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AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
AT HOME CORPORATION
COUNTDOWN ACQUISITION CORP.
AND
EXCITE, INC.
Dated as of January 19, 1999
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TABLE OF CONTENTS
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ARTICLE I THE MERGER..............................................................................2
1.1 The Merger......................................................................2
1.2 Effective Time; Closing.........................................................2
1.3 Effect of the Merger............................................................2
1.4 Certificate of Incorporation; Bylaws............................................2
1.5 Directors and Officers..........................................................3
1.6 Effect on Capital Stock.........................................................3
1.7 Surrender of Certificates.......................................................5
1.8 No Further Ownership Rights in Company Capital Stock............................6
1.9 Lost, Stolen or Destroyed Certificates..........................................7
1.10 Tax Consequences................................................................7
1.11 Taking of Necessary Action; Further Action......................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................7
2.1 Organization of the Company.....................................................7
2.2 Company Capital Structure.......................................................8
2.3 Obligations With Respect to Capital Stock......................................10
2.4 Authority; Non-Contravention...................................................10
2.5 SEC Filings; Company Financial Statements......................................12
2.6 Absence of Certain Changes or Events...........................................13
2.7 Taxes..........................................................................14
2.8 Title to Properties; Absence of Liens and Encumbrances.........................15
2.9 Intellectual Property..........................................................16
2.10 Compliance; Permits; Restrictions..............................................19
2.11 Litigation.....................................................................19
2.12 Brokers' and Finders' Fees.....................................................20
2.13 Transactions with Affiliates...................................................20
2.14 Employee Benefit Plans.........................................................20
2.15 Environmental Matters..........................................................24
2.16 Agreements, Contracts and Commitments..........................................25
2.17 Change of Control Payments.....................................................26
2.18 Disclosure.....................................................................26
2.19 Board Approval.................................................................27
2.20 Fairness Opinion...............................................................27
2.21 Section 203 of the Delaware General Corporation Law and Company Rights
Plan Not Applicable............................................................27
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..............................27
3.1 Organization of Parent.........................................................28
3.2 Parent Capital Structure.......................................................28
3.3 Obligations With Respect to Capital Stock......................................29
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3.4 Authority; Non-Contravention...................................................30
3.5 SEC Filings; Parent Financial Statements.......................................31
3.6 Absence of Certain Changes or Events...........................................32
3.7 Taxes..........................................................................33
3.8 Title to Properties; Absence of Liens and Encumbrances.........................34
3.9 Intellectual Property..........................................................35
3.10 Compliance; Permits; Restrictions..............................................36
3.11 Litigation.....................................................................37
3.12 Brokers' and Finders' Fees.....................................................37
3.13 Environmental Matters..........................................................37
3.14 Agreements, Contracts and Commitments..........................................38
3.15 Disclosure.....................................................................38
3.16 Board Approval.................................................................39
3.17 Fairness Opinion...............................................................39
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME...................................................39
4.1 Conduct of Business by the Company.............................................39
4.2 Conduct of Business by Parent..................................................42
ARTICLE V ADDITIONAL AGREEMENTS..................................................................43
5.1 Prospectus/Proxy Statement; Registration Statement; Other Filings..............43
5.2 Meeting of Company Stockholders................................................44
5.3 Meeting of Parent Stockholders.................................................46
5.4 Confidentiality; Access to Information.........................................47
5.5 No Solicitation................................................................48
5.6 Public Disclosure..............................................................49
5.7 Reasonable Efforts; Notification...............................................49
5.8 Third Party Consents...........................................................51
5.9 Stock Options and Employee Benefits; Warrants..................................51
5.10 Form S-8.......................................................................53
5.11 Indemnification................................................................53
5.12 Board of Directors of Parent...................................................53
5.13 Nasdaq Listing.................................................................54
5.14 Company Affiliates; Restrictive Legend.........................................54
5.15 Certain Employee Benefits......................................................54
ARTICLE VI CONDITIONS TO THE MERGER..............................................................54
6.1 Conditions to Obligations of Each Party to Effect the Merger...................54
6.2 Additional Conditions to Obligations of the Company............................56
6.3 Additional Conditions to the Obligations of Parent and Merger Sub..............56
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ARTICLE VII TERMINATION, AMENDMENT AND WAIVER....................................................57
7.1 Termination....................................................................57
7.2 Notice of Termination; Effect of Termination...................................59
7.3 Fees and Expenses..............................................................59
7.4 Amendment......................................................................60
7.5 Extension; Waiver..............................................................60
ARTICLE VIII GENERAL PROVISIONS..................................................................61
8.1 Non-Survival of Representations and Warranties.................................61
8.2 Notices........................................................................61
8.3 Interpretation; Knowledge......................................................62
8.4 Counterparts...................................................................63
8.5 Entire Agreement; Third Party Beneficiaries....................................63
8.6 Severability...................................................................63
8.7 Other Remedies; Specific Performance...........................................63
8.8 Governing Law..................................................................64
8.9 Rules of Construction..........................................................64
8.10 Assignment.....................................................................64
8.11 WAIVER OF JURY TRIAL...........................................................64
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<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as
of January 19, 1999, among At Home Corporation, a Delaware corporation
("PARENT"), Countdown Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), and Excite, Inc. a Delaware
corporation (the "COMPANY").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the Delaware General Corporation Law ("DELAWARE LAW"),
Parent, Merger Sub and the Company intend to enter into a business combination
transaction.
B. The Board of Directors of the Company (i) has determined that the
Merger (as defined in Section 1.1) is fair to, and in the best interests of, the
Company and its stockholders, (ii) has approved this Agreement, the Merger and
the other transactions contemplated by this Agreement and (iii) subject to the
terms and conditions of this Agreement, has determined to recommend that the
stockholders of the Company adopt and approve this Agreement and approve the
Merger.
C. The Board of Directors of Parent (i) has determined that the Merger
(as defined in Section 1.1) is fair to, and in the best interests of, Parent and
its stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) has determined to
recommend that the stockholders of Parent approve the issuance of shares of
Parent Common Stock (as defined below) pursuant to the Merger and approve an
amendment to Parent's Certificate of Incorporation to increase the authorized
number of shares of Parent Common Stock so as to permit the transactions
contemplated hereby, subject to and upon consummation of the Merger.
D. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's and Company's respective willingness to
enter into this Agreement, certain stockholders of Company are entering into
Voting Agreements in substantially the form attached hereto as Exhibit A-1 (the
"COMPANY VOTING AGREEMENTS"), and certain stockholders of Parent are entering
into Voting Agreements in substantially the form attached hereto as Exhibit A-2
(the "PARENT VOTING AGREEMENTS").
E. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
the Company shall execute and deliver a Stock Option Agreement in favor of
Parent in substantially the form attached hereto as Exhibit B (the "STOCK OPTION
AGREEMENT") . The Board of Directors of the Company has approved the Stock
Option Agreement.
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
<PAGE> 6
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
the Company (the "MERGER"), the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation. The Company
as the surviving corporation after the Merger is hereinafter sometimes referred
to as the "SURVIVING CORPORATION".
1.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "CERTIFICATE OF
MERGER") (the time of such filing with the Secretary of State of the State of
Delaware (or such later time as may be agreed in writing by the Company and
Parent and specified in the Certificate of Merger) being the "EFFECTIVE TIME")
as soon as practicable on or after the Closing Date (as herein defined). Unless
the context otherwise requires, the term "AGREEMENT" as used herein refers
collectively to this Agreement and Plan of Reorganization and the Certificate of
Merger. The closing of the Merger (the "CLOSING") shall take place at the
offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, at a time
and date to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions set forth in
Article VI, or at such other time, date and location as the parties hereto agree
in writing (the "CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation; provided, however, that at the Effective Time the
<PAGE> 7
Certificate of Incorporation of the Surviving Corporation shall be amended so
that the name of the Surviving Corporation shall be "Excite, Inc.".
(b) The Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be, at the Effective Time, the Bylaws of the
Surviving Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holders of any of the
following securities, the following shall occur:
(a) Conversion of Company Capital Stock.
(i) Company Common Stock. Each share of Common Stock,
par value $0.001 per share, of the Company (including the associated Rights (as
defined in that certain Rights Agreement (the "COMPANY RIGHTS PLAN") dated as of
October 15, 1998 between the Company and BankBoston, N.A., as Rights Agent)
("COMPANY COMMON STOCK") issued and outstanding immediately prior to the
Effective Time, other than any shares of the Company Common Stock to be canceled
pursuant to Section 1.6(b), will be canceled and extinguished and automatically
converted (subject to Section 1.6(e)) into the right to receive 1.041902 shares
(the "EXCHANGE RATIO") of the Series A Common Stock, par value $0.01 per share,
of Parent ("PARENT COMMON STOCK") upon surrender of the certificate representing
such share of Company Common Stock in the manner provided in Section 1.7 (or in
the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit (and bond, if required) in the manner provided in Section 1.9). If any
shares of Company Common Stock outstanding immediately prior to the Effective
Time are unvested or are subject to a repurchase option, risk of forfeiture or
other condition under any applicable restricted stock purchase agreement or
other agreement with the Company, then the shares of Parent Common Stock issued
in exchange for such shares of Company Common Stock will also be unvested and
subject to the same repurchase option, risk of forfeiture or other condition,
and the certificates representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends. The Company shall take all
action that may be necessary to ensure that, from and after the Effective Time,
Parent is entitled to exercise any such repurchase option or other right set
forth in any such restricted stock purchase agreement or other agreement.
