AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
INFOSEEK CORPORATION,
THE WALT DISNEY COMPANY
AND
BINGO ACQUISITION CORP.
DATED AS OF JULY 10, 1999
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of July 10, 1999 by and among Infoseek Corporation, a
Delaware corporation (the "Company"), The Walt Disney Company, a Delaware
corporation ("Parent"), and Bingo Acquisition Corp. a Delaware corporation and
wholly owned, direct subsidiary of Parent ("Acquisition Company").
RECITALS
A. The Boards of Directors of each of Parent, the Company and Acquisition
Company believe that it is in the best interests of each such company and its
respective stockholders to consummate the reorganization provided for herein,
pursuant to which Parent will directly acquire all of the capital stock of the
Company through a merger of Acquisition Company with and into the Company, with
the Company being the surviving corporation.
B. For federal income tax purposes, it is intended that the foregoing
merger qualify as a reorganization under the provisions of Section 368(a)(1)(B)
and (a)(2)(E) of the United States Internal Revenue Code of 1986, as amended
(the "Code").
C. Concurrently with the execution hereof, in order to induce Parent to
enter into this Agreement, certain stockholders of the Company are entering into
support agreements (the "Support Agreements") providing for certain voting and
other restrictions with respect to shares of Company Common Stock held by them
upon the terms and conditions specified therein.
D. Immediately prior to the Effective Time (as defined herein), the
Restated Certificate of Incorporation of Parent will be amended and restated to,
among other things, authorize 1,000,000,000 shares of Internet Group Common
Stock (as defined herein).
E. The Company, on the one hand, and Parent and Acquisition Company, on the
other hand, desire to make certain representations, warranties, covenants and
other agreements in connection with the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration the receipt of which is hereby acknowledged, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger.
Subject to the terms and conditions of this Agreement and in accordance
with the Delaware General Corporation Law (the "DGCL"), at the Effective Time,
Acquisition
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Company shall merge (the "Merger") with and into the Company in accordance with
the applicable provisions of the DGCL, whereupon Acquisition Company's separate
corporate existence shall cease and the Company shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of Delaware. As a result of the
Merger, the Company shall become a wholly owned, direct subsidiary of Parent.
The effects and consequences of the Merger shall be as set forth in Section 1.3
below.
1.2 Filing of Certificate of Merger; Effective Time.
The Company shall cause a certificate of merger with respect to the
Merger in substantially the form attached hereto as Exhibit A (the "Certificate
of Merger") to be executed and filed on the date of the Closing (as defined
below), or such other date as the Company, Parent and Acquisition Company may
agree, with the Secretary of State of the State of Delaware as provided in the
DGCL. The Merger shall become effective at the time and date on which the
Certificate of Merger has been duly filed with the Secretary of State or such
time and date as is agreed upon by the parties and specified in the Certificate
of Merger, and such time and date are referred to herein as the "Effective
Time."
1.3 Effect of the Merger.
The parties agree to the following provisions with respect to the Merger:
(a) Name of Surviving Corporation.
The name of the Surviving Corporation from and after the Effective Time
shall be "Infoseek Corporation."
(b) Certificate of Incorporation.
The Certificate of Incorporation of the Surviving Corporation shall be
the Certificate of Incorporation of the Company until thereafter amended as
provided by law and such Certificate of Incorporation.
(c) Bylaws.
The Bylaws of the Surviving Corporation shall, at the Effective Time,
be the Bylaws of Acquisition Company until thereafter amended as provided by law
and such Bylaws.
(d) Directors.
The directors of Acquisition Company immediately prior to the Effective
Time shall be the directors of the Surviving Corporation as of the Effective
Time and until their successors are duly appointed or elected in accordance with
applicable law, or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws.
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(e) Officers.
The officers of the Surviving Corporation at the Effective Time shall
be the officers of the Company immediately prior to the Effective Time until
their successors are duly appointed or elected in accordance with applicable
law, or until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and Bylaws.
1.4 The Closing.
Subject to the terms and conditions of this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New
York 10019-6092, at 10:00 a.m., local time, on (a) the next business day after
the last to be fulfilled or waived of the conditions set forth in Article VI
shall be fulfilled or waived in accordance herewith (other than conditions which
by their nature are to be satisfied at the Closing, but subject to such
conditions) or (b) at such other time, date or place as the Company and Parent
may agree in writing. The date on which the Closing occurs is referred to herein
as the "Closing Date."
1.5 Internet Group.
On the Closing Date, immediately prior to the consummation of the Merger
and the filing of the Certificate of Merger, Parent shall file the proposed
amendment and restatement of the Restated Certificate of Incorporation of Parent
substantially as set forth as Exhibit B hereto (the "Parent Charter Amendment")
with the Secretary of State of the State of Delaware. The Board of Directors has
adopted resolutions approving the Parent Charter Amendment and certain policies
pertaining to the Parent Common Stock (as defined in Section 1.7) substantially
as set forth as Exhibit C hereto (the "Parent Common Stock Policies"), which
Parent Charter Amendment and Parent Common Stock Policies shall establish the
"Internet Group" effective as of the Effective Time. For purposes of this
Agreement, the term "Internet Group" shall have the meaning set forth in the
Parent Charter Amendment and the term "Internet Group Companies" shall have the
meaning set forth in the Parent Common Stock Policies; provided, however, that
for periods prior to the Effective Time, the term Internet Group shall not
include those assets, rights, properties and liabilities that are owned by the
Company immediately prior to the consummation of the transactions contemplated
hereby.
1.6 Conversion of Acquisition Company Stock.
At the Effective Time, each share of the common stock of Acquisition
Company outstanding immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into and shall become one (1) share of common stock of the Surviving
Corporation.
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1.7 Conversion of Company Common Stock and Company Options.
(a) At the Effective Time, each issued and outstanding share of Company
Capital Stock (i) other than the shares owned by Parent and Disney Enterprises,
Inc., a wholly owned subsidiary of Parent ("DEI") shall be converted, without
any action on the part of the holders thereof, into 1.15 shares of Internet
Group Common Stock (the "Exchange Ratio"), (ii) owned by Parent shall remain
outstanding and (iii) owned by DEI shall be converted, without any action on the
part of the holders thereof, into one-one-hundredth of a share (rounded up to
the nearest whole share) of Parent Series A Voting Preferred Stock. As used
herein, the following terms have the following meanings:
(i) "Company Capital Stock" means all shares of Company Common Stock
and all shares of any other capital stock of the Company;
(ii) "Company Common Stock" means the common stock, par value $.001
per share, of the Company, including any share purchase rights associated
therewith pursuant to the Company's share purchase rights plan;
(iii) "Company Options" means all issued and outstanding options,
warrants and other rights to acquire or receive Company Capital Stock (whether
or not vested); provided, however, that "Company Options" shall not include the
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Company Common Stock Warrant issued to Parent dated November 18, 1998;
(iv) "Internet Group Common Stock" means the Internet Group Common
Stock, par value $.01 per share, of Parent (including any share purchase rights
that may be associated therewith pursuant to any share purchase rights plan
adopted by Parent), a new class of Parent Capital Stock that will have the terms
and features set forth in the Parent Charter Amendment;
(v) "Parent Capital Stock" means all shares of Parent Common Stock
and all shares of any other capital stock of Parent;
(vi) "Parent Common Stock" means the common stock, par value $.01 per
share, of Parent, including any share purchase rights that may be associated
therewith pursuant to any share purchase rights plan adopted by Parent;
(vii) "Parent Options" means all issued and outstanding options,
warrants and other rights to acquire or receive Parent Capital Stock (whether or
not vested); and
(viii) "Total Outstanding Company Shares" means the aggregate number
of shares of Company Capital Stock outstanding immediately prior to the
Effective Time.
(b) Notwithstanding anything contained in this Section 1.7 to the
contrary, each share of Company Common Stock issued and held in the Company's
treasury immediately prior to the Effective Time shall, by virtue of the Merger,
cease to be
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outstanding and shall be canceled and retired without payment of any
consideration therefor.
(c) At the Effective Time, each outstanding Company Option shall be
transferred to and assumed by Parent in such manner that it is converted into an
option to purchase shares of Internet Group Common Stock (each an "Internet
Group Option"), as provided below. Notwithstanding the foregoing, the unvested
portion (and the unvested portion only) of the Company Options held by
non-employee directors of the Company as of the date hereof and any Company
Option granted to non-employee directors of the Company in the ordinary course
following the date hereof (the "Unvested Non-Employee Director Options") shall
not be transferred to and assumed by Parent (any vested portion of the Company
Options held by non-employee directors of the Company shall be transferred to
and assumed by Parent in such manner that it is converted into an Internet Group
Option). Following the Effective Time, each such Internet Group Option shall be
exercisable upon the same terms and conditions as then are applicable to such
Company Option, except that (i) each such Internet Group Option shall be
exercisable for that number of shares of Internet Group Common Stock equal to
the product obtained by multiplying the number of shares of Company Capital
Stock that were issuable upon exercise in full of such assumed Company Option
immediately prior to the Effective Time by the Exchange Ratio, rounded down to
the nearest whole number of shares of Internet Group Common Stock and (ii) the
per share exercise price for the shares of Internet Group Common Stock issuable
upon exercise of such Internet Group Option shall be equal to the quotient
obtained by dividing the exercise price per share of Company Capital Stock at
which such Company Option was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded up to the nearest whole cent. It is the
intention of the parties that, to the extent that any such Company Option
constituted an "incentive stock option" (within the meaning of Section 422 of
the Code) immediately prior to the Effective Time, the Internet Group Option
continue to qualify as an incentive stock option to the maximum extent permitted
by Section 422 of the Code, and that the assumption of the Company Options
provided by this Section 1.7(c) satisfy the conditions of Section 424(a) of the
Code.
(d) The Company shall cause all "purchase intervals" under all
"offering periods" of the Company's Employee Stock Purchase Plan (the "ESPP")
that have not previously terminated in accordance with their terms to terminate
immediately prior to the Effective Time and for a final exercise of ESPP options
to be made at such time. The amount of cash to be allocated by Parent to the
Internet Group as provided in Section 5.17 of this Agreement shall be decreased
by the sum of the exercise price of each option exercised under the ESPP on and
after the date hereof multiplied by the respective number of shares of each such
option under the ESPP.
1.8 Exchange Agent.
Parent shall appoint a reputable institution reasonably acceptable to the
Company to serve as exchange agent (the "Exchange Agent") in the Merger.
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1.9 Parent to Provide Common Stock.
