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= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of Earliest Event Reported) - July 10, 1999
_______________
THE WALT DISNEY COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 1-11605 95-4545390
------- ------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
Incorporation)
500 South Buena Vista Street, Burbank, California 91521
(Address of principal executive offices) (Zip Code)
(818) 560-1000
(Registrant's telephone number, including area code)
_______________
Not applicable
(Former name or address, if changed since last report)
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
<PAGE>
Item 5. Other Events.
On July 10, 1999, The Walt Disney Company ("TWDC"), Bingo Acquisition
Corp., a wholly owned subsidiary of TWDC ("Acquisition Company"), and Infoseek
Corporation ("Infoseek") entered into an Agreement and Plan of Reorganization
(the "Reorganization Agreement") pursuant to which, subject to the terms and
conditions set forth therein, Acquisition Company will merge (the "Merger") with
and into Infoseek, with Infoseek as the surviving corporation in the Merger (the
"Surviving Corporation"). As a result of the Merger, (i) each outstanding share
of Infoseek common stock, par value $.001 per share ("Infoseek Common Stock"),
other than shares of Infoseek Common Stock owned by TWDC and Disney Enterprises,
Inc., a wholly owned subsidiary of TWDC ("DEI"), will be converted into 1.15
shares of a new class of TWDC common stock, par value $.01 per share ("TWDC
Internet Common Stock"), which will track the economic performance of Infoseek
and certain TWDC assets to be contributed by TWDC and its affiliates (the
"Internet Group"), (ii) each outstanding share of Infoseek Common Stock owned by
TWDC will remain outstanding, (iii) each outstanding share of Infoseek Common
Stock owned by DEI will be converted into shares of a new series of TWDC voting
preferred stock and (iv) Infoseek will become a direct wholly owned subsidiary
of the TWDC. TWDC will retain an approximate 72% retained interest in the
economic performance of the Internet Group.
Subject to the terms and conditions of the Reorganization Agreement,
on the Closing Date (as defined in the Reorganization Agreement) TWDC will file
an amended and restated Certificate of Incorporation (the "Restated
Certificate"). Pursuant to the terms of the Reorganization Agreement,
the Board of Directors of TWDC has approved certain policies pertaining to TWDC
common stock (the "Common Stock Policies"). A copy of each of the proposed
Restated Certificate and the Common Stock Policies is filed as an Exhibit hereto
and is incorporated herein by reference.
In connection with the Reorganization Agreement, TWDC entered into
individual Support Agreements dated as of July 10, 1999 (the "Support
Agreements") with Steven T. Kirsch and Andrew E. Newton (the "Principal
Stockholders"). The Support Agreements relate to approximately 5,900,000 shares
of Infoseek Common Stock. Pursuant to the Support Agreements, the Principal
Stockholders have agreed to vote all of the shares of Infoseek Common Stock they
own as of July 10, 1999 and continue to hold at the time of the Infoseek Special
Meeting (as defined below) and any additional shares of Infoseek Common Stock
acquired thereafter and continue to hold at the time of the Infoseek Special
Meeting in favor of the Merger, for approval and adoption by Infoseek of the
Reorganization Agreement, for approval of the other transactions contemplated by
the Reorganization Agreement and against any other merger, merger agreement or
similar transaction.
The Board of Directors of TWDC and the Disinterested Directors of
Infoseek (as defined in the Amended and Restated Certificate of Incorporation of
Infoseek) have unanimously approved the Merger. The consummation of the
transactions contemplated by the Reorganization Agreement is subject to certain
conditions, including (i) approval of the Merger by the holders of a majority of
the shares of Infoseek Common Stock (other than TWDC and DEI) at a special
meeting of stockholders of Infoseek (the
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"Infoseek Special Meeting"), (ii) the requisite vote of the stockholders of TWDC
to authorize the TWDC Internet Common Stock at a special meeting of stockholders
of TWDC (the "TWDC Special Meeting") and (iii) certain other customary
conditions in a transaction of this nature, including receipt of all necessary
regulatory approvals. TWDC, with the assistance and cooperation of Infoseek,
will prepare a joint proxy statement/prospectus (the "Joint Proxy
Statement/Prospectus") relating to the Merger and the shares of TWDC Internet
Common Stock to be issued thereunder and distribute the Joint Proxy
Statement/Prospectus to the stockholders of Infoseek and TWDC prior to the
Infoseek Special Meeting and the TWDC Special Meeting, respectively. After the
Merger, the Infoseek Common Stock will be delisted from trading on the Nasdaq
National Market, and registration of the Infoseek Common Stock will be
terminated pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934.
It is expected that the TWDC Internet Common Stock will be listed on the New
York Stock Exchange for trading. A copy of each of the Reorganization Agreement
and the Joint Press Release of the Walt Disney Company and Infoseek Corporation,
dated July 12, 1999, issued in connection with approval and execution of the
Reorganization Agreement is filed as an Exhibit hereto and is incorporated
herein by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
2.1 Agreement and Plan of Reorganization dated as of July 10, 1999,
by and among Infoseek Corporation, The Walt Disney Company and
Bingo Acquisition Corp.
99.1 Joint Press Release of The Walt Disney Company and Infoseek
Corporation dated July 12, 1999.
99.2 Proposed Amendment and Restatement of the Restated Certificate
of Incorporation of The Walt Disney Company.
99.3 Policies of The Walt Disney Company relating to its Common
Stock.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended The Walt Disney Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE WALT DISNEY COMPANY
By: /s/ Thomas O. Staggs
------------------------------
Name: Thomas O. Staggs
Title: Executive Vice-President
and Chief Financial Officer
Date: July 12, 1999
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Reorganization dated as of July 10, 1999,
by and among Infoseek Corporation, The Walt Disney Company and
Bingo Acquisition Corp.
99.1 Joint Press Release of The Walt Disney Company and Infoseek
Corporation dated July 12, 1999.
99.2 Proposed Amendment and Restatement of the Restated Certificate
of Incorporation of The Walt Disney Company.
99.3 Policies of The Walt Disney Company relating to its Common
Stock.
5
<PAGE>
Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
INFOSEEK CORPORATION,
THE WALT DISNEY COMPANY
AND
BINGO ACQUISITION CORP.
DATED AS OF JULY 10, 1999
<PAGE>
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
<PAGE>
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.
