclosed on Schedule 5.2(a) of the TMCS Disclosure Schedule, shares of TMCS
Class B Common Stock reserved for issuance upon the exercise of stock options
pursuant to the TMCS Stock Plans, (ii) shares of TMCS Class B Common Stock
reserved for issuance upon conversion of the outstanding shares of TMCS Class A
Common Stock; and (iii) approximately 800,000 shares reserved for issuance or
which TMCS otherwise is committed to issue in respect of the transactions
contemplated by the definitive agreement to acquire City Auction. Since February
5, 1999, TMCS has not issued any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock. TMCS has
previously provided or promptly after the date hereof will provide Lycos and
Newco with a list of the option holders, the date of each option to purchase
TMCS Common Stock granted, the number of shares subject to each such option, the
expiration date of each such option, and the price at which each such option may
be exercised under the applicable TMCS Stock Plan.
(b) TMCS owns, directly or indirectly, all of the issued and
outstanding shares of capital stock or other equity ownership interests of each
of the TMCS Subsidiaries, free and clear of any liens, pledges, charges,
encumbrances and security interests whatsoever ("Liens"), and all of such shares
or equity ownership interests are duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No TMCS Subsidiary has or is bound
by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise receive any shares of
capital stock or any other equity security of such Subsidiary.
5.3 Authority; No Violation. (a) TMCS has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized (including such authorization as may be required so that no
state anti-takeover statute or similar statute or regulation, including, without
limitation, Section 203 of the DGCL, is or becomes operative with respect to
this Agreement or the transactions contemplated hereby) and this Agreement has
been duly and validly adopted, by the Board of Directors of TMCS. The Board of
Directors of TMCS has directed that an information statement describing this
Agreement and the transactions contemplated hereby be mailed
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to TMCS's stockholders and, except for (i) obtaining the requisite vote of the
holders of TMCS Class A Common Stock and TMCS Class B Common Stock, voting
together as a single class, for the adoption of this Agreement and the
transactions contemplated hereby (it being understood that, pursuant to Section
9.4(b) hereof, Parent has agreed to cause to be voted in favor of the adoption
of this Agreement the shares of TMCS Class A Common Stock it owns or the votes
of which it controls, and that such number of shares is sufficient to obtain
such stockholder approval) and (ii) the filing by TMCS with the Delaware
Secretary of State of a certificate of merger with respect to the TMCS Merger
and the matters contemplated by Article I of this Agreement, no other corporate
proceedings on the part of TMCS are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by TMCS and (assuming due authorization,
execution and delivery by the other parties hereto) constitutes a valid and
binding obligation of TMCS, enforceable against TMCS in accordance with its
terms (except as may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors generally and
the availability of equitable remedies).
(b) Neither the execution and delivery of this Agreement by TMCS nor
the consummation by TMCS of the transactions contemplated hereby, nor compliance
by TMCS with any of the terms or provisions hereof, will (i) violate any
provision of the TMCS Charter or TMCS By-Laws or (ii) assuming that the consents
and approvals referred to in Section 5.4 are duly obtained, (A) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to TMCS, any of its Subsidiaries or any of their
respective properties or assets or (B) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of TMCS or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which TMCS or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected, except (in the case of clause (ii) above)
for such violations, conflicts, breaches or defaults which, either individually
or in the aggregate, will not have a Material Adverse Effect on TMCS.
5.4 Consents and Approvals. Except for (i) the filing of the pre-merger
notification report under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) the filing of any required applications
or notices with any state or foreign agencies and approval of such applications
and notices (the "Government Approvals"), (iii) the filing with the Securities
and Exchange Commission (the "SEC") of a joint proxy/information statement in
definitive form relating to the meeting of Lycos's stockholders to be held in
connection with this Agreement and the transactions contemplated hereby (which
shall also constitute an information statement in definitive form to be mailed
to TMCS stockholders) (the "Proxy/Information Statement"), and of the
registration statement on Form S-4 (the "S-4") of Newco in which the
Proxy/Information Statement will be included as a prospectus, (iv) the filing of
Certificates of Merger with respect to the TMCS Merger and the Lycos Merger with
the Secretary of State of the State of Delaware pursuant to the DGCL, (v) such
filings and approvals as are required to be
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made or obtained under the securities or "Blue Sky" laws of various states in
connection with the issuance of the shares of Newco Capital Stock pursuant to
this Agreement, (vi) the filing of applications for the authorization for
quotation on Nasdaq of the shares of Newco Common Stock and Newco Convertible
Preferred Stock to be issued pursuant to the Transactions and the approvals
thereof and (vii) the approval of this Agreement by the requisite vote of the
stockholders of Lycos and TMCS, no consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") are
necessary in connection with (A) the execution and delivery by TMCS of this
Agreement and (B) the consummation by TMCS of the Reorganization and the other
transactions contemplated hereby.
5.5 Financial Statements. TMCS has previously made available to Lycos
copies of (a) the unaudited condensed balance sheets of TMCS and its
Subsidiaries as of December 31, 1998, and the related unaudited condensed
combined statements of operations for the year ended December 31, 1998 and the
fiscal year ended January 31, 1998; (b) the audited balance sheets of TMCS as of
January 31, 1997 and 1998 and the related statements of operations,
stockholders' equity and cash flows for the three fiscal years in the period
ended January 31, 1998, in each case, accompanied by the audit report of Ernst
and Young LLP, independent public accountants with respect to TMCS; and (c) the
audited consolidated balance sheets of the predecessors of TMCS as of December
31, 1996 and 1997 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the period commencing
September 20, 1995 and ending on December 31, 1997, in each case, accompanied by
the audit report of Ernst and Young LLP, independent public accountants with
respect to the predecessor of TMCS; in each case, except for subsection 5.5(a),
as set forth in the prospectus, dated December 2, 1998, filed with the SEC on
December 2, 1998 (the "TMCS Prospectus"). The unaudited condensed balance sheet
of TMCS as of December 31, 1998, together with the notes thereto, is referred to
herein as the "TMCS Balance Sheet". The TMCS Balance Sheet (including the
related notes, where applicable) is based on the historical financial statements
of TMCS and the predecessors to TMCS as adjusted. The financial statements
should be read in conjunction with the audited and unaudited financial
statements, including the related notes where applicable, of TMCS and the
predecessor to TMCS. The TMCS Balance Sheet fairly presents in all material
respects the consolidated financial position of TMCS and its Subsidiaries as of
the date thereof. The audited and unaudited historical financial statements
referred to in this Section 5.5 (including the related notes, where applicable)
fairly present in all material respects the results of the consolidated
operations and changes in stockholders' equity and consolidated financial
position of TMCS and its Subsidiaries or, as the case may be, its predecessors,
for the respective fiscal periods or as of the respective dates therein set
forth, subject to normal adjustments in the case of unaudited statements; each
of such statements (including the related notes, where applicable) complies in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable) has been
prepared in all material respects in accordance with United States generally
accepted accounting principles ("GAAP") consistently applied during the periods
involved, except, in each case, as indicated in such statements or in the notes
thereto. The books and records of TMCS and its Subsidiaries have been, and are
being, maintained in all material respects in ac-
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cordance with GAAP and any other applicable legal and accounting requirements
and reflect only actual transactions.
5.6 Broker's Fees. Other than Goldman, Sachs & Co. ("Goldman Sachs"),
neither TMCS nor any TMCS Subsidiary nor any of their respective officers or
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with the Transactions.
A true and complete copy of Goldman Sachs' engagement letter with respect to the
Transactions has been previously delivered to the other parties hereto.
5.7 Absence of Certain Changes or Events. (a) Except as publicly
disclosed in the TMCS Reports filed prior to the date hereof, since January 31,
1998, no event or events have occurred that have had, either individually or in
the aggregate, a Material Adverse Effect on TMCS.
(b) Except as disclosed in the TMCS Reports filed prior to the date
hereof, since January 31, 1998, TMCS and its Subsidiaries have carried on their
respective businesses in all material respects in the ordinary course.
(c) Since January 31, 1998, neither TMCS nor any of its Subsidiaries
has (i) except for such actions as are in the ordinary course of business or
except as required by applicable law, (A) increased the wages, salaries,
compensation, pension, or other fringe benefits or perquisites payable to any
executive officer, employee, or director from the amount thereof in effect as of
January 31, 1998, or (B) granted any severance or termination pay, entered into
any contract to make or grant any severance or termination pay, or paid any
bonuses (other than customary year-end bonuses for the year ended December 31,
1998) or (ii) suffered any strike, work stoppage, slowdown, or other labor
disturbance which will, either individually or in the aggregate, have a Material
Adverse Effect on TMCS.
5.8 Legal Proceedings. (a) Except as disclosed in the TMCS Reports
filed prior to the date hereof, neither TMCS nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of TMCS's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against TMCS
or any of its Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement or the Option Agreements which, in
any such case, is reasonably likely, either individually or in the aggregate, to
have a Material Adverse Effect on TMCS.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon TMCS, any of its Subsidiaries or the assets of TMCS or
any of its Subsidiaries that has had, or will have, either individually or in
the aggregate, a Material Adverse Effect on TMCS.
5.9 Taxes and Tax Returns. (a) Each of TMCS and its Subsidiaries has
duly filed all federal, state, foreign and local information returns and tax
returns required to be filed by it on or prior to the date hereof (all such
returns being accurate and complete in all material respects) and has duly paid
or made adequate provision for the payment of all Taxes and other governmental
charges which have been incurred or are due or claimed to be due from it by
federal, state, foreign or local taxing authorities on or prior to the date of
this Agreement (including, without
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limitation, if and to the extent applicable, those due in respect of its
properties, income, business, capital stock, deposits, franchises, licenses,
sales and payrolls) other than information returns, tax returns, Taxes or other
governmental charges as to which the failure to file, pay or make provision for
will not, either individually or in the aggregate, have a Material Adverse
Effect on TMCS. Except as would not, individually or in the aggregate, have a
Material Adverse Effect on TMCS, there are no disputes pending, or claims
asserted for, Taxes or assessments upon TMCS or any of its Subsidiaries for
which TMCS does not have adequate reserves. In addition, (A) proper and accurate
amounts have been withheld by TMCS and its Subsidiaries from their employees for
all prior periods in compliance in all material respects with the tax
withholding provisions of applicable federal, state and local laws, except where
failure to do so will not, either individually or in the aggregate, have a
Material Adverse Effect on TMCS, (B) federal, state, and local returns which are
accurate and complete in all material respects have been filed by TMCS and its
Subsidiaries for all periods for which returns were due with respect to income
tax withholding, Social Security and unemployment taxes, except where failure to
do so will not, either individually or in the aggregate, have a Material Adverse
Effect on TMCS, (C) the amounts shown on such federal, state or local returns to
be due and payable have been paid in full or adequate provision therefor has
been included by TMCS in its consolidated financial statements, except where
failure to do so will not, either individually or in the aggregate, have a
Material Adverse Effect on TMCS and (D) there are no Tax liens upon any property
or assets of TMCS or its Subsidiaries except liens for current taxes not yet due
or liens that will not, either individually or in the aggregate, have a Material
Adverse Effect on TMCS. Neither TMCS nor any of its Subsidiaries has been
required to include in income any adjustment pursuant to Section 481 of the Code
by reason of a voluntary change in accounting method initiated by TMCS or any of
its Subsidiaries, and the Internal Revenue Service (the "IRS") has not initiated
or proposed any such adjustment or change in accounting method, in either case
which has had or will have, either individually or in the aggregate, a Material
Adverse Effect on TMCS. Except as set forth in the financial statements
described in Section 6.5, neither TMCS nor any of its Subsidiaries has entered
into a transaction which is being accounted for as an installment obligation
under Section 453 of the Code, which will have, either individually or in the
aggregate, a Material Adverse Effect on TMCS.
(b) As used in this Agreement, the term "Tax" or "Taxes" means all
federal, state, local, and foreign income, excise, gross receipts, gross income,
ad valorem, profits, gains, property, capital, sales, transfer, use, payroll,
employment, severance, withholding, duties, intangibles, franchise, backup
withholding, and other taxes, charges, levies or like assessments together with
all penalties and additions to tax and interest thereon.
(c) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by TMCS or any Subsidiary of
TMCS under any contract, plan, program, arrangement or understanding will have,
either individually or in the aggregate, a Material Adverse Effect on TMCS.
5.10 Employees. (a) Promptly following the date hereof, TMCS will
deliver a true and complete list of each material employee or director benefit
plan, arrangement or agreement that is maintained, or contributed to, as of the
date of this Agreement (the "TMCS Benefit
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Plans") by TMCS, any of its Subsidiaries or by any trade or business, whether or
not incorporated (a "TMCS ERISA Affiliate"), all of which together with TMCS
would be deemed a "single employer" within the meaning of Section 4001 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(b) TMCS has heretofore made or promptly following the date hereof will
make available to Lycos true and complete copies of each of the TMCS Benefit
Plans and certain related documents, including, but not limited to, (i) the
actuarial report for such TMCS Benefit Plan (if applicable) for each of the last
two years and (ii) the most recent determination letter from the IRS (if
applicable) for such TMCS Benefit Plan.
(c) (i) Each of the TMCS Benefit Plans has been operated and
administered in all material respects in compliance with applicable laws,
including, but not limited to, ERISA and the Code, (ii) each of the TMCS Benefit
Plans intended to be "qualified" within the meaning of Section 401(a) of the
Code is so qualified, and there are no existing circumstances or any events that
have occurred that will adversely affect the qualified status of any such TMCS
Benefit Plan, (iii) with respect to each TMCS Benefit Plan that is subject to
Title IV of ERISA, the present value of accrued benefits under such TMCS Benefit
Plan, based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such TMCS Benefit Plan's actuary with
respect to such TMCS Benefit Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such TMCS Benefit Plan allocable
to such accrued benefits, (iv) no TMCS Benefit Plan provides benefits,
including, without limitation, death or medical benefits (whether or not
insured), with respect to current or former employees or directors of TMCS or
its Subsidiaries beyond their retirement or other termination of service, other
than (A) coverage mandated by applicable law, (B) death benefits or retirement
benefits under any "employee pension plan" (as such term is defined in Section
3(2) of ERISA), (C) deferred compensation benefits accrued as liabilities on the
books of TMCS or its Subsidiaries or (D) benefits the full cost of which is
borne by the current or former employee or director (or his beneficiary), (v) no
material liability under Title IV of ERISA has been incurred by TMCS, its
Subsidiaries or any TMCS ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a material risk to TMCS, its Subsidiaries
or any TMCS ERISA Affiliate of incurring a material liability thereunder, (vi)
no TMCS Benefit Plan is a "multiemployer pension plan" (as such term is defined
in Section 3(37) of ERISA), (vii) all contributions or other amounts payable by
TMCS or its Subsidiaries as of the Effective Time with respect to each TMCS
Benefit Plan in respect of current or prior plan years have been paid or accrued
in accordance with GAAP and Section 412 of the Code, (viii) none of TMCS, its
Subsidiaries or any other person, including any fiduciary, has engaged in a
transaction in connection with which TMCS, its Subsidiaries or any TMCS Benefit
Plan will be subject to either a material civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section
4975 or 4976 of the Code, and (ix) to the best knowledge of TMCS there are no
pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the TMCS Benefit Plans or any
trusts related thereto that will have, either individually or in the aggregate,
a Material Adverse Effect on TMCS.