(ii) Company Preferred Stock. Each share of Series
E-3 Preferred Stock, par value $0.001 per share, of the Company (including the
associated Rights (as defined in the Company Rights Plan), if any) ("COMPANY
PREFERRED STOCK" and, together with Company Common
<PAGE> 8
Stock, "COMPANY CAPITAL STOCK") issued and outstanding immediately prior to the
Effective Time, other than any shares of the Company Preferred Stock to be
canceled pursuant to Section 1.6(b), will be canceled and extinguished and
automatically converted (subject to Section 1.6(e)) into the right to receive a
number of shares of Parent Common Stock equal to the Exchange Ratio multiplied
by the number of shares of Company Common Stock issuable upon conversion of one
share of Company Preferred Stock, upon surrender of the certificate representing
such share of Company Preferred Stock in the manner provided in Section 1.7 (or
in the case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit (and bond, if required) in the manner provided in Section 1.9). If any
shares of Company Preferred Stock outstanding immediately prior to the Effective
Time are unvested or are subject to a repurchase option, risk of forfeiture or
other condition under any applicable restricted stock purchase agreement or
other agreement with the Company, then the shares of Parent Common Stock issued
in exchange for such shares of Company Preferred Stock will also be unvested and
subject to the same repurchase option, risk of forfeiture or other condition,
and the certificates representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends. The Company shall take all
action that may be necessary to ensure that, from and after the Effective Time,
Parent is entitled to exercise any such repurchase option or other right set
forth in any such restricted stock purchase agreement or other agreement.
(b) Cancellation of Parent-Owned Stock. Each share of Company
Capital Stock held by the Company or owned by Merger Sub, Parent or any direct
or indirect wholly-owned subsidiary of the Company or of Parent immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) Stock Options; Employee Stock Purchase Plans. At the
Effective Time, all options to purchase Company Common Stock then outstanding
under the Company's 1995 Equity Incentive Plan, the Company's 1996 Equity
Incentive Plan, as amended, the Company's 1996 Directors Stock Option Plan, the
Netbot, Inc. 1996 Stock Option Plan, the MatchLogic, Inc. 1997 Equity
Compensation Plan, the MatchLogic, Inc. 1996 Stock Option Plan, the Throw, Inc.
1996 Option Plan and the Classifieds 2000, Inc. 1996 Stock Option Plan
(collectively, the "COMPANY STOCK OPTION PLANS") shall be assumed by Parent in
accordance with Section 5.9 hereof. Rights outstanding under the Company's 1996
Employee Stock Purchase Plan (the "COMPANY PURCHASE PLAN") shall be treated as
set forth in Section 5.9 hereof.
(d) Capital Stock of Merger Sub. Each share of Common Stock of
Merger Sub (the "MERGER SUB COMMON STOCK") issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued, fully
paid and nonassessable share of Common Stock of the Surviving Corporation. Each
certificate evidencing ownership of shares of Merger Sub Common Stock shall
evidence ownership of such shares of capital stock of the Surviving Corporation.
(e) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Capital Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock that otherwise would be received by such holder) shall,
<PAGE> 9
upon surrender of such holder's Certificate(s) (as defined in Section 1.7(c)),
receive from Parent an amount of cash (rounded to the nearest whole cent),
without interest, equal to the product of (i) such fraction, multiplied by (ii)
the average closing price of one share of Parent Common Stock for the ten (10)
most recent days that Parent Common Stock has traded ending on the trading day
ending one day prior to the Closing Date, as reported on the Nasdaq National
Market System ("NASDAQ").
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the appropriate effect of any stock split, reverse
stock split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Capital Stock),
reorganization, recapitalization, reclassification or other like change with
respect to Parent Common Stock or Company Capital Stock occurring on or after
the date hereof and prior to the Effective Time.
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent shall select an institution
reasonably satisfactory to the Company to act as the exchange agent (the
"EXCHANGE AGENT") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this Article I, the shares of Parent Common Stock issuable
pursuant to Section 1.6 in exchange for outstanding shares of Company Capital
Stock, and cash in an amount sufficient for payment in lieu of fractional shares
pursuant to Section 1.6(e) and any dividends or distributions which holders of
shares of Company Capital Stock may be entitled pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly after the Effective Time,
Parent shall cause the Exchange Agent to mail to each holder of record (as of
the Effective Time) of a certificate or certificates (the "CERTIFICATES") which
immediately prior to the Effective Time represented outstanding shares of
Company Capital Stock whose shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 1.6, cash in lieu of any
fractional shares pursuant to Section 1.6(f) and any dividends or other
distributions pursuant to Section 1.7(d), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Parent
Common Stock, cash in lieu of any fractional shares pursuant to Section 1.6(e)
and any dividends or other distributions pursuant to Section 1.7(d). Upon
surrender of Certificates for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates representing the number of whole
shares of Parent Common Stock, payment in lieu of fractional shares which such
holders have the right to receive pursuant to Section 1.6(e) and any
<PAGE> 10
dividends or distributions payable pursuant to Section 1.7(d), and the
Certificates so surrendered shall forthwith be canceled. Until so surrendered,
outstanding Certificates will be deemed from and after the Effective Time, for
all corporate purposes, subject to Section 1.7(d) as to the payment of
dividends, to evidence the ownership of the number of full shares of Parent
Common Stock into which such shares of Company Capital Stock shall have been so
converted and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.6(e) and any dividends or
distributions payable pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holders of any unsurrendered Certificates
with respect to the shares of Parent Common Stock represented thereby until the
holders of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such Certificates, the
Exchange Agent shall deliver to the record holders thereof, without interest,
certificates representing whole shares of Parent Common Stock issued in exchange
therefor along with payment in lieu of fractional shares pursuant to Section
1.6(e) hereof and the amount of any such dividends or other distributions with a
record date after the Effective Time payable with respect to such whole shares
of Parent Common Stock.
(e) Transfers of Ownership. If certificates for shares of
Parent Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificates surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) Required Withholding. Each of the Exchange Agent, Parent
and the Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Capital Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of
state, local or foreign tax law or under any other applicable Legal Requirement
(as defined in Section 3.10). To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the person to whom such amounts would otherwise have been
paid.
(g) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation
nor any party hereto shall be liable to a holder of shares of Parent Common
Stock or Company Capital Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Capital Stock. All shares of
Parent
<PAGE> 11
Common Stock issued upon the surrender for exchange of shares of Company Capital
Stock in accordance with the terms hereof (including any cash paid in respect
thereof pursuant to Section 1.6(f) and 1.7(d)) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
Capital Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Company Capital Stock which
were outstanding immediately prior to the Effective Time. If after the Effective
Time Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of Parent
Common Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(e) and any dividends or distributions payable pursuant to Section
1.7(d); provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent, the Company or
the Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
1.11 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub will take all such lawful and necessary action, so long
as such action is consistent with this Agreement. Parent shall cause Merger Sub
to perform fully all of its obligations relating to this Agreement and the
transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date hereof and as of the Closing Date, the Company
represents and warrants to Parent and Merger Sub, subject to the exceptions
specifically disclosed in writing in the disclosure letter supplied by the
Company to Parent dated as of the date hereof and certified by a duly authorized
officer of the Company (the "COMPANY SCHEDULES"), as follows:
2.1 Organization of the Company.
<PAGE> 12
(a) The Company has no subsidiaries, except for the
corporations identified in Part 2.1(a)(i) of the Company Schedules; and neither
the Company nor any of the other corporations identified in Part 2.1(a)(i) of
the Company Schedules owns any capital stock of, or any equity interest of any
nature in, any other entity, other than the entities identified in Part
2.1(a)(ii) of the Company Schedules, except for passive investments in equity
interests of public companies as part of the cash management program of the
Company. Neither the Company nor any subsidiary thereof has agreed or is
obligated to make, or is bound by any written, oral or other agreement,
contract, subcontract, lease, binding understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan or
legally binding commitment or undertaking of any nature, as in effect as of the
date hereof or as may hereinafter be in effect ("CONTRACT") under which Contract
it may become obligated to make, any future investment in or capital
contribution to any other entity. Neither the Company, nor any subsidiary
thereof, has, at any time, been a general partner of any general partnership,
limited partnership or other entity.