2
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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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<PAGE>
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
-------- -------
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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<PAGE>
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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<PAGE>
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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<PAGE>
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,
-------- -------
that any adverse change, event or effect that is caused by (i) the announcement
or pendency of the Merger shall not be taken into account in determining whether
there has been or would be a Material Adverse Effect with respect to any party
and (ii) any breach of any covenant hereunder by any action or failure to act by
any of Parent or the Internet Group, on the one hand, or the Company, on the
other hand, shall not be taken into account in determining whether there has
been or would be a Material Adverse Effect on the other party. Parent has
delivered a true and correct copy of its Restated Certificate of Incorporation
and Bylaws and the charter or other organizational documents of each of the
Internet Group Companies, each as amended to date, to the Company.
2.2 Parent Capital Structure.
(a) The authorized capital stock of Parent consists of 3,600,000,000
shares of Parent Common Stock, of which 2,060,734,292 shares were issued and
outstanding as of July 1, 1999 and 100,000,000 shares of preferred stock, par
value $0.01 per share, of which no shares were issued and outstanding as of July
1, 1999. All outstanding shares of Parent Capital Stock are duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, the Restated Certificate of Incorporation or Bylaws
of Parent or any agreement to which Parent is a party or by which it is bound
and have been issued in compliance with federal and state securities
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laws. There are no accrued or unpaid dividends with respect to any shares of
Parent Capital Stock. Parent has no other capital stock authorized, issued or
outstanding.
(b) Except for those plans of Parent set forth in the Parent SEC
Documents (as defined in Section 2.6) or set forth in Section 2.2(b) of the
Parent Disclosure Schedule (the "Parent Stock Plans"), there is no stock option
plan or other plan providing for equity compensation maintained by Parent. There
are no other options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which Parent or any subsidiary of Parent is a
party or by which it is bound obligating Parent or any subsidiary of Parent to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of Parent Capital Stock or interests
in any subsidiary of Parent, as the case may be, or obligating Parent or any
subsidiary of Parent to grant, extend, accelerate the vesting of, change the
price of, otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. To Parent's knowledge, there are no voting trusts,
proxies, or other agreements or understandings with respect to the voting stock
of Parent or any subsidiary of Parent.
(c) The authorized capital stock of Acquisition Company ("Acquisition
Company Capital Stock") consists of 1,000 shares of common stock, of which 100
shares are issued and outstanding as of the date hereof and as of the Effective
Time. All outstanding shares of Acquisition Company Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Certificate of Incorporation or Bylaws
of Acquisition Company or any agreement to which Acquisition Company is a party
or by which it is bound and have been issued in compliance with federal and
state securities laws. There are no declared or accrued unpaid dividends with
respect to any shares of Acquisition Company Capital Stock. Acquisition Company
has no other capital stock authorized, issued or outstanding.
2.3 Authority.
Each of Parent and Acquisition Company has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of each of Parent and Acquisition
Company, and no further action is required on the part of Parent or Acquisition
Company to authorize this Agreement and the transactions contemplated hereby,
subject only to the approval of the holders of Parent Common Stock of the Parent
Charter Amendment and the issuance of the Internet Group Common Stock in
connection with the Merger. This Agreement, the Parent Charter Amendment and the
Merger have been approved unanimously by the Boards of Directors of Parent and,
as applicable, Acquisition Company and by the stockholder of Acquisition
Company. This Agreement has been, and all agreements to be executed and
delivered in connection with the transactions contemplated hereby by Parent or
Acquisition Company will be, duly executed and delivered by Parent or
Acquisition Company, as the case may be, and, assuming the due authorization,
execution and delivery by the other parties hereto and thereto, constitute the
valid and binding obligation of Parent or Acquisition Company, as the case may
be, enforceable in accordance with their respective terms,
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except as such enforceability may be limited by principles of public policy and
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and to rules of law governing specific performance,
injunctive relief or other equitable remedies.
2.4 No Conflict.
Except as set forth in Section 2.4 of the Parent Disclosure Schedule, the
execution and delivery of this Agreement do not, and all agreements to be
executed and delivered in connection with the transactions contemplated hereby
by Parent or Acquisition Company will not, and the performance and consummation
of the transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation,
modification or acceleration of any obligation or loss of any benefit under (any
such event, a "Conflict"), (i) any provision of the Restated Certificate of
Incorporation or Bylaws of Parent or Certificate of Incorporation or Bylaws of
Acquisition Company or the charter or organizational documents of any of the
Internet Group Companies, (ii) any material mortgage, indenture, lease, contract
or other agreement or instrument, permit, concession, franchise or license to
which Parent, Acquisition Company or any of their subsidiaries or any of their
material properties or assets are subject or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent, Acquisition
Company or any of their subsidiaries or their respective material properties or
assets, except, in the case of clauses (ii) and (iii) above, as would not have a
Material Adverse Effect on Parent or the Internet Group.
2.5 Consents.
Except as set forth in Section 2.5 of the Parent Disclosure Schedule, no
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Body or any other party is required
by or with respect to Parent, Acquisition Company or any of their respective
subsidiaries in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (i) the
filing with the Securities and Exchange Commission (the "SEC") of the Joint
Proxy Statement of Parent and the Company, as amended from time to time through
effectiveness (the "Joint Proxy Statement"), pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), for the solicitation of the
approval of the stockholders of Parent of the Parent Charter Amendment, (ii) the
filing with the SEC of a Registration Statement on Form S-4 (the "Form S-4
Registration Statement") pursuant to the Securities Act with respect to those
shares of Internet Group Common Stock issuable in the Merger, in which the Joint
Proxy Statement will be included as part of the Form S-4 Registration Statement,
(iii) such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, (iv) the filing of the Parent Charter Amendment and the
Certificate of Merger with the Secretary of State of the State of Delaware, (v)
any applicable filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (vi) the approval of the
stockholders of Parent of the Parent Charter Amendment, (vii) any other such
filings
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or approvals as may be required under Delaware law and (viii) such consents,
waivers, approvals, orders authorizations, registrations, declarations, and
filings, which, if not obtained or made, would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or the Internet Group or
prevent or materially delay the consummation of the transactions contemplated
hereby. For purposes of this Agreement, "Governmental Body" shall mean any: (a)
nation, state, commonwealth, province, territory, county, municipality, district
or other jurisdiction of any nature; (b) federal, state, local, municipal,
foreign or other government or (c) governmental or quasi-governmental authority
of any nature (including any governmental division, department, agency,
commission, instrumentality, official, organization, unit, body or entity and
any court or other tribunal).