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(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) (i) result (either alone or upon the
occurrence of any additional acts or events) in any payment (including, without
limitation, severance, unemployment compensation, "excess parachute payment"
(within the meaning of Section 280G of the Code), forgiveness of indebtedness or
otherwise) becoming due to any director or any employee of TMCS or any of its
affiliates from TMCS or any of its affiliates under any TMCS Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any TMCS Benefit
Plan or (iii) result in any acceleration of the time of payment or vesting of
any such benefits which will, either individually or in the aggregate, have a
Material Adverse Effect on TMCS.
5.11 SEC Reports. TMCS has previously made available to Lycos an
accurate and complete copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1998 by
TMCS or any of its predecessors with the SEC pursuant to the Securities Act of
1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (the "TMCS Reports") and prior to the date
hereof and (b) communication mailed by TMCS or any of its predecessors to its
stockholders since January 1, 1998 and prior to the date hereof, and no such
TMCS Report or communication (including without limitation the TMCS Prospectus),
as of the date thereof, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in which
they were made, not misleading, except that information as of a later date (but
before the date hereof) shall be deemed to modify information as of an earlier
date. Since January 1, 1998, as of their respective dates, all TMCS Reports
filed under the Securities Act and the Exchange Act complied in all material
respects with the published rules and regulations of the SEC with respect
thereto.
5.12 Compliance with Applicable Law. Except as disclosed in the TMCS
Reports filed prior to the date hereof, TMCS and each of its Subsidiaries hold
all material licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses under and pursuant to each, and
have complied in all material respects with and are not in default in any
material respect under any, applicable law, statute, order, rule, regulation,
policy and/or guideline of any Governmental Entity relating to TMCS or any of
its Subsidiaries, except where the failure to hold such license, franchise,
permit or authorization or such noncompliance or default will not, either
individually or in the aggregate, have a Material Adverse Effect on TMCS.
5.13 Intellectual Property; Proprietary Rights; Employee Restrictions.
(a) All material registered copyrights, copyright registrations and copyright
applications, trademark registrations and applications for registration, patents
and patent applications, trademarks, service marks, trade names, or Internet
domain names (collectively, "Intellectual Property Rights") used by TMCS or its
Subsidiaries in their respective businesses, are owned by TMCS or such
Subsidiaries by operation of law, or have been validly assigned to TMCS or such
Subsidiaries or TMCS otherwise has the right to use such Intellectual Property
Rights in its business as currently conducted. TMCS believes that the
Intellectual Property Rights are sufficient to carry on the business of TMCS as
presently conducted. TMCS or one of its Subsidiaries has exclusive ownership
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of or a license to use all Intellectual Property Rights used by TMCS or its
Subsidiaries in TMCS's business as presently conducted, including all other
registered Intellectual Property Rights used in connection with or contained in
all versions of TMCS's World Wide Web sites and all licenses, assignments and
releases of Intellectual Property Rights of others without which TMCS or its
Subsidiaries could not offer the services they currently offer or has obtained
any licenses, releases or assignments reasonably necessary to use all third
parties' Intellectual Property Rights in works embodied in its services, except
as would not, individually or in the aggregate, have a Material Adverse Effect
on TMCS. The present business activities or products of TMCS do not infringe any
Intellectual Property Rights of others, except as would not, individually or in
the aggregate, have a Material Adverse Effect on TMCS. To its knowledge, TMCS
has not received any notice or other claim from any person asserting that any of
TMCS's present activities infringe or may infringe any Intellectual Property
Rights of such person.
(b) Except as would not have a Material Adverse Effect on TMCS or as
disclosed in the TMCS Reports filed prior to the date hereof, (i) TMCS has the
right to use all trade secrets, customer lists, hardware designs, programming
processes, software and other information required for its services or its
business as presently conducted or contemplated; (ii) TMCS has taken all
reasonable measures to protect and preserve the security and confidentiality of
its trade secrets and other confidential information; (iii) all employees and
consultants of TMCS or its Subsidiaries involved in the design, review,
evaluation or development of products or Intellectual Property Rights have
executed nondisclosure and assignment of inventions agreements to protect the
confidentiality of TMCS's trade secrets and other confidential information and
to vest in TMCS exclusive ownership of such Intellectual Property Rights; (iv)
to the knowledge of TMCS, all trade secrets and other confidential information
of TMCS are not part of the public domain or knowledge, nor, to the knowledge of
TMCS, have they been misappropriated by any person having an obligation to
maintain such trade secrets or other confidential information in confidence for
TMCS; and (v) to the knowledge of TMCS, no employee or consultant of TMCS or any
or its Subsidiaries has used any trade secrets or other confidential information
of any other person in the course of their work for TMCS or such Subsidiary.
(c) To the knowledge of TMCS, no university, government agency (whether
federal or state) or other organization sponsored research and development
conducted by TMCS or any of its Subsidiaries or has any claim of right to or
ownership of or other encumbrance upon the Intellectual Property Rights there of
TMCS. TMCS is not aware of any infringement by others of its copyrights or other
Intellectual Proprietary Rights in any of its technology or services, or any
violation of the confidentiality of any of its proprietary information. To
TMCS's knowledge, TMCS is not making unlawful use of any confidential
information or trade secrets of any past or present employees of TMCS or any of
its Subsidiaries. For the purposes of this Section 5.13, and except where the
context otherwise requires, Intellectual Property Rights also includes any and
all intellectual property rights, licenses, databases, computer programs and
other computer software user interfaces, know-how, trade secrets, customer
lists, proprietary technology, processes and formulae, source code, object code,
algorithms, architecture, structure, display screens, layouts, development
tools, instructions, templates, marketing materials created by TMCS or its
Subsidiaries, inventions, trade dress, logos and designs.
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5.14 Certain Contracts. (a) Neither TMCS nor any of its Subsidiaries is
a party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) with respect to the employment of any directors,
officers or employees, other than in the ordinary course of business consistent
with past practice, (ii) which, upon the consummation or stockholder approval of
the Transactions will (either alone or upon the occurrence of any additional
acts or events) result in any payment (whether of severance pay or otherwise)
becoming due from TMCS, Newco, or any of their respective Subsidiaries to any
officer or employee thereof, (iii) which is a "material contract" (as such term
is defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed
after the date of this Agreement that has not been filed or incorporated by
reference in the TMCS Reports, (iv) which materially restricts the conduct of
any line of business by TMCS or upon consummation of the Transactions will
materially restrict the ability of Newco to engage in any line of business, (v)
with or to a labor union or guild (including any collective bargaining
agreement) or (vi) (including any stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan) any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any stockholder approval or the consummation of the
Transactions, or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement. TMCS has
previously made or promptly following the date hereof will make available to
Lycos true and correct copies of all material employment and deferred
compensation agreements which are in writing and to which TMCS is a party. Each
contract, arrangement, commitment or understanding of the type described in this
Section 5.14(a), whether or not set forth in the TMCS Disclosure Schedule, is
referred to herein as a "TMCS Contract," and neither TMCS nor any of its
Subsidiaries knows of, or has received notice of, any violation of the above by
any of the other parties thereto which, either individually or in the aggregate,
will have a Material Adverse Effect on TMCS.
(b) (i) Each TMCS Contract is valid and binding on TMCS or any of its
Subsidiaries, as applicable, and in full force and effect, (ii) TMCS and each of
its Subsidiaries has in all material respects performed all obligations required
to be performed by it to date under each TMCS Contract, except where such
noncompliance, either individually or in the aggregate, will not have a Material
Adverse Effect on TMCS, and (iii) no event or condition exists which constitutes
or, after notice or lapse of time or both, will constitute, a material default
on the part of TMCS or any of its Subsidiaries under any such TMCS Contract,
except where such default, either individually or in the aggregate, will not
have a Material Adverse Effect on TMCS.
5.15 Undisclosed Liabilities. Except for those liabilities that are
fully reflected or reserved against on the consolidated TMCS Balance Sheet and
for liabilities incurred in the ordinary course of business consistent with past
practice, since September 28, 1998, neither TMCS nor any of its Subsidiaries has
incurred any liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that, either
individually or in the aggregate, has had or will have a Material Adverse Effect
on TMCS.
5.16 Insurance. TMCS and its Subsidiaries have in effect insurance
coverage with reputable insurers or are self-insured, which in respect of
amounts, premiums, types and risks insured, constitutes reasonably adequate
coverage against all risks customarily insured against by
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bank holding companies and their subsidiaries comparable in size and operations
to TMCS and its Subsidiaries.
5.17 Environmental Liability. There are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that could reasonably result
in the imposition, on TMCS of any liability or obligation arising under common
law or under any local, state or federal environmental statute, regulation or
ordinance including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), pending
or, to TMCS's knowledge, threatened against TMCS, which liability or obligation
will, either individually or in the aggregate, have a Material Adverse Effect on
TMCS. To the knowledge of TMCS, there is no reasonable basis for any such
proceeding, claim, action or governmental investigation that would impose any
liability or obligation that will, individually or in the aggregate, have a
Material Adverse Effect on TMCS. TMCS is not subject to any agreement, order,
judgment, decree, letter or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any liability or obligation
with respect to the foregoing that will have, either individually or in the
aggregate, a Material Adverse Effect on TMCS.
5.18 State Takeover Laws. Section 203 of the DGCL will not apply to
this Agreement or any of the transactions contemplated hereby or thereby.
5.19 Year 2000 Compliance. TMCS has adopted and implemented a
commercially reasonable plan to provide (a) that the change of the year from
1999 to the year 2000 will not materially and adversely affect the information
and business systems or online operations of TMCS or its Subsidiaries and (b)
that the impacts of such change on the vendors and customers of TMCS and its
Subsidiaries will not have a Material Adverse Effect on TMCS. In TMCS's
reasonable best estimate, no expenditures materially in excess of currently
budgeted items previously disclosed to Lycos will be required in order to cause
the information and business systems of TMCS and its Subsidiaries to operate
properly following the change of the year 1999 to the year 2000. TMCS reasonably
expects that it will resolve any issues related to such change of the year in
accordance with the timetable contemplated by such plan (and in any event on a
timely basis in order to be resolved before the year 2000). Between the date of
this Agreement and the Effective Time, TMCS shall continue to use all
commercially reasonable efforts to implement such plan.
5.20 Certain Tax Matters. As of the date of this Agreement, TMCS has no
reason to believe that the Reorganization and the Contribution, taken together,
will not qualify as an exchange within the meaning of Section 351 of the Code.
5.21 Registration Statement. None of the information supplied or to be
supplied by TMCS in writing for inclusion or incorporation by reference in the
S-4 will, at the time it becomes effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. If at any
time prior to the meeting of the stockholders of Lycos to be held in connection
with the
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adoption of this Agreement, or any adjournment thereof, any event with respect
to TMCS, its officers and directors or any of its Subsidiaries shall, occur
which is required to be described in an amendment of, or a supplement to the
S-4, TMCS shall notify Newco and Lycos thereof by reference to this Section 5.21
and such event shall be so described. Any such amendment or supplement shall be
promptly filed with the SEC and, as and to the extent required by law,
disseminated to the stockholders of TMCS, and such amendment or supplement shall
comply in all material respects with all provisions of the Securities Act.
5.22 Ownership of Lycos Capital Stock. Neither TMCS nor any of it
Subsidiaries owns any shares of Lycos Capital Stock.
5.23 Opinion of Financial Advisors. The Special Committee of the Board
of Directors of TMCS has received the opinion, dated as of the date hereof, of
Goldman Sachs to the effect that the Class A Exchange Ratio, the Class B
Exchange Ratio and the TMCS Preferred Exchange Ratio in the TMCS Merger are,
taken as a whole, fair to the holders of TMCS Common Stock, other than Parent
and its Subsidiaries (other than TMCS), from a financial point of view.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF LYCOS
Except as disclosed in the Lycos disclosure schedule delivered to TMCS
and Newco concurrently herewith (the "Lycos Disclosure Schedule") and subject to
the standard set forth in Section 12.10, Lycos hereby represents and warrants to
TMCS and Newco as follows:
6.1 Corporate Organization. (a) Lycos is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Lycos has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not, either individually or in the aggregate, have a Material Adverse
Effect on Lycos. True and complete copies of the Restated Certificate of
Incorporation (the "Lycos Charter") and the Amended and Restated By-Laws of
Lycos (the "Lycos Bylaws"), as in effect as of the date of this Agreement, have
previously been made available by Lycos to Newco and TMCS.
(b) Each Lycos Subsidiary (i) is duly organized and validly existing
under the laws of its jurisdiction of organization, (ii) is duly qualified to do
business and in good standing in all jurisdictions (whether Federal, state,
local or foreign) where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and in which the failure to be so
qualified would have a Material Adverse Effect on Lycos and (iii) has all
requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
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6.2 Capitalization. (a) The authorized capital stock of Lycos consists
of 100,000,000 shares of Lycos Common Stock, of which, as of February 5, 1999,
43,174,101 shares were issued and outstanding, and 5,000,000 shares of preferred
stock, par value $.01 per share, of Lycos ("Lycos Preferred Stock" and, together
with Lycos Common Stock, "Lycos Capital Stock") of which as of the date hereof
no shares were issued and outstanding. As of the date hereof, not more than
1,000,000 shares of Lycos Common Stock are held in Lycos's treasury. As of the
date hereof, no shares of Lycos Common Stock or Lycos Preferred Stock were
reserved for issuance, except for (i) the shares of Lycos Common Stock issuable
pursuant to the Option Agreements, (ii) 15,100,000 shares reserved for issuance
pursuant to the Lycos 1995 Stock Option Plan, the Lycos 1996 Stock Option Plan,
the Lycos 1996 Non-Employee Director Stock Option Plan, the 1996 Employee Stock
Purchase Plan and other employee and director stock plans of Lycos in effect as
of the date hereof (the "Lycos Stock Plans") and (iii) up to 3,371,442 shares
reserved for issuance in respect of the transactions contemplated by the
definitive merger agreement entered into on October 5, 1998, and amended and
restated on November 23, 1998, by the Company and Wired Ventures Inc. (the
"Wired Merger Agreement"). All of the issued and outstanding shares of Lycos
Common Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this Agreement, except for
the Lycos Option Agreements, the Lycos Stock Plans, the Wired Merger Agreement
and as contemplated by the engagement letter described in Section 6.6 hereof,
Lycos does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of Lycos Capital Stock or any other equity
securities of Lycos or any securities representing the right to purchase or
otherwise receive any shares of Lycos Capital Stock. Since February 5, 1999,
Lycos has not issued any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock, other than
as permitted by Section 8.2(b) and pursuant to (A) the exercise of employee
stock options granted prior to such date and (B) pursuant to the Option
Agreements. Lycos has previously provided or promptly after the date hereof will
provide TMCS and Newco with a list of the option holders, the date of each
option to purchase Lycos Common Stock granted, the number of shares subject to
each such option, the expiration date of each such option and the price at which
each such option may be exercised under an applicable Lycos Stock Plan.