Promptly after the Effective Time, Parent shall make available to the
Exchange Agent for exchange in accordance with this Article I the shares of
Internet Group Common Stock issuable pursuant to Article I in exchange for all
of the outstanding shares of Company Capital Stock.
1.10 Exchange Procedures.
Promptly after the Effective Time, Parent shall cause the Exchange
Agent to mail to each holder of record (as of the Effective Time) of a
certificate or certificates (the "Certificates"), which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock whose
shares were converted into shares of Internet Group Common Stock pursuant to
Section 1.7 and any dividends or other distributions pursuant to Section 1.11,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall contain such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Internet Group Common Stock and any dividends or other
distributions pursuant to Section 1.11. Upon surrender of Certificates for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holders of such Certificates shall be entitled to receive in exchange
therefor certificates representing the number of whole shares of Internet Group
Common Stock into which their shares of Company Capital Stock were converted at
the Effective Time and any dividends or distributions payable pursuant to
Section 1.11, and the Certificates so surrendered shall forthwith be canceled.
Until so surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 1.11 as to the
payment of dividends, to evidence the ownership of the number of full shares of
Internet Group Common Stock into which such shares of Company Capital Stock
shall have been so converted and any dividends or distributions payable pursuant
to Section 1.11. If any portion of the Internet Group Common Stock, and cash in
lieu of fractional shares thereof (and any dividends or distributions thereon)
otherwise payable hereunder to any person, is to be issued or paid to a person
other than the person in whose name the Certificate is registered, it shall be a
condition to such issuance or payment that the Certificate so surrendered shall
be properly endorsed or otherwise be in proper form for transfer and that the
person requesting such issuance or payment shall pay to the Exchange Agent any
transfer or other taxes required as a result of such issuance or payment to a
person other than the registered holder of such Company Stock Certificate or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
1.11 Dividends, Fractional Shares, Etc.
(a) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared after the Effective Time on Internet
Group Common Stock shall be paid with respect to any shares of Company Capital
Stock represented by a
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Company Stock Certificate, nor shall any cash payment in lieu of fractional
shares be paid with respect to any such shares, until such Company Stock
Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such Company Stock
Certificate, there shall be paid to the holder of the Internet Group Common
Stock certificates issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole shares of Internet Group Common Stock and not paid, less the amount of any
withholding taxes which may be required thereon and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Internet Group Common
Stock, less the amount of any withholding taxes which may be required thereon.
(b) All shares of Internet Group Common Stock issued upon surrender of
Company Stock Certificates in accordance with this Article I shall be deemed to
be in full satisfaction of all rights pertaining to the shares of Company
Capital Stock represented thereby, and from and after the Effective Time, there
shall be no transfers on the stock transfer books of the Company of the shares
of Company Capital Stock. If, after the Effective Time, certificates
representing any such shares are presented to the Surviving Corporation, they
shall be canceled and exchanged for certificates for the consideration, if any,
deliverable in respect thereof pursuant to this Agreement in accordance with the
procedures set forth in this Article I.
(c) No fractional shares of Internet Group Common Stock shall be issued
pursuant to the Merger. In lieu of the issuance of any fractional share of
Internet Group Common Stock pursuant to the Merger, cash adjustments will be
paid to holders in respect of any fractional share of Internet Group Common
Stock that would otherwise be issuable, and the amount of such cash adjustment
shall be equal to the product of such fractional amount and the average closing
price of Internet Group Common Stock for the first five trading days commencing
on and immediately following the Closing Date.
(d) Upon demand by Parent, the Exchange Agent shall deliver to Parent
any portion of the Internet Group Common Stock made available to the Exchange
Agent pursuant to Section 1.10 hereof, and cash in lieu of fractional shares
thereof, that remains undistributed to holders of Company Capital Stock one year
after the Effective Time. Holders of Certificates who have not complied with
this Article I prior to such demand shall thereafter look only to Parent for
payment of any claim to such Internet Group Common Stock and dividends or
distributions, if any, in respect thereof.
(e) None of Parent, Acquisition Company, the Company, the Exchange
Agent or any other person shall be liable to any former holder of shares of
Company Capital Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws. Any amounts
remaining unclaimed by any holder of Company Capital Stock immediately prior to
such time when such amounts would otherwise escheat to or become the
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property of any Governmental Body (as defined in Section 2.5), shall, to the
extent permitted by applicable laws, become the property of Parent, free and
clear of all claims or interest of any person previously entitled thereto.
(f) Each of the Surviving Corporation and Parent shall be entitled to
deduct and withhold from the Internet Group Common Stock, and cash in lieu of
fractional shares thereof (and any dividends or distributions thereon) otherwise
payable hereunder to any person such amounts as it is required to deduct and
withhold with respect to the making of such payment under any provision of
federal, state, local or foreign income tax law. To the extent that the
Surviving Corporation or Parent so withholds those amounts, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of Company Capital Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Parent, as the case may be.
(g) In the event that any Company Stock Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Company Stock Certificate to be lost, stolen or destroyed
and, if required by Parent, the posting by such person of a bond in such
reasonable amount as Parent may direct as indemnity against any claim that may
be made against it with respect to such Company Stock Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Company Stock
Certificate the applicable merger consideration, cash in lieu of fractional
shares, and unpaid dividends and distributions on shares of Internet Group
Common Stock deliverable in respect thereof pursuant to this Agreement.
1.12 Rule 145.
Subject to applicable law, Company Stock Certificates surrendered for
exchange by any person constituting an "affiliate" of the Company for purposes
of Rule 145(c) under the Securities Act of 1933, as amended (the "Securities
Act"), shall not be exchanged until Parent has received a written agreement in
substantially the form attached hereto as Exhibit D from such person agreeing to
comply with the provisions of Rule 145 under the Securities Act.
1.13 Tax Consequences.
It is intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(1)(B) and (a)(2)(E) of the
Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Section 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION COMPANY
Each of Parent and Acquisition Company hereby, jointly and severally,
represents and warrants to the Company, subject to such exceptions as are
specifically disclosed in the disclosure schedule supplied by Parent to the
Company (the "Parent Disclosure
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Schedule"), as of the date hereof and as of the Effective Time as though made at
the Effective Time, as follows:
2.1 Organization of Parent and Acquisition Company.
Each of Parent and Acquisition Company is a corporation duly organized,
validly existing and in good standing under Delaware law. Each corporation or
general partnership included in the Internet Group (the "Internet Group
Companies") is a corporation or partnership, as the case may be, duly organized
or formed, validly existing and in good standing under the laws of its
jurisdiction of incorporation or formation. Each of the Internet Group Companies
is, directly or indirectly, wholly owned by Parent, or will be wholly owned by
Parent as a result of the Merger. Each of Parent, Acquisition Company and each
of the Internet Group Companies that is a corporation has the corporate power to
own its properties and to carry on its business as now being conducted. Each of
Parent and the Internet Group Companies that is a corporation is duly qualified
to do business and in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent or on the Internet Group, as the case may be. Each of
the Internet Group Companies that is a partnership has the legal power to own
its properties and to carry on its business as now conducted, and is duly
qualified to do business and in good standing as a foreign entity in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent or on the Internet Group, as the case may be. For all
purposes of this Agreement, the term "Material Adverse Effect" means any change,
event or effect that would be reasonably likely to have a material adverse
effect on the business, assets (including intangible assets), financial
condition or results of operations of the entity or business referred to
together with its subsidiaries, if any, taken as a whole; provided, however,
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that any adverse change, event or effect that is caused by (i) the announcement
or pendency of the Merger shall not be taken into account in determining whether
there has been or would be a Material Adverse Effect with respect to any party
and (ii) any breach of any covenant hereunder by any action or failure to act by
any of Parent or the Internet Group, on the one hand, or the Company, on the
other hand, shall not be taken into account in determining whether there has
been or would be a Material Adverse Effect on the other party. Parent has
delivered a true and correct copy of its Restated Certificate of Incorporation
and Bylaws and the charter or other organizational documents of each of the
Internet Group Companies, each as amended to date, to the Company.
2.2 Parent Capital Structure.
(a) The authorized capital stock of Parent consists of 3,600,000,000
shares of Parent Common Stock, of which 2,060,734,292 shares were issued and
outstanding as of July 1, 1999 and 100,000,000 shares of preferred stock, par
value $0.01 per share, of which no shares were issued and outstanding as of July
1, 1999. All outstanding shares of Parent Capital Stock are duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, the Restated Certificate of Incorporation or Bylaws
of Parent or any agreement to which Parent is a party or by which it is bound
and have been issued in compliance with federal and state securities
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laws. There are no accrued or unpaid dividends with respect to any shares of
Parent Capital Stock. Parent has no other capital stock authorized, issued or
outstanding.
(b) Except for those plans of Parent set forth in the Parent SEC
Documents (as defined in Section 2.6) or set forth in Section 2.2(b) of the
Parent Disclosure Schedule (the "Parent Stock Plans"), there is no stock option
plan or other plan providing for equity compensation maintained by Parent. There
are no other options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which Parent or any subsidiary of Parent is a
party or by which it is bound obligating Parent or any subsidiary of Parent to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of Parent Capital Stock or interests
in any subsidiary of Parent, as the case may be, or obligating Parent or any
subsidiary of Parent to grant, extend, accelerate the vesting of, change the
price of, otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. To Parent's knowledge, there are no voting trusts,
proxies, or other agreements or understandings with respect to the voting stock
of Parent or any subsidiary of Parent.
(c) The authorized capital stock of Acquisition Company ("Acquisition
Company Capital Stock") consists of 1,000 shares of common stock, of which 100
shares are issued and outstanding as of the date hereof and as of the Effective
Time. All outstanding shares of Acquisition Company Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Certificate of Incorporation or Bylaws
of Acquisition Company or any agreement to which Acquisition Company is a party
or by which it is bound and have been issued in compliance with federal and
state securities laws. There are no declared or accrued unpaid dividends with
respect to any shares of Acquisition Company Capital Stock. Acquisition Company
has no other capital stock authorized, issued or outstanding.
2.3 Authority.
Each of Parent and Acquisition Company has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of each of Parent and Acquisition
Company, and no further action is required on the part of Parent or Acquisition
Company to authorize this Agreement and the transactions contemplated hereby,
subject only to the approval of the holders of Parent Common Stock of the Parent
Charter Amendment and the issuance of the Internet Group Common Stock in
connection with the Merger. This Agreement, the Parent Charter Amendment and the
Merger have been approved unanimously by the Boards of Directors of Parent and,
as applicable, Acquisition Company and by the stockholder of Acquisition
Company. This Agreement has been, and all agreements to be executed and
delivered in connection with the transactions contemplated hereby by Parent or
Acquisition Company will be, duly executed and delivered by Parent or
Acquisition Company, as the case may be, and, assuming the due authorization,
execution and delivery by the other parties hereto and thereto, constitute the
valid and binding obligation of Parent or Acquisition Company, as the case may
be, enforceable in accordance with their respective terms,
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except as such enforceability may be limited by principles of public policy and
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and to rules of law governing specific performance,
injunctive relief or other equitable remedies.