(b) The Company and each of its subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all necessary corporate power and
authority: (i) to conduct its business in the manner in which its business is
currently being conducted; (ii) to own and use its assets in the manner in which
its assets are currently owned and used; and (iii) to perform its obligations
under all Contracts by which it is bound.
(c) The Company and each of its subsidiaries is qualified to
do business as a foreign corporation, and is in good standing, under the laws of
all jurisdictions where the nature of its business requires such qualification
and where the failure to so qualify would have a Material Adverse Effect (as
defined in Section 8.3) on the Company.
(d) The Company has delivered or made available to Parent a
true and correct copy of the Certificate of Incorporation (including any
Certificate of Designations) and Bylaws of the Company and similar governing
instruments of each of its subsidiaries, each as amended to date (collectively,
the "COMPANY CHARTER DOCUMENTS"), and each such instrument is in full force and
effect. The Company is not in violation of any of the provisions of the Company
Charter Documents. None of the Company's subsidiaries is in violation of any
provision of its Articles or Certificate of Incorporation or Bylaws or other
similar governing instruments, except for such violations as are not material to
the Company and its subsidiaries taken as a whole.
(e) The Company has delivered or made available to Parent all
proposed or considered amendments to the Company Charter Documents.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of:
(i) 100,000,000 shares of Company Common Stock, of which 52,676,876 shares had
been issued and were
<PAGE> 13
outstanding as of the date hereof; and (ii) 4,000,000 shares of preferred stock,
par value $0.001 per share, of which (A) no shares are outstanding as of the
date of this Agreement and (B) 350,000 shares of which have been designated as
Series E-3 Preferred Stock and 250,000 shares of which have been designated as
Series F Junior Participating Preferred Stock. As of the date hereof, an
aggregate of $5.0 million principal amount of convertible promissory notes are
outstanding, which are convertible into shares of Company Common Stock based on
the market price of the Company Common Stock. All of the outstanding shares of
capital stock of the Company have been duly authorized and validly issued, and
are fully paid and nonassessable. As of the date of this Agreement, there are no
shares of Company Common Stock held in treasury by the Company. Upon
consummation of the Merger, (A) the shares of Parent Common Stock issued in
exchange for any shares of Company Common Stock that are subject to a Contract
pursuant to which the Company has the right to repurchase, redeem or otherwise
reacquire any shares of Company Common Stock will, without any further act of
Parent, the Company or any other person, become subject to the restrictions,
conditions and other provisions contained in such Contract, and (B) Parent will
automatically succeed to and become entitled to exercise the Company's rights
and remedies under any such Contract.
(b) As of the date of this Agreement: (i) 10,967,436 shares of
Company Common Stock are subject to issuance pursuant to outstanding options to
purchase Company Common Stock under the Company Stock Option Plans(excluding
options granted pursuant to Section 5.9(d) hereof) for an aggregate exercise
price of $224,746,618; and (ii) 680,665 shares of Company Common Stock are
reserved for future issuance under the Company Purchase Plan. (Stock options
granted by the Company pursuant to the Company Stock Option Plans are referred
to in this Agreement as "COMPANY OPTIONS"). Part 2.2(b) of the Company Schedules
sets forth the following information with respect to each Company Option
outstanding as of the date of this Agreement: (i) the name of the optionee; (ii)
the particular plan pursuant to which such Company Option was granted; (iii) the
number of shares of Company Common Stock subject to such Company Option; (iv)
the exercise price of such Company Option; (v) the date on which such Company
Option was granted or assumed; (vi) the date on which such Company Option
expires and (vii) whether the exercisability of such option will be accelerated
in any way by the transactions contemplated by this Agreement, and indicates the
extent of acceleration. The Company has made available to Parent accurate and
complete copies of all stock option plans pursuant to which the Company has
granted stock options that are currently outstanding, the form of all stock
option agreements evidencing such options and the applicable vesting schedule
for each such option. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in Part
2.2(b)(i) of the Company Schedules, there are no commitments or agreements of
any character to which the Company is bound obligating the Company to accelerate
the vesting of any Company Option as a result of the Merger.
(c) All outstanding shares of Company Common Stock, all
outstanding Company Options, and all outstanding shares of capital stock of each
subsidiary of the Company have been
<PAGE> 14
issued and granted in compliance with (i) all applicable securities laws and, to
the knowledge of the Company, all other applicable Legal Requirements (as
defined below) and (ii) all material requirements set forth in applicable
Contracts. For the purposes of this Agreement, "LEGAL REQUIREMENTS" means any
federal, state, local, municipal, foreign or other law, statute, constitution,
principle of common law, resolution, ordinance, code, edict, decree, rule,
regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Entity (as defined below).
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Part 2.3 of the Company Schedules, there are no equity securities, partnership
interests or similar ownership interests of any class of any Company equity
security, or any securities exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except for securities the Company
owns free and clear of all material claims and Encumbrances, directly or
indirectly through one or more subsidiaries, and except for shares of capital
stock or other similar ownership interests of certain subsidiaries of the
Company that are owned by certain nominee equity holders as required by the
applicable law of the jurisdiction of organization of such subsidiaries (which
shares or other interests do not materially affect the Company's control of such
subsidiaries), as of the date of this Agreement, there are no equity securities,
partnership interests or similar ownership interests of any class of equity
security of any subsidiary of the Company, or any security exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. For the purposes of this Agreement "ENCUMBRANCES" means any lien,
pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim,
infringement, interference, option, right of first refusal, preemptive right,
community property interest or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset) but does not include liens imposed by law in respect of
obligations not yet due which are owed in respect of taxes or which otherwise
are owed to carriers, warehousepersons or laborers. Except as set forth in Part
2.3 of the Company Schedules or as set forth in Section 2.2 hereof and except
for the Stock Option Agreement, there are no subscriptions, options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
to which the Company or any of its subsidiaries is a party or by which it is
bound obligating the Company or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, or repurchase, redeem or
otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests of
the Company or any of its subsidiaries or obligating the Company or any of its
subsidiaries to grant, extend, accelerate the vesting of or enter into any such
subscription, option, warrant, equity security, call, right, commitment or
agreement. As of the date of this Agreement, except as contemplated by this
Agreement and except for the Company Rights Plan, there are no registration
rights and there is, except for the Company Voting Agreement, no voting trust,
proxy, rights plan, antitakeover plan or other agreement or understanding to
which the Company is a party or by which it is bound with respect to any equity
security of any class of the Company or with respect to any equity security,
partnership interest or
<PAGE> 15
similar ownership interest of any class of any of its subsidiaries. Stockholders
of the Company will not be entitled to dissenters' or appraisal rights under
applicable state law in connection with the Merger.
2.4 Authority; Non-Contravention.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and the Stock Option Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Stock Option Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company, subject only to the
approval and adoption of this Agreement and the approval of the Merger by the
Company's stockholders and the filing of the Certificate of Merger pursuant to
Delaware Law. A vote of the holders of a majority of the outstanding shares of
the Company Common Stock is sufficient for the Company's stockholders to approve
and adopt this Agreement and approve the Merger. This Agreement and the Stock
Option Agreement have each been duly executed and delivered by the Company and,
assuming due execution and delivery by Parent and Merger Sub, constitute valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as enforceability may be limited by
bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement and the Stock Option Agreement by the
Company do not, and the performance of this Agreement and the Stock Option
Agreement by the Company will not, (i) conflict with or violate the Company
Charter Documents, (ii) subject to obtaining the approval and adoption of this
Agreement and the approval of the Merger by the Company's stockholders as
contemplated in Section 5.2 and compliance with the requirements set forth in
Section 2.4(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or by
which the Company or any of its subsidiaries or any of their respective
properties is bound or affected, or (iii) result in any material breach of or
constitute a material default (or an event that with notice or lapse of time or
both would become a material default) under, or impair the Company's rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a material Encumbrance on any of the material properties or
assets of the Company or any of its subsidiaries pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, concession, or other instrument or obligation to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective assets are bound or affected. The
terms of this Agreement, including without limitation, the provisions of Article
I and Section 5.9 hereof, do not conflict with or violate the Company Charter
Documents or conflict with or violate or impair the Company's rights or alter
the rights (other than changes in the securities subject thereto from shares of
Company Capital Stock to shares of Parent Common Stock and corresponding
appropriate adjustments to per share conversion or exercise prices thereunder in
accordance with the terms of this Agreement) or obligations of any third party
under any instrument or agreement to which the Company is a party or by which it
is bound relating to the issuance of any securities of the Company,
<PAGE> 16
including without limitation, any options, warrants or Company Preferred Stock,
and, subject to obtaining the approval and adoption of this Agreement and the
approval of the Merger by the Company's stockholders as aforesaid, the
effectuation of the transactions contemplated by Article I and Section 5.9
hereof do not require the approval or consent of any holder of securities of the
Company. As of the date hereof, each share of Company Preferred Stock is
convertible into one share of Company Common Stock. Part 2.4(b) of the Company
Schedules lists all consents, waivers and approvals under any of the Company's
or any of its subsidiaries' agreements, contracts, licenses or leases required
to be obtained in connection with the consummation of the transactions
contemplated hereby, which, if individually or in the aggregate not obtained,
would result in a material loss of benefits to the Company, Parent or the
Surviving Corporation as a result of the Merger.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic ("GOVERNMENTAL ENTITY"), is required to be obtained or made by the
Company in connection with the execution and delivery of this Agreement and the
Stock Option Agreement or the consummation of the Merger, except for (i) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business, (ii) the filing of the
Prospectus/Proxy Statement (as defined in Section 2.18) and a Schedule 13D with
regard to the Parent Voting Agreements with the Securities and Exchange
Commission ("SEC") in accordance with the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") and the effectiveness of the Registration Statement
(as defined in Section 2.18), (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), and the securities or antitrust laws of any foreign country, and (iv)
such other consents, authorizations, filings, approvals and registrations which
if not obtained or made would not be material to the Company or Parent or have a
material adverse effect on the ability of the parties hereto to consummate the
Merger.