2.6 SEC Documents and Parent Financial Statements.
Parent has furnished the Company with a true and complete copy of all of
its filings with the SEC since January 1, 1998 through the date hereof (the
"Parent SEC Documents"). Each of the Parent SEC Documents when filed (i)
complied as to form in all material respects with the applicable requirements of
the Exchange Act and (ii) was true and correct in all material respects and did
not omit to state any material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except in each case as superseded in any
subsequent filings. All financial statements (including any related schedules or
notes) of Parent included in the Parent SEC Documents were prepared in
accordance with United States generally accepted accounting principals,
consistently applied ("GAAP"), are consistent with each other and present fairly
in all material respects the consolidated financial condition and consolidated
operating results and cash flows of Parent as of their respective dates and
during the periods indicated therein, subject, in the case of unaudited
statements, to normal year-end adjustments, which will not be material in
amount. Parent maintains a system of internal accounting controls sufficient to
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability. Parent's unaudited consolidated balance sheet as
of March 31, 1999 included in the Parent SEC Documents is referred to herein as
the "Parent Current Balance Sheet," and Parent's audited consolidated balance
sheet as of September 30, 1998 and its audited consolidated statements of
operations and cash flows for the year then ended included in the Parent SEC
Documents are referred to herein as the "Parent Financials."
2.7 Internet Group Common Stock; Internet Group Companies and Business.
When issued and delivered in accordance with the terms of this Agreement,
the Internet Group Common Stock will be duly authorized, validly issued, fully
paid and nonassessable and free of any preemptive or similar right. Except as
set forth in Section 2.7 of the Parent Disclosure Schedule, there is no stock
option plan or other plan providing for equity compensation maintained by
Internet Group. Except as set forth in Section 2.7 of the Parent Disclosure
Schedule, there are no other options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which Parent or
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any subsidiary of Parent is a party or by which it is bound obligating Parent or
any subsidiary of Parent to issue, deliver, sell, repurchase or redeem, or cause
to be issued, delivered, sold, repurchased or redeemed, any shares of Internet
Group Common Stock (except in exchange for Company Options pursuant to Section
1.7 above) or interests in any of the Internet Group Companies, as the case may
be. Except as set forth in Section 2.7 of the Parent Disclosure Schedule, there
are no outstanding or authorized stock appreciation, phantom stock, profit
participation or other similar rights with respect to Internet Group Common
Stock. Except as set forth in Section 2.7 of the Parent Disclosure Schedule,
there are no minority interests or options, calls or other rights to acquire
whatsoever any equity or other interests (ownership, economic or otherwise) in
any of the Internet Group Companies or the business or assets of the Internet
Group.
2.8 Ownership of Acquisition Company; No Prior Activities.
Acquisition Company is a wholly owned, direct subsidiary of Parent
created solely for the purpose of effecting the Merger. As of the date hereof
and the Effective Time, except for obligations or liabilities incurred in
connection with its incorporation or organization and the transactions
contemplated by this Agreement and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, Acquisition Company
has not and will not have incurred, directly or indirectly, through any
subsidiary or affiliate, any material obligations or liabilities or engaged in
any material business activities of any type or kind whatsoever or entered into
any agreements or arrangements with any person.
2.9 Internet Group Financial Statements.
Section 2.9 of the Parent Disclosure Schedule sets forth the Internet
Group's (i) audited combined balance sheet as of September 30, 1998 and the
statements of operations and cash flows for the year then ended, including notes
thereto (the "Year-End Financials"), and (ii) unaudited combined balance sheet
as of March 31, 1999 and the related combined statements of operations and cash
flows for the six months then ended (the "Interim Financials"). Such Year-End
Financials have been prepared with a materiality standard based upon the
Internet Group and not Parent taken as a whole. Except as otherwise specifically
described in Section 2.9 of the Parent Disclosure Schedule, the Year-End
Financials and the Interim Financials have been prepared in accordance with GAAP
applied on a basis consistent throughout the periods indicated and are
consistent with each other, and each of the Year-End Financials and the Interim
Financials have been prepared as though the Parent Common Stock Policies, as
will be applied following the Effective Time, had been in place for, and applied
consistently during, such periods (except with respect to the royalties payable
to Parent in connection with DisneyStore.com). The Year-End Financials and
Interim Financials present fairly in all material respects the combined
financial condition and combined operating results of the Internet Group as of
the dates and during the periods indicated therein, subject in the case of the
Interim Financials, to normal year-end adjustments, which will not be material
in amount. As of the date hereof, Parent maintains a system of internal
accounting controls sufficient to provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements of the
Internet Group in
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conformity with GAAP and to maintain asset accountability. The Internet Group
combined balance sheet as of March 31, 1999 included in the Interim Financials
shall be hereinafter referred to as the "Current Balance Sheet."
2.10 No Changes.
Since March 31, 1999, except as otherwise expressly contemplated by
this Agreement, the Internet Group's business has been conducted in the ordinary
course consistent with past practice and there has not been any action, event,
occurrence, development, change in method of doing business or state of
circumstances or facts that, individually or in the aggregate, has had a
Material Adverse Effect on the Internet Group.
2.11 Restrictions on Business Activities.
Except as described in Section 2.11 of the Parent Disclosure Schedule as
of the date hereof, there is no agreement (non-compete or otherwise),
commitment, judgment, injunction, order or decree to which Parent or any of its
subsidiaries is a party or otherwise binding upon Parent or its subsidiaries
which has the effect of prohibiting any business practice of the Internet Group,
any acquisition of property (tangible or intangible) by the Internet Group or
the conduct of the business by the Internet Group which would have a Material
Adverse Effect on the Internet Group and the Company taken as a whole. Without
limiting the foregoing, as of the date hereof, none of Parent or its
subsidiaries has entered into any agreement under which any of the Internet
Group Companies is restricted from selling, licensing or otherwise distributing
any of its material technology or products to or providing services to or
selling advertising to, customers or potential customers or any class of
customers, in any geographic area, during any period of time or in any market
which would have a Material Adverse Effect on the Internet Group and the Company
taken as a whole.
2.12 Title to Properties; Absence of Liens and Encumbrances.
(a) Section 2.12(a) of the Parent Disclosure Schedule sets forth a list
of all real property used in the business of the Internet Group that would be
required to be identified by Item 102 of Regulation S-K.