2.4 No Conflict.
Except as set forth in Section 2.4 of the Parent Disclosure Schedule, the
execution and delivery of this Agreement do not, and all agreements to be
executed and delivered in connection with the transactions contemplated hereby
by Parent or Acquisition Company will not, and the performance and consummation
of the transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation,
modification or acceleration of any obligation or loss of any benefit under (any
such event, a "Conflict"), (i) any provision of the Restated Certificate of
Incorporation or Bylaws of Parent or Certificate of Incorporation or Bylaws of
Acquisition Company or the charter or organizational documents of any of the
Internet Group Companies, (ii) any material mortgage, indenture, lease, contract
or other agreement or instrument, permit, concession, franchise or license to
which Parent, Acquisition Company or any of their subsidiaries or any of their
material properties or assets are subject or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent, Acquisition
Company or any of their subsidiaries or their respective material properties or
assets, except, in the case of clauses (ii) and (iii) above, as would not have a
Material Adverse Effect on Parent or the Internet Group.
2.5 Consents.
Except as set forth in Section 2.5 of the Parent Disclosure Schedule, no
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Body or any other party is required
by or with respect to Parent, Acquisition Company or any of their respective
subsidiaries in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (i) the
filing with the Securities and Exchange Commission (the "SEC") of the Joint
Proxy Statement of Parent and the Company, as amended from time to time through
effectiveness (the "Joint Proxy Statement"), pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), for the solicitation of the
approval of the stockholders of Parent of the Parent Charter Amendment, (ii) the
filing with the SEC of a Registration Statement on Form S-4 (the "Form S-4
Registration Statement") pursuant to the Securities Act with respect to those
shares of Internet Group Common Stock issuable in the Merger, in which the Joint
Proxy Statement will be included as part of the Form S-4 Registration Statement,
(iii) such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, (iv) the filing of the Parent Charter Amendment and the
Certificate of Merger with the Secretary of State of the State of Delaware, (v)
any applicable filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (vi) the approval of the
stockholders of Parent of the Parent Charter Amendment, (vii) any other such
filings
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or approvals as may be required under Delaware law and (viii) such consents,
waivers, approvals, orders authorizations, registrations, declarations, and
filings, which, if not obtained or made, would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or the Internet Group or
prevent or materially delay the consummation of the transactions contemplated
hereby. For purposes of this Agreement, "Governmental Body" shall mean any: (a)
nation, state, commonwealth, province, territory, county, municipality, district
or other jurisdiction of any nature; (b) federal, state, local, municipal,
foreign or other government or (c) governmental or quasi-governmental authority
of any nature (including any governmental division, department, agency,
commission, instrumentality, official, organization, unit, body or entity and
any court or other tribunal).
2.6 SEC Documents and Parent Financial Statements.
Parent has furnished the Company with a true and complete copy of all of
its filings with the SEC since January 1, 1998 through the date hereof (the
"Parent SEC Documents"). Each of the Parent SEC Documents when filed (i)
complied as to form in all material respects with the applicable requirements of
the Exchange Act and (ii) was true and correct in all material respects and did
not omit to state any material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except in each case as superseded in any
subsequent filings. All financial statements (including any related schedules or
notes) of Parent included in the Parent SEC Documents were prepared in
accordance with United States generally accepted accounting principals,
consistently applied ("GAAP"), are consistent with each other and present fairly
in all material respects the consolidated financial condition and consolidated
operating results and cash flows of Parent as of their respective dates and
during the periods indicated therein, subject, in the case of unaudited
statements, to normal year-end adjustments, which will not be material in
amount. Parent maintains a system of internal accounting controls sufficient to
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability. Parent's unaudited consolidated balance sheet as
of March 31, 1999 included in the Parent SEC Documents is referred to herein as
the "Parent Current Balance Sheet," and Parent's audited consolidated balance
sheet as of September 30, 1998 and its audited consolidated statements of
operations and cash flows for the year then ended included in the Parent SEC
Documents are referred to herein as the "Parent Financials."
2.7 Internet Group Common Stock; Internet Group Companies and Business.
When issued and delivered in accordance with the terms of this Agreement,
the Internet Group Common Stock will be duly authorized, validly issued, fully
paid and nonassessable and free of any preemptive or similar right. Except as
set forth in Section 2.7 of the Parent Disclosure Schedule, there is no stock
option plan or other plan providing for equity compensation maintained by
Internet Group. Except as set forth in Section 2.7 of the Parent Disclosure
Schedule, there are no other options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which Parent or
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any subsidiary of Parent is a party or by which it is bound obligating Parent or
any subsidiary of Parent to issue, deliver, sell, repurchase or redeem, or cause
to be issued, delivered, sold, repurchased or redeemed, any shares of Internet
Group Common Stock (except in exchange for Company Options pursuant to Section
1.7 above) or interests in any of the Internet Group Companies, as the case may
be. Except as set forth in Section 2.7 of the Parent Disclosure Schedule, there
are no outstanding or authorized stock appreciation, phantom stock, profit
participation or other similar rights with respect to Internet Group Common
Stock. Except as set forth in Section 2.7 of the Parent Disclosure Schedule,
there are no minority interests or options, calls or other rights to acquire
whatsoever any equity or other interests (ownership, economic or otherwise) in
any of the Internet Group Companies or the business or assets of the Internet
Group.
2.8 Ownership of Acquisition Company; No Prior Activities.
Acquisition Company is a wholly owned, direct subsidiary of Parent
created solely for the purpose of effecting the Merger. As of the date hereof
and the Effective Time, except for obligations or liabilities incurred in
connection with its incorporation or organization and the transactions
contemplated by this Agreement and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, Acquisition Company
has not and will not have incurred, directly or indirectly, through any
subsidiary or affiliate, any material obligations or liabilities or engaged in
any material business activities of any type or kind whatsoever or entered into
any agreements or arrangements with any person.
2.9 Internet Group Financial Statements.
Section 2.9 of the Parent Disclosure Schedule sets forth the Internet
Group's (i) audited combined balance sheet as of September 30, 1998 and the
statements of operations and cash flows for the year then ended, including notes
thereto (the "Year-End Financials"), and (ii) unaudited combined balance sheet
as of March 31, 1999 and the related combined statements of operations and cash
flows for the six months then ended (the "Interim Financials"). Such Year-End
Financials have been prepared with a materiality standard based upon the
Internet Group and not Parent taken as a whole. Except as otherwise specifically
described in Section 2.9 of the Parent Disclosure Schedule, the Year-End
Financials and the Interim Financials have been prepared in accordance with GAAP
applied on a basis consistent throughout the periods indicated and are
consistent with each other, and each of the Year-End Financials and the Interim
Financials have been prepared as though the Parent Common Stock Policies, as
will be applied following the Effective Time, had been in place for, and applied
consistently during, such periods (except with respect to the royalties payable
to Parent in connection with DisneyStore.com). The Year-End Financials and
Interim Financials present fairly in all material respects the combined
financial condition and combined operating results of the Internet Group as of
the dates and during the periods indicated therein, subject in the case of the
Interim Financials, to normal year-end adjustments, which will not be material
in amount. As of the date hereof, Parent maintains a system of internal
accounting controls sufficient to provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements of the
Internet Group in
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conformity with GAAP and to maintain asset accountability. The Internet Group
combined balance sheet as of March 31, 1999 included in the Interim Financials
shall be hereinafter referred to as the "Current Balance Sheet."
2.10 No Changes.
Since March 31, 1999, except as otherwise expressly contemplated by
this Agreement, the Internet Group's business has been conducted in the ordinary
course consistent with past practice and there has not been any action, event,
occurrence, development, change in method of doing business or state of
circumstances or facts that, individually or in the aggregate, has had a
Material Adverse Effect on the Internet Group.
2.11 Restrictions on Business Activities.
Except as described in Section 2.11 of the Parent Disclosure Schedule as
of the date hereof, there is no agreement (non-compete or otherwise),
commitment, judgment, injunction, order or decree to which Parent or any of its
subsidiaries is a party or otherwise binding upon Parent or its subsidiaries
which has the effect of prohibiting any business practice of the Internet Group,
any acquisition of property (tangible or intangible) by the Internet Group or
the conduct of the business by the Internet Group which would have a Material
Adverse Effect on the Internet Group and the Company taken as a whole. Without
limiting the foregoing, as of the date hereof, none of Parent or its
subsidiaries has entered into any agreement under which any of the Internet
Group Companies is restricted from selling, licensing or otherwise distributing
any of its material technology or products to or providing services to or
selling advertising to, customers or potential customers or any class of
customers, in any geographic area, during any period of time or in any market
which would have a Material Adverse Effect on the Internet Group and the Company
taken as a whole.
2.12 Title to Properties; Absence of Liens and Encumbrances.
(a) Section 2.12(a) of the Parent Disclosure Schedule sets forth a list
of all real property used in the business of the Internet Group that would be
required to be identified by Item 102 of Regulation S-K.
(b) Except as set forth in Section 2.12(b) of the Parent Disclosure
Schedule, either Parent, its subsidiaries or the Internet Group Companies, as
the case may be, has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all material tangible
properties and assets, real, personal and mixed, used or held for use in
connection with business of the Internet Group, free and clear of any Liens (as
defined in Section 3.12), except (i) as reflected in the Current Balance Sheet,
(ii) for Taxes (as defined in Section 3.12) not yet due and payable or
delinquent and (iii) where such imperfections of title and encumbrances, if any,
are not material in character, amount or extent, and do not materially detract
from the value, or materially interfere with the present use, of the property
subject thereto or affected thereby.
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2.13 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following
and all rights in, arising out of, or associated therewith: (i) all United
States and foreign patents and utility models and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, and equivalent or similar rights anywhere in the
world in inventions and discoveries; (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and all
documentation relating to any of the foregoing; (iii) all copyrights, copyright
registrations and applications therefor and all other rights corresponding
thereto throughout the world; (iv) all trade names, logos, common law trademarks
and service marks; trademark and service mark registrations and applications
therefor and all goodwill associated therewith throughout the world; (v) all
databases and data collections and all rights therein throughout the world; (vi)
all computer software including all source code, object code, firmware,
development tools, files, records and data, all media on which any of the
foregoing is recorded, all Web addresses, sites and domain names, all rights of
publicity and privacy; (vii) any similar, corresponding or equivalent rights to
any of the foregoing; and (viii) all documentation related to any of the
foregoing.