2.5 SEC Filings; Company Financial Statements.
(a) The Company has filed all forms, reports and documents
required to be filed by the Company with the SEC since January 1, 1997 and has
made available to Parent such forms, reports and documents in the form filed
with the SEC. All such required forms, reports and documents (including those
that the Company may file subsequent to the date hereof), as amended, are
referred to herein as the "COMPANY SEC REPORTS." As of their respective dates,
the Company SEC Reports (i) were prepared in accordance and complied in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Company SEC
Reports and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
<PAGE> 17
except to the extent corrected prior to the date hereof by a subsequently filed
Company SEC Report. None of the Company's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in the Company SEC Reports
(the "COMPANY FINANCIALS"), including each Company SEC Report filed after the
date hereof until the Closing, (i) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, (ii)
was prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q, 8-K or any successor form under the Exchange Act) and (iii) fairly
presented in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as at the respective dates thereof and
the consolidated results of the Company's operations and cash flows for the
periods indicated, except that the unaudited interim financial statements may
not contain footnotes and were or are subject to normal and recurring year-end
adjustments. The balance sheet of the Company contained in the Company SEC
Reports as of September 30, 1998 is hereinafter referred to as the "COMPANY
BALANCE SHEET." Except as disclosed in the Company Financials, since the date of
the Company Balance Sheet neither the Company nor any of its subsidiaries has
any liabilities required under GAAP to be set forth on a consolidated balance
sheet (absolute, accrued, contingent or otherwise) which are, individually or in
the aggregate, material to the business, results of operations or financial
condition of the Company and its subsidiaries taken as a whole, except for
liabilities incurred since the date of the Company Balance Sheet in the ordinary
course of business consistent with past practices and liabilities incurred
pursuant to this Agreement.
(c) the Company has heretofore furnished to Parent a complete
and correct copy of any amendments or modifications, which have not yet been
filed with the SEC but which are required to be filed, to agreements, documents
or other instruments which previously had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Since the date of the
Company Balance Sheet there has not been: (i) any Material Adverse Effect on the
Company, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in respect of, any of
the Company's or any of its subsidiaries' capital stock, or any purchase,
redemption or other acquisition by the Company or any of its subsidiaries of any
of the Company's capital stock or any other securities of the Company or its
subsidiaries or any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases from employees following their
termination pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any split, combination or reclassification of any of the
Company's or any of its subsidiaries' capital stock, (iv) any granting by the
Company or any of its subsidiaries of any increase in compensation or fringe
benefits, except for normal increases of cash compensation in the ordinary
course of business
<PAGE> 18
consistent with past practice, or any payment by the Company or any of its
subsidiaries of any bonus, except for bonuses made in the ordinary course of
business consistent with past practice, or any granting by the Company or any of
its subsidiaries of any increase in severance or termination pay or any entry by
the Company or any of its subsidiaries into any currently effective employment,
severance, termination or indemnification agreement or any agreement the
benefits of which are contingent or the terms of which are materially altered
upon the occurrence of a transaction involving the Company of the nature
contemplated hereby, (v) entry by the Company or any of its subsidiaries into
any licensing or other agreement with regard to the acquisition or disposition
of any material Intellectual Property (as defined in Section 2.9) other than
licenses, distribution agreements, advertising agreements, sponsorship
agreements or merchant program agreements entered into in the ordinary course of
business consistent with past practice (collectively, "ORDINARY COURSE
AGREEMENTS"), (vi) any amendment or consent with respect to any licensing
agreement filed or required to be filed by the Company with the SEC, (vii) any
material change by the Company in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, or (viii) any
material revaluation by the Company of any of its assets, including, without
limitation, writing down the value of capitalized inventory or writing off notes
or accounts receivable other than in the ordinary course of business.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement,
"TAX" or "TAXES" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) The Company and each of its subsidiaries have
timely filed all federal, state, local and foreign returns, estimates,
information statements and reports ("RETURNS") relating to Taxes required to be
filed by the Company and each of its subsidiaries with any Tax authority, except
such Returns which are not material to the Company. The Company and each of its
subsidiaries have paid all Taxes shown to be due on such Returns.
(ii) The Company and each of its subsidiaries as of
the Effective Time will have withheld with respect to its employees all federal
and state income taxes, Taxes pursuant to the Federal Insurance Contribution Act
("FICA"), Taxes pursuant to the Federal Unemployment Tax Act ("FUTA") and other
Taxes required to be withheld, except such Taxes which are not material to the
Company.
<PAGE> 19
(iii) Neither the Company nor any of its subsidiaries
has been delinquent in the payment of any material Tax nor is there any material
Tax deficiency outstanding, proposed or assessed against the Company or any of
its subsidiaries, nor has the Company or any of its subsidiaries executed any
unexpired waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of
the Company or any of its subsidiaries by any Tax authority is presently in
progress, nor has the Company or any of its subsidiaries been notified of any
request for such an audit or other examination.
(v) No adjustment relating to any Returns filed by
the Company or any of its subsidiaries has been proposed in writing formally or
informally by any Tax authority to the Company or any of its subsidiaries or any
representative thereof.
(vi) Neither the Company nor any of its subsidiaries
has any liability for any material unpaid Taxes which has not been accrued for
or reserved on the Company Balance Sheet in accordance with GAAP, whether
asserted or unasserted, contingent or otherwise, which is material to the
Company, other than any liability for unpaid Taxes that may have accrued since
the date of the Company Balance Sheet in connection with the operation of the
business of the Company and its subsidiaries in the ordinary course.
(vii) There is no contract, agreement, plan or
arrangement to which the Company or any of its subsidiaries is a party as of the
date of this Agreement, including but not limited to the provisions of this
Agreement, covering any employee or former employee of the Company or any of its
subsidiaries that, individually or collectively, would reasonably be expected to
give rise to the payment of any amount that would not be deductible pursuant to
Sections 280G, 404 or 162(m) of the Code. There is no contract, agreement, plan
or arrangement to which the Company is a party or by which it is bound to
compensate any individual for excise taxes paid pursuant to Section 4999 of the
Code.
(viii) Neither the Company nor any of its
subsidiaries has filed any consent agreement under Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the
Company or any of its subsidiaries.
(ix) Neither the Company nor any of its subsidiaries
is party to or has any obligation under any tax-sharing, tax indemnity or tax
allocation agreement or arrangement.
(x) None of the Company's or its subsidiaries' assets
are tax exempt use property within the meaning of Section 168(h) of the Code.
<PAGE> 20
2.8 Title to Properties; Absence of Liens and Encumbrances.
(a) Part 2.8(a) of the Company Schedules lists the real
property interests owned by the Company and its subsidiaries as of the date of
this Agreement. Part 2.8(a)(i) of the Company Schedules lists all real property
leases to which the Company or any of its subsidiaries is a party as of the date
of this Agreement and each amendment thereto that is in effect as of the date of
this Agreement that provide for annual payments in excess of $250,000. All such
current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default) that would give rise to a
material claim. Other than the leaseholds created under the real property leases
identified in Part 2.8(a)(i) of the Company Schedules, the Company and its
subsidiaries own no interest in real property.