(b) Lycos owns, directly or indirectly, all of the issued and
outstanding shares of capital stock or other equity ownership interests of each
of the Lycos Subsidiaries, free and clear of any Liens, and all of such shares
or equity ownership interests are duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No Lycos Subsidiary has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise receive any shares of
capital stock or any other equity security of such Subsidiary.
6.3 Authority; No Violation. (a) Lycos has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contem-
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plated hereby have been duly and validly authorized (including such
authorization as may be required so that no state anti-takeover statute or
similar statute or regulation, including, without limitation, Section 203 of the
DGCL) by the Board of Directors of Lycos. The Board of Directors of Lycos has
directed that this Agreement and the transactions contemplated hereby be
submitted to Lycos's stockholders for adoption at a meeting of such stockholders
and, except for (i) the adoption of this Agreement by the affirmative vote of
the holders of a majority of the outstanding shares of Lycos Common Stock and
(ii) the filing by Lycos with the Delaware Secretary of State of a certificate
of merger with respect to the Lycos Merger and the matters contemplated by
Article I of this Agreement, no other corporate proceedings on the part of Lycos
are necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Lycos and (assuming due authorization, execution and delivery by
the other parties hereto) constitutes a valid and binding obligation of Lycos,
enforceable against Lycos in accordance with its terms (except as may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
the rights of creditors generally and the availability of equitable remedies).
(b) Neither the execution and delivery of this Agreement by Lycos, nor
the consummation by Lycos of the transactions contemplated hereby, nor
compliance by Lycos with any of the terms or provisions hereof, will (i) violate
any provision of the Lycos Charter or Lycos By-Laws, or (ii) assuming that the
consents and approvals referred to in Section 6.4 are duly obtained, (A) violate
any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Lycos, any of its Subsidiaries or any of their
respective properties or assets or (B) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of Lycos or any of its Subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Lycos or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected, except (in the case of clause (ii) above)
for such violations, conflicts, breaches or defaults which, individually or in
the aggregate, will not have a Material Adverse Effect on Lycos.
6.4 Consents and Approvals. Except for (i) the filing of the pre-merger
notification report under the HSR Act, (ii) the Government Approvals, (iii) the
filing with the SEC of the Proxy/Information Statement and of the S-4, (iv) the
filing of Certificates of Merger with respect to the TMCS Merger and the Lycos
Merger with the Secretary of State of the State of Delaware pursuant to the
DGCL, (v) such filings and approvals as are required to be made or obtained
under the securities or "Blue Sky" laws of various states in connection with the
issuance of the shares of Newco Capital Stock pursuant to this Agreement, (vi)
the filing of applications for the authorization of quotation on Nasdaq of Newco
Class B Common Stock and Newco Convertible Preferred Stock to be issued pursuant
hereto and the approvals thereof, and (vii) the approval of this Agreement by
the requisite vote of the stockholders of Lycos, no consents or approvals of or
filings or registrations with any Governmental Entity are necessary in
connection with (A) the
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execution and delivery by Lycos of this Agreement and (B) the consummation by
Lycos of the Merger and the other transactions contemplated hereby.
6.5 Financial Statements. Lycos has previously made available to TMCS
copies (i) of the consolidated balance sheets of Lycos and its Subsidiaries as
of July 31, 1998 and 1997 and the related consolidated statements of operations,
stockholders' equity and cash flows for the fiscal years 1996 through 1998,
inclusive, as reported in Lycos's Annual Report on Form 10-K for the fiscal year
ended July 31, 1998 filed with the SEC under the Exchange Act (the "Lycos
10-K"), in each case, accompanied by the audit report of KPMG LLP, independent
public accountants with respect to Lycos; and (ii) the consolidated balance
sheets of Lycos and its Subsidiaries as of October 31, 1998 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the period ended October 31, 1998, as reported in Lycos's Quarterly Report on
Form 10-Q for the three months ended October 31, 1998 filed with the SEC under
the Exchange Act. The October 31, 1998 consolidated balance sheet of Lycos
(including the related notes, where applicable) fairly presents in all material
respects the consolidated financial position of Lycos and its Subsidiaries as of
the date thereof, and the other financial statements referred to in this Section
6.5 (including the related notes, where applicable) fairly present in all
material respects the results of the consolidated operations and changes in
stockholders' equity and consolidated financial position of Lycos and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth, subject to normal year-end audit adjustments in the case of
unaudited statements; each of such statements (including the related notes,
where applicable) complies in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto; and each of such statements (including the related notes, where
applicable) has been prepared in all material respects in accordance with GAAP
consistently applied during the periods involved, except, in each case, as
indicated in such statements or in the notes thereto. The books and records of
Lycos and its Subsidiaries have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
6.6 Broker's Fees. Other than Wasserstein Perella & Co. ("Wasserstein
Perella"), neither Lycos nor any Lycos Subsidiary nor any of their respective
officers or directors has employed any broker or finder or incurred any
liability for any broker's fees, commissions or finder's fees in connection with
the Mergers or related transactions contemplated by this Agreement, the
Contribution Agreement or the Option Agreements. A true and complete copy of
Wasserstein Perella's engagement letter with respect to the Transactions has
been previously delivered to the other parties hereto.
6.7 Absence of Certain Changes or Events. (a) Except as publicly
disclosed in Lycos Reports filed prior to the date hereof, since July 31, 1998,
no event or events have occurred which has had or would have, individually or in
the aggregate, a Material Adverse Effect on Lycos.
(b) Except as disclosed in Lycos Reports filed prior to the date
hereof, since July 31, 1998, Lycos and its Subsidiaries have carried on their
respective businesses in all material respects in the ordinary course.
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(c) Except as contemplated by the employment agreements, dated as of
the date hereof, with the Chief Executive Officer of Lycos and the Chief
Financial Officer of Lycos, since July 31, 1998, neither Lycos nor any of its
Subsidiaries has (i) except for such actions as are in the ordinary course of
business or except as required by applicable law, (A) increased the wages,
salaries, compensation, pension, or other fringe benefits or perquisites payable
to any executive officer, employee, or director from the amount thereof in
effect as of July 31, 1998, or (B) granted any severance or termination pay,
entered into any contract to make or grant any severance or termination pay, or
paid any bonuses (other than customary bonuses for fiscal 1998) or (ii) suffered
any strike, work stoppage, slowdown, or other labor disturbance which will have,
either individually or in the aggregate, a Material Adverse Effect on Lycos.
6.8 Legal Proceedings. (a) Except as disclosed in the Lycos Reports
filed prior to the date hereof, neither Lycos nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of Lycos's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against Lycos
or any of its Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement or the Option Agreements which, in
any such case, is reasonably likely, either individually or in the aggregate, to
have a Material Adverse Effect on Lycos.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Lycos, any of its Subsidiaries or the assets of Lycos
or any of its Subsidiaries that has had or will have, either individually or in
the aggregate, a Material Adverse Effect on Lycos.
6.9 Taxes and Tax Returns. (a) Each of Lycos and its Subsidiaries has
duly filed all federal, state, foreign and local information returns and tax
returns required to be filed by it on or prior to the date hereof (all such
returns being accurate and complete in all material respects) and has duly paid
or made adequate provision for the payment of all Taxes and other governmental
charges which have been incurred or are due or claimed to be due from it by
federal, state, foreign or local taxing authorities on or prior to the date of
this Agreement (including, without limitation, if and to the extent applicable,
those due in respect of its properties, income, business, capital stock,
deposits, franchises, licenses, sales and payrolls) other than information
returns, tax returns, Taxes or other governmental charges as to which the
failure to file, pay or make provision for will not have, either individually or
in the aggregate, a Material Adverse Effect on Lycos. Except as would not,
individually or in the aggregate, have a Material Adverse Effect on Lycos, there
are no disputes pending, or claims asserted for, Taxes or assessments upon Lycos
or any of its Subsidiaries for which Lycos does not have adequate reserves. In
addition, (i) proper and accurate amounts have been withheld by Lycos and its
Subsidiaries from their employees for all prior periods in compliance in all
material respects with the tax withholding provisions of applicable federal,
state and local laws, except where failure to do so will not, either
individually or in the aggregate, have a Material Adverse Effect on Lycos, (ii)
federal, state and local returns which are accurate and complete in all material
respects have been filed by Lycos and its Subsidiaries for all periods for which
returns were due with respect to income tax withholding, Social Security and
unemployment taxes, except where failure to do so will not, either individually
or in the aggregate, have a Material Adverse Effect on Lycos, (iii) the amounts
shown on such federal, state or local returns to be due and payable have been
paid in full or adequate provision
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therefor has been included by Lycos in its consolidated financial statements,
except where failure to do so will not, individually or in the aggregate, have a
Material Adverse Effect on Lycos and (iv) there are no Tax liens upon any
property or assets of Lycos or its Subsidiaries except liens for current taxes
not yet due or liens that will not have, either individually or in the
aggregate, a Material Adverse Effect on Lycos. Neither Lycos nor any of its
Subsidiaries has been required to include in income any adjustment pursuant to
Section 481 of the Code by reason of a voluntary change in accounting method
initiated by Lycos or any of its Subsidiaries, and the IRS has not initiated or
proposed any such adjustment or change in accounting method, in either case,
which has had or will have, either individually or in the aggregate, a Material
Adverse Effect on Lycos. Except as set forth in the financial statements
described in Section 6.5, neither Lycos nor any of its Subsidiaries has entered
into a transaction which is being accounted for as an installment obligation
under Section 453 of the Code, which will have, either individually or in the
aggregate, a Material Adverse Effect on Lycos.
(b) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by Lycos or any Subsidiary
of Lycos under any contract, plan, program, arrangement or understanding will
have, either individually or in the aggregate, a Material Adverse Effect on
Lycos.
6.10 Employees. (a) Promptly following the date hereof, Lycos will
deliver a true and complete list of each material employee benefit plan,
arrangement or agreement that is maintained, or contributed to, as of the date
of this Agreement (the "Lycos Benefit Plans") by Lycos, any of its Subsidiaries
or by any trade or business, whether or not incorporated (a "Lycos ERISA
Affiliate"), all of which together with Lycos would be deemed a "single
employer" within the meaning of Section 4001 of ERISA.
(b) Lycos has heretofore made or promptly following the date hereof
will make available to TMCS true and complete copies of each of the Lycos
Benefit Plans and certain related documents, including, but not limited to, (i)
the actuarial report for such Lycos Benefit Plan (if applicable) for each of the
last two years, and (ii) the most recent determination letter from the IRS (if
applicable) for such Lycos Benefit Plan.
(c) (i) Each of the Lycos Benefit Plans has been operated and
administered in all material respects in compliance with applicable laws,
including, but not limited to, ERISA and the Code, (ii) each of the Lycos
Benefit Plans intended to be "qualified" within the meaning of Section 401(a) of
the Code is so qualified, and there are no existing circumstances or any events
that have occurred that will adversely affect the qualified status of any such
Lycos Benefit Plan, (iii) with respect to each Lycos Benefit Plan which is
subject to Title IV of ERISA, the present value of accrued benefits under such
Lycos Benefit Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such Lycos Benefit
Plan's actuary with respect to such Lycos Benefit Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such Lycos
Benefit Plan allocable to such accrued benefits, (iv) no Lycos Benefit Plan
provides benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees or
directors of Lycos or its Subsidiaries beyond their retirement or other
termination of service, other
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than (A) coverage mandated by applicable law, (B) death benefits or retirement
benefits under any "employee pension plan" (as such term is defined in Section
3(2) of ERISA), (C) deferred compensation benefits accrued as liabilities on the
books of Lycos or its Subsidiaries or (D) benefits the full cost of which is
borne by the current or former employee or director (or his beneficiary), (v) no
material liability under Title IV of ERISA has been incurred by Lycos, its
Subsidiaries or any Lycos ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a material risk to Lycos, its Subsidiaries
or any Lycos ERISA Affiliate of incurring a material liability thereunder, (vi)
no Lycos Benefit Plan is a "multiemployer pension plan" (as such term is defined
in Section 3(37) of ERISA), (vii) all contributions or other amounts payable by
Lycos or its Subsidiaries as of the Effective Time with respect to each Lycos
Benefit Plan in respect of current or prior plan years have been paid or accrued
in accordance with GAAP and Section 412 of the Code, (viii) none of Lycos, its
Subsidiaries or any other person, including any fiduciary, has engaged in a
transaction in connection with which Lycos, its Subsidiaries or any Lycos
Benefit Plan will be subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to
Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Lycos there
are no pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Lycos Benefit Plans or any
trusts related thereto which will have, either individually or in the aggregate,
a Material Adverse Effect on Lycos.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) (i) result (either alone or upon the
occurrence of any additional acts or events) in any payment (including, without
limitation, severance, unemployment compensation, "excess parachute payment"
(within the meaning of Section 280G of the Code), forgiveness of indebtedness or
otherwise) becoming due to any director or any employee of Lycos or any of its
affiliates from Lycos or any of its affiliates under any Lycos Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Lycos Benefit
Plan or (iii) result in any acceleration of the time of payment or vesting of
any such benefits that will have, either individually or in the aggregate, a
Material Adverse Effect on Lycos.
6.11 SEC Reports. Lycos has previously made available to TMCS an
accurate and complete copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since August 1, 1997 by
Lycos with the SEC pursuant to the Securities Act or the Exchange Act (the
"Lycos Reports") and prior to the date hereof and (b) communication mailed by
Lycos to its stockholders since August 1, 1997 and prior to the date hereof, and
no such Lycos Report or communication, as of the date thereof, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date (but before the date hereof) shall be
deemed to modify information as of an earlier date. Since August 1, 1997, as of
their respective dates, all Lycos Reports filed under the Securities Act and the
Exchange Act complied in all material respects with the published rules and
regulations of the SEC with respect thereto.
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6.12 Compliance with Applicable Law. Except as disclosed in the Lycos
Reports filed prior to the date hereof, Lycos and each of its Subsidiaries hold
all material licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses under and pursuant to each, and
have complied in all material respects with and are not in default in any
material respect under any, applicable law, statute, order, rule, regulation,
policy and/or guideline of any Governmental Entity relating to Lycos or any of
its Subsidiaries, except where the failure to hold such license, franchise,
permit or authorization or such noncompliance or default will not, either
individually or in the aggregate, have a Material Adverse Effect on Lycos.