"Internet Group Intellectual Property" shall mean any Intellectual
Property that is (i) owned by or exclusively licensed to Parent, any of the
Internet Group Companies or any of their respective subsidiaries and (ii) used
in connection with the business of the Internet Group, but in all events
excluding (A) Intellectual Property owned by the Company or the Company
Subsidiaries other than ABC News/Starwave Partners (d/b/a ABC News Internet
Ventures) ("AIV") and ESPN/Starware Partners (d/b/a ESPN Internet Ventures)
("EIV"), which Intellectual Property is exclusively licensed to AIV or EIV, (B)
Intellectual Property that is or was developed or owned by AIV or EIV and (C)
Intellectual Property that is or was jointly developed, funded or owned by the
Company or any of the Company Subsidiaries (other than AIV and EIV) on the one
hand and Parent or any of the Internet Group Companies or their respective
subsidiaries (other than AIV and EIV) on the other hand.
"Registered Intellectual Property" shall mean all United
States, international and foreign: (i) patents and patent applications
(including provisional applications); (ii) registered trademarks, applications
to register trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and applications
for copyright registration; (iv) any mask work registrations and applications to
register mask works; and (v) any other Internet Group Intellectual Property that
is the subject of an application, certificate, filing, registration or other
document issued by, filed with, or recorded by, any state, government or other
public legal authority.
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(b) Section 2.13(b) of the Parent Disclosure Schedule lists all
Registered Intellectual Property owned by, or filed in the name of, Parent, any
of the Internet Group Companies or any of their respective subsidiaries except
such Registered Intellectual Property the absence of which would not have a
Material Adverse Effect on the Internet Group or the conduct of the Internet
Group's business and which is used primarily in connection with the business of
the Internet Group (the " Internet Group Registered Intellectual Property") and
lists any proceedings or actions before any court, tribunal (including the
United States Patent and Trademark Office (the "PTO") or equivalent authority
anywhere in the world) related to any of the Internet Group Registered
Intellectual Property, except for any proceedings which, if adversely
determined, would not have a Material Adverse Effect on the Internet Group.
(c) Except as set forth in Section 2.13(c) of the Parent Disclosure
Schedule or as would not have a Material Adverse Effect on the Internet Group or
the conduct of the Internet Group's business, each item of Internet Group
Intellectual Property owned by Parent, any Internet Group Companies or their
respective subsidiaries, including all Internet Group Registered Intellectual
Property listed in Section 2.13(b) of the Parent Disclosure Schedule, is free
and clear of any Liens, except for Liens for Taxes not yet due and payable or
delinquent. Except as set forth in Section 2.13(c) of the Parent Disclosure
Schedule or as would not have a Material Adverse Effect on the Internet Group or
the conduct of the Internet Group's business, one or more of Parent, the
Internet Group Companies or any of their respective subsidiaries, as the case
may be, (i) is the exclusive owner or has valid and enforceable rights to use of
all trade names, logos, common law trademarks and service marks used in
connection with the operation or conduct of the business of the Internet Group
as currently conducted, including the sale of any products or technology or the
provision of any services by the Internet Group; and (ii) is the exclusive owner
of or has valid and enforceable rights to use, all copyrighted works that are
Parent's or any of the Internet Group Companies' or any of their respective
subsidiaries', as the case may be, products or other works of authorship used in
connection with the operation or conduct of the Internet Group's business as
currently conducted, including the sale of any products or technology or the
provision of any services by the Internet Group.
(d) Except as set forth in Section 2.13(d) of the Parent Disclosure
Schedule and except for any transfers, grants or authorizations that have not or
do not have a Material Adverse Effect on the Internet Group or the conduct of
the Internet Group's business, none of Parent or the Internet Group Companies or
any of their respective subsidiaries has transferred ownership of or authorized
the retention of any rights to use any Internet Group Intellectual Property to
any other person.
(e) Except (i) as set forth in Section 2.13(e) of the Parent Disclosure
Schedule, (ii) for Intellectual Property the absence of which would not have a
Material Adverse Effect on the Internet Group, (iii) for "shrink-wrap" software
and similar widely available commercial end-user software used by the Internet
Group or in the conduct of the Internet Group's business, and (iv) open source
and similar free software available generally without payment of any royalties
or other license fees: the Internet Group Intellectual Property constitutes all
of the Intellectual Property used in or necessary to the
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conduct of the Internet Group's business as currently conducted, including,
without limitation, the design, development, copying, performance, display,
creation of derivative works, distribution, manufacture, use, import, license
and sale of the products, technology and services of the Internet Group. Except
as set forth in Section 2.13(e) of the Parent Disclosure Schedule, no person who
has licensed Internet Group Intellectual Property to Parent or any of the
Internet Group Companies or any of their respective subsidiaries has ownership
rights or license rights to improvements in such licensed Internet Group
Intellectual Property, provided that the foregoing shall apply only to
improvements (A) the absence of which would have a Material Adverse Effect on
the Internet Group or the conduct of Internet Group's business and (B) which
were made by Parent, any Internet Group Company or any of their respective
subsidiaries.
(f) Except for "shrink-wrap" and similar widely available commercial
end-user licenses or contracts, licenses and agreements the existence,
termination or breach of which would not have a Material Adverse Effect on the
Internet Group or the conduct of the Internet Group's business, the contracts,
licenses and agreements listed in Section 2.13(f) of the Parent Disclosure
Schedule include all contracts, licenses and agreements to which Parent, any of
the Internet Group Companies or any of their respective subsidiaries is a party
with respect to any Internet Group Intellectual Property.
(g) Except as set forth in Section 2.13(g) of the Parent Disclosure
Schedule or except for matters which, if adversely determined, would not have a
Material Adverse Effect on the Internet Group or the conduct of the Internet
Group's business: the operation of the Internet Group's business as currently
conducted, including, without limitation, the design, development, copying,
performance, display, creation of derivative works, distribution, manufacture,
use, import, license and sale of the products, technology and services of the
Internet Group, does not infringe or misappropriate the Intellectual Property of
any person, violate the rights of any person (including, but not limited to,
rights to privacy or publicity), or constitute unfair competition or trade
practices under the laws of any relevant jurisdiction; and none of Parent, the
Internet Group Companies or any of their respective subsidiaries has received
notice from any person claiming that such operation, or any act, product,
technology or service of the Internet Group infringes or misappropriates the
Intellectual Property of any person, or that Parent, any of the Internet Group
Companies or any of their respective subsidiaries has engaged in unfair
competition or trade practices under the laws of any relevant jurisdiction (nor
does Parent, any Internet Group Company or any of their respective subsidiaries
have knowledge of any basis therefor).
(h) All necessary registration, maintenance and renewal fees in
connection with the Internet Group Registered Intellectual Property the absence
of which would have a Material Adverse Effect on the Internet Group or the
conduct of the Internet Group's business have been paid and all necessary
documents and certificates in connection with such Internet Group Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property when commercially reasonable.
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(i) Except as set forth in Section 2.13(i) of the Parent Disclosure
Schedule or for those contracts, licenses or agreements the existence,
termination or breach of which would not have a Material Adverse Effect on the
Internet Group or the conduct of Internet Group's business, there are no
contracts, licenses or agreements between Parent, any of the Internet Group
Companies or any of their respective subsidiaries and any other person with
respect to Internet Group Intellectual Property under which there is any dispute
regarding the scope of such contract, license or agreement or performance under
such contract, license or agreement, including with respect to any payments to
be made or received by Parent, any of the Internet Group Companies or any of
their respective subsidiaries, as the case may be, which, if adversely
determined, would have a Material Adverse Effect on the Internet Group or the
conduct of the Internet Group's business.
(j) Except as set forth in Section 2.13(j) of the Parent Disclosure
Schedule or for pending claims which, if successfully asserted, would not have a
Material Adverse Effect on the Internet Group or the conduct of the Internet
Group's business, there is no pending claim by Parent, any of the Internet Group
Companies or any of their respective subsidiaries against any person for
infringing or misappropriating any Internet Group Intellectual Property. Without
limiting the foregoing, to the knowledge of Parent, any of the Internet Group
Companies or any of their respective subsidiaries, there is no pending claim by
any person other than Parent, any of the Internet Group Companies or any of
their respective subsidiaries against any person for infringing or
misappropriating any Internet Group Intellectual Property, which claim, if
adversely determined, would have a Material Adverse Effect on the Internet Group
or the conduct of the Internet Group's business.
(k) Except as set forth in Section 2.13(k) of the Parent Disclosure
Schedule or as would not have a Material Adverse Effect on the conduct of the
Internet Group or the Internet Group's business as currently conducted, no
Internet Group Intellectual Property or product, technology or service of the
Internet Group is subject to any proceeding or outstanding decree, order,
judgment, settlement or other similar agreement or stipulation that restricts in
any manner the use, transfer or licensing thereof by Parent, any of the Internet
Group Companies or any of their respective subsidiaries, as the case may be, or
would affect the validity, use or enforceability of such Internet Group
Intellectual Property.
(l) The consummation of the transaction contemplated by this Agreement
will not result in the loss of, or otherwise adversely affect, any ownership
rights of Parent, any of the Internet Group Companies or any of their respective
subsidiaries in any Internet Group Intellectual Property material to the
Internet Group, or result in the breach or termination of any license, contract
or agreement to which any of the foregoing persons are a party with respect to
any Internet Group Intellectual Property material to the Internet Group. The
consummation of the transactions contemplated by this Agreement will not cause
or obligate Parent, any of the Internet Group Companies or any of their
respective subsidiaries to (i) grant to any third party any rights or licenses
with respect to any Internet Group Intellectual Property material to the
Internet Group, or (ii) pay any royalties or other amounts with respect to
Internet Group Intellectual Property material to the Internet Group in excess of
those being paid prior to the Effective Time.
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2.14 Agreements, Contracts and Commitments.