(b) Except as set forth in Section 2.12(b) of the Parent Disclosure
Schedule, either Parent, its subsidiaries or the Internet Group Companies, as
the case may be, has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all material tangible
properties and assets, real, personal and mixed, used or held for use in
connection with business of the Internet Group, free and clear of any Liens (as
defined in Section 3.12), except (i) as reflected in the Current Balance Sheet,
(ii) for Taxes (as defined in Section 3.12) not yet due and payable or
delinquent and (iii) where such imperfections of title and encumbrances, if any,
are not material in character, amount or extent, and do not materially detract
from the value, or materially interfere with the present use, of the property
subject thereto or affected thereby.
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2.13 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following
and all rights in, arising out of, or associated therewith: (i) all United
States and foreign patents and utility models and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, and equivalent or similar rights anywhere in the
world in inventions and discoveries; (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and all
documentation relating to any of the foregoing; (iii) all copyrights, copyright
registrations and applications therefor and all other rights corresponding
thereto throughout the world; (iv) all trade names, logos, common law trademarks
and service marks; trademark and service mark registrations and applications
therefor and all goodwill associated therewith throughout the world; (v) all
databases and data collections and all rights therein throughout the world; (vi)
all computer software including all source code, object code, firmware,
development tools, files, records and data, all media on which any of the
foregoing is recorded, all Web addresses, sites and domain names, all rights of
publicity and privacy; (vii) any similar, corresponding or equivalent rights to
any of the foregoing; and (viii) all documentation related to any of the
foregoing.
"Internet Group Intellectual Property" shall mean any Intellectual
Property that is (i) owned by or exclusively licensed to Parent, any of the
Internet Group Companies or any of their respective subsidiaries and (ii) used
in connection with the business of the Internet Group, but in all events
excluding (A) Intellectual Property owned by the Company or the Company
Subsidiaries other than ABC News/Starwave Partners (d/b/a ABC News Internet
Ventures) ("AIV") and ESPN/Starware Partners (d/b/a ESPN Internet Ventures)
("EIV"), which Intellectual Property is exclusively licensed to AIV or EIV, (B)
Intellectual Property that is or was developed or owned by AIV or EIV and (C)
Intellectual Property that is or was jointly developed, funded or owned by the
Company or any of the Company Subsidiaries (other than AIV and EIV) on the one
hand and Parent or any of the Internet Group Companies or their respective
subsidiaries (other than AIV and EIV) on the other hand.
"Registered Intellectual Property" shall mean all United
States, international and foreign: (i) patents and patent applications
(including provisional applications); (ii) registered trademarks, applications
to register trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and applications
for copyright registration; (iv) any mask work registrations and applications to
register mask works; and (v) any other Internet Group Intellectual Property that
is the subject of an application, certificate, filing, registration or other
document issued by, filed with, or recorded by, any state, government or other
public legal authority.
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(b) Section 2.13(b) of the Parent Disclosure Schedule lists all
Registered Intellectual Property owned by, or filed in the name of, Parent, any
of the Internet Group Companies or any of their respective subsidiaries except
such Registered Intellectual Property the absence of which would not have a
Material Adverse Effect on the Internet Group or the conduct of the Internet
Group's business and which is used primarily in connection with the business of
the Internet Group (the " Internet Group Registered Intellectual Property") and
lists any proceedings or actions before any court, tribunal (including the
United States Patent and Trademark Office (the "PTO") or equivalent authority
anywhere in the world) related to any of the Internet Group Registered
Intellectual Property, except for any proceedings which, if adversely
determined, would not have a Material Adverse Effect on the Internet Group.
(c) Except as set forth in Section 2.13(c) of the Parent Disclosure
Schedule or as would not have a Material Adverse Effect on the Internet Group or
the conduct of the Internet Group's business, each item of Internet Group
Intellectual Property owned by Parent, any Internet Group Companies or their
respective subsidiaries, including all Internet Group Registered Intellectual
Property listed in Section 2.13(b) of the Parent Disclosure Schedule, is free
and clear of any Liens, except for Liens for Taxes not yet due and payable or
delinquent. Except as set forth in Section 2.13(c) of the Parent Disclosure
Schedule or as would not have a Material Adverse Effect on the Internet Group or
the conduct of the Internet Group's business, one or more of Parent, the
Internet Group Companies or any of their respective subsidiaries, as the case
may be, (i) is the exclusive owner or has valid and enforceable rights to use of
all trade names, logos, common law trademarks and service marks used in
connection with the operation or conduct of the business of the Internet Group
as currently conducted, including the sale of any products or technology or the
provision of any services by the Internet Group; and (ii) is the exclusive owner
of or has valid and enforceable rights to use, all copyrighted works that are
Parent's or any of the Internet Group Companies' or any of their respective
subsidiaries', as the case may be, products or other works of authorship used in
connection with the operation or conduct of the Internet Group's business as
currently conducted, including the sale of any products or technology or the
provision of any services by the Internet Group.
(d) Except as set forth in Section 2.13(d) of the Parent Disclosure
Schedule and except for any transfers, grants or authorizations that have not or
do not have a Material Adverse Effect on the Internet Group or the conduct of
the Internet Group's business, none of Parent or the Internet Group Companies or
any of their respective subsidiaries has transferred ownership of or authorized
the retention of any rights to use any Internet Group Intellectual Property to
any other person.
(e) Except (i) as set forth in Section 2.13(e) of the Parent Disclosure
Schedule, (ii) for Intellectual Property the absence of which would not have a
Material Adverse Effect on the Internet Group, (iii) for "shrink-wrap" software
and similar widely available commercial end-user software used by the Internet
Group or in the conduct of the Internet Group's business, and (iv) open source
and similar free software available generally without payment of any royalties
or other license fees: the Internet Group Intellectual Property constitutes all
of the Intellectual Property used in or necessary to the
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conduct of the Internet Group's business as currently conducted, including,
without limitation, the design, development, copying, performance, display,
creation of derivative works, distribution, manufacture, use, import, license
and sale of the products, technology and services of the Internet Group. Except
as set forth in Section 2.13(e) of the Parent Disclosure Schedule, no person who
has licensed Internet Group Intellectual Property to Parent or any of the
Internet Group Companies or any of their respective subsidiaries has ownership
rights or license rights to improvements in such licensed Internet Group
Intellectual Property, provided that the foregoing shall apply only to
improvements (A) the absence of which would have a Material Adverse Effect on
the Internet Group or the conduct of Internet Group's business and (B) which
were made by Parent, any Internet Group Company or any of their respective
subsidiaries.