6.13 Intellectual Property; Proprietary Rights; Employee Restrictions.
(a) All Intellectual Property Rights used by Lycos or its Subsidiaries in their
respective businesses are owned by Lycos or such Subsidiaries by operation of
law, have been validly assigned to Lycos or such Subsidiaries or Lycos otherwise
has the right to use such Intellectual Property Rights in its business as
currently conducted. Lycos believes that the Intellectual Property Rights are
sufficient to carry on the business of Lycos as presently conducted. Lycos or
one of its Subsidiaries has exclusive ownership of or a license to use all
Intellectual Property Rights all Intellectual Property Rights used by Lycos or
its Subsidiaries in Lycos's business as presently conducted, including all other
registered Intellectual Property Rights used in connection with or contained in
all versions of Lycos's World Wide Web sites and all licenses, assignments and
releases of Intellectual Property Rights of others without which Lycos or its
Subsidiaries could not offer the services they currently offer or has obtained
any licenses, releases or assignments reasonably necessary to use all third
parties' Intellectual Property Rights in works embodied in its services, except
as would not, individually or in the aggregate, have a Material Adverse Effect
on Lycos. The present business activities or products of Lycos do not infringe
any Intellectual Property Rights of others, except as would not, have a Material
Adverse Effect on Lycos. To its knowledge, Lycos has not received any notice or
other claim from any person asserting that any of Lycos's present activities
infringe or may infringe any Intellectual Property Rights of such person.
(b) Except as would not have a Material Adverse Effect on Lycos or as
disclosed in the Lycos Reports filed prior to the date hereof, (i) Lycos has the
right to use all trade secrets, customer lists, hardware designs, programming
processes, software and other information required for its services or its
business as presently conducted or contemplated; (ii) Lycos has taken all
reasonable measures to protect and preserve the security and confidentiality of
its trade secrets and other confidential information; (iii) all employees and
consultants of Lycos or its Subsidiaries involved in the design, review,
evaluation or development of products or Intellectual Property Rights have
executed nondisclosure and assignment of inventions agreements to protect the
confidentiality of Lycos's trade secrets and other confidential information and
to vest in Lycos exclusive ownership of such Intellectual Property Rights; (iv)
to the knowledge of Lycos, all trade secrets and other confidential information
of Lycos are not part of the public domain or knowledge, nor, to the knowledge
of Lycos, have they been misappropriated by any person having an obligation to
maintain such trade secrets or other confidential information in confidence for
Lycos; (v) to the knowledge of Lycos, no employee or consultant of Lycos or any
of its Subsidiaries has used any trade secrets or other confidential information
of any other person in the course of their work for Lycos or such Subsidiary.
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(c) To the knowledge of Lycos, no university, government agency
(whether federal or state) or other organization sponsored research and
development conducted by Lycos or any of its Subsidiaries or has any claim of
right to or ownership of or other encumbrance upon the Intellectual Property
Rights of Lycos. Lycos is not aware of any infringement by others of its
copyrights or other Intellectual Proprietary Rights in any of its technology or
services, or any violation of the confidentiality of any of its proprietary
information. To Lycos's knowledge, Lycos is not making unlawful use of any
confidential information or trade secrets of any past or present employees of
Lycos or any of its Subsidiaries. For the purposes of this Section 6.13, and
except where the context otherwise requires, Intellectual Property Rights also
includes any and all intellectual property rights, licenses, databases, computer
programs and other computer software user interfaces, know-how, trade secrets,
customer lists, proprietary technology, processes and formulae, source code,
object code, algorithms, architecture, structure, display screens, layouts,
development tools, instructions, templates, marketing materials created by Lycos
or its Subsidiaries, inventions, trade dress, logos and designs.
6.14 Certain Contracts. (a) Neither Lycos nor any of its Subsidiaries
is a party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) with respect to the employment of any directors,
officers or employees other than in the ordinary course of business consistent
with past practice, (ii) which, upon the consummation or stockholder approval of
the Transactions will (either alone or upon the occurrence of any additional
acts or events) result in any payment (whether of severance pay or otherwise)
becoming due from Lycos or Newco or any of their respective Subsidiaries to any
officer or employee thereof, (iii) which is a "material contract" (as such term
is defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed
after the date of this Agreement that has not been filed or incorporated by
reference in the Lycos Reports, (iv) which materially restricts the conduct of
any line of business by Lycos or upon consummation of the Transactions will
materially restrict the ability of Newco to engage in any line of business, (v)
with or to a labor union or guild (including any collective bargaining
agreement) or (vi) (including any stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan) any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any stockholder approval or the consummation of the
Transactions, or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement. Lycos has
previously made or promptly following the date hereof will make available to
TMCS true and correct copies of all material employment and deferred
compensation agreements which are in writing and to which Lycos is a party. Each
contract, arrangement, commitment or understanding of the type described in this
Section 6.14(a), whether or not set forth in the Lycos Disclosure Schedule, is
referred to herein as a "Lycos Contract," and neither Lycos nor any of its
Subsidiaries knows of, or has received notice of, any violation of the above by
any of the other parties thereto which will have, individually or in the
aggregate, a Material Adverse Effect on Lycos.
(b) (i) Each Lycos Contract is valid and binding on Lycos or any of its
Subsidiaries, as applicable, and in full force and effect, (ii) Lycos and each
of its Subsidiaries has in all material respects performed all obligations
required to be performed by it to date under each Lycos Contract, except where
such noncompliance, either individually or in the aggregate, will not have
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a Material Adverse Effect on Lycos, and (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, will constitute, a
material default on the part of Lycos or any of its Subsidiaries under any such
Lycos Contract, except where such default, either individually or in the
aggregate, will not have a Material Adverse Effect on Lycos.
6.15 Undisclosed Liabilities. Except for those liabilities that are
fully reflected or reserved against on the consolidated balance sheet of Lycos
included in the Lycos October 31, 1998 Form 10-Q and for liabilities incurred in
the ordinary course of business consistent with past practice, since October 31,
1998, neither Lycos nor any of its Subsidiaries has incurred any liability of
any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that, either individually or in the aggregate, has
had or will have, a Material Adverse Effect on Lycos.
6.16 Insurance. Lycos and its Subsidiaries have in effect insurance
coverage with reputable insurers or are self-insured, which in respect of
amounts, premiums, types and risks insured, constitutes reasonably adequate
coverage against all risks customarily insured against by bank holding companies
and their subsidiaries comparable in size and operations to Lycos and its
Subsidiaries.
6.17 Environmental Liability. There are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that reasonably could result
in the imposition, on Lycos of any liability or obligation arising under common
law or under any local, state or federal environmental statute, regulation or
ordinance including, without limitation, CERCLA, pending or, to Lycos's
knowledge, threatened against Lycos, which liability or obligation will have,
either individually or in the aggregate, a Material Adverse Effect on Lycos. To
the knowledge of Lycos, there is no reasonable basis for any such proceeding,
claim, action or governmental investigation that would impose any liability or
obligation that will have, either individually or in the aggregate, a Material
Adverse Effect on Lycos. Lycos is not subject to any agreement, order, judgment,
decree, letter or memorandum by or with any court, governmental authority,
regulatory agency or third party imposing any liability or obligation with
respect to the foregoing that will have, either individually or in the
aggregate, a Material Adverse Effect on Lycos.
6.18 State Takeover Laws. (a) The Board of Directors of Lycos has
approved the transactions contemplated by this Agreement and the Option
Agreements for purposes of Section 203(a)(1) of the DGCL such that the
provisions of Section 203 of the DGCL will not apply to this Agreement or the
Option Agreements or any of the transactions contemplated hereby or thereby.
6.19 Year 2000 Compliance. Lycos has adopted and implemented a
commercially reasonable plan to provide (A) that the change of the year from
1999 to the year 2000 will not materially and adversely affect the information
and business systems or online operations of Lycos or its Subsidiaries and (B)
that the impacts of such change on the vendors and customers of Lycos and its
Subsidiaries will not have a Material Adverse Effect on Lycos. In Lycos's
reason-
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able best estimate, no expenditures materially in excess of currently budgeted
items previously disclosed to TMCS will be required in order to cause the
information and business systems of Lycos and its Subsidiaries to operate
properly following the change of the year 1999 to the year 2000. Lycos
reasonably expects that it will resolve any issues related to such change of the
year in accordance with the timetable contemplated by such plan (and in any
event on a timely basis in order to be resolved before the year 2000). Between
the date of this Agreement and the Effective Time, Lycos shall continue to use
all commercially reasonable efforts to implement such plan.
6.20 Certain Tax Matters. As of the date of this Agreement, Lycos has
no reason to believe that the Reorganization and the Contribution, taken
together, will not qualify as an exchange contemplated by Section 351 of the
Code.
6.21 Registration Statement. None of the information supplied or to be
supplied by Lycos in writing for inclusion or incorporation by reference in the
S-4 will, at the time it becomes effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. If at any
time prior to the date of the meeting of stockholders of Lycos held in
connection with the adoption of this Agreement, or any adjournment thereof, any
event with respect to Lycos, its officers and directors or any of its
Subsidiaries shall occur which is required to be described in an amendment of,
or a supplement to the S-4, Lycos shall notify Newco and TMCS thereof by
reference to this Section 6.21 and such event shall be so described. Any such
amendment or supplement shall be promptly filed with the SEC and, as and to the
extent required by law, disseminated to the stockholders of Lycos, and such
amendment or supplement shall comply in all material respects with all
provisions of the Securities Act.
6.22 Ownership of TMCS Capital Stock. Neither Lycos nor any of it
Subsidiaries owns any shares of TMCS Capital Stock.
6.23 Opinion of Financial Advisors. The Board of Directors of Lycos has
received the opinion, dated as of the date hereof, of Wasserstein Perella to the
effect that the consideration to be received by holders of Lycos Common Stock in
the Lycos Merger is fair to such holders from a financial point of view.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PARENT, NEWCO, L MERGER SUB AND T MERGER SUB
Each of Parent, Newco, L Merger Sub and T Merger Sub hereby represents
and warrants to Lycos and TMCS as follows:
7.1 Representations and Warranties of Parent and Newco. The
representations and warranties of each of Parent and Newco set forth in the
Contribution Agreement are hereby incorporated herein by reference (including
the disclosure schedules relating thereto) as if set forth
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herein, for the benefit of Lycos and TMCS as if made by Parent to each of Lycos
and TMCS. True and complete copies of the Certificate of Incorporation of Newco
have previously been made available by Parent or Newco to each of Lycos and
TMCS. Parent has previously delivered to Lycos and TMCS a true and complete copy
of the disclosure schedule delivered to Newco in connection with the
Contribution Agreement.
7.2 Corporate Organization of Merger Subs. Each of the Merger Subs is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. True and complete copies of the Certificate of
Incorporation of each of the Merger Subs have previously been made available by
Parent or Newco to each of Lycos and TMCS. Neither Merger Sub has any
Subsidiaries or investments in any entity.
7.3 Capitalization. The authorized capital stock of each Merger Sub
consists of 1,000 shares of common stock. All of the issued and outstanding
shares of each Merger Sub are owned by Newco free and clear of any Liens. All of
the issued and outstanding shares of each Merger Sub have been duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. The
Merger Subs do not have and are not bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of capital stock or any other equity
securities thereof or any securities representing the right to purchase or
otherwise receive any shares of such capital stock. As of the date hereof, no
shares of capital stock of the Merger Subs were reserved for issuance.
7.4 Authority; No Violation. (a) Each of the Merger Subs has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved, and this Agreement has been duly and validly
adopted, by the Board of Directors of each Merger Sub and by Newco as the sole
shareholder thereof. Except for the filing by each Merger Sub with the Delaware
Secretary of a certificate of merger with respect to the Mergers and the matters
contemplated by Article I of this Agreement, no other corporate proceedings on
the part of either Merger Sub are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each Merger Sub and (assuming due
authorization, execution and delivery by the other parties hereto) constitutes a
valid and binding obligation of each Merger Sub, enforceable against each Merger
Sub in accordance with its terms (except as may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the rights of
creditors generally and the availability of equitable remedies).
(b) Neither the execution and delivery of this Agreement by either
Merger Sub, nor the consummation by either Merger Sub of the transactions
contemplated hereby, nor compliance by TMCS with any of the terms or provisions
hereof, will violate any provision of the certificate by-laws of such Merger Sub
or, assuming receipt of the consents and approvals referred to in Section 5.4,
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to such Merger Sub.
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7.5 Conduct of Business. Each of the Merger Subs and Newco is a
corporation formed solely for the purpose of consummating the Transactions and
has not engaged in any business activity except as contemplated by this
Agreement and the Contribution Agreement.
7.6 Broker's Fees. Other than as set forth herein, neither Merger Sub
nor any of their respective officers, directors or affiliates has employed any
broker or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with the Mergers or related transactions
contemplated by this Agreement, the Contribution Agreement or the Option
Agreements.
ARTICLE VIII
COVENANTS RELATING TO CONDUCT OF BUSINESS
8.1 Conduct of Businesses Prior to the Effective Time. During the
period from the date of this Agreement to the Effective Time, except as
expressly contemplated or permitted by this Agreement, the Contribution
Agreement or the Option Agreements, or as disclosed in the TMCS Disclosure
Schedule and the Lycos Disclosure Schedule, each of Lycos, TMCS, Newco, L Merger
Sub and T Merger Sub shall, and shall cause each of their respective
Subsidiaries to, (a) conduct its business in the ordinary course consistent with
past practices, (b) use reasonable best efforts to maintain and preserve intact
its business organization, employees and advantageous business relationships and
retain the services of its key officers and key employees and (c) take no action
which would adversely affect or delay the ability of either Lycos or TMCS to
obtain any necessary approvals of any regulatory agency or other governmental
authority required for the transactions contemplated hereby, perform its
covenants and agreements under this Agreement or the Option Agreements or to
consummate the transactions contemplated hereby or thereby or otherwise delay or
prohibit consummation of the Transactions.