Section 2.14 of the Parent Disclosure Schedule sets forth all material
agreements, contracts, covenants, instruments, leases, licenses or commitments
of the Internet Group (collectively, the "Internet Group Contracts"). Parent and
each of its subsidiaries is in compliance in all material respects with, and has
not, in any material respects, breached, violated or defaulted under, or
received notice that it has breached, violated or defaulted in such manner
under, any of the terms or conditions of the Internet Group Contracts, nor does
Parent have knowledge of any event that would constitute such a breach,
violation or default with the lapse of time, giving of notice or both. Each
Internet Group Contract is in full force and effect and, to the knowledge of
Parent, is not subject to any material default thereunder by any party obligated
to Parent or any of its subsidiaries pursuant thereto. Parent and each of its
subsidiaries has obtained, or will obtain prior to the Closing Date, all
necessary consents, waivers and approvals of parties to any Internet Group
Contract as are required thereunder in connection with the Merger or for such
Internet Group Contracts to remain in effect without material modification after
the Effective Time. Following the Effective Time, Parent and each of its
subsidiaries will be permitted to exercise all of their respective rights under
each Internet Group Contract then in effect without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which Parent or any of its subsidiaries would otherwise be required to
pay had the transactions contemplated by this Agreement not occurred.
2.15 Litigation.
Except as set forth in the Parent SEC Documents or in Section 2.15 of the
Parent Disclosure Schedule, as of the date hereof, there is no material action,
suit or proceeding of any nature pending, or, to Parent's knowledge threatened,
against Parent, any of its subsidiaries or the Internet Group Companies, their
properties or any of their officers or directors, relating to the Internet
Group. To Parent's knowledge, as of the date hereof, there is no material
investigation pending or threatened against Parent, or any of its subsidiaries
or the Internet Group Companies or their properties (nor, to the knowledge of
Parent, is there any reasonable basis therefor), relating to the Internet Group
by or before any Governmental Body.
2.16 Governmental Authorizations.
Section 2.16 of the Parent Disclosure Schedule sets forth each consent,
license, permit, grant or other authorization issued to Parent or its
subsidiaries by a Governmental Body (i) pursuant to which the Internet Group
currently operates or holds any interest in any of their properties or (ii)
which is required for the operation of the Internet Group's business or the
holding of any such interest, in each case the absence of which would have a
Material Adverse Effect on the Internet Group (herein collectively called the
"Internet Group Authorizations"). The Internet Group Authorizations are in full
force and effect and constitute all licenses, permits, grants or other
authorizations by Governmental Bodies required to permit the Internet Group to
operate or conduct its
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business or hold any interest in its properties or assets, in each case except
to the extent that would not result in a Material Adverse Effect on the Internet
Group.
2.17 Minute Books.
The minutes of the Internet Group Companies made available to counsel for
the Company are the only minutes of the Internet Group Companies.
2.18 Environmental Matters.
(a) Hazardous Material. Except as would not have a Material Adverse
Effect on the Internet Group: none of the Internet Group Companies has: (i)
operated any underground storage tanks at any property that any Internet Group
Company has at any time owned, operated, occupied or leased; or (ii) illegally
released in violation of applicable environmental laws as in effect at the time
of such release any material amount of any substance that has been designated by
any Governmental Body or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, and
ureaformaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office, maintenance and
janitorial supplies used in the ordinary course of business (a "Hazardous
Material"). No Hazardous Materials are present as a result of the deliberate
actions of Parent or any of its subsidiaries in, on or under any property,
including the land and the improvements, ground water and surface water thereof,
that any Internet Group Company currently owns, operates, occupies or leases,
except for such Hazardous Materials which would not have a Material Adverse
Effect on the Internet Group.
(b) Hazardous Materials Activities. Except as would not have a Material
Adverse Effect on the Internet Group: none of the Internet Group Companies has
illegally transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of any
environmental law as in effect at the time of such transport, storage, use,
manufacture, disposal, release or exposure, nor has any Internet Group Company
illegally disposed of, transported, sold, or manufactured any product containing
a Hazardous Material in violation of any environmental law as in effect at the
time of such transport, manufacture, disposal or sale (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities").
(c) Permits. Except as would not have a Material Adverse Effect on the
Internet Group, Parent and its subsidiaries currently hold all material
environmental approvals, permits, licenses, clearances and consents (the
"Environmental Permits"), if any, necessary for the conduct of any Hazardous
Material Activities by any Internet Group Company and the other businesses of
Internet Group as such activities and businesses are currently being conducted.
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(d) Environmental Liabilities. Except as would not have a Material
Adverse Effect on the Internet Group, no action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending and served
or, to Parent's knowledge threatened, against Parent or any subsidiary of Parent
concerning any Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of the Internet Group. Except as would not have a Material
Adverse Effect on the Internet Group, Parent has no knowledge of any fact or
circumstance which would reasonably be expected to involve the Internet Group in
any environmental litigation or impose upon the Internet Group any environmental
liability.
The representations set forth in this Section 2.18 are the sole and exclusive
representations of Parent with respect to the subject matter hereof, including,
without limitation, with respect to environmental laws, Environmental Permits,
Hazardous Materials or Hazardous Materials Activities.
2.19 Brokers' and Finders' Fees.
Except as set forth in Section 2.19 of the Parent Disclosure Schedule,
Parent has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
2.20 Employee Benefit Plans; Employment Matters.
(a) Definitions.
For purposes of this Section 2.20, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common
control with Parent within the meaning of Section 414(b), (c), (m) or (o) of the
Code and the regulations thereunder.
(ii) "Employee Plan" shall refer to any plan, program, policy,
contract or agreement or other arrangement providing for bonuses, severance or
retention payments or benefits, termination pay, deferred compensation,
pensions, profit sharing, performance awards, stock or stock- related awards, or
fringe benefits, or other employee benefits of any kind, written or otherwise,
funded or unfunded, including, without limitation, any plan which is or has been
maintained, contributed to, or required to be contributed to, by Parent or any
affiliate for the benefit of any Employee, and pursuant to which Parent or any
affiliate has or may have any material liability, contingent or otherwise.
(iii) "Employee" shall mean any current, former, or retired
employee, consultant, officer, or director of Parent or any of its subsidiaries
who performs services to the Internet Group.
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(b) Employee Plans. Except as disclosed in the Parent SEC Documents or
as would not have a Material Adverse Effect on the Internet Group, all Employee
Plans are in compliance with all applicable requirements of law, including ERISA
and the Code, and in compliance with the terms of such Employee Plans.
(c) Employment Matters.
Except as disclosed in the Parent SEC Documents or as would not have a
Material Adverse Effect on the Internet Group, as of the Effective Time. Parent
and its subsidiaries will be in compliance in all material respects with all
material applicable laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours, in
each case, with respect to Employees.
2.21 Parent Charter Amendment and Parent Common Stock Policies.
The Board of Directors of Parent has unanimously approved (i) the
Parent Charter Amendment, which amendment, subject to the approval of the
holders of a majority of the shares of Parent Common Stock outstanding as of the
record date for the Parent Stockholders Meeting (as defined in Section 5.2) and
the filing thereof with the Secretary of State of Delaware, will become
effective immediately prior to the Effective Time and (ii) the Parent Common
Stock Policies which will become effective as of the Effective Time.
2.22 Compliance with Laws.
Parent and its subsidiaries have complied in all material respects with,
are not in material violation of, and have not received any notices of material
violation with respect to, any material federal, state or local statute, law or
regulation relating to the operation of the Internet Group's business.
2.23 Opinion of Financial Advisor.
The Board of Directors of Parent has received an opinion of Goldman Sachs
& Co. to the effect that, as of the date hereof, the consideration to be paid by
Parent pursuant to this Agreement is fair to Parent from a financial point of
view.
2.24 Reorganization.
As of the date hereof, Parent does not have any knowledge of any fact or
circumstance that is reasonably likely to prevent the Merger from qualifying as
a reorganization described in section 368(a) of the Code.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent, subject to such
exceptions as are specifically disclosed in the disclosure schedule supplied by
the Company to Parent (the "Company Disclosure Schedule"), as of the date hereof
and as of the Effective Time as though made at the Effective Time, as follows:
3.1 Organization, Standing and Power.
The Company is a corporation duly organized, validly existing and in good
standing under Delaware law. The Company has the corporate power to own, lease
and operate its properties and to carry on its business as now being conducted
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect on the Company. The Company has delivered to
Parent a true and correct copy of the Amended and Restated Certificate of
Incorporation and Bylaws of the Company, as amended to date. Each of the Company
Subsidiaries (as defined in Section 3.2) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
formation and has the corporate or other applicable power to own its property
and to carry on its business as now being conducted. Each of the Company
Subsidiaries is duly qualified to do business and in good standing in each
jurisdiction outside of the jurisdiction of its incorporation or formation in
which the failure to be so qualified would have a Material Adverse Effect on the
Company. The Company has made available a true and correct copy of the charter
and bylaws or other organizational document of each of the Company Subsidiaries,
each as amended to date, to Parent.
3.2 Company Subsidiaries.
Except as set forth in Section 3.2 of the Company Disclosure Schedule,
the Company does not have, and has never had, any subsidiaries, in each case
that would be required to be listed as a "Subsidiary" in exhibits to the
periodic reports of the Company under the Exchange Act. The entities set forth
in Section 3.2 of the Company Disclosure Schedule are hereinafter occasionally
referred to individually as a "Company Subsidiary" and collectively as the
"Company Subsidiaries," except as otherwise set forth in Section 3.2 of the
Company Disclosure Schedule. Section 3.2 of the Company Disclosure Schedule also
sets forth the form and percentage interest of the Company in the Company
Subsidiaries and, to the extent that a Company Subsidiary set forth thereon is
not wholly owned by the Company, lists the other person or persons, or entity or
entities, who have an interest in such Company Subsidiary and the percentage of
such interest.
3.3 Authority; No Conflict; Consents.
The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and
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delivery of this Agreement, and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, and no further action is required on the part of the
Company to authorize this Agreement or the transactions contemplated hereby,
subject only to the approval of this Agreement by the Company's stockholders
(which approval must include approval by more than 50% of the Company's total
current voting power held by the Disinterested Stockholders (as defined below)).