(f) Except for "shrink-wrap" and similar widely available commercial
end-user licenses or contracts, licenses and agreements the existence,
termination or breach of which would not have a Material Adverse Effect on the
Internet Group or the conduct of the Internet Group's business, the contracts,
licenses and agreements listed in Section 2.13(f) of the Parent Disclosure
Schedule include all contracts, licenses and agreements to which Parent, any of
the Internet Group Companies or any of their respective subsidiaries is a party
with respect to any Internet Group Intellectual Property.
(g) Except as set forth in Section 2.13(g) of the Parent Disclosure
Schedule or except for matters which, if adversely determined, would not have a
Material Adverse Effect on the Internet Group or the conduct of the Internet
Group's business: the operation of the Internet Group's business as currently
conducted, including, without limitation, the design, development, copying,
performance, display, creation of derivative works, distribution, manufacture,
use, import, license and sale of the products, technology and services of the
Internet Group, does not infringe or misappropriate the Intellectual Property of
any person, violate the rights of any person (including, but not limited to,
rights to privacy or publicity), or constitute unfair competition or trade
practices under the laws of any relevant jurisdiction; and none of Parent, the
Internet Group Companies or any of their respective subsidiaries has received
notice from any person claiming that such operation, or any act, product,
technology or service of the Internet Group infringes or misappropriates the
Intellectual Property of any person, or that Parent, any of the Internet Group
Companies or any of their respective subsidiaries has engaged in unfair
competition or trade practices under the laws of any relevant jurisdiction (nor
does Parent, any Internet Group Company or any of their respective subsidiaries
have knowledge of any basis therefor).
(h) All necessary registration, maintenance and renewal fees in
connection with the Internet Group Registered Intellectual Property the absence
of which would have a Material Adverse Effect on the Internet Group or the
conduct of the Internet Group's business have been paid and all necessary
documents and certificates in connection with such Internet Group Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property when commercially reasonable.
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(i) Except as set forth in Section 2.13(i) of the Parent Disclosure
Schedule or for those contracts, licenses or agreements the existence,
termination or breach of which would not have a Material Adverse Effect on the
Internet Group or the conduct of Internet Group's business, there are no
contracts, licenses or agreements between Parent, any of the Internet Group
Companies or any of their respective subsidiaries and any other person with
respect to Internet Group Intellectual Property under which there is any dispute
regarding the scope of such contract, license or agreement or performance under
such contract, license or agreement, including with respect to any payments to
be made or received by Parent, any of the Internet Group Companies or any of
their respective subsidiaries, as the case may be, which, if adversely
determined, would have a Material Adverse Effect on the Internet Group or the
conduct of the Internet Group's business.
(j) Except as set forth in Section 2.13(j) of the Parent Disclosure
Schedule or for pending claims which, if successfully asserted, would not have a
Material Adverse Effect on the Internet Group or the conduct of the Internet
Group's business, there is no pending claim by Parent, any of the Internet Group
Companies or any of their respective subsidiaries against any person for
infringing or misappropriating any Internet Group Intellectual Property. Without
limiting the foregoing, to the knowledge of Parent, any of the Internet Group
Companies or any of their respective subsidiaries, there is no pending claim by
any person other than Parent, any of the Internet Group Companies or any of
their respective subsidiaries against any person for infringing or
misappropriating any Internet Group Intellectual Property, which claim, if
adversely determined, would have a Material Adverse Effect on the Internet Group
or the conduct of the Internet Group's business.
(k) Except as set forth in Section 2.13(k) of the Parent Disclosure
Schedule or as would not have a Material Adverse Effect on the conduct of the
Internet Group or the Internet Group's business as currently conducted, no
Internet Group Intellectual Property or product, technology or service of the
Internet Group is subject to any proceeding or outstanding decree, order,
judgment, settlement or other similar agreement or stipulation that restricts in
any manner the use, transfer or licensing thereof by Parent, any of the Internet
Group Companies or any of their respective subsidiaries, as the case may be, or
would affect the validity, use or enforceability of such Internet Group
Intellectual Property.
(l) The consummation of the transaction contemplated by this Agreement
will not result in the loss of, or otherwise adversely affect, any ownership
rights of Parent, any of the Internet Group Companies or any of their respective
subsidiaries in any Internet Group Intellectual Property material to the
Internet Group, or result in the breach or termination of any license, contract
or agreement to which any of the foregoing persons are a party with respect to
any Internet Group Intellectual Property material to the Internet Group. The
consummation of the transactions contemplated by this Agreement will not cause
or obligate Parent, any of the Internet Group Companies or any of their
respective subsidiaries to (i) grant to any third party any rights or licenses
with respect to any Internet Group Intellectual Property material to the
Internet Group, or (ii) pay any royalties or other amounts with respect to
Internet Group Intellectual Property material to the Internet Group in excess of
those being paid prior to the Effective Time.
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2.14 Agreements, Contracts and Commitments.
Section 2.14 of the Parent Disclosure Schedule sets forth all material
agreements, contracts, covenants, instruments, leases, licenses or commitments
of the Internet Group (collectively, the "Internet Group Contracts"). Parent and
each of its subsidiaries is in compliance in all material respects with, and has
not, in any material respects, breached, violated or defaulted under, or
received notice that it has breached, violated or defaulted in such manner
under, any of the terms or conditions of the Internet Group Contracts, nor does
Parent have knowledge of any event that would constitute such a breach,
violation or default with the lapse of time, giving of notice or both. Each
Internet Group Contract is in full force and effect and, to the knowledge of
Parent, is not subject to any material default thereunder by any party obligated
to Parent or any of its subsidiaries pursuant thereto. Parent and each of its
subsidiaries has obtained, or will obtain prior to the Closing Date, all
necessary consents, waivers and approvals of parties to any Internet Group
Contract as are required thereunder in connection with the Merger or for such
Internet Group Contracts to remain in effect without material modification after
the Effective Time. Following the Effective Time, Parent and each of its
subsidiaries will be permitted to exercise all of their respective rights under
each Internet Group Contract then in effect without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which Parent or any of its subsidiaries would otherwise be required to
pay had the transactions contemplated by this Agreement not occurred.