8.2 Forbearances. During the period from the date of this Agreement to
the Effective Time, except as set forth in the Lycos Disclosure Schedule or the
TMCS Disclosure Schedule, or as disclosed prior to the date hereof in the TMCS
Reports or the Lycos Reports, as the case may be, and, except as expressly
contemplated by this Agreement, the Contribution Agreement or the Option
Agreements, none of Lycos, TMCS, Newco, L Merger Sub and T Merger Sub shall, and
none of Lycos, TMCS or Newco shall permit any of their respective Subsidiaries
to, without the prior written consent of the other parties to this Agreement
(provided that the consent of Parent shall be deemed to be the consent of Newco
and the Merger Subs)
(a) other than in the ordinary course of business and amounts
that are not material, incur any indebtedness for borrowed money (other
than short-term indebtedness incurred to refinance short-term
indebtedness and indebtedness of TMCS or any of its wholly-owned
Subsidiaries to TMCS or any of its Subsidiaries, on the one hand, or of
Lycos or any of its Subsidiaries to Lycos or any of its wholly-owned
Subsidiaries, on the other hand), assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of
any other individual, corporation or other entity, or make any loan or
advance;
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(b) (i) adjust, split, combine or reclassify any capital
stock;
(ii) make, declare or pay any dividend, or make any
other distribution on, or directly or indirectly
redeem, purchase or otherwise acquire or encumber,
any shares of its capital stock or any securities
or obligations convertible (whether currently
convertible or convertible only after the passage
of time or the occurrence of certain events) into
or exchangeable for any shares of its capital
stock, except in connection with cashless exercise
or similar transactions pursuant to the exercise of
stock options issued and outstanding as of the date
hereof under the TMCS Stock Plans or Lycos Stock
Plans;
(iii) grant any stock appreciation rights or grant any
individual, corporation or other entity any right
to acquire any shares of its capital stock, other
than (A) in each case only in the ordinary course
of business in connection with grants to employees,
of options to acquire up to an aggregate of 500,000
shares of Lycos Common Stock issuable under the
Lycos Stock Plans or an aggregate of 200,000
shares of TMCS Class B Common Stock issuable under
the TMCS Stock Plans, and (B) in connection with
the consummation of the transactions contemplated
by the Wired Merger Agreement as publicly disclosed
as of the date hereof, in the case of Lycos; or
(iv) issue any additional shares of capital stock except
pursuant to (A) the exercise of stock options under
the TMCS Stock Plans or Lycos Stock Plans, as the
case may be, issued and outstanding as of the date
hereof, (B) the Option Agreements, in the case of
Lycos, (C) in connection with the consummation of
the transactions contemplated by the Wired Merger
Agreement as publicly disclosed as of the date
hereof, in the case of Lycos and (D) the conversion
of shares of TMCS Class A Common Stock pursuant to
the terms of the TMCS Charter, in the case of TMCS.
(c) sell, transfer, mortgage, encumber or otherwise dispose of
any of its material properties or assets to any individual, corporation
or other entity, other than to a wholly owned Subsidiary, or cancel,
release or assign any indebtedness to any such person or any claims
held by any such person, except pursuant to contracts or agreements in
force at the date of this Agreement;
(d) except for transactions in the ordinary course of business
or pursuant to contracts or agreements in force at the date of or
expressly permitted by this Agreement, make any material investment or
acquisition, whether by purchase of stock or securities,
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contributions to capital, property transfers, or purchase of any
property or assets of any other individual, corporation or other entity
other than a Subsidiary thereof;
(e) except for transactions in the ordinary course of
business, terminate, or amend or waive any material provision of, any
TMCS Contract or Lycos Contract, as the case may be, or make any
material change in any instrument or agreement governing the terms of
any material lease or contract other than normal renewals of contracts
and leases without material adverse changes of terms, or its
securities;
(f) except in the ordinary course of business consistent with
past practice, increase in any manner the compensation or fringe
benefits of any of its employees or pay any pension, severance or
retirement allowance not required by any existing plan or agreement to
any such employees or become a party to, amend or commit itself to any
pension, retirement, profit-sharing or welfare benefit plan or
agreement or employment agreement with or for the benefit of any
employee, or accelerate the vesting of, or the lapsing of restrictions
with respect to, any stock options or other stock-based compensation;
(g) settle any material claim, action or proceeding involving
money damages, except in the ordinary course of business;
(h) knowingly take any action that would prevent or impede the
Reorganization and the Contribution, taken together, from qualifying as
an exchange contemplated by Section 351 of the Code;
(i) amend its certificate of incorporation or its bylaws,
except that Newco may amend its Certificate of Incorporation to provide
for the Newco Convertible Preferred Stock and to make the changes set
forth in Section 2.3;
(j) take any action that is intended or would reasonably be
expected to result in any of its representations and warranties set
forth in this Agreement being or becoming untrue in any material
respect at any time prior to the Effective Time, or in any of the
conditions to the Merger set forth in Article X not being satisfied or
in a violation of any provision of this Agreement;
(k) other than in the ordinary course of business consistent
with past practices, (i) sell or enter into any material license
agreement with respect to any Intellectual Property Rights used by it
in its business with any person or entity or buy or enter into any
material license agreement with respect to the Intellectual Property
Rights of any person or entity; (ii) sell or transfer to any person or
entity any material rights to any Intellectual Property Rights used by
it in its business; or (iii) enter into or materially amend any TMCS
Contract or Lycos Contract, as the case may be, pursuant to which any
other party is granted marketing or distribution rights of any type or
scope with respect to any material products of its or any its
Subsidiaries;
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(l) except to the extent permitted by Section 8.2(k), enter
into any "non-compete" or similar agreement that would materially
restrict the businesses of Newco following consummation of the
Transactions;
(m) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of such entity (other than the Transactions);
(n) implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by GAAP
or regulatory guidelines; or
(o) agree to take, make any commitment to take, or adopt any
resolutions of its board of directors in support of, any of the actions
prohibited by this Section 8.2.
ARTICLE IX
ADDITIONAL AGREEMENTS
9.1 Regulatory Matters. (a) Newco, Lycos and TMCS shall promptly
prepare and file with the SEC the Proxy/Information Statement, and Newco shall
promptly prepare and file with the SEC the S-4, in which the Proxy/Information
Statement will be included as a prospectus. Newco shall use its reasonable best
efforts to have the S-4 declared effective under the Securities Act as promptly
as practicable after such filing, and Lycos and TMCS shall thereafter mail or
deliver the Proxy/Information Statement to their respective stockholders. Newco
shall use its reasonable best efforts to obtain all necessary state securities
law or "Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement, and Lycos and TMCS shall furnish all information
concerning Lycos and the holders of Lycos Capital Stock, or TMCS and the holders
of TMCS Capital Stock, as the case may be, as may be reasonably requested in
connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Mergers) and the Option
Agreements, and to comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such Governmental Entities.
Parent, Lycos and TMCS shall have the right to review in advance, and, to the
extent practicable, each will consult the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
relating to Parent, TMCS or Lycos, as the case may be, and any of their
respective Subsidiaries, which appear in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto shall act reasonably and as promptly
as practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions con-
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templated by this Agreement and the Option Agreements and each party will keep
the other apprised of the status of matters relating to completion of the
transactions contemplated herein.
(c) Newco, Lycos and TMCS shall, upon request, furnish the other
parties hereto with all information concerning themselves, their Subsidiaries,
affiliates, directors, officers and stockholders and such other matters as may
be reasonably necessary or advisable in connection with the Proxy/Information
Statement, the S-4 or any other statement, filing, notice or application made by
or on behalf of Newco, Lycos, TMCS or any of their respective Subsidiaries to
any Governmental Entity in connection with the Transactions contemplated by this
Agreement.
(d) Lycos and TMCS shall, and Parent shall cause Newco to, promptly
advise the other parties hereto upon receiving any communication from any
Governmental Entity whose consent or approval is required for consummation of
the transactions contemplated by this Agreement or the Option Agreements that
causes such party to believe that there is a reasonable likelihood that any
Requisite Regulatory Approval will not be obtained or that the receipt of any
such approval will be materially delayed.
9.2 Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each of the parties
hereto, for the purposes of verifying the representations and warranties of the
other and preparing for the Merger and the other matters contemplated by this
Agreement and the Contribution Agreement, shall, and shall cause each of their
respective Subsidiaries to, afford to the officers, employees, accountants,
counsel and other representatives of the other parties, access, during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
each of the parties hereto shall, and shall cause their respective Subsidiaries
to, make available to the other parties (i) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws (other than
reports or documents which such party is not permitted to disclose under
applicable law) and (ii) all other information concerning its business,
properties and personnel as such party may reasonably request. No party hereto
shall be required to provide access to or to disclose information where such
access or disclosure would violate or prejudice the rights of its customers,
jeopardize the attorney-client privilege of the institution in possession or
control of such information or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered into prior to the
date of this Agreement. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
(b) Each of the parties hereto shall hold all information furnished by
or on behalf of any other party or any of such party's Subsidiaries or
representatives pursuant to Section 9.2(a) in confidence to the extent required
by, and in accordance with, the provisions of the confidentiality agreement,
among Parent, Lycos and TMCS (the "Confidentiality Agreement").
(c) No investigation by any of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
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9.3 No Solicitation. Without the prior written consent of Newco and
TMCS, Lycos shall not, and shall cause its Subsidiaries and its and its
Subsidiaries' officers, directors, agents, advisors and affiliates not to,
solicit or encourage inquiries or proposals with respect to, or engage in any
negotiations concerning, or provide any confidential information to, or have any
discussions with, any person relating to any tender offer or exchange offer for,
or any proposal for the acquisition of a substantial equity interest in, or of a
substantial portion of the assets of, or any merger, consolidation or other
business combination with, Lycos or any of its Subsidiaries. Lycos shall
promptly, but in any event within 24 hours, advise Newco and TMCS of its receipt
of any such proposal or inquiry, of the substance thereof, and of the identity
of the person making such proposal or inquiry. Lycos shall immediately cease and
cause to be terminated any activities, discussions or negotiations conducted
prior to the date of this Agreement with any parties other than the parties
hereto with respect to any of the foregoing.
9.4 Stockholders' Approvals. (a) Lycos shall call a meeting of its
stockholders to be held as soon as reasonably practicable for the purpose of
obtaining the requisite stockholder approval required in connection with this
Agreement and the Lycos Merger, and shall use its reasonable best efforts to
cause such meetings to occur as soon as reasonably practicable. The Board of
Directors of Lycos shall use its reasonable best efforts to obtain from the
stockholders of Lycos the vote in favor of the adoption of this Agreement
required by the DGCL to consummate the transactions contemplated hereby, and
shall recommend to the stockholders of Lycos that they so vote; provided that
the Board of Directors shall not be required to use such reasonable best efforts
to obtain the vote in favor of the adoption of this Agreement or to make or
continue to make such recommendation if such Board of Directors, after having
consulted with and considered the advice of outside counsel, has determined that
the making of such reasonable best efforts to obtain the vote in favor of the
adoption of this Agreement or making or continuing to make such recommendation
would cause the members of the Board of Directors of Lycos to breach their
fiduciary duties under applicable laws.
(b) Promptly after the date hereof (but in no event later than the date
on which the S-4 is filed with the SEC), Parent shall vote or cause to be voted
all shares of TMCS Class A Common Stock and TMCS Class B Common Stock owned by
it, or of which it otherwise is entitled to direct the voting, in favor of the
adoption of this Agreement. Parent represents and warrants to Lycos and TMCS
that such shares represent voting power sufficient to obtain the requisite vote
of TMCS stockholders in favor of the adoption of this Agreement under the DGCL.
9.5 Legal Conditions to Merger. Each of Parent, Newco, Lycos and TMCS
shall, and shall cause its Subsidiaries to, use their reasonable best efforts
(a) to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements that may be imposed on such party or
its Subsidiaries with respect to the Merger and, subject to the conditions set
forth in Article X hereof, to consummate the transactions contemplated by this
Agreement, and (b) to obtain (and to cooperate with the other party to obtain)
any material consent, authorization, order or approval of, or any exemption by,
any Governmental Entity and any other third party that is required to be
obtained by Parent, Newco, TMCS or Lycos or any of their respective Subsidiaries
in connection with the Merger and the other transactions contemplated by this
Agreement or the Contribution Agreement. Without limiting the foregoing, Parent,
Newco,
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Lycos and TMCS agree to use reasonable best efforts to cooperate to effect any
amendments to, or obtain any consents under, the Lycos Option Plans and the TMCS
Option Plans as are necessary or desirable to give effect to the provisions of
Article III with respect to the options granted under such plans.
9.6 Affiliates. Each of Lycos and TMCS shall use its reasonable best
efforts to cause each director, executive officer and other person who is an
"affiliate" (for purposes of Rule 145 under the Securities Act) of such party to
deliver to Newco, as soon as practicable after the date of this Agreement, and
in any event prior to the Effective Time, a written agreement, in the form of
Exhibit 9.6(a) or 9.6(b) hereto, as applicable, providing that such person will
not sell, pledge, transfer or otherwise dispose of any shares of Newco Series A
Common Stock, Newco Series B Common Stock or Newco Convertible Preferred Stock
to be received by such "affiliate" in the Merger, other than as contemplated in
such written agreement.
9.7 Nasdaq Quotation. Newco shall use reasonable best efforts to cause
the shares of Newco Common Stock and Newco Convertible Preferred Stock to be
issued in the Mergers to be authorized for quotation on Nasdaq, subject to
official notice of issuance, prior to the Effective Time.
9.8 Employee Benefit Plans. (a) From and after the Effective Time,
unless otherwise mutually determined, the TMCS Benefit Plans and Lycos Benefit
Plans in effect as of the date of this Agreement shall remain in effect with
respect to employees of TMCS or Lycos (or their Subsidiaries), respectively,
covered by such plans at the Effective Time until such time as the Surviving
Corporations and Newco shall, subject to applicable law, the terms of this
Agreement and the terms of such plans, adopt new benefit plans with respect to
employees of Newco and its Subsidiaries (the "New Benefit Plans"). Prior to the
Closing Date, Parent, TMCS and Lycos shall cooperate in reviewing, evaluating
and analyzing the Lycos Benefit Plans and TMCS Benefit Plans with a view towards
developing appropriate New Benefit Plans for the employees covered thereby.
Newco will, or will cause the Surviving Corporations to, (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to employees of
TMCS and Lycos under any welfare plan that such employees may be eligible to
participate in after the Effective Time, to the extent that such conditions
would have been waived under the corresponding welfare plan in which any such
employee participated immediately prior to the Effective Time, (ii) provide each
employee of TMCS or Lycos with credit for any co-payments and deductibles paid
prior to the Effective Time, for the calendar year in which the Effective Time
occurs, in satisfying any applicable deductible or out-of-pocket requirements
under any welfare plans that such employees are eligible to participate in after
the Effective Time, and (iii) provide each employee with credit for all service
for purposes of eligibility, vesting and benefit accruals (but not for benefit
accruals under any defined benefit pension plan) with TMCS or Lycos and their
affiliates, as applicable, under each employee benefit plan, program, or
arrangement of Newco, the Surviving Corporation or their subsidiaries in which
such employees are eligible to participate in after the Effective Time;
provided, however, that in no event shall the employees be entitled to any
credit to the extent that it would result in a duplication of benefits with
respect to the same period of service.