This Agreement and the Merger have been unanimously approved by "Disinterested
Directors" of the Company, as defined in the Amended and Restated Certificate of
Incorporation of the Company. The Disinterested Directors of the Company have
duly and validly authorized and approved by all necessary corporate action, this
Agreement, the Support Agreement and the transactions contemplated hereby and
thereby, so that by the execution and delivery hereof no restrictive provision
of any "fair price," "moratorium," "control-share acquisition," "interested
stockholders" or other similar anti-takeover statute or regulation (including,
without limitation, Section 203 of the Delaware General Corporation Law) or
restrictive provision of any applicable anti-takeover provision in the Amended
and Restated Certificate of Incorporation or Bylaws of the Company is, or at the
closing of the transactions contemplated hereby will be, applicable to the
Company, Parent, Acquisition Company and the Parent Common Stock, the Merger or
any other transaction contemplated by this Agreement and so that the
transactions contemplated hereby and by the Support Agreement may be consummated
as promptly as practicable on the terms contemplated hereby and thereby. This
Agreement has been, and all agreements to be executed and delivered in
connection with the transactions contemplated hereby by the Company or any of
the Company Subsidiaries will be, duly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by the other parties
hereto and thereto, constitute the valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by principles of public policy and subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and to rules of law governing specific performance, injunctive relief or
other equitable remedies. The execution and delivery by the Company of this
Agreement does not, and all agreements to be executed and delivered in
connection with the transactions contemplated hereby by the Company or any of
the Company Subsidiaries will not, and the performance and consummation of the
transactions contemplated hereby and thereby will not, result in any Conflict
with (i) any provision of the Amended and Restated Certificate of Incorporation
or Bylaws of the Company, (ii) any material mortgage, indenture, lease, contract
or other agreement or instrument, permit, concession, franchise or license to
which the Company or any Company Subsidiary, or any of their properties or
assets are subject, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any Company
Subsidiary or their respective properties or assets, except in the case of
clauses (ii) and (iii) above, as would not have a Material Adverse Effect on the
Company. Except as set forth in Section 3.3 of the Company Disclosure Schedule,
no consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Body or any other party is required
by or with respect to the Company in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing with the
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SEC of the Joint Proxy Statement, (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware, (iii) such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws,
(iv) any applicable filings required under the HSR Act, (v) the approval of this
Agreement and the Merger by the Company's stockholders (which approval must
include approval by more than 50% of the Company's total current voting power
held by the "Disinterested Stockholders" of the Company, as defined in the
Company's Amended and Restated Certificate of Incorporation), (vi) any other
such filings or approvals as may be required under Delaware law and (vii) such
consents, waivers, approvals, orders authorizations, registrations,
declarations, and filings, which, if not obtained or made, would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
or prevent or materially delay the consummation of the transactions contemplated
hereby.
3.4 Company Capital Structure.
(a) The authorized capital stock of the Company consists of 500,000,000
shares of Company Common Stock of which 62,169,544 shares are issued and
outstanding as of June 30, 1999, and 25,000,000 shares of preferred stock, par
value $.001 per share, of which no shares are issued and outstanding as of the
date hereof. All issued and outstanding shares of Company Capital Stock have
been duly authorized, and are validly issued, fully paid and non-assessable and
not subject to preemptive rights created by statute, the Amended and Restated
Certificate of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound and have been issued in
compliance with federal and state securities laws. There are no declared or
accrued unpaid dividends with respect to any shares of Company Capital Stock.
The Company has no other capital stock authorized, issued or outstanding.
(b) Except for those option plans of the Company set forth in the
Company SEC Documents (as defined in Section 3.5) (the "Company Option Plans"),
there is no stock option plan or other plan providing for equity compensation of
any person maintained by the Company or a Company Subsidiary. As of June 30,
1999, the Company has reserved 13,825,000 shares of Company Capital Stock for
issuance to employees and consultants pursuant to the Company Option Plans, of
which options to purchase 11,318,423 shares of Company Capital Stock have been
issued as of the date hereof, of which 9,797,948 shares remain subject to
options unexercised as of the date hereof. Section 3.4(b) of the Company
Disclosure Schedule sets forth the name of the holder of any Company Capital
Stock subject to vesting, the number of shares of Company Capital Stock subject
to vesting and the vesting schedule for such Company Capital Stock, including
the extent vested as of the most recent practicable date, and sets forth the
name of the holder of any Company Options, the number of shares of Company
Capital Stock subject to such Company Options and the vesting schedule for such
Company Options, including the extent vested to date. Except as set forth in
Section 3.4(b) of the Company Disclosure Schedule, there is no outstanding
Company Capital Stock which is subject to vesting or Company Options, and there
are no options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which the Company or any Company Subsidiary is a
party or by which it is bound
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obligating the Company or any Company Subsidiary to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of Company Capital Stock or interests in any Company
Subsidiary, as the case may be, or obligating the Company or any Company
Subsidiary to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or other similar rights with respect to the Company
or any Company Subsidiary. Except as contemplated by this Agreement, to the
Company's knowledge, there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting stock of the Company or any Company
Subsidiary.
3.5 SEC Documents and Company Financial Statements.
The Company has furnished Parent with a true and complete copy of all of
its filings with the SEC since January 1, 1998 through the date hereof (the
"Company SEC Documents"). Each of the Company SEC Documents when filed (i)
complied as to form in all material respects with the applicable requirements of
the Exchange Act and (ii) was true and correct in all material respects and did
not omit to state any material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except in each case as superseded in any
subsequent filings. All financial statements (including any related Schedules or
notes) of the Company included in the Company SEC Documents were prepared in
accordance with GAAP, are consistent with each other, and fairly present in all
material respects the consolidated financial condition and consolidated
operating results and cash flows of the Company as of their respective dates and
during the periods indicated therein, subject, in the case of unaudited
financial statements, to normal year-end adjustments, which will not be material
in amount. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability. The Company's unaudited consolidated
balance sheet as of March 31, 1999 included within the Company SEC Documents is
referred to herein as the "Company Current Balance Sheet," and the Company's
audited consolidated balance sheet as of October 3, 1998 and its audited
consolidated statements of operations and cash flows for the period then ended
included in the Company SEC Documents are referred to herein as the "Company
Financials."
3.6 No Undisclosed Liabilities.
Except (i) as reflected in the Company Current Balance Sheet, (ii) as set
forth in Section 3.6 to the Company Disclosure Schedule, or (iii) with respect
to any matter arising in the ordinary course of business consistent with past
practices since March 31, 1999, the Company and the Company Subsidiaries have no
liability, indebtedness, obligation, expense, claim, deficiency, guarantee or
endorsement of any type, including any related to Taxes, whether accrued,
absolute, contingent, matured, unmatured or other, which individually or in the
aggregate are required to be reflected or reserved against on the consolidated
balance sheet of the Company and the Company Subsidiaries in
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accordance with GAAP, or that, individually or in the aggregate, would have a
Material Adverse Effect on the Company. In addition, since March 31, 1999, there
has not been any declaration, setting aside or payment of a dividend or other
distribution with respect to the Company Capital Stock or any material change in
accounting methods or practices by the Company or any Company Subsidiary.
3.7 No Changes.
Since the date of the Company Current Balance Sheet, except as otherwise
expressly contemplated by this Agreement, the Company and the Company
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been any action, event, occurrence,
development, change in method of doing business or state of circumstances or
facts that, individually or in the aggregate, has had a Material Adverse Effect
on Company.
3.8 Restrictions on Business Activities.
Except as described in Section 3.8 of the Company Disclosure Schedule as
of the date hereof, there is no agreement (non-compete or otherwise),
commitment, judgment, injunction, order or decree to which the Company or any of
the Company Subsidiaries is a party or otherwise binding upon the Company or the
Company Subsidiaries which has the effect of prohibiting any business practice
of the Company, any acquisition or property (tangible or intangible) by the
Company or the conduct of the business by the Company which would have a
Material Adverse Effect on the Company and the Internet Group taken as a whole.
Without limiting the foregoing, as of the date hereof, none of the Company or
the Company Subsidiaries has entered into any agreement under which the Company
or any of the Company Subsidiaries is restricted from selling, licensing or
otherwise distributing any of its material technology or products to or
providing services to or selling advertising to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any market which would have a Material Adverse Effect on the
Company and the Internet Group taken as a whole.
3.9 Title to Properties; Absence of Liens and Encumbrances.
The Company SEC Documents set forth all material real property used in
the Company's business. The Company or the Company Subsidiaries, as the case may
be, has good and valid title to, or, in the case of leased properties and
assets, valid leasehold interests in, all material tangible properties and
assets, real, personal and mixed, used or held for use in connection with
business of the Company and the Company Subsidiaries, free and clear of any
Liens, except (i) as reflected in the Company Current Balance Sheet, (ii) for
Taxes not yet due and payable or delinquent and (iii) where such imperfections
of title and encumbrances, if any, are not material in character, amount or
extent, and do not materially detract from the value, or materially interfere
with the present use, of the property subject thereto or affected thereby.
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3.10 Brokers' and Finders' Fees.
Except for those fees payable to Merrill Lynch & Co., Inc. ("Merrill
Lynch"), as financial advisor to the Company (the "Company Financial Advisor")
pursuant to an engagement letter, a true and correct copy of which has been
furnished to Parent, neither the Company nor any Company Subsidiary has
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
3.11 Litigation.
Except as set forth in the Company SEC Documents or in Section 3.11 of
the Company Disclosure Schedule, as of the date hereof, there is no material
action, suit or proceeding of any nature pending, or, to the Company's knowledge
threatened, against the Company or any of the Company Subsidiaries, their
properties or any of their officers or directors. To the Company's knowledge, as
of the date hereof, there is no material investigation pending or threatened
against the Company or any of the Company Subsidiaries, their properties or any
of their officers or directors (nor, to the knowledge of the Company, is there
any reasonable basis therefor) by or before any Governmental Body.
3.12 Taxes.
(a) Tax Definitions.
(i) "Tax" or, collectively, "Taxes" means (A) any and all federal,
state, local and foreign taxes, assessments and other governmental charges,
duties, impositions and liabilities, including taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts; (B) any liability for the payment of any
amounts of the type described in clause (A) as a result of being or ceasing to
be a member of an affiliated, consolidated, combined or unitary group for any
period (including, without limitation, any liability under Treas. Reg. Section
1.1502-6 or any comparable provision of foreign, state or local law); and (C)
any liability for the payment of any amounts of the type described in clause (A)
or (B) as a result of any express or implied obligation to indemnify any other
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(ii) "Tax Return" means any report, return, election, notice,
estimate, declaration, information statement and other forms and documents
(including, without limitation, all schedules, exhibits and other attachments
thereto) relating to and filing or required to be filed with a Taxing authority
in connection with any Taxes (including, without limitation, estimated Taxes).
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(iii) "Lien" means any lien, pledge, charge, claim, restriction or
transfer, mortgage, security interest or other encumbrance of any sort.
(b) Tax Returns and Audits.