2.15 Litigation.
Except as set forth in the Parent SEC Documents or in Section 2.15 of the
Parent Disclosure Schedule, as of the date hereof, there is no material action,
suit or proceeding of any nature pending, or, to Parent's knowledge threatened,
against Parent, any of its subsidiaries or the Internet Group Companies, their
properties or any of their officers or directors, relating to the Internet
Group. To Parent's knowledge, as of the date hereof, there is no material
investigation pending or threatened against Parent, or any of its subsidiaries
or the Internet Group Companies or their properties (nor, to the knowledge of
Parent, is there any reasonable basis therefor), relating to the Internet Group
by or before any Governmental Body.
2.16 Governmental Authorizations.
Section 2.16 of the Parent Disclosure Schedule sets forth each consent,
license, permit, grant or other authorization issued to Parent or its
subsidiaries by a Governmental Body (i) pursuant to which the Internet Group
currently operates or holds any interest in any of their properties or (ii)
which is required for the operation of the Internet Group's business or the
holding of any such interest, in each case the absence of which would have a
Material Adverse Effect on the Internet Group (herein collectively called the
"Internet Group Authorizations"). The Internet Group Authorizations are in full
force and effect and constitute all licenses, permits, grants or other
authorizations by Governmental Bodies required to permit the Internet Group to
operate or conduct its
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business or hold any interest in its properties or assets, in each case except
to the extent that would not result in a Material Adverse Effect on the Internet
Group.
2.17 Minute Books.
The minutes of the Internet Group Companies made available to counsel for
the Company are the only minutes of the Internet Group Companies.
2.18 Environmental Matters.
(a) Hazardous Material. Except as would not have a Material Adverse
Effect on the Internet Group: none of the Internet Group Companies has: (i)
operated any underground storage tanks at any property that any Internet Group
Company has at any time owned, operated, occupied or leased; or (ii) illegally
released in violation of applicable environmental laws as in effect at the time
of such release any material amount of any substance that has been designated by
any Governmental Body or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, and
ureaformaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office, maintenance and
janitorial supplies used in the ordinary course of business (a "Hazardous
Material"). No Hazardous Materials are present as a result of the deliberate
actions of Parent or any of its subsidiaries in, on or under any property,
including the land and the improvements, ground water and surface water thereof,
that any Internet Group Company currently owns, operates, occupies or leases,
except for such Hazardous Materials which would not have a Material Adverse
Effect on the Internet Group.
(b) Hazardous Materials Activities. Except as would not have a Material
Adverse Effect on the Internet Group: none of the Internet Group Companies has
illegally transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of any
environmental law as in effect at the time of such transport, storage, use,
manufacture, disposal, release or exposure, nor has any Internet Group Company
illegally disposed of, transported, sold, or manufactured any product containing
a Hazardous Material in violation of any environmental law as in effect at the
time of such transport, manufacture, disposal or sale (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities").
(c) Permits. Except as would not have a Material Adverse Effect on the
Internet Group, Parent and its subsidiaries currently hold all material
environmental approvals, permits, licenses, clearances and consents (the
"Environmental Permits"), if any, necessary for the conduct of any Hazardous
Material Activities by any Internet Group Company and the other businesses of
Internet Group as such activities and businesses are currently being conducted.
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(d) Environmental Liabilities. Except as would not have a Material
Adverse Effect on the Internet Group, no action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending and served
or, to Parent's knowledge threatened, against Parent or any subsidiary of Parent
concerning any Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of the Internet Group. Except as would not have a Material
Adverse Effect on the Internet Group, Parent has no knowledge of any fact or
circumstance which would reasonably be expected to involve the Internet Group in
any environmental litigation or impose upon the Internet Group any environmental
liability.
The representations set forth in this Section 2.18 are the sole and exclusive
representations of Parent with respect to the subject matter hereof, including,
without limitation, with respect to environmental laws, Environmental Permits,
Hazardous Materials or Hazardous Materials Activities.
2.19 Brokers' and Finders' Fees.
Except as set forth in Section 2.19 of the Parent Disclosure Schedule,
Parent has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
2.20 Employee Benefit Plans; Employment Matters.
(a) Definitions.
For purposes of this Section 2.20, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common
control with Parent within the meaning of Section 414(b), (c), (m) or (o) of the
Code and the regulations thereunder.
(ii) "Employee Plan" shall refer to any plan, program, policy,
contract or agreement or other arrangement providing for bonuses, severance or
retention payments or benefits, termination pay, deferred compensation,
pensions, profit sharing, performance awards, stock or stock- related awards, or
fringe benefits, or other employee benefits of any kind, written or otherwise,
funded or unfunded, including, without limitation, any plan which is or has been
maintained, contributed to, or required to be contributed to, by Parent or any
affiliate for the benefit of any Employee, and pursuant to which Parent or any
affiliate has or may have any material liability, contingent or otherwise.
(iii) "Employee" shall mean any current, former, or retired
employee, consultant, officer, or director of Parent or any of its subsidiaries
who performs services to the Internet Group.
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(b) Employee Plans. Except as disclosed in the Parent SEC Documents or
as would not have a Material Adverse Effect on the Internet Group, all Employee
Plans are in compliance with all applicable requirements of law, including ERISA
and the Code, and in compliance with the terms of such Employee Plans.
(c) Employment Matters.
Except as disclosed in the Parent SEC Documents or as would not have a
Material Adverse Effect on the Internet Group, as of the Effective Time. Parent
and its subsidiaries will be in compliance in all material respects with all
material applicable laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours, in
each case, with respect to Employees.
2.21 Parent Charter Amendment and Parent Common Stock Policies.
The Board of Directors of Parent has unanimously approved (i) the
Parent Charter Amendment, which amendment, subject to the approval of the
holders of a majority of the shares of Parent Common Stock outstanding as of the
record date for the Parent Stockholders Meeting (as defined in Section 5.2) and
the filing thereof with the Secretary of State of Delaware, will become
effective immediately prior to the Effective Time and (ii) the Parent Common
Stock Policies which will become effective as of the Effective Time.
2.22 Compliance with Laws.
Parent and its subsidiaries have complied in all material respects with,
are not in material violation of, and have not received any notices of material
violation with respect to, any material federal, state or local statute, law or
regulation relating to the operation of the Internet Group's business.