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(b) The foregoing notwithstanding, Newco shall, and shall cause the
Surviving Corporations to, honor in accordance with their terms all benefits
accrued as of the date hereof under the Lycos Benefit Plans or the TMCS Benefit
Plans or under other contracts, arrangements, commitments, or understandings
described in the Lycos Disclosure Schedule and the TMCS Disclosure Schedule.
(c) Unless mutually agreed upon by the parties hereto, TMCS shall
terminate the TMCS 1998 Employee Stock Purchase Plan prior to Effective Time and
a "new exercise date" under such plan shall occur prior to the Effective Time,
and Lycos shall terminate the Lycos 1996 Employee Stock Purchase Plan and the
"exercise date" under such plan shall occur prior to the Effective Time.
(d) Nothing in this Section 9.8 shall be interpreted as preventing the
Surviving Corporations from amending, modifying or terminating any Lycos Benefit
Plans, TMCS Benefit Plans, or other contracts, arrangements, commitments or
understandings, in accordance with their terms and applicable law.
9.9 Indemnification; Directors' and Officers' Insurance. (a) In the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation in which
any individual who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer of
Lycos or any of its Subsidiaries or of TMCS or any of its Subsidiaries (the
"Indemnified Parties"), is, or is threatened to be, made a party based in whole
or in part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he is or was a director or officer of Lycos or any of its Subsidiaries
or TMCS or any of its Subsidiaries or any of their respective predecessors or
(ii) this Agreement, the Contribution Agreement, the Option Agreements or any of
the transactions contemplated hereby or thereby, whether in any case asserted or
arising before or after the Effective Time, the parties hereto agree to
cooperate and use their best efforts to defend against and respond thereto. It
is understood and agreed that after the Effective Time, Newco shall indemnify
and hold harmless, as and to the fullest extent permitted by law, each such
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney's fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law upon receipt of any
undertaking required by applicable law), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action, suit,
proceeding or investigation.
(b) Newco shall use its reasonable best efforts to cause the
individuals serving as officers and directors of Lycos and its Subsidiaries, or
officers and directors of TMCS and its Subsidiaries, in each case, immediately
prior to the Effective Time to be covered for a period of three (3) years from
the Effective Time (or the period of the applicable statute of limitations, if
longer) by the directors' and officers' liability insurance policy maintained by
Lycos or TMCS, as the case may be (provided that Newco may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions in the aggregate which are not in the aggregate less advantageous
than such policy and that Newco shall not be obligated to pay annual premiums in
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excess of 300% of the last annual premium paid by TMCS or Lycos, as the case may
be) with respect to acts or omissions occurring prior to the Effective Time
which were committed by such officers and directors in their capacity as such.
(c) In the event Newco or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Newco
assume the obligations set forth in this Section 9.9.
(d) The provisions of this Section 9.9 shall survive the Effective Time
and are intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party and his or her heirs and representatives.
9.10 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 Corporations or Newco with full title to
all properties, assets, rights, approvals, immunities and franchises of any of
the parties to the Merger, the proper officers and directors of each party to
this Agreement and their respective Subsidiaries shall take all such necessary
action as may be reasonably requested by, and at the sole expense of, Newco.
9.11 Advice of Changes. Lycos and TMCS shall each promptly advise the
other parties hereto of any change or event (a) having a Material Adverse Effect
on it or (b) which it believes would or would be reasonably likely to cause or
constitute a material breach of any of its representations, warranties or
covenants contained herein.
9.12 Section 16. Each of Lycos and TMCS shall, reasonably promptly
following the date hereof, provide to Newco a list of (a) the directors and
officers (as such terms are used under Section 16 of the Exchange Act and the
rules and regulations of the SEC thereunder) of such company, (b) the number of
shares of Newco Common Stock and Newco Class B Common Stock and options thereon
and the number of shares of Newco Convertible Preferred Stock (together, the
"Section 16 Securities") expected to be received pursuant to the Reorganization
by each such officer or director at the Effective Time on account of shares of
Lycos Common Stock, TMCS Class A Common Stock or TMCS Class B Common Stock, as
the case may be, reasonably expected to be held by such directors and officers
immediately prior to the Effective Time and (c) a description of the material
terms of such options. Prior to the Effective Time, the Newco Board of Directors
shall take such action consistent with the SEC's interpretive guidance to
approve the issuance of the Section 16 Securities to each such director and
officer of such company for purposes of Rule 16b-3(d) under the Exchange Act
such that the deemed "purchase" of such Section 16 Securities by such persons
pursuant to the Reorganization shall be exempt from liability pursuant to
Section 16(b) of the Exchange Act.
9.13 Contribution Agreement. Newco shall not amend or enter into any
agreement amending the Contribution Agreement, or waive or modify any of the
rights and obligations of any of the parties thereunder, without the prior
written consent of each of Lycos and a majority
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of the independent directors of TMCS. Parent and Newco agree to cause the
consummation of the Contribution immediately following the satisfaction, or
waiver in compliance with this Agreement, of the conditions set forth in Article
VI of the Contribution Agreement.
9.14 Other Businesses. (a) Subject to paragraph (b) below, neither
anything contained in this Agreement nor the ownership of shares of Newco Common
Stock (except as may be provided in the Newco certificate of incorporation)
shall (i) restrict Parent or any of its Subsidiaries from engaging in or owning
an interest in any business which competes with Newco or any Subsidiary of
Newco, or (ii) restrict Newco or any of its Subsidiaries from engaging in or
owning an interest in any business which competes with Parent or any of its
Subsidiaries.
(b) From and after the date hereof, until such time as Parent no longer
owns, directly or indirectly (including through LLC), a number of shares of
Newco Common Stock and/or Newco Class B Common Stock (including shares of Newco
Common Stock acquired by Parent, the LLC and their Subsidiaries after the date
hereof) equal to at least one-third of the number of shares of Newco Class B
Common Stock issued to Parent, LLC or Parent's other Subsidiaries in connection
with the Transactions (such number of shares, as equitably adjusted to reflect
any stock split, stock dividend or similar event affecting Newco Common Stock,
the "Parent Sunset Threshold"), Parent agrees, subject to the next sentence
below, that all business opportunities relating to online activities, automated
ticketing services and on-air home shopping businesses (other than such
activities, services and businesses that are incidental to Parent's other lines
of business, such as USA.com and SciFi.com) will be conducted in Newco and its
Subsidiaries. However, the preceding sentence shall not apply if Newco has
rejected such business opportunity.
(c) In the event that Parent acquires a business that has, as part of
it, a substantial business described in paragraph (b) above (other than a
business described in the last sentence of paragraph (b) above), Parent shall
use its commercially reasonable best efforts to cause such portion of the
acquired business to be available to be acquired by Newco, or otherwise operated
or managed by Newco in order to permit Newco the benefit of such businesses on
such terms as the parties may mutually agree, using their respective
commercially reasonable best efforts and good faith to negotiate such terms.
(d) For the avoidance of doubt, the restrictions contained in this
Section 9.14 shall not apply to Universal Studios, Inc. and Liberty Media Corp.
and their respective affiliates (other than Parent and the LLC, and their
respective Subsidiaries).
9.15 Affiliate Sales Agreement. Consistent with past practice, Parent
shall continue to secure, at Newco's direction and request, carriage as
available for The Home Shopping Network ("HSN") on cable systems or broadcast
stations. Parent shall charge Newco for such services an amount equal to
allocated overhead at cost plus a nominal service fee, such service fee to be in
such amounts as is consistent with the past practice between Parent and HSN. In
fulfilling its obligations under the first sentence of this paragraph, Parent
shall use commercially reasonable efforts, acting in good faith, to secure such
coverage at the most favorable rates, and on the most favorable terms, available
to Parent.
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9.16 Limitations on Sale of Parent Shares. Parent, on its behalf and on
behalf of LLC and their respective Subsidiaries, agrees that, during the 10
trading days preceding and following each measurement period (as defined in the
Certificate of Designations with respect to Newco Convertible Preferred Stock),
it will not sell (other than in private transactions), or permit the
announcement of an anticipated sale in the open market of, any shares of Newco
Common Stock or Newco Class B Common Stock owned by such entities (other than to
another Subsidiary of Parent or LLC). During each measurement period, Parent
shall be permitted to so effect sales of shares of Newco Common Stock or Newco
Class B Common Stock (either through conversion into shares of Newco Common
Stock or otherwise), provided that the aggregate number of shares sold during
any one measurement period does not exceed the greater of (i) 1% of the
outstanding shares of Newco Common Stock or (ii) the average weekly volume over
the four-week period immediately preceding the commencement of such measurement
period. Notwithstanding the provisions of this Section 9.16, Parent, the LLC and
their respective Subsidiaries shall be permitted to enter into and effect sales
of shares of Newco stock during the Second Measurement Period and the Third
Measurement Period (each as defined in the Newco Convertible Preferred Stock
Designations) which are effected in private transactions.
9.17 Promotion. It is the intention of the Parent to cause its
Subsidiaries to endeavor to promote the businesses of Newco.
ARTICLE X
CONDITIONS PRECEDENT
10.1 Conditions to Each Party's Obligation to Effect the Mergers. The
respective obligations of the parties to effect the Mergers shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been
adopted by the respective requisite affirmative vote of the holders of
Lycos Common Stock entitled to vote thereon.
(b) Nasdaq Listings. The shares of Newco Common Stock and
Newco Convertible Preferred Stock which shall be issued to the
stockholders of Lycos and TMCS upon consummation of the Mergers shall
have been authorized for quotation on Nasdaq, subject to official
notice of issuance.
(c) Other Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby shall have been
obtained and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired (all such
approvals and the expiration of all such waiting periods being referred
to herein as the "Requisite Regulatory Approvals").
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(d) S-4. The S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the
S-4 shall have been issued and no proceedings for that purpose shall
have been initiated or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Mergers or any of the other
transactions contemplated by this Agreement shall be in effect. No
statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity
which prohibits, materially restricts or makes illegal consummation of
the Merger.
(f) No Conditions to the Contribution. All of the conditions
(other than the conditions set forth in Sections 6.1(a) and 6.2(c) of
the Contribution Agreement) to the obligations of the parties to the
Contribution Agreement to consummate the Contribution shall have been
satisfied (or waived, but only to the extent permitted by this
Agreement), and each of Lycos and TMCS shall have received a
certificate executed on behalf of Parent by an appropriate executive by
an officer of Parent and Newco to such effect.
10.2 Conditions to Obligations of Lycos. The obligations of Lycos to
effect the Lycos Merger are also subject to the satisfaction, or waiver by
Lycos, at or prior to the Effective Time, of the following conditions:
(a) Representations and Warranties. Subject to the standard
set forth in Section 12.10(b), the representations and warranties of
TMCS and Newco set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing
Date. Lycos shall have received a certificate signed on behalf of each
of TMCS and Newco by an appropriate executive officer of each company
to such effect.
(b) Performance of Obligations of TMCS. Each of TMCS and Newco
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, and Lycos shall have received a certificate signed on behalf of
each of TMCS and Newco by an appropriate executive officer of each
company to such effect.
(c) Federal Tax Opinion. Lycos shall have received an opinion
of Wachtell, Lipton, Rosen & Katz, dated the Closing Date,
substantially to the effect that (i) the Reorganization and the
Contribution, taken together, will constitute an exchange described in
Section 351(a) or 351(b) of the Code and (ii) no gain or loss will be
recognized by the stockholders of Lycos upon the receipt of shares of
Newco Common Stock in exchange for their shares of Lycos Common Stock
pursuant to the Lycos Merger, except to the extent of other property or
money received and with respect to cash received in lieu of a
fractional share interest in Newco Common Stock.
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10.3 Conditions to Obligations of TMCS and Newco. The obligations of
TMCS to effect the TMCS Merger and the obligations of Newco to effect the
Mergers are also subject to the satisfaction or waiver by TMCS and Newco at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. Subject to the standard
set forth in Section 12.10(b), the representations and warranties of
Lycos set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date.
TMCS and Newco shall each have received a certificate signed on behalf
of Lycos by its Chief Executive Officer or Chief Financial Officer to
such effect.
(b) Performance of Obligations of Lycos. Lycos 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,
and TMCS and Newco shall each have received a certificate signed on
behalf of Lycos by its Chief Executive Officer or its Chief Financial
Officer to such effect.
(c) Federal Tax Opinion. TMCS shall have received an opinion
of Gibson, Dunn & Crutcher, dated the Closing Date, substantially to
the effect that (i) the Reorganization and the Contribution, taken
together, will constitute an exchange described in Section 351(a) or
351(b) of the Code and (ii) no gain or loss will be recognized by the
stockholders of TMCS upon the receipt of shares of Newco Common Stock
or Newco Class B Common Stock in exchange for their shares of TMCS
Class A Common Stock or TMCS Class B Common Stock pursuant to the TMCS
Merger, except to the extent of other property or money received and
with respect to cash received in lieu of a fractional share interest in
Newco Common Stock or Newco Class B Common Stock.
ARTICLE XI
TERMINATION AND AMENDMENT
11.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented in
connection with the Mergers by the stockholders of Lycos or TMCS:
(a) by mutual consent of Lycos, TMCS and Newco in a written
instrument;
(b) by any of Newco, Lycos or TMCS if any Governmental Entity
that must grant a Requisite Regulatory Approval has denied approval of
the Mergers and such denial has become final and nonappealable or any
Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order permanently enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement;
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(c) by any of Newco, Lycos or TMCS, if the approval of the
Lycos stockholders required by Section 10.1(a) shall not have been
obtained at a meeting duly convened therefor or at any adjournment
thereof;
(d) by Newco, Lycos or TMCS if the Transactions shall not have
been consummated on or before the first anniversary of the date of this
Agreement, unless the failure of the Closing to occur by such date
shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such
party set forth herein; or
(e) by any of Newco, Lycos or TMCS (provided that the
terminating party is not then in breach of any representation,
warranty, covenant or other agreement contained herein) if there shall
have been a breach of any of the covenants or agreements or any of the
representations or warranties set forth or expressly incorporated in
this Agreement on the part of Parent, Newco or TMCS, in the case of a
termination by Lycos; Parent, Newco or Lycos, in the case of a
termination by TMCS, or TMCS or Lycos, in the case of a termination by
Newco, which breach, either individually or in the aggregate, would
constitute, if occurring or continuing on the Closing Date, the failure
of the conditions set forth in Section 10.1(f), 10.2(a), 10.2(b),
10.3(a) or 10.3(b), as the case may be, and which is not cured within
30 days following written notice to the party committing such breach or
by its nature or timing cannot be cured prior to the Closing Date.