(i) As of the Effective Time, the Company and the Company
Subsidiaries will have prepared and timely filed (or caused to be prepared and
timely filed) all required federal Tax Returns and all material, state, local
and foreign Tax Returns, relating to any and all Taxes concerning or
attributable to the Company and the Company Subsidiaries or their operations and
such Tax Returns shall be true and correct in all material respects and have
been completed in all material respects in accordance with applicable law.
Notwithstanding the foregoing, no representation is made hereby regarding the
size or availability of net operating losses of the Company or the Company
Subsidiaries.
(ii) Except to the extent the failure to do so would not be
material, as of the Effective Time, the Company and each of the Company
Subsidiaries (A) will have paid (or caused to be paid) all Taxes that the
Company or any Company Subsidiary is required to pay and will have withheld (or
caused to be withheld) with respect to employees of the Company and/or the
Company Subsidiaries, or otherwise, all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld, and (B) will have accrued on the
Company Financials, all Taxes attributable to the operations of the Company and
the Company Subsidiaries for the periods covered by the Company Financials in
accordance with GAAP. The Company and the Company Subsidiaries will not have
incurred any material liability for Taxes for the period from the date of the
Company Current Balance Sheet to the Effective Time other than in the ordinary
course of business;
(iii) There has been no delinquency in the payment of any
material, unaccrued Tax with respect to the Company, any of the Company
Subsidiaries or their operations, nor is there any material Tax deficiency
outstanding, assessed or proposed with respect to the operations of the Company
or any of the Company Subsidiaries, nor has the Company or any of the Company
Subsidiaries executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax relating to the Company
or any of the Company Subsidiaries;
(iv) No audit or other examination of any federal Tax Return or
any material state, local or foreign Tax Return relating to Taxes with respect
to the Company or any Company Subsidiary is presently in progress, nor has the
Company or any Company Subsidiary been notified in writing of any request for
such an audit or other examination;
(v) There are (and there will be immediately following the
Effective Time) no Liens on the assets of the Company or any of the Company
Subsidiaries relating to or attributable to Taxes other than Liens for Taxes not
yet due and payable;
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(vi) Other than with respect to Parent or its subsidiaries,
neither the Company nor any of the Company Subsidiaries is a party to any Tax
sharing, Tax indemnification or Tax allocation agreement nor does the Company or
any of the Company Subsidiaries owe any amount under any such agreement;
(vii) Neither the Company nor any of the Company Subsidiaries has
filed any consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(4) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by the Company or a Company
Subsidiary;
(viii) The Company and each of the Company Subsidiaries have made
available to Parent or its legal counsel, copies of all foreign, federal and
state income and all state sales and use Tax Returns for the Company and each
Company Subsidiary filed for all periods since its inception; and
(ix) Notwithstanding anything herein to the contrary, no
representation or warranty with respect to Taxes is made concerning any Tax
liability to Parent or any of its subsidiaries or any Tax matter whatsoever
arising out of transactions contemplated by this Agreement.
(c) Compensation Taxes.
There is no contract, agreement, plan or arrangement to which the Company
is a party as of the date of this Agreement, including, but not limited to, the
provisions of this Agreement, covering any service provider or former service
provider to the Company or any Company Subsidiary, which as a result of the
Merger (either alone or together with the occurrence of any additional or
subsequent events), could give rise to the payment of any amount that would not
be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
(d) Reorganization.
As of the date hereof, the Company does not have any knowledge of any
fact or circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization described in section 368(a) of the Code.
3.13 Employee Benefit Plans; Compensation.
(a) Definitions.
For purposes of this Section 3.13, the following terms shall have
the meanings set forth below:
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(i) As used in this Section 3.13, "Affiliate" shall mean any other
person or entity under common control with the Company within the meaning of
Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder.
(ii) As used in this Section 3.13 and Section 4.1(a), "Employee
Plan" shall refer to any plan, program, policy, contract, agreement or other
arrangement providing for bonuses, severance or retention payments or benefits,
termination pay, deferred compensation, pensions, profit sharing, performance
awards, stock or stock-related awards or fringe benefits of any kind, written or
otherwise, funded or unfunded, including, without limitation, any plan which is
or has been maintained, contributed to, or required to be contributed to, by the
Company or any Affiliate for the benefit of any Employee, and pursuant to which
the Company or any Affiliate has or may have any material liability, contingent
or otherwise.
(iii) As used in this Section 3.13 and Section 4.1(a), "Employee"
shall mean any current, former, or retired employee, consultant, officer, or
director of the Company or any Affiliate.
(iv) As used in this Section 3.13 and Section 4.1(a), "Employee
Agreement" shall refer to each employment, severance, retention, stock option,
stock purchase, restrictive covenant or other agreement or contract between the
Company or any Affiliate and any Employee;
(b) Schedule. Section 3.13(b) of the Company Disclosure Schedule
contains an accurate and complete list of each Employee Plan and each Employee
Agreement. The Company has provided or made available to Parent true and
complete copies of all Employee Plans and Employee Agreements, all written
summaries or material employee communications relating thereto, and all
governmental or regulatory filings, reports or material governmental or
regulatory communications relating thereto.
(c) Employee Plan Compliance.
(i) The Company has performed in all material respects all
obligations required to be performed by it under each Employee Plan and Employee
Agreement and each Employee Plan and Employee Agreement has been established and
maintained in material conformity with its terms and in material compliance with
all applicable laws, statutes, orders, rules and regulations, including ERISA
and the Code; (ii) each Employee Plan intended to qualify under Section 401(a)
of the Code and each trust intended to qualify under Section 501(a) of the Code
has either received a favorable determination letter with respect to each such
Plan from the IRS or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a determination
letter and make any amendments necessary to obtain a favorable determination;
(iii) there are no actions, suits or claims pending, or, to the knowledge of the
Company, threatened or anticipated (other than routine claims for benefits)
against any Employee Plan or against the assets of any Employee Plan; (iv) each
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to the Company,
any of the Company
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Subsidiaries, Parent, Acquisition Company or any Affiliate (other than ordinary
administration expenses typically incurred in a termination event); and (v)
there are no inquiries or proceedings pending or, to the knowledge of the
Company, threatened by the IRS or DOL with respect to any Employee Plan.
(d) No Pension Plans.
The Company or any of its Affiliates does not now, nor have
they ever, maintained, established, sponsored, participated in, or contributed
to, any Employee Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code.
(e) No Multiemployer Plans.
At no time has the Company or any of its Affiliates
contributed to or been requested to contribute to any Employer Plan that is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
(f) No Post-Employment Obligations.
No Employee Plan provides, or has any liability to provide,
life insurance, medical or other employee welfare benefits to any Employee upon
his or her retirement or termination of employment for any reason, except as may
be required by statute, and has not represented, promised or contracted (whether
in oral or written form) to any Employee (other than (i) benefit coverage
mandated by applicable law, including benefits provided pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and the
regulations thereunder ("COBRA"), (ii) benefits the full cost of which are borne
by current or former employees of the Company (or such employees' beneficiaries
or dependents); (iii) disability benefits under any of the Employee Plans; (iv)
benefits under any Employment Agreement and (v) life insurance benefits for any
Employee who dies while in service with the Company (either individually or to
Employees as a group)) that such Employees(s) would be provided with life
insurance, medical or other employee welfare benefits upon their retirement or
termination of employment, except to the extent required by statute.
(g) Effect of Transaction.
Except as set forth in Section 3.13(g) of the Company
Disclosure Schedule, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, stock option or restricted stock vesting acceleration,
distribution, increase in benefits or obligation to fund benefits with respect
to any Employee (except to the extent required by the Code and ERISA if Parent
causes a partial or full termination to occur under any Employee Plan).
(h) Employment Matters.
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The Company (i) is in compliance in all material respects with
all material applicable laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours, in
each case, with respect to Employees; (ii) has withheld all amounts required by
law or by agreement to be withheld from the wages, salaries and other payments
to Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; (iv) is not liable for
any payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for Employees.
(i) Labor.
The Company has not engaged in any unfair labor practices
which could, individually or in the aggregate, directly or indirectly result in
any material liability to the Company, the Company Subsidiaries or any
Affiliate. None of the Company or any Company Subsidiary is presently a party
to, or bound by, any collective bargaining agreement or union contract with
respect to Employees and no collective bargaining agreement is being negotiated
by the Company.
3.14 Compliance with Laws.
The Company and the Company Subsidiaries have complied in all material
respects with, are not in violation of, and have not received any notices of
violation with respect to, any material foreign, federal, state or local
statute, law or regulation.
3.15 Agreements, Contracts, Commitments.
The Company and each Company Subsidiary is in compliance in all material
respects with, and has not, in any material respects, breached, violated or
defaulted under, or received notice that it has breached, violated or defaulted
in such manner under, any of the terms or conditions of any agreement, contract,
covenant, instrument, lease, license or commitment that is included in any
Securities Act or Exchange Act filing of the Company as a "Material Contract"
(collectively, "Company Contracts"), nor does the Company have knowledge of any
event that would cause such a breach, violation or default with the lapse of
time, giving of notice or both. Each Company Contract is in full force and
effect and, to the knowledge of the Company, is not subject to any material
default thereunder by any party obligated to the Company or the Company
Subsidiaries pursuant thereto. The Company and each Company Subsidiary has
obtained, or will obtain prior to the Closing Date, all necessary consents,
waivers and approvals of parties to any Company Contract as are required
thereunder in connection with the Merger or for such Contracts to remain in
effect without material modification after the Effective Time. Following the
Effective Time, the Company and each Company Subsidiary will be permitted to
exercise all of their respective rights under each Contract then in effect
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company or Company Subsidiaries
would otherwise be required to pay had the transactions contemplated by this
Agreement not occurred.
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3.16 Intellectual Property.
(a) For purposes of this Agreement, "Company Intellectual Property"
shall mean any Intellectual Property owned by or exclusively licensed to the
Company (including, without limitation, Patent Number 5,751,956 ("Method and
Apparatus for Redirection of Server External Hyper-Link References")) (the
"Click-On Patent") or any of the Company Subsidiaries, but in all events
excluding: (i) Intellectual Property owned by or exclusively licensed to
Starwave Corporation as of the Effective Time as defined in that certain
Agreement and Plan of Reorganization, dated June 18, 1998, by and among Infoseek
Corporation, a California corporation, Infoseek Corporation, a Delaware
corporation, Starwave Corporation, a Washington corporation, and Disney
Enterprises, Inc., a Delaware corporation; (ii) Intellectual Property owned by
Parent, any of the Internet Group Companies or their respective subsidiaries
other than AIV and EIV which Intellectual Property is exclusively licensed to
AIV and EIV; (iii) Intellectual Property that is or was developed or owned by
AIV or EIV; (iv) Intellectual Property that is or was developed, funded or owned
by the Company or any of the Company Subsidiaries (other than AIV and EIV) on
the one hand and Parent or any of the Internet Group Companies or any of their
respective subsidiaries (other than AIV and EIV) on the other hand and (v)
Licensor Properties (as defined in that certain License Agreement, dated June
18, 1998 (the "License Agreement") by and among Infoseek Corporation, a
California corporation and Disney Enterprises, Inc., a Delaware corporation)
exclusively licensed to the Company as of the Effective Date (as defined in the
License Agreement).