2.23 Opinion of Financial Advisor.
The Board of Directors of Parent has received an opinion of Goldman Sachs
& Co. to the effect that, as of the date hereof, the consideration to be paid by
Parent pursuant to this Agreement is fair to Parent from a financial point of
view.
2.24 Reorganization.
As of the date hereof, Parent does not have any knowledge of any fact or
circumstance that is reasonably likely to prevent the Merger from qualifying as
a reorganization described in section 368(a) of the Code.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent, subject to such
exceptions as are specifically disclosed in the disclosure schedule supplied by
the Company to Parent (the "Company Disclosure Schedule"), as of the date hereof
and as of the Effective Time as though made at the Effective Time, as follows:
3.1 Organization, Standing and Power.
The Company is a corporation duly organized, validly existing and in good
standing under Delaware law. The Company has the corporate power to own, lease
and operate its properties and to carry on its business as now being conducted
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect on the Company. The Company has delivered to
Parent a true and correct copy of the Amended and Restated Certificate of
Incorporation and Bylaws of the Company, as amended to date. Each of the Company
Subsidiaries (as defined in Section 3.2) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
formation and has the corporate or other applicable power to own its property
and to carry on its business as now being conducted. Each of the Company
Subsidiaries is duly qualified to do business and in good standing in each
jurisdiction outside of the jurisdiction of its incorporation or formation in
which the failure to be so qualified would have a Material Adverse Effect on the
Company. The Company has made available a true and correct copy of the charter
and bylaws or other organizational document of each of the Company Subsidiaries,
each as amended to date, to Parent.
3.2 Company Subsidiaries.
Except as set forth in Section 3.2 of the Company Disclosure Schedule,
the Company does not have, and has never had, any subsidiaries, in each case
that would be required to be listed as a "Subsidiary" in exhibits to the
periodic reports of the Company under the Exchange Act. The entities set forth
in Section 3.2 of the Company Disclosure Schedule are hereinafter occasionally
referred to individually as a "Company Subsidiary" and collectively as the
"Company Subsidiaries," except as otherwise set forth in Section 3.2 of the
Company Disclosure Schedule. Section 3.2 of the Company Disclosure Schedule also
sets forth the form and percentage interest of the Company in the Company
Subsidiaries and, to the extent that a Company Subsidiary set forth thereon is
not wholly owned by the Company, lists the other person or persons, or entity or
entities, who have an interest in such Company Subsidiary and the percentage of
such interest.
3.3 Authority; No Conflict; Consents.
The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and
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delivery of this Agreement, and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, and no further action is required on the part of the
Company to authorize this Agreement or the transactions contemplated hereby,
subject only to the approval of this Agreement by the Company's stockholders
(which approval must include approval by more than 50% of the Company's total
current voting power held by the Disinterested Stockholders (as defined below)).
This Agreement and the Merger have been unanimously approved by "Disinterested
Directors" of the Company, as defined in the Amended and Restated Certificate of
Incorporation of the Company. The Disinterested Directors of the Company have
duly and validly authorized and approved by all necessary corporate action, this
Agreement, the Support Agreement and the transactions contemplated hereby and
thereby, so that by the execution and delivery hereof no restrictive provision
of any "fair price," "moratorium," "control-share acquisition," "interested
stockholders" or other similar anti-takeover statute or regulation (including,
without limitation, Section 203 of the Delaware General Corporation Law) or
restrictive provision of any applicable anti-takeover provision in the Amended
and Restated Certificate of Incorporation or Bylaws of the Company is, or at the
closing of the transactions contemplated hereby will be, applicable to the
Company, Parent, Acquisition Company and the Parent Common Stock, the Merger or
any other transaction contemplated by this Agreement and so that the
transactions contemplated hereby and by the Support Agreement may be consummated
as promptly as practicable on the terms contemplated hereby and thereby. This
Agreement has been, and all agreements to be executed and delivered in
connection with the transactions contemplated hereby by the Company or any of
the Company Subsidiaries will be, duly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by the other parties
hereto and thereto, constitute the valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by principles of public policy and subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and to rules of law governing specific performance, injunctive relief or
other equitable remedies. The execution and delivery by the Company of this
Agreement does not, and all agreements to be executed and delivered in
connection with the transactions contemplated hereby by the Company or any of
the Company Subsidiaries will not, and the performance and consummation of the
transactions contemplated hereby and thereby will not, result in any Conflict
with (i) any provision of the Amended and Restated Certificate of Incorporation
or Bylaws of the Company, (ii) any material mortgage, indenture, lease, contract
or other agreement or instrument, permit, concession, franchise or license to
which the Company or any Company Subsidiary, or any of their properties or
assets are subject, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any Company
Subsidiary or their respective properties or assets, except in the case of
clauses (ii) and (iii) above, as would not have a Material Adverse Effect on the
Company. Except as set forth in Section 3.3 of the Company Disclosure Schedule,
no consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Body or any other party is required
by or with respect to the Company in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing with the
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SEC of the Joint Proxy Statement, (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware, (iii) such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws,
(iv) any applicable filings required under the HSR Act, (v) the approval of this
Agreement and the Merger by the Company's stockholders (which approval must
include approval by more than 50% of the Company's total current voting power
held by the "Disinterested Stockholders" of the Company, as defined in the
Company's Amended and Restated Certificate of Incorporation), (vi) any other
such filings or approvals as may be required under Delaware law and (vii) such
consents, waivers, approvals, orders authorizations, registrations,
declarations, and filings, which, if not obtained or made, would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
or prevent or materially delay the consummation of the transactions contemplated
hereby.
3.4 Company Capital Structure.
(a) The authorized capital stock of the Company consists of 500,000,000
shares of Company Common Stock of which 62,169,544 shares are issued and
outstanding as of June 30, 1999, and 25,000,000 shares of preferred stock, par
value $.001 per share, of which no shares are issued and outstanding as of the
date hereof. All issued and outstanding shares of Company Capital Stock have
been duly authorized, and are validly issued, fully paid and non-assessable and
not subject to preemptive rights created by statute, the Amended and Restated
Certificate of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound and have been issued in
compliance with federal and state securities laws. There are no declared or
accrued unpaid dividends with respect to any shares of Company Capital Stock.
The Company has no other capital stock authorized, issued or outstanding.