11.2 Effect of Termination. In the event of termination of this
Agreement by either Lycos or TMCS as provided in Section 11.1, this Agreement
shall forthwith become void and have no effect, and none of Parent, Newco, L
Merger Sub, T Merger Sub, Lycos, TMCS, any of their respective Subsidiaries or
any of the officers or directors of any of them shall have any liability of any
nature whatsoever hereunder, or in connection with the transactions contemplated
hereby, except that (i) Sections 9.2(b), 11.2, 12.1 and 12.2 shall survive any
termination of this Agreement, and (ii) notwithstanding anything to the contrary
contained in this Agreement, no party shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision of
this Agreement.
11.3 Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors, at any time before or after approval of
the matters presented in connection with the Mergers by the stockholders of
Lycos and TMCS; provided, however, that after any approval of the transactions
contemplated by this Agreement by the respective stockholders of Lycos or TMCS,
there may not be, without further approval of such stockholders, any amendment
of this Agreement that changes the amount or the form of the consideration to be
delivered hereunder to the holders of Lycos Common Stock, TMCS Class A Common
Stock or TMCS Class B Common Stock, other than as contemplated by this
Agreement. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. No amendment of this Agreement
by TMCS shall be effective unless approved by the independent members of the
TMCS Board of Directors.
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11.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein; provided, however,
that after any approval of the transactions contemplated by this Agreement by
the respective stockholders of Lycos or TMCS, there may not be, without further
approval of such stockholders, any extension or waiver of this Agreement or any
portion thereof which reduces the amount or changes the form of the
consideration to be delivered to the holders of Lycos Common Stock, TMCS Class A
Common Stock or TMCS Class B Common Stock, hereunder, other than as contemplated
by this Agreement. Any agreement on the part of a 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, but such extension or waiver or failure to
insist on strict compliance with an obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. No extension or waiver pursuant to this Agreement by TMCS shall
be effective unless approved by the independent members of the TMCS Board of
Directors.
ARTICLE XII
GENERAL PROVISIONS
12.1 Nonsurvival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement (other than the Option
Agreements and the Confidentiality Agreement, which shall terminate in
accordance with their terms) shall survive the Effective Time, except for
Sections 3.4, 3.5, 3.6, 9.9, the last sentence of Section 9.13, 9.14, 9.15, 9.16
and 9.17 and for those other covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the Effective Time.
12.2 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, provided, however, that the costs and expenses of
printing and mailing the Proxy/Information Statement, and all filing and other
fees paid to the SEC in connection with the Merger, shall be borne equally by
Parent, Lycos and TMCS.
12.3 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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(a) if to Lycos, to:
Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02460
Attention: General Counsel
Telecopier: 781-370-2600
with a copy to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
Attention: Mark H. Burnett, Esq.
Kenneth J. Gordon, Esq.
Telecopier: 617-248-7100;
(b) if to TMCS, to:
Ticketmaster Online-CitySearch, Inc.
790 East Colorado Boulevard, Suite 200
Pasadena, CA 91101
Attention: General Counsel
Telecopier: 626-405-9929
with a copy to:
Gibson, Dunn & Crutcher LLP
333 S. Grand Avenue
Los Angeles, CA 90071
Attention: Andrew E. Bogen, Esq.
Telecopier: 213-229-7520
and
(c) if to Parent or Newco, to:
c/o USA Networks, Inc.
152 West 57th Street
New York, NY 10019
Attention: General Counsel
Telecopier: 212-314-7329
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with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Pamela S. Seymon, Esq.
Andrew J. Nussbaum, Esq.
Telecopier: 212-403-2000
12.4 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Notwithstanding anything to the contrary in this Agreement or the
Option Agreements, nothing herein or therein shall require any party hereto or
thereto to take any action in violation of law.
12.5 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
12.6 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof other than the Contribution
Agreement, the Option Agreements and the Confidentiality Agreement.
12.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of law principles.
12.8 Publicity. Except as otherwise required by applicable law or the
rules of Nasdaq, none of the parties hereto shall, or shall permit any of its
Subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the consent
of the other parties hereto, which consent shall not be unreasonably withheld
(provided that the consent of Parent shall be deemed to be the consent of Newco
and the Merger Subs).
12.9 Assignment; Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. 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. Except as otherwise
specifically
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provided in Section 9.9, this Agreement (including the documents and instruments
referred to herein) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
12.10 Standards; Disclosure Schedules. (a) Prior to the execution and
delivery of this Agreement, Lycos delivered the Lycos Disclosure Schedule to
TMCS and Newco, and TMCS delivered the TMCS Disclosure Schedule to Lycos and
Newco, each of which disclosure schedule sets forth, among other things, items
the disclosure of which is necessary or appropriate either in response to an
express disclosure requirement contained in a provision hereof or as an
exception to one or more of such party's representations or warranties contained
in Article V, in the case of TMCS, or Article VI, in the case of Lycos, or to
one or more of such party's covenants contained in Article VII; provided,
however, that notwithstanding anything in this Agreement to the contrary, (i) no
such item is required to be set forth in a Disclosure Schedule as an exception
to a representation or warranty if its absence would not result in the related
representation or warranty being deemed untrue or incorrect under the standard
set forth in Section 10.2(a) or Section 10.3(a), as the case may be, and (ii)
the mere inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by a party that such
item represents a material exception or a material fact, event or circumstance
or that such item has had or would have had a Material Adverse Effect with
respect to Lycos or TMCS, as the case may be; provided, further, that no
Disclosure Schedule or other information, or modification thereof, that is
provided following the execution and delivery of this Agreement by the parties
hereto shall be deemed to modify any representation, warranty or covenant set
forth herein or in the Contribution Agreement.
(b) No representation or warranty of TMCS contained in Article V
(except for Section 5.7(a) and representations relating to the capitalization of
TMCS in Section 5.2) or of Lycos contained in Article VI (except for Section
6.7(a) and representations relating to the capitalization of Lycos in Section
6.2) shall be deemed untrue or incorrect for any purpose under this Agreement,
and no party hereto shall be deemed to have breached a representation or
warranty for any purpose under this Agreement, in any case, as a consequence of
the existence or absence of any fact, circumstance or event unless such fact,
circumstance or event, individually or when taken together with all other facts,
circumstances or events inconsistent with any representations or warranties
contained in Article V, in the case of TMCS, or Article VI, in the case of
Lycos, has had a Material Adverse Effect with respect to TMCS or Lycos,
respectively. For all purposes of determining whether any facts or events
contravening a representation or warranty contained herein constitute,
individually or in the aggregate, a Material Adverse Effect, representations and
warranties contained in Article V (other than Section 5.7(a) and the
capitalization representations) or Article VI (other than Section 6.7(a) and the
capitalization representations) shall be read without regard to any reference to
materiality or Material Adverse Effect set forth therein.
(c) The foregoing standards of this Section 12.10 shall apply, mutatis
mutandis, to the representations and warranties of Parent and Newco contained
herein.
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IN WITNESS WHEREOF, Parent, Lycos, TMCS, Newco, L Merger Sub and T
Merger Sub have caused this Agreement to be executed by their respective
officers thereunto duly authorized as of the date first above written.
USA NETWORKS, INC.
By: /s/ Victor A. Kaufman
---------------------------------------
Name: Victor A. Kaufman
Title: Office of the Chairman and Chief
Financial Officer
LYCOS, INC.
By: /s/ Robert M. Davis
---------------------------------------
Name: Robert M. Davis
Title: President and Chief Executive
Officer
TICKETMASTER ONLINE-CITYSEARCH, INC.
By: /s/ Michael Guttentag
---------------------------------------
Name: Michael Guttentag
Title: Vice President - Business
Development
USA INTERACTIVE INC.
By: /s/ Dara Khosrowshahi
---------------------------------------
Name: Dara Khosrowshahi
Title: Vice President and Treasurer
[Agreement and Plan of Reorganization]
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LEMMA, INC.
By: /s/ Dara Khosrowshahi
---------------------------------------
Name: Dara Khosrowshahi
Title: President
TYCHO, INC.
By: /s/ Dara Khosrowshahi
---------------------------------------
Name: Dara Khosrowshahi
Title: President
[Agreement and Plan of Reorganization]
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Exhibit B
FORM OF
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES A CONVERTIBLE REDEEMABLE PREFERRED STOCK
OF
USA/LYCOS INTERACTIVE NETWORKS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
USA/Lycos Interactive Networks, Inc., a Delaware corporation
(the "Corporation"), certifies that pursuant to the authority contained in
Article [FOURTH] of its Certificate of Incorporation, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, its Board of Directors has adopted the following resolution creating a
series of its Preferred Stock, par value $0.01 per share, designated as Series A
Convertible Redeemable Preferred Stock:
RESOLVED, that a series of the class of authorized Convertible
Redeemable Preferred Stock, par value $0.01 per share, of the Corporation be
hereby created, and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series
shall be designated as the "Series A Convertible Redeemable Preferred Stock"
(the "Series A Convertible Preferred Stock") and the number of shares
constituting such series shall be _________.
Section 2. Dividends. The holders of shares of Series A
Convertible Preferred Stock shall not be entitled to receive dividends with
respect to such shares.
Section 3. Voting Rights. Except as provided by law or as may
otherwise be provided in the Certificate of Incorporation of the Corporation or
in any amendment thereto, the holders of shares of Series A Convertible
Preferred Stock shall not be entitled to any voting rights as stockholders with
respect to such shares.
Section 4. Redemption.
(a) Shares of Series A Convertible Preferred Stock shall not
be redeemable except as provided in this Section 4.
(b) If as of the 39-month anniversary following the date of
the initial issuance of the shares of Series A Convertible Preferred
Stock (the "Initial Issuance Date"), the Average Market Price (as
defined in Section 9) is less than or equal to the First Target
<PAGE>
Price (as defined in Section 9), the Board of Directors of the
Corporation shall direct that all of the shares of Series A Convertible
Preferred Stock then outstanding be redeemed by paying therefor in cash
$0.01 per share.
(c) On the date that redemption is being made pursuant to
paragraph (b) of this Section 4, the Corporation shall deposit for the
benefit of the holders of shares of Series A Convertible Preferred
Stock the funds necessary for such redemption with a bank or trust
company in the Borough of Manhattan, the City of New York, having a
capital and surplus of at least $500,000,000. Any monies so deposited
by the Corporation and unclaimed at the end of one year from the date
designated for such redemption shall revert to the general funds of the
Corporation. After such reversion, any such bank or trust company
shall, upon demand, pay over to the Corporation such unclaimed amounts
and thereupon such bank or trust company shall be relieved of all
responsibility in respect thereof and any holder of shares of Series A
Convertible Preferred Stock shall look only to the Corporation for the
payment of the redemption price. Any interest accrued on funds
deposited pursuant to this paragraph (c) shall be paid from time to
time to the Corporation for its own account.
(d) Upon the deposit of funds pursuant to paragraph (c) in
respect of shares of Series A Convertible Preferred Stock being
redeemed pursuant to paragraph (b) of this Section 4, notwithstanding
that any certificates for such shares shall not have been surrendered
for cancellation, the shares represented thereby shall no longer be
deemed outstanding, and all rights of the holders of shares of Series A
Convertible Preferred Stock shall cease and terminate, excepting only
the right to receive the redemption price therefor.
Section 5. Reacquired Shares. Any shares of Series A
Convertible Preferred Stock converted, redeemed, purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be retired and canceled
promptly after the acquisition thereof. All such shares shall upon their
cancellation, and upon the filing of an appropriate certificate with the
Secretary of State of the State of Delaware, become authorized but unissued
shares of Preferred Stock, par value $0.01 per share, of the Corporation and may
be reissued as part of another series of Preferred Stock, par value $0.01 per
share, of the Corporation subject to the conditions or restrictions on issuance
set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(a) Except as provided in paragraph (b) of this Section 6,
upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (i) to the holders of shares of capital
stock of the Corporation ranking junior (upon liquidation, dissolution
or winding up) to the Series A Convertible Preferred Stock unless,
prior thereto, the holders of shares of Series A Convertible Preferred
Stock shall have received the Liquidation Value with respect to such
shares or (ii) to the holders of shares of capital stock ranking on a
parity (upon liquidation, dissolution or winding up) with the Series A
Convertible Preferred Stock, except distributions made ratably on the
Series A Convertible Preferred Stock and all such parity stock in
proportion to the total amounts to
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which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. For purposes of this Section 6,
the Liquidation Value shall be $0.01 per share.
(b) If the Corporation shall commence a voluntary case under
the Federal bankruptcy laws or any other applicable Federal or State
bankruptcy, insolvency or similar law, or consent to the entry of an
order for relief in an involuntary case under any such law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or make an assignment for the benefit
of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case under the Federal
bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official)
of the Corporation or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such
decree or order shall be unstayed and in effect for a period of 90
consecutive days and on account of any such event the Corporation shall
liquidate, dissolve or wind up, no distribution shall be made (i) to
the holders of shares of capital stock of the Corporation ranking
junior (upon liquidation, dissolution or winding up) to the Series A
Convertible Preferred Stock unless, prior thereto, the holders of
shares of Series A Convertible Preferred Stock shall have received the
Liquidation Value with respect to such shares or (ii) to the holders of
shares of capital stock ranking on a parity (upon liquidation,
dissolution or winding up) with the Series A Convertible Preferred
Stock, except distributions made ratably on the Series A Convertible
Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
(c) Neither the consolidation, merger or other business
combination of the Corporation with or into any other Person or Persons
nor the sale of all or substantially all of the assets of the
Corporation shall be deemed to be a liquidation, dissolution or winding
up of the Corporation for purposes of this Section 6.
Section 7. Conversion. On the Conversion Date, each share of
Series A Convertible Preferred Stock shall automatically be converted into the
right to receive shares of common stock, par value $.01 per share, of the
Corporation ("Common Stock"), on the terms and conditions set forth in this
Section 7.
(a) Subject to the provisions for adjustment hereinafter set
forth, each share of Series A Convertible Preferred Stock shall be
converted into the right to receive a number of fully paid and
nonassessable shares of Common Stock equal to the "Conversion Ratio,"
which shall initially be equal to one (1) and which shall be subject to
adjustment as provided in this Section 7.
(b) The Conversion Ratio shall be subject to adjustment from
time to time as follows:
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(i) In case the Corporation shall at any time or from
time to time declare a dividend, or make a distribution, on
the outstanding shares of Common Stock in shares of Common
Stock or subdivide or reclassify the outstanding shares of
Common Stock into a greater number of shares or combine or
reclassify the outstanding shares of Common Stock into a
smaller number of shares of Common Stock, then, and in each
such case, the Conversion Ratio shall be adjusted to equal the
number determined by multiplying (A) the Conversion Ratio
immediately prior to such adjustment by (B) a fraction, the
numerator of which shall be the number of shares of Common
Stock outstanding immediately after such dividend,
distribution, subdivision or reclassification, and the
denominator of which shall be the number of shares of Common
Stock outstanding immediately before such dividend,
distribution, subdivision or reclassification. An adjustment
made pursuant to this clause (i) shall become effective (A) in
the case of any such dividend or distribution, immediately
after the close of business on the record date for the
determination of holders of shares of Common Stock entitled to
receive such dividend or distribution, or (B) in the case of
any such subdivision, reclassification or combination, at the
close of business on the day upon which such corporate action
becomes effective.