(b) The Company and each of its subsidiaries has good and
valid title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of its tangible properties and assets, real, personal and
mixed, used or held for use in its business, free and clear of any liens,
pledges, charges, claims, security interests or other encumbrances of any sort
except for liens imposed by law in respect of obligations not yet due which are
owed in respect of taxes or which otherwise are owed to carriers,
warehousepersons or laborers ("LIENS"), except as reflected in the Company
Financials and except for such Liens or other imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
2.9 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following
and all rights in, arising out of, or associated therewith:
(i) all United States, international and foreign patents and
applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether
patentable or not), invention disclosures, improvements, trade
secrets, proprietary information, know how, technology,
technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights,
copyrights registrations and applications therefor, and all
other rights corresponding thereto throughout the world; (iv)
all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos,
URLs, common law trademarks and service marks, trademark and
service mark registrations and applications therefor
throughout the world (collectively, "TRADEMARKS"); (vi) all
databases and data collections and all rights therein
throughout the world, including User Data (as defined below);
(vii) all moral and economic rights of authors and inventors,
however denominated, throughout the world, and (viii) any
similar or equivalent rights to any of the foregoing anywhere
in the world.
<PAGE> 21
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual
Property that is owned by, or exclusively licensed to, the
Company or any of its subsidiaries.
"REGISTERED INTELLECTUAL PROPERTY" means all United States,
international and foreign: (i) patents and patent applications
(including provisional applications); (ii) registered
trademarks, applications to register trademarks, intent-to-use
applications, or other registrations or applications related
to trademarks; (iii) registered copyrights and applications
for copyright registration; and (iv) any other Intellectual
Property that is the subject of an application, certificate,
filing, registration or other document issued, filed with, or
recorded by any state, government or other public legal
authority.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means all of the
Registered Intellectual Property owned by, or filed in the
name of, the Company or any of its subsidiaries.
"USER DATA" means known, assumed or inferred information or
attributes about a user or subscriber.
(a) No material Company Intellectual Property or product or
service of the Company is subject to any proceeding or outstanding decree,
order, judgment, agreement, or stipulation restricting in any manner the use,
transfer, or licensing thereof by the Company, or which may affect the validity,
use or enforceability of such Company Intellectual Property, except for
restrictions on User Data included in published privacy policies of Company or
any of its subsidiaries.
(b) Each material item of Company Registered Intellectual
Property is valid and subsisting, all necessary registration, maintenance and
renewal fees currently due in connection with such Registered Intellectual
Property have been made and all necessary documents, recordations and
certificates in connection with such Registered Intellectual Property have been
filed with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property.
(c) The Company or one of its subsidiaries owns and has good
and exclusive title to, or has joint ownership or license (sufficient for the
conduct of its business as currently conducted) to, each material item of
Company Intellectual Property free and clear of any material lien or encumbrance
(excluding licenses and related restrictions); and the Company is the exclusive
owner of all material Trademarks used in connection with the operation or
conduct of the business of the Company, including the sale of any products or
the provision of any services by the Company.
(d) The Company or one of its subsidiaries owns exclusively,
and has good title to, all material copyrighted works that are Company products
or which the Company or any of its subsidiaries otherwise expressly purports to
own.
<PAGE> 22
(e) To the extent that any material Intellectual Property has
been developed or created by a third party for the Company or any of its
subsidiaries, the Company or one of its subsidiaries has a written agreement
with such third party with respect thereto and the Company or such subsidiary
thereby either (i) has obtained ownership of, and is the exclusive owner of, or
(ii) has obtained a license (sufficient for the conduct of its business as
currently conducted) to all such third party's Intellectual Property in such
work, material or invention by operation of law or by valid assignment or
license, to the fullest extent it is legally possible to do so.
(f) Neither the Company nor any of its subsidiaries has
transferred ownership of, or granted any exclusive license with respect to, any
Intellectual Property that is or was material to the Company Intellectual
Property, to any third party.
(g) The Company Schedules list all material contracts,
licenses and agreements to which the Company or any of its subsidiaries is a
party (i) with respect to Company Intellectual Property licensed or transferred
to any third party (other than Ordinary Course Agreements); or (ii) pursuant to
which a third party has licensed or transferred any material Intellectual
Property to the Company or any of its subsidiaries.
(h) To the knowledge of the Company, all material contracts,
licenses and agreements relating to the Company Intellectual Property are in
full force and effect. The consummation of the transactions contemplated by this
Agreement will neither violate nor result in the breach, modification,
cancellation, termination, or suspension of such contracts, licenses and
agreements. The Company and each of its subsidiaries is in material compliance
with, and has not materially breached any term of any such contracts, licenses
and agreements and, to the knowledge of the Company, all other parties to such
contracts, licenses and agreements are in compliance with, and have not
materially breached any term of, such contracts, licenses and agreements.
Following the Closing Date, the Surviving Corporation will be permitted to
exercise all of the Company's rights under such contracts, licenses and
agreements to the same extent the Company would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which the Company would otherwise be required to pay.
(i) The operation of the business of the Company as such
business currently is conducted, including the Company's design, development,
marketing and sale of the products or services of the Company (including with
respect to products currently under development) has not, does not and will not
infringe or misappropriate the Intellectual Property of any third party or
constitute unfair competition or trade practices under the laws of any
jurisdiction, except with respect to the use, licensing and sale of User Data,
which use, licensing or sale, to the knowledge of the Company, will not violate
the Intellectual Property rights or any United States privacy or similar United
States right of any third party or constitute unfair competition or trade
practices under the laws of any jurisdiction.
<PAGE> 23
(j) The Company has not received notice from any third party
that the operation of the business of the Company or any act, product or service
of the Company, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction.
(k) To the knowledge of the Company, no person has or is
infringing or misappropriating any material Company Intellectual Property.
(l) The Company has taken reasonable steps to protect the
Company's rights in the Company's confidential information and trade secrets
that it wishes to protect or any trade secrets or confidential information of
third parties provided to the Company, and, without limiting the foregoing, the
Company has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement substantially in the
form provided to Parent and all current and former employees and contractors of
the Company and its subsidiaries have executed such an agreement, except where
the failure to do so is not reasonably expected to be material to the Company.
2.10 Compliance; Permits; Restrictions.
(a) Neither the Company nor any of its subsidiaries is, in any
material respect, in conflict with, or in default or in violation of (i) to the
knowledge of the Company, any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which the Company or
any of its subsidiaries or any of their respective businesses or properties is,
or the Company believes is reasonably likely to be, bound or affected, or (ii)
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties is bound or
affected, except for conflicts, violations and defaults that (individually or in
the aggregate) would not cause the Company to lose any material benefit or incur
any material liability. No investigation or review by any Governmental Entity is
pending or, to the Company's knowledge, has been threatened in a writing
delivered to the Company, against the Company or any of its subsidiaries, nor,
to the Company's knowledge, has any Governmental Entity indicated an intention
to conduct an investigation of the Company or any of its subsidiaries. There is
no material agreement, judgment, injunction, order or decree binding upon the
Company or any of its subsidiaries which has or could reasonably be expected to
have the effect of prohibiting or materially impairing any business practice of
the Company or any of its subsidiaries, any acquisition of material property by
the Company or any of its subsidiaries or the conduct of business by the Company
as currently conducted.
(b) The Company and its subsidiaries hold, to the extent
legally required, all permits, licenses, variances, exemptions, orders and
approvals from Governmental Entities that are material to and required for the
operation of the business of the Company as currently conducted (collectively,
the "COMPANY PERMITS"). The Company and its subsidiaries are in compliance in
all
<PAGE> 24
material respects with the terms of the Company Permits, except where the
failure to be in compliance with the terms of the Company Permits would not be
material to the Company.
2.11 Litigation. Except as disclosed in Part 2.11 of the Company
Schedules, there are no claims, suits, actions or proceedings pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seeks to restrain or enjoin
the consummation of the transactions contemplated by this Agreement or which
could reasonably be expected, either singularly or in the aggregate with all
such claims, actions or proceedings, to be material to the Company. No
Governmental Entity has at any time challenged or questioned in a writing
delivered to the Company the legal right of the Company to design, manufacture,
offer or sell any of its products or services in the present manner or style
thereof. As of the date hereof, to the knowledge of the Company, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
will, or that would reasonably be expected to, cause or provide a bona fide
basis for a director or executive officer of the Company to seek indemnification
from the Company.
Except as disclosed in Part 2.11 of the Company Schedules, the Company
has never been subject to an audit, compliance review, investigation or like
contract review by the GSA office of the Inspector General or other Governmental
Entity or agent thereof in connection with any government contract (a
"GOVERNMENT AUDIT"), to the Company's knowledge no Government Audit is
threatened or reasonably anticipated, and in the event of such Government Audit,
to the knowledge of the Company no basis exists for a finding of noncompliance
with any material provision of any government contract or a refund of any
amounts paid or owed by any Governmental Entity pursuant to such government
contract. For each item disclosed in the Company Schedule pursuant to this
Section 2.11 a true and complete copy of all correspondence and documentation
with respect thereto has been provided to Parent.