(b) Section 3.16(b) of the Company Disclosure Schedule lists all
Registered Intellectual Property owned by, or filed in the name of, the Company
or any Company Subsidiary except such Registered Intellectual Property the
absence of which would not have a Material Adverse Effect on the Company or the
conduct of the Company's business (the "Company Registered Intellectual
Property") and lists any proceedings or actions before any court or tribunal
(including the PTO or equivalent authority anywhere in the world) related to any
of the Company Registered Intellectual Property, except for any proceeding
which, if adversely determined, would not have a Material Adverse Effect on the
Company.
(c) Except as set forth in Section 3.16(c) of the Company Disclosure
Schedule or as would not have a Material Adverse Effect on the Company or the
conduct of the Company's business, each item of Company Intellectual Property
owned by Company or the Company Subsidiaries, including all Company Registered
Intellectual Property listed in Section 3.16(b) of the Company Disclosure
Schedule, is free and clear of any Liens, except for Liens for Taxes not yet due
and payable or delinquent. Except as set forth in Section 3.16(c) of the Company
Disclosure Schedule or as would not have a Material Adverse Effect on the
Company, or the conduct of the Company's business, one or more of the Company
and the Company Subsidiaries, as the case may be: (i) is the exclusive owner of
or has valid and enforceable rights to use all trade names, logos common law
trademarks and service marks used in connection with the operation or conduct of
the business of the Company or any of the Company Subsidiaries as currently
conducted, including the sale of any products or technology or the provision of
any services by the Company or any of the Company Subsidiaries and (ii) is the
exclusive owner of or has
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valid and enforceable rights to use all copyrighted works that are the Company's
or the Company Subsidiaries' products or any works of authorship used in
connection with the operation or conduct of the business of the Company or any
of the Company Subsidiaries as currently conducted, including the sale of any
products or technology or the provision of any services by the Company or any of
the Company Subsidiaries.
(d) Except as set forth in Section 3.16(d) of the Company Disclosure
Schedule and except for any transfers, grants or authorizations that have not or
do not have a Material Adverse Effect on the Company or the conduct of the
Company's business, neither the Company nor any of the Company Subsidiaries has
transferred ownership of or authorized the retention of any rights to use any
Intellectual Property that is or was Company Intellectual Property to any other
person.
(e) Except (i) as set forth in Section 3.16(e) of the Company
Disclosure Schedule, (ii) for Intellectual Property the absence of which would
not have a Material Adverse Effect on the Company, (iii) "shrink-wrap" software
and similar widely available commercial end-user software used by the Company or
Company Subsidiaries or in the conduct or the Company's and the Company
Subsidiaries' businesses, and (iv) open source and similar free software
available generally without payment of any royalties or other license fees: the
Company Intellectual Property constitutes all of the Intellectual Property used
in or necessary to the conduct of the Company's and the Company Subsidiaries'
business as currently conducted, including, without limitation, the design,
development, copying, performance, display, creation of derivative works,
distribution, manufacture, use, import, license and sale of products, technology
and services of the Company and of any of the Company's Subsidiaries. Except as
set forth in Section 3.16(e) of the Company Disclosure Schedule, no person who
has licensed Intellectual Property to the Company or any of the Company
Subsidiaries has ownership rights or license rights to improvements in such
licensed Intellectual Property provided the foregoing shall apply only to
improvements (A) the absence of which would have a Material Adverse Effect on
the Company or the conduct of the Company's business and (B) which were made by
the Company or any of the Company's Subsidiaries.
(f) Except for "shrink-wrap" and similar widely available commercial
end-user licenses or contracts, licenses and agreements the existence,
termination or breach of which would not have a Material Adverse Effect on the
Company or the conduct of the Company's business, the contracts, licenses and
agreements listed in Section 3.16(f) of the Company Disclosure Schedule include
all contracts, licenses and agreements to which the Company or any of the
Company Subsidiaries is a party with respect to any Company Intellectual
Property.
(g) Except as set forth in Section 3.16(g) of the Company Disclosure
Schedule or except for matters which, if adversely determined, would not have a
Material Adverse Effect on the Company or the conduct of the Company's business:
the operation of the business of the Company and the Company Subsidiaries as it
currently is conducted, including, without limitation, the design, development,
copying, performance, display, creation of derivative works, distribution,
manufacture, use, import, license and sale of products, technology and services
of the Company or any of the Company Subsidiaries,
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does not infringe or misappropriate the Intellectual Property of any person,
violate the rights of any person (including, but not limited to, rights to
privacy or publicity), or constitute unfair competition or trade practices under
the law of any relevant jurisdiction, and neither the Company nor any of the
Company Subsidiaries has received notice from any person claiming that such
operation, or any act, product, technology or service of or by the Company or
any of the Company Subsidiaries infringes or misappropriates the Intellectual
Property of any person or that the Company or any of the Company Subsidiaries
has engaged in unfair competition or trade practices under the laws of any
relevant jurisdiction (nor does the Company or any Company Subsidiary have
knowledge of any basis therefor).
(h) To the Company's knowledge, there is no prior art that would
compromise the validity of the Click-On Patent under any subsection of 35 U.S.C.
Section 102. The Company has no knowledge of any public knowledge or use
anywhere, by anyone, of the subject matter disclosed in the Click-On Patent
before the invention date. The Company has no knowledge of the subject matter
disclosed in the Click-On Patent having been patented or described anywhere in a
printed publication by anyone before the invention date. The Company has no
knowledge of the subject matter disclosed in the Click-On Patent having been in
public use or on sale anywhere, by anyone, before February 22, 1995.
(i) All necessary registration, maintenance and renewal fees in
connection with Company Registered Intellectual Property the absence of which
would have a Material Adverse Effect on the Company or the conduct of the
Company's business have been paid and all necessary documents and certificates
in connection with such Company Registered Intellectual Property have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property when commercially reasonable.
(j) Except as set forth in Section 3.16(j) of the Company Disclosure
Schedule or for those contracts, licenses and agreements the existence,
termination or breach of which would not have Material Adverse Effect on the
Company or the conduct of the Company's business, there are no contracts,
licenses or agreements between the Company or any of the Company Subsidiaries
and any other person with respect to Company Intellectual Property under which
there is any dispute regarding the scope of such contract, license or agreement
or performance under such contract, license or agreement, including with respect
to any payments to be made or received by the Company or any Company Subsidiary
which, if adversely determined, would have a Material Adverse Effect on the
Company or the conduct of the Company's business.
(k) Except as set forth in Section 3.16(k) of the Company Disclosure
Schedule or for pending claims which, if successfully asserted, would not have a
Material Adverse Effect on the Company or the conduct of the Company's business,
there is no pending claim by the Company or any Company Subsidiary against any
person for infringing or misappropriating any Company Intellectual Property.
Without limiting the generality of the foregoing, to the knowledge of the
Company or any Company Subsidiary, there is no
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pending claim by any person other than the Company or any Company Subsidiary
against any person for infringing or misappropriating any Company Intellectual
Property which claim, if adversely determined, would have a Material Adverse
Effect on the Company or the conduct of the Company's business.
(l) Except as set forth in Section 3.16(l) of the Company Disclosure
Schedule or as would not have a Material Adverse Effect on the Company or the
conduct of the Company's business as currently conducted, no Company
Intellectual Property or product, technology or service of the Company or any of
the Company Subsidiaries is subject to any proceeding or outstanding decree,
order, judgment, settlement or other similar agreement or stipulation that
restricts in any manner the use, transfer or licensing thereof by the Company or
any Company Subsidiary or would affect the validity, use or enforceability of
such Company Intellectual Property.
(m) The consummation of the transactions contemplated by this Agreement
will not result in the loss of, or otherwise adversely affect, any ownership
rights of the Company or any of the Company Subsidiaries in any Company
Intellectual Property material to the Company, or result in the breach or
termination of any license, contract or agreement to which any of the foregoing
persons are a party with respect to any Company Intellectual Property material
to the Company. The consummation of the transactions contemplated by this
Agreement will not cause or obligate the Company or any of the Company
Subsidiaries to (i) grant to any third party any rights or licenses with respect
to any Company Intellectual Property material to the Company, or (ii) pay any
royalties or other amounts with respect to Company Intellectual Property
material to the Company in excess of those being paid prior to the Effective
Time.
3.17 Governmental Authorization.
Section 3.17 of the Company Disclosure Schedule accurately list each
consent, license, permit, grant or other authorization issued to the Company or
the Company Subsidiaries by a Governmental Body (i) pursuant to which the
Company currently operates or holds any interest in any of its properties or
(ii) which is required for the operation of the Company's business or the
holding of any such interest, in each case the absence of which would have a
Material Adverse Effect on the Company (herein collectively called the "Company
Authorizations"). The Company Authorizations are in full force and effect and
constitute all licenses, permits, grants or other authorization by Governmental
Bodies required to permit the Company to operate or conduct its business or hold
any interest in its properties or assets, in each case except as would not have
a Material Adverse Effect on the Company.
3.18 Environmental Matters.
(a) Hazardous Material. Except as would not have a Material Adverse
Effect on the Company, none of the Company and the Company Subsidiaries has: (i)
operated any underground storage tanks at any property that any of the Company
and the Company Subsidiaries has at any time owned, operated, occupied or
leased; or (ii) illegally released in violation of applicable environmental laws
as in effect at the time of
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such release any material amounts of Hazardous Material. No Hazardous Materials
are present as a result of the deliberate actions of the Company or any of the
Company Subsidiaries in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that any of the Company or
the Company Subsidiaries has at any time owned, operated, occupied or leased,
except for such Hazardous Materials which would not have a Material Adverse
Effect on the Company.
(b) Hazardous Materials Activities. Except as would not have a Material
Adverse Effect on the Company: none of the Company or the Company Subsidiaries
has illegally transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of any
environmental law as in effect at the time of such transport, manufacture,
disposal or sale, nor has any of the Company or the Company