(ii) In case the Corporation shall at any time or
from time to time declare, order, pay or make a dividend or
other distribution (including, without limitation, any
distribution of stock or other securities, cash or other
property or rights or warrants to subscribe for securities of
the Corporation or any of its Subsidiaries by way of dividend
or spinoff, but excluding regular ordinary cash dividends as
may be declared from time to time by the Corporation) on its
Common Stock, other than shares of Common Stock which are
referred to in clause (i) of this paragraph (b), then, and in
each such case, the Conversion Ratio shall be adjusted to
equal the number determined by multiplying (A) the Conversion
Ratio immediately prior to the record date fixed for the
determination of stockholders entitled to receive such
dividend or distribution by (B) a fraction, the numerator of
which shall be the Current Market Price per share of Common
Stock on the last Trading Day on which purchasers of Common
Stock in regular way trading would be entitled to receive such
dividend or distribution and the denominator of which shall be
the Current Market Price per share of Common Stock on the
first Trading Day on which purchasers of Common Stock in
regular way trading would not be entitled to receive such
dividend or distribution (the "Ex-dividend Date"); provided
that the fraction determined by the foregoing clause (B) shall
not be less than 1. An adjustment made pursuant to this clause
(ii) shall be effective at the close of business on the
Ex-dividend Date. If the Corporation completes a tender offer
or otherwise repurchases shares of Common Stock in a single
transaction or a related series of transactions, provided such
tender offer or offer to repurchase is open to all or
substantially all holders of Common Stock (not including open
market or other selective repurchase programs), the Conversion
Ratio shall be adjusted as though (A) the Corporation had
effected a reverse split of the Common Stock to reduce the
number of shares of Common Stock outstanding
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from (x) the number outstanding immediately prior to the
completion of the tender offer or to the first repurchase for
which the adjustment is being made to (y) the number
outstanding immediately after the completion of the tender
offer or the last repurchase for which the adjustment is being
made and (B) the Corporation had paid a dividend on the Common
Stock outstanding immediately after completion of the tender
offer or of the last repurchase for which the adjustment is
being made in an aggregate amount equal to the aggregate
consideration paid by the Corporation pursuant to the tender
offer or repurchases for which the adjustment is being made.
In applying the first two sentences of this Section 7(b)(ii)
to the event described in the clause (B) of the preceding
sentence, the Current Market Price of the Common Stock on the
date of the closing of any such tender offer or on the date of
the last repurchase shall be taken as the value of the Common
Stock on the Ex-Dividend Date, and the value of the Common
Stock on the day preceding the Ex-Dividend Date shall be
assumed to be equal to the sum of (x) the value on the
Ex-Dividend Date and (y) the per share amount of the dividend
described in such clause (B). In the event that any of the
consideration paid by the Corporation in any tender offer or
repurchase to which this Section 7(b)(ii) applies is in a form
other than cash, the value of such consideration shall be
determined by an independent investment banking firm of
nationally recognized standing to be selected by the Board of
Directors of the Corporation.
(iii) In case at any time the Corporation shall be a
party to any transaction (including, without limitation, a
merger, consolidation, sale of all or substantially all of the
Corporation's assets, liquidation or recapitalization (other
than solely a change in the par value of equity securities) of
the Common Stock and excluding any transaction to which clause
(i) or (ii) of this paragraph (b) applies) in which the
previously outstanding Common Stock shall be changed into or
exchanged for different securities of the Corporation or
common stock or other securities of another corporation or
interests in a noncorporate entity or other property
(including cash) or any combination of any of the foregoing
(each such transaction being herein called the "Transaction,"
the date of consummation of the Transaction being herein
called the "Consummation Date", and the Corporation (in the
case of a recapitalization of the Common Stock to which this
clause (iii) applies or any other such transaction in which
the Corporation retains substantially all of its assets and
survives as a corporation) or such other corporation or entity
(in each other case) being herein called the "Acquiring
Company"), then, as a condition of the consummation of the
Transaction, the Corporation shall, as determined in good
faith by its Board of Directors based on advice as agreed to
by two investment banking firms of nationally recognized
standing, one selected by the Corporation and one selected by
USA Networks, Inc. ("USA Networks") (or any successor
stockholder of the Corporation holding a majority of the
voting power thereof), provide (as evidenced by a resolution
of the Board of Directors) for the shares of Series A
Convertible Preferred Stock outstanding at the Consummation
Date to be exchanged, without any vote of the holders of the
Series A Convertible Preferred Stock, for such other common
stock
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<PAGE>
or other securities, or cash or property as equitably reflects
the fair market value of a share of Series A Convertible
Preferred Stock at such Consummation Date, taking into account
all relevant factors, in the absence of the Transaction;
provided, however, that if the two investment banking firms
referred to in this sentence are unable to agree on such fair
market value, then such firms shall select a third investment
banking firm of nationally recognized standing which shall
then render such advice to the Board of Directors; and
provided, further, that in the event that at the time the
Corporation becomes a party to a Transaction there is no
shareholder holding a majority of the voting power of the
Corporation, the Corporation shall choose a single investment
banking firm of national standing to render the advice as to
fair market value contemplated by this Section 7(b)(iii).
(iv) Subject to Section 7(b)(iii), at the opening of
business on the Conversion Date, the Conversion Ratio shall be
adjusted to equal the number determined by multiplying (A) the
Conversion Ratio immediately prior to such adjustment by (B)
the Final Adjustment Factor.
All calculations under this paragraph (b) shall be made to the nearest
one ten-thousandth of a share.
(c) If any adjustment (other than the adjustment provided in
paragraph (b)(iv)) in the number of shares of Common Stock into which
each share of Series A Convertible Preferred Stock may be converted
required pursuant to this Section 7 would result in an increase or
decrease of less than 1% in the number of shares of Common Stock into
which each share of Series A Convertible Preferred Stock is then
convertible, the amount of any such adjustment shall be carried forward
and adjustment with respect thereto shall be made at the earlier of (i)
the time of and together with any subsequent adjustment, which,
together with such amount and any other amount or amounts so carried
forward, shall aggregate at least 1% of the number of shares of Common
Stock into which each share of Series A Convertible Preferred Stock is
then convertible or (ii) the opening of business on the Conversion
Date.
(d) The Board of Directors may at its option increase the
number of shares of Common Stock into which each share of Series A
Convertible Preferred Stock may be converted, in addition to the
adjustments required by this Section 7, as shall be determined by it
(as evidenced by a resolution of the Board of Directors) to be
advisable in order to avoid or diminish any income deemed to be
received by any holder for federal income tax purposes of shares of
Common Stock or Series A Convertible Preferred Stock resulting from any
events or occurrences giving rise to adjustments pursuant to this
Section 7 or from any other similar event.
(e) The holder of any shares of Series A Convertible Preferred
Stock may exercise his right to receive in respect of such shares the
shares of Common Stock or other property or securities, as the case may
be, to which such holder has become entitled by surrendering for such
purpose to the Corporation, at its principal office or at such other
office or agency maintained by the Corporation for that purpose, a
certificate or
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certificates representing the shares of Series A Convertible Preferred
Stock to be converted accompanied by such other customary documents as
are necessary to effect the conversion and specifying the name or names
in which such holder wishes the certificate or certificates for shares
of Common Stock or other property or securities as the case may be, to
which such holder has become entitled to be issued. In case such notice
shall specify a name or names other than that of such holder, such
notice shall be accompanied by payment of all transfer taxes payable
upon the issuance of shares of Common Stock or other property or
securities as the case may be, to which such holder has become entitled
in such name or names. Other than such taxes, the Corporation will pay
any and all issue and other taxes (other than taxes based on income)
that may be payable in respect of any issue or delivery of shares of
Common Stock or other property or securities, as the case may be, to
which such holder has become entitled on conversion of Series A
Convertible Preferred Stock pursuant hereto. As promptly as
practicable, and in any event within five business days after the
surrender of such certificate or certificates and the receipt of such
notice relating thereto and, if applicable, payment of all transfer
taxes (or the demonstration to the satisfaction of the Corporation that
such taxes have been paid), the Corporation shall deliver or cause to
be delivered certificates representing the number of validly issued,
fully paid and nonassessable full shares of Common Stock to which the
holder of shares of Series A Convertible Preferred Stock so converted
shall be entitled or other property or services as the case may be, to
which such holder has become entitled.
(f) From and after the Conversion Date or the Redemption Date,
a holder of shares of Series A Convertible Preferred Stock shall have
no voting or other rights, other than the right to receive upon
delivery of the certificate or certificates evidencing shares of Series
A Convertible Preferred Stock as provided by paragraph 7(e), the
securities or property described in Section 7, if any, or the
redemption price as set forth in Section 4, as applicable.
(g) In connection with the conversion of any shares of Series
A Convertible Preferred Stock, no fractions of shares of Common Stock
shall be issued, but in lieu thereof the Corporation shall pay a cash
adjustment in respect of such fractional interest in an amount equal to
such fractional interest multiplied by the Current Market Price per
share of Common Stock on the day on which such shares of Series A
Convertible Preferred Stock are deemed to have been converted.
(h) The Corporation shall at all times reserve and keep
available out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Series A Convertible
Preferred Stock, such number of shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all then
outstanding shares of Series A Convertible Preferred Stock. The
Corporation shall from time to time, in accordance with the laws of
Delaware, increase the authorized amount of Common Stock if at any time
the number of authorized shares of Common Stock remaining unissued
shall not be sufficient to permit the conversion at such time of all
then outstanding shares of Series A Convertible Preferred Stock.
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<PAGE>
Section 8. Reports as to Adjustments. Whenever the Conversion
Ratio is adjusted as provided in Section 7 hereof, the Corporation shall (i)
promptly place on file at its principal office and at the office of each
transfer agent for the Series A Convertible Preferred Stock, if any, a
statement, signed by an officer of the Corporation, setting forth in reasonable
detail the event requiring the adjustment and the method by which such
adjustment was calculated and specifying the new Conversion Ratio, and (ii)
promptly mail to the holders of record of the outstanding shares of Series A
Convertible Preferred Stock at their respective addresses as the same shall
appear in the Corporation's stock records a notice stating that the number of
shares of Common Stock into which the shares of Series A Convertible Preferred
Stock are convertible has been adjusted and setting forth the new Conversion
Ratio (or describing the new stock, securities, cash or other property) as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof, and when such adjustment became
effective.
Section 9. Definitions. For the purposes of the Certificate of
Designations, Preferences and Rights of Series A Convertible Redeemable
Preferred Stock which embodies this resolution:
"Conversion Date" shall mean the date that is 5 business days
following the earlier of (x) the 39-month anniversary of the Initial Issuance
Date and (y) the Consummation Date, in the event of a Transaction contemplated
by Section 7(b)(iii) hereof.
"Current Market Price" per share of Common Stock on any date
shall be deemed to be the closing price per share of Common Stock for such date.
The closing price for each day shall be the last sale price, regular way or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or,
admitted to trading on the New York Stock Exchange or, if the Common Stock is
not listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the last
quoted sale price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ")
or such other system then in use, or, if on any such date the Common Stock is
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Common
Stock selected by the Board of Directors. If the Common Stock is not publicly
held or so listed or publicly traded, "Current Market Price" shall mean the Fair
Market Value per share as determined in good faith by the Board of Directors of
the Corporation.
"Fair Market Value" means the amount which a willing buyer
would pay a willing seller in an arm's-length transaction as determined in good
faith by the Board of Directors of the Corporation, unless otherwise provided
herein.
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"Final Adjustment Factor": When the Conversion Date is as
specified in clause (x) of the definition of Conversion Date, the Final
Adjustment Factor shall equal
0 if AMP < or = TP1
1 if AMP > or = TP2
AMP - TP1 otherwise
---------
TP2 - TP1
where
AMP = Average Market Price: [MP1 + MP2 + MP3] [MP4]
--------------- + ---
6 2
TP1 = First Target Price: $143.27
TP2 = Second Target Price: $257.88
MP1 = First Measured Price: the daily volume weighted average of the
Adjusted Current Market Prices for the Trading Days during the
First Measurement Period
MP2 = Second Measured Price: the daily volume weighted average of the
Adjusted Current Market Prices for the Trading Days during the
Second Measurement Period
MP3 = Third Measured Price: the daily volume weighted average of the
Adjusted Current Market Prices for the Trading Days during the
Third Measurement Period
MP4 = Fourth Measured Price: the daily volume weighted average of the
Adjusted Current Market Prices for the Trading Days during the
Fourth Measurement Period
First Measurement Period: 90 calendar day period following the Initial
Issuance Date.
Second Measurement Period: 90 calendar day period ending on the
15-month anniversary of the Initial Issuance Date.
Third Measurement Period: 90 calendar day period ending on the
27-month anniversary of the Initial Issuance Date.
Fourth Measurement Period: 90 calendar day period ending on the
39-month anniversary of the Initial Issuance Date.
Adjusted Current Market Price: as of any date, the product of the
Current Market Price on such date times the Conversion Ratio applicable
at the close of business on such date.
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When the Conversion Date is as specified in clause (y) of the
definition of Conversion Date, the Final Adjustment Factor shall be inapplicable
and Section 7(b)(iii) shall govern.
"Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
"Trading Day" means a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, any day other than a
Saturday, Sunday, or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
Section 10. Rank. The Series A Convertible Preferred Stock
shall rank prior to each other class or series of capital stock (including,
without limitation, each class of common stock of the Corporation) of, or other
equity interests (including, without limitation, warrants, rights, calls or
options exercisable for or convertible into capital stock or equity interests)
in, the Corporation.
Section 11. Transfer. To the extent held by USANi LLC, a
Delaware limited liability company ("LLC"), USA Networks or any of their
respective subsidiaries, or any limited liability companies or limited
partnerships controlled by LLC or USA Networks, shares of the Series A
Convertible Preferred Stock shall not be transferable or assignable (except by
operation of law) and any certificates representing shares of Series A
Convertible Preferred Stock held by any such person shall contain a legend to
the effect that such securities are nontransferable, nonassignable and
nonnegotiable except by operation of law. Nothing herein shall affect the
transferability of any Common Stock into which any shares of the Series A
Convertible Preferred is convertible.
IN WITNESS WHEREOF, USA/Lycos Interactive Networks, Inc. has
caused this Certificate of Designations, Preferences and Rights of Series A
Convertible Redeemable Preferred Stock to be duly executed by its ___________
and attested to by its Secretary this ___ day of ______________, 1999.
USA/LYCOS INTERACTIVE NETWORKS, INC.
By: __________________________________
Name:
ATTEST:
By: _____________________________
Name:
10