2.12 Brokers' and Finders' Fees. Except for fees payable to BancBoston
Robertson Stephens Inc. pursuant to an engagement letter dated January 8, 1999,
the material terms of which (other than certain terms relating to fees payable
upon the consummation of possible transactions between the Company and parties
other than Parent, none of which fees are due or payable) are set forth on Part
2.12 of the Company Schedules, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.13 Transactions with Affiliates. Except as set forth in the Company
SEC Reports, since the date of the Company's last proxy statement filed with the
SEC, no event has occurred as of the date of this Agreement that would be
required to be reported by the Company pursuant to Item 404 of Regulation S-K
promulgated by the SEC. Part 2.13 of the Company Schedules identifies each
person who is an "affiliate" (as that term is used in Rule 145 promulgated under
the Securities Act) of the Company as of the date of this Agreement.
<PAGE> 25
2.14 Employee Benefit Plans.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.14(a)(i) below (which definition shall apply
only to this Section 2.14), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations issued thereunder;
(ii) "COMPANY EMPLOYEE PLAN" shall mean any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by the Company or any Affiliate for the benefit
of any Employee
(iii) "COBRA" shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended
(iv) "DOL" shall mean the Department of Labor;
(v) "EMPLOYEE" shall mean any current, former, or
retired employee, officer, or director of the Company or any Affiliate;
(vi) "EMPLOYEE AGREEMENT" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or similar agreement or contract currently in force between
the Company or any Affiliate and any Employee or consultant which pertains to a
service provider who has or will receive payments from the Company in excess of
$150,000 in any calendar year;
(vii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act
of 1993, as amended;
(ix) "INTERNATIONAL EMPLOYEE PLAN" shall mean each
Company Employee Plan that has been adopted or maintained by the Company,
whether informally or formally, for the benefit of Employees outside the United
States;
<PAGE> 26
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "MULTIEMPLOYER PLAN" shall mean any "Pension
Plan" (as defined below) which is a "multiemployer plan," as defined in Section
3(37) of ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiii) "PENSION PLAN" shall mean each Company
Employee Plan which is an "employee pension benefit plan," within the meaning of
Section 3(2) of ERISA.
(b) Schedule. Part 2.14(b) of the Company Schedules contain an
accurate and complete list of each Company Employee Plan and each Employee
Agreement. The Company does not have any plan or commitment to establish any new
Company Employee Plan, to modify any Company Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to enter into any Company Employee Plan or Employee Agreement,
nor does it have any intention or commitment to do any of the foregoing.
(c) Documents. The Company has provided, or will provide as
soon as practicable following the execution of this Agreement, to Parent: (i)
correct and complete copies of all documents embodying to each Company Employee
Plan and each Employee Agreement including all amendments thereto; (ii) the most
recent annual actuarial valuations, if any, prepared for each Company Employee
Plan; (iii) the three (3) most recent annual reports (Form Series 5500 and all
schedules and financial statements attached thereto), if any, required under
ERISA or the Code in connection with each Company Employee Plan or related
trust; (iv) if the Company Employee Plan is funded, the most recent annual and
periodic accounting of Company Employee Plan assets; (v) the most recent summary
plan description together with the summary of material modifications thereto, if
any, required under ERISA with respect to each Company Employee Plan; (vi) all
IRS determination, opinion, notification and advisory letters, and rulings
relating to Company Employee Plans and copies of all applications and
correspondence to or from the IRS or the DOL with respect to an examination,
audit or submission under the Voluntary Compliance Resolution Program or Closing
Agreement Program of any Company Employee Plan; (vii) all material written
agreements and contracts relating to each Company Employee Plan, including, but
not limited to, administrative service agreements, group annuity contracts and
group insurance contracts; (viii) all communications material to any Employee or
Employees relating to any Company Employee Plan and any proposed Company
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events any of which would result in any material
liability to the Company; and (ix) all registration statements and current
prospectuses prepared in connection with each Company Employee Plan.
(d) Employee Plan Compliance. (i) The Company has performed in
all material
<PAGE> 27
respects all obligations required to be performed by it under, is not in default
or violation of, and has no knowledge of any default or violation by any other
party to each Company Employee Plan, and each Company Employee Plan has been
established and maintained in all material respects in accordance with its terms
and in compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) each Company
Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code is set forth on a
standardized prototype plan or has either received a favorable determination
letter from the IRS with respect to each such Plan as to its qualified status
under the Code, including all amendments to the Code effected by the Tax Reform
Act of 1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a determination letter and make any amendments necessary to obtain a favorable
determination; (iii) no "prohibited transaction," within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section 408 of ERISA, has occurred with respect to any Company Employee
Plan; (iv) there are no actions, suits or claims pending, or, to the knowledge
of the Company, threatened or reasonably anticipated (other than routine claims
for benefits) against any Company Employee Plan or against the assets of any
Company Employee Plan; (v) each Company Employee Plan can be amended, terminated
or otherwise discontinued after the Effective Time in accordance with its terms,
without liability to Parent, the Company or any of its Affiliates (other than
ordinary administration expenses typically incurred in a termination event);
(vi) there are no audits, inquiries or proceedings pending or, to the knowledge
of the Company or any Affiliates, threatened by the IRS or DOL with respect to
any Company Employee Plan; and (vii) neither the Company nor any Affiliate is
subject to any penalty or tax with respect to any Company Employee Plan under
Section 402(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company
contributed to or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan
provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and the Company
has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) Neither the Company nor any Affiliate has, prior to the
Effective Time, and in any material respect, violated the health care
continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees.
<PAGE> 28
(i) Effect of Transaction The execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Company Employee Plan, Employee Agreement, trust or loan that
will or may result in any payment (whether of severance pay or other wise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee.
(j) Employment Matters. The Company and each of its
subsidiaries: (i) is in compliance in all material respects with all applicable
foreign, federal, state and local laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and wages
and hours, in each case, with respect to Employees; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages, salaries
and other payments to Employees; (iii) to the Company's knowledge, is not liable
for any arrears of wages or any taxes or any penalty for failure to comply with
any of the foregoing; and (iv) is not liable for any material payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
pending or threatened claims or actions against the Company or any of its
subsidiaries under any worker's compensation policy or long-term disability
policy. To the Company's knowledge, no employee of the Company has violated in
any material respect any employment contract, nondisclosure agreement or
noncompetition agreement by which such employee is bound due to such employee
being employed by the Company and disclosing to the Company or using trade
secrets or proprietary information of any other person or entity.
(k) Labor. No general work stoppage or labor strike against
the Company is pending or, to the knowledge of the Company, threatened. To the
knowledge of the Company, there are no activities or proceedings of any labor
union to organize any Employees. There are no material actions, suits, claims,
labor disputes or grievances pending, or, to the knowledge of the Company,
threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any
material liability to the Company. To the knowledge of the Company, neither the
Company nor any of its subsidiaries has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act. The Company and its
subsidiaries are not presently, nor have any of them been in the past, a party
to, or bound by, any collective bargaining agreement or union contract with
respect to Employees and no collective bargaining agreement is being negotiated
by the Company or any of its subsidiaries.
(l) International Employee Plan. Each International Employee
Plan has been established, maintained and administered in material compliance
with its terms and conditions and with the requirements prescribed by all
material statutory or regulatory laws that are applicable to
<PAGE> 29
such International Employee Plan. Furthermore, no International Employee Plan
has unfunded liabilities, that as of the Effective Time, will not be offset by
insurance or fully accrued. Except as required by law, no condition exists that
would prevent the Company or Parent from terminating or amending any
International Employee Plan at any time for any reason.
2.15 Environmental Matters.
(a) Hazardous Material. Except as would not result in material
liability to the Company, no underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies, (a "HAZARDOUS MATERIAL") are present, as a result of the
actions of the Company or any of its subsidiaries or any affiliate of the
Company, or, to the Company's knowledge, as a result of any actions of any third
party or otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the Company or any of
its subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not result
in a material liability to the Company (in any individual case or in the
aggregate) (i) neither the Company nor any of its subsidiaries has transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing Date, and (ii) neither the Company nor any of its subsidiaries has
disposed of, transported, sold, used, released, exposed its employees or others
to or manufactured any product containing a Hazardous Material (collectively
"HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. The Company and its subsidiaries currently hold
all environmental approvals, permits, licenses, clearances and consents (the
"COMPANY ENVIRONMENTAL PERMITS") necessary for the conduct of the Company's and
its subsidiaries' Hazardous Material Activities and other businesses of the
Company and its subsidiaries as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ or injunction is pending, and
to the Company's knowledge, no action, proceeding, revocation proceeding,
amendment procedure, writ or injunction has been threatened by any Governmental
Entity against the Company or any of its subsidiaries in a writing delivered to
the Company concerning any Company Environmental Permit, Hazardous Material or
any Hazardous
<PAGE> 30
Materials Activity of the Company or any of its subsidiaries.
2.16 Agreements, Contracts and Commitments. Except as otherwise set
forth in Part 2.16 of the Company Schedules, as of the date hereof neither the
Company nor any of its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or
commitment with any officer or director or higher level employee or member of
the Company's Board of Directors, other than those that are terminable by the
Company or any of its subsidiaries on no more than thirty days notice without
liability or financial obligation, except to the extent general principles of
wrongful termination law may limit the Company's or any of its subsidiaries'
ability to terminate employees at will;
(b) any agreement, contract or commitment containing any
covenant materially limiting the right of the Company or any of its subsidiaries
to engage in any line of business or to compete with any person or granting any
exclusive distribution rights;
(c) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by the Company or any of its
subsidiaries after the date of this Agreement of a material amount of assets not
in the ordinary course of business or pursuant to which the Company or any of
its subsidiaries has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise other than the Company's
subsidiaries that is material to the Company's business as currently conducted;
(d) any agreement, contract or commitment currently in force
to provide source code to any third party for any product or technology that is
material to the Company and its subsidiaries taken as a whole; or
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined below), is in
breach, violation or default under, and neither the Company nor any of its
subsidiaries has received written notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which the Company or any of its
subsidiaries is a party or by which it is bound that are required to be
disclosed in the Company Schedules pursuant to clauses (a) through (d) above or
pursuant to Section 2.9 hereof or are required to be filed with any Company SEC
Report (any such agreement, contract or commitment, a "COMPANY CONTRACT") in
such a manner as would permit any other party to cancel or terminate any such
Company Contract, or would permit any other party to seek material damages or
other remedies (for any or all of such breaches, violations or defaults, in the
aggregate).
2.17 Change of Control Payments. Part 2.17 of the Company Schedules
sets forth each plan or agreement pursuant to which any amounts may become
payable (whether currently or in the future) to current or former employees and
directors of the Company or any of its subsidiaries as a
<PAGE> 31
result of or in connection with the Merger.
2.18 Disclosure. None of the information supplied or to be supplied by
or on behalf of the Company for inclusion or incorporation by reference in the
registration statement on Form S-4 (or similar successor form) to be filed with
the SEC by Parent in connection with the issuance of Parent Common Stock in the
Merger (including amendments or supplements thereto) (the "REGISTRATION
STATEMENT") will, at the time the Registration Statement becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
are made, not misleading, except that no representation or warranty is made by
the Company with respect to statements made or incorporated by reference therein
about Parent or Merger Sub supplied by Parent for inclusion or incorporation by
reference in the Registration Statement.. None of the information supplied or to
be supplied by or on behalf of the Company for inclusion or incorporation by
reference in the Prospectus/Proxy Statement to be filed with the SEC as part of
the Registration Statement (the "PROSPECTUS/PROXY STATEMENT"), will, at the time
the Prospectus/Proxy Statement is mailed to the stockholders of the Company or
Parent, at the time of the Company Stockholders' Meeting or Parent Stockholders'
Meeting or as of the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Prospectus/Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations promulgated by the SEC
thereunder, except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein about
Parent or Merger Sub supplied by Parent for inclusion or incorporation by
reference in the Prospectus/Proxy Statement.
2.19 Board Approval. The Board of Directors of the Company (including
any required committee or subgroup of the Board of Directors of the Company)
has, as of the date of this Agreement, determined (i) that the Merger is fair
to, and in the best interests of the Company and its stockholders, and (ii) to
recommend that the stockholders of the Company approve and adopt this Agreement
and approve the Merger.
2.20 Fairness Opinion. The Company's Board of Directors has received a
written opinion from BankBoston Robertson Stephens Inc., dated as of the date
hereof, to the effect that as of the date hereof, the Exchange Ratio is fair to
the Company's stockholders from a financial point of view and has delivered to
Parent a copy of such opinion.
2.21 Section 203 of the Delaware General Corporation Law and Company
Rights Plan Not Applicable. The Board of Directors of Company has taken all
actions so that (a) the restrictions contained in Section 203 of the Delaware
General Corporation Law applicable to a "business combination" (as defined in
such Section 203) will not apply to the execution, delivery or performance of
this Agreement or the Stock Option Agreement or to the consummation of the
Merger or the other transactions contemplated by this Agreement and the Stock
Option Agreement
<PAGE> 32
and (b) the execution, delivery and performance of this Agreement and the Option
Agreement and the consummation of the Merger will not cause any change, effect
or result under the Company Rights Plan which is adverse to the interests of
Parent. Without limiting the generality of the foregoing, if necessary to
accomplish the foregoing, the Company Rights Plan has been amended to (i) render
the Company Rights Plan inapplicable to the Merger and the other transactions
contemplated by this Agreement, (ii) ensure that (x) none of Parent or its
subsidiaries is an Acquiring Person (as defined in the Company Rights Plan)
pursuant to the Company Rights Plan by virtue of the execution of this Agreement
or the Stock Option Agreement or the consummation of the Merger or the other
transactions contemplated hereby and thereby and (y) a Distribution Date or
Shares Acquisition Date (as such terms are defined in the Company Rights Plan)
does not occur by reason of the execution of this Agreement or the Stock Option
Agreement, the consummation of the Merger, or the consummation of the
transactions contemplated hereby or thereby, and such amendment may not be
further amended by Company without the prior consent of Parent in its sole
discretion.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As of the date hereof and as of the Closing Date, Parent and Merger Sub
represent and warrant to the Company, subject to the exceptions specifically
disclosed in writing in the disclosure letter supplied by Parent and Merger Sub
to the Company dated as of the date hereof and certified by a duly authorized
officer of Parent (the "PARENT SCHEDULES"), as follows:
3.1 Organization of Parent.
(a) Except as set forth on Part 3.1(a) of the Parent
Schedules, Parent does not own any capital stock of, or any equity interest of
any nature in, any other entity, except for passive investments in equity
interests of public companies as part of the cash management program of Parent.
Neither Parent nor any of its subsidiaries has agreed or is obligated to make,
or is bound by any contract under which contract it may become obligated to
make, any future investment in or capital contribution to any other entity.
Neither Parent nor any of its subsidiaries has, at any time, been a general
partner of any general partnership, limited partnership or other entity.
(b) Parent and each of its subsidiaries (including Merger Sub)
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all necessary corporate
power and authority: (i) to conduct its business in the manner in which its
business is currently being conducted; (ii) to own and use its assets in the
manner in which its assets are currently owned and used; and (iii) to perform
its obligations under all Contracts by which it is bound.
(c) Parent and each of its subsidiaries (including Merger Sub)
is qualified to do business as a foreign corporation, and is in good standing,
under the laws of all jurisdictions where
<PAGE> 33
the nature of its business requires such qualification and where the failure to
so qualify would have a Material Adverse Effect on Parent.
(d) Parent has delivered or made available to the Company a
true and correct copy of the Certificate of Incorporation (including any
Certificate of Designations) and Bylaws of Parent and similar governing
instruments of each of its subsidiaries (including Merger Sub), each as amended
to date (collectively, the "PARENT CHARTER DOCUMENTS"), and each such instrument
is in full force and effect. Parent is not in violation of any of the provisions
of the Parent Charter Documents. None of Parent's subsidiaries (including Merger
Sub) is in violation of any of the provisions of its Articles or Certificate of
Incorporation or Bylaws or other similar governing instruments, except for such
violations as are not material to Parent and its subsidiaries taken as a whole.
(e) Parent has delivered or made available to the Company all
proposed or considered amendments to the Parent Charter Documents.
3.2 Parent Capital Structure.
(a) The authorized capital stock of Parent consists of: (i)
230,277,660 shares of Common Stock, $0.01 par value, of which 200,000,000 shares
have been designated Series A Common Stock, 15,400,000 shares have been
designated Series B Common Stock and 14,877,660 shares have been designated
Series K Common Stock, of which 105,329,712 shares of Series A Common Stock,
15,400,000 shares of Series B Common Stock and 2,609,707 shares of Series K
Common Stock had been issued and were outstanding as of January 15, 1999; and
(ii) 9,650,000 shares of Preferred Stock, $0.01 par value per share, of which no
shares have been issued and are outstanding as of the date of this Agreement.
All of the outstanding shares of Parent's Common Stock and Preferred Stock have
been duly authorized and validly issued, and are fully paid and nonassessable.
(b) As of January 15, 1999: (i) 9,035,138 shares of Parent
Common Stock were subject to issuance pursuant to outstanding options to
purchase Common Stock under Parent's stock option plans; and (ii) 768,055 shares
of Parent Common Stock were reserved for future issuance under Parent's 1997
Employee Stock Purchase Plan (the "PARENT PURCHASE PLAN"). (Stock options
granted by Parent pursuant to Parent's stock option plans are referred to in
this Agreement as "PARENT OPTIONS"). Parent has made available to the Company
accurate and complete copies of all stock option plans pursuant to which Parent
has granted stock options that are currently outstanding and the form of all
stock option agreements evidencing such options. All shares of Parent Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and nonassessable.
(c) All outstanding shares of Parent Common Stock, all
outstanding Parent
<PAGE> 34
Options, and all outstanding shares of capital stock of each subsidiary of
Parent have been issued and granted in compliance with (i) all applicable
securities laws and, to Parent's knowledge, all other applicable Legal
Requirements and (ii) all material requirements set forth in applicable
Contracts.
(d) The authorized capital stock of Merger Sub consists of
1000 shares of Common Stock, $0.001 par value, of which 1000 shares have been
issued and are outstanding and held by Parent as of the date of this Agreement.
All of the outstanding shares of Merger Sub's Common Stock have been duly
authorized and validly issued, and are fully paid and nonassessable. There are
no equity securities, partnership interests or similar ownership interests of
any class of Merger Sub equity security, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding.
3.3 Obligations With Respect to Capital Stock. Except as set forth in
Part 3.3 of the Parent Schedules, there are no equity securities, partnership
interests or similar ownership interests of any class of Parent equity security,
or any securities exchangeable or convertible into or exercisable for such
equity securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except for securities Parent owns free and
clear of all material claims and Encumbrances, directly or indirectly through
one or more subsidiaries, and except for shares of capital stock or other
similar ownership interests of certain subsidiaries of Parent that are owned by
certain nominee equity holders as required by the applicable law of the
jurisdiction of organization of such subsidiaries (which shares or other
interests do not materially affect Parent's control of such subsidiaries), as of
the date of this Agreement, there are no equity securities, partnership
interests or similar ownership interests of any class of equity security of any
subsidiary of Parent, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as set
forth in Part 3.3 of the Parent Schedules or Section 3.2 above, there are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which Parent or any of its
subsidiaries is a party or by which it is bound obligating Parent or any of its
subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of Parent or any of its subsidiaries or
obligating Parent or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement. As of the date of this
Agreement, except as contemplated by this Agreement, there are no registration
rights and, except for the Parent Voting Agreement, there is no voting trust,
proxy, rights plan, antitakeover plan or other agreement or understanding to
which Parent is a party or by which it is bound with respect to any equity
security of any class of Parent or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of its
subsidiaries. Stockholders of Parent will not be entitled to dissenters' or
appraisal rights under applicable state law in connection with the Merger.
<PAGE> 35
3.4 Authority; Non-Contravention.
(a) Parent has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub (including, in the case of
Merger Sub, all shareholder action by Parent as its sole stockholder), subject
only to the approval of the issuance of the shares of Parent Common Stock
pursuant to the Merger and approval of an amendment to Parent's Certificate of
Incorporation to increase the authorized number of shares of Parent Common Stock
so as to permit the transactions contemplated hereby, subject to and upon
consummation of the Merger, and the filing of the Certificate of Merger pursuant
to Delaware Law. The vote in favor of such issuance and an amendment to Parent's
Certificate of Incorporation by TCI Internet Holdings, Inc. ("TCI") is currently
sufficient, and, to the extent TCI shall not have breached the Parent Voting
Agreement to which it is a party and to the extent such Parent Voting Agreement
shall not have terminated by its terms, will be sufficient at the time of the
Parent Stockholders Meeting, for Parent's stockholders to approve such issuance
and amendment. This Agreement has been duly executed and delivered by Parent and
Merger Sub, and assuming due execution and delivery by the Company, constitute a
valid and binding obligation of Parent and Merger Sub, enforceable against
Parent and Merger Sub in accordance with their respective terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement by Parent and
Merger Sub do not, and the performance of this Agreement by Parent and Merger
Sub will not, (i) subject to the approval of an amendment to Parent's
Certificate of Incorporation to appropriately increase the authorized number of
shares of Parent Common Stock, conflict with the Parent Charter Documents, (ii)
subject to obtaining the approval by Parent's stockholders of the issuance of
the shares of Parent Common Stock pursuant to the Merger and an amendment to
Parent's Certificate of Incorporation to appropriately increase the authorized
number of shares of Parent Common Stock as contemplated in Section 5.3 and
compliance with the requirements set forth in Section 3.4(b) below, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Parent or any of its subsidiaries or by which Parent or any of its
subsidiaries or any of their respective properties are bound or affected, or
(iii) result in any material breach of or constitute a material default (or an
event that with notice or lapse of time or both would become a material default)
under, or impair Parent's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a material
Encumbrance on any of the material properties or assets of Parent or any of its
subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, concession, or other
instrument or obligation to which Parent or any of its subsidiaries is a party
or by which Parent or any of its subsidiaries or its or any of their respective
assets are bound or affected. Merger Sub was formed for the purpose of
consummating the Merger and has no material assets or liabilities. Part 2.4(a)
of the Parent Schedules lists all consents, waivers and approvals under any of
the Company's or any of its subsidiaries' agreements, contracts, licenses or
leases required to be obtained in connection with the consummation of the
transactions contemplated
<PAGE> 36
hereby, which, if individually or in the aggregate not obtained, would result in
a material loss of benefits to Parent as a result of the Merger.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity, is required to
be obtained or made by Parent or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the Merger, except for (i) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, (ii) the filing of an amendment to Parent's Certificate of
Incorporation to increase the authorized number of shares of Parent Common Stock
so as to permit the transactions contemplated hereby, (iii) the filing of the
Registration Statement and the Prospectus/Proxy Statement and a Schedule 13D
with regard to the Company Voting Agreements and the Stock Option Agreement in
accordance with the Securities Act and the Exchange Act, as the case may be, and
the effectiveness of the Registration Statement, (iv) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal, foreign and state securities (or related)
laws and the HSR Act, and the securities or antitrust laws of any foreign
country, and (v) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not be material to Parent or
have a material adverse effect on the ability of the parties hereto to
consummate the Merger.
3.5 SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, reports and documents required
to be filed by Parent with the SEC since January 1, 1997 and has made available
to the Company such forms, reports and documents in the form filed with the SEC.
All such required forms, reports and documents (including those that Parent may
file subsequent to the date hereof), as amended, together with the offering
memorandum dated December 21, 1998 prepared by Parent in connection with
Parent's private placement of convertible subordinated debentures due 2018, are
referred to herein as the "PARENT SEC REPORTS"). As of their respective dates,
Parent SEC Reports (i) were prepared in accordance and complied in all material
respects with the requirements of the Securities Act, or the Exchange Act, as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such Parent SEC Reports and (ii) did not at the time they were filed contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except to the extent corrected prior to the date hereof by a
subsequently filed Parent SEC Report. None of Parent's subsidiaries is required
to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in the Parent SEC Reports
(the "PARENT FINANCIALS"), including each Parent SEC Report filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be
<PAGE> 37
permitted by the SEC on Form 10-Q, 8-K or any successor form under the Exchange
Act) and (iii) fairly presented in all material respects the consolidated
financial position of Parent and its consolidated subsidiaries as at the
respective dates thereof and the consolidated results of Parent's operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements may not contain footnotes and were or are subject to normal
and recurring year-end adjustments. The balance sheet of Parent contained in
Parent SEC Report as of September 30, 1998 is hereinafter referred to as (the
"PARENT BALANCE SHEET"). Except as disclosed in the Parent Financials, since the
date of the Parent Balance Sheet neither Parent nor any of its subsidiaries has
any liabilities required under GAAP to be set forth on a consolidated balance
sheet (absolute, accrued, contingent or otherwise) which are, individually or in
the aggregate, material to the business, results of operations or financial
condition of Parent and its subsidiaries taken as a whole, except for
liabilities incurred since the date of the Parent Balance Sheet in the ordinary
course of business consistent with past practices and liabilities incurred
pursuant to this Agreement.
(c) Parent has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Parent with the SEC
pursuant to the Securities Act or the Exchange Act.
3.6 Absence of Certain Changes or Events. Since the date of Parent
Balance Sheet there has not been: (i) any Material Adverse Effect on Parent,
(ii) any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of Parent's
or any of its subsidiaries' capital stock, or any purchase, redemption or other
acquisition by Parent or any of its subsidiaries of any of Parent's capital
stock or any other securities of Parent or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities except
for repurchases from employees following their termination pursuant to the terms
of their pre-existing stock option or purchase agreements, (iii) any split,
combination or reclassification of any of Parent's or any of its subsidiaries'
capital stock, (iv) any granting by Parent or any of its subsidiaries of any
increase in compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Parent or any of its subsidiaries of any bonus, except for
bonuses made in the ordinary course of bus