(b) Except for those option plans of the Company set forth in the
Company SEC Documents (as defined in Section 3.5) (the "Company Option Plans"),
there is no stock option plan or other plan providing for equity compensation of
any person maintained by the Company or a Company Subsidiary. As of June 30,
1999, the Company has reserved 13,825,000 shares of Company Capital Stock for
issuance to employees and consultants pursuant to the Company Option Plans, of
which options to purchase 11,318,423 shares of Company Capital Stock have been
issued as of the date hereof, of which 9,797,948 shares remain subject to
options unexercised as of the date hereof. Section 3.4(b) of the Company
Disclosure Schedule sets forth the name of the holder of any Company Capital
Stock subject to vesting, the number of shares of Company Capital Stock subject
to vesting and the vesting schedule for such Company Capital Stock, including
the extent vested as of the most recent practicable date, and sets forth the
name of the holder of any Company Options, the number of shares of Company
Capital Stock subject to such Company Options and the vesting schedule for such
Company Options, including the extent vested to date. Except as set forth in
Section 3.4(b) of the Company Disclosure Schedule, there is no outstanding
Company Capital Stock which is subject to vesting or Company Options, and there
are no options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which the Company or any Company Subsidiary is a
party or by which it is bound
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obligating the Company or any Company Subsidiary to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of Company Capital Stock or interests in any Company
Subsidiary, as the case may be, or obligating the Company or any Company
Subsidiary to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or other similar rights with respect to the Company
or any Company Subsidiary. Except as contemplated by this Agreement, to the
Company's knowledge, there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting stock of the Company or any Company
Subsidiary.
3.5 SEC Documents and Company Financial Statements.
The Company has furnished Parent with a true and complete copy of all of
its filings with the SEC since January 1, 1998 through the date hereof (the
"Company SEC Documents"). Each of the Company SEC Documents when filed (i)
complied as to form in all material respects with the applicable requirements of
the Exchange Act and (ii) was true and correct in all material respects and did
not omit to state any material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except in each case as superseded in any
subsequent filings. All financial statements (including any related Schedules or
notes) of the Company included in the Company SEC Documents were prepared in
accordance with GAAP, are consistent with each other, and fairly present in all
material respects the consolidated financial condition and consolidated
operating results and cash flows of the Company as of their respective dates and
during the periods indicated therein, subject, in the case of unaudited
financial statements, to normal year-end adjustments, which will not be material
in amount. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability. The Company's unaudited consolidated
balance sheet as of March 31, 1999 included within the Company SEC Documents is
referred to herein as the "Company Current Balance Sheet," and the Company's
audited consolidated balance sheet as of October 3, 1998 and its audited
consolidated statements of operations and cash flows for the period then ended
included in the Company SEC Documents are referred to herein as the "Company
Financials."
3.6 No Undisclosed Liabilities.
Except (i) as reflected in the Company Current Balance Sheet, (ii) as set
forth in Section 3.6 to the Company Disclosure Schedule, or (iii) with respect
to any matter arising in the ordinary course of business consistent with past
practices since March 31, 1999, the Company and the Company Subsidiaries have no
liability, indebtedness, obligation, expense, claim, deficiency, guarantee or
endorsement of any type, including any related to Taxes, whether accrued,
absolute, contingent, matured, unmatured or other, which individually or in the
aggregate are required to be reflected or reserved against on the consolidated
balance sheet of the Company and the Company Subsidiaries in
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accordance with GAAP, or that, individually or in the aggregate, would have a
Material Adverse Effect on the Company. In addition, since March 31, 1999, there
has not been any declaration, setting aside or payment of a dividend or other
distribution with respect to the Company Capital Stock or any material change in
accounting methods or practices by the Company or any Company Subsidiary.
3.7 No Changes.
Since the date of the Company Current Balance Sheet, except as otherwise
expressly contemplated by this Agreement, the Company and the Company
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been any action, event, occurrence,
development, change in method of doing business or state of circumstances or
facts that, individually or in the aggregate, has had a Material Adverse Effect
on Company.
3.8 Restrictions on Business Activities.
Except as described in Section 3.8 of the Company Disclosure Schedule as
of the date hereof, there is no agreement (non-compete or otherwise),
commitment, judgment, injunction, order or decree to which the Company or any of
the Company Subsidiaries is a party or otherwise binding upon the Company or the
Company Subsidiaries which has the effect of prohibiting any business practice
of the Company, any acquisition or property (tangible or intangible) by the
Company or the conduct of the business by the Company which would have a
Material Adverse Effect on the Company and the Internet Group taken as a whole.
Without limiting the foregoing, as of the date hereof, none of the Company or
the Company Subsidiaries has entered into any agreement under which the Company
or any of the Company Subsidiaries is restricted from selling, licensing or
otherwise distributing any of its material technology or products to or
providing services to or selling advertising to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any market which would have a Material Adverse Effect on the
Company and the Internet Group taken as a whole.
3.9 Title to Properties; Absence of Liens and Encumbrances.
The Company SEC Documents set forth all material real property used in
the Company's business. The Company or the Company Subsidiaries, as the case may
be, has good and valid title to, or, in the case of leased properties and
assets, valid leasehold interests in, all material tangible properties and
assets, real, personal and mixed, used or held for use in connection with
business of the Company and the Company Subsidiaries, free and clear of any
Liens, except (i) as reflected in the Company Current Balance Sheet, (ii) for
Taxes not yet due and payable or delinquent and (iii) where such imperfections
of title and encumbrances, if any, are not material in character, amount or
extent, and do not materially detract from the value, or materially interfere
with the present use, of the property subject thereto or affected thereby.
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3.10 Brokers' and Finders' Fees.
Except for those fees payable to Merrill Lynch & Co., Inc. ("Merrill
Lynch"), as financial advisor to the Company (the "Company Financial Advisor")
pursuant to an engagement letter, a true and correct copy of which has been
furnished to Parent, neither the Company nor any Company Subsidiary has
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
3.11 Litigation.
Except as set forth in the Company SEC Documents or in Section 3.11 of
the Company Disclosure Schedule, as of the date hereof, there is no material
action, suit or proceeding of any nature pending, or, to the Company's knowledge
threatened, against the Company or any of the Company Subsidiaries, their
properties or any of their officers or directors. To the Company's knowledge, as
of the date hereof, there is no material investigation pending or threatened
against the Company or any of the Company Subsidiaries, their properties or any
of their officers or directors (nor, to the knowledge of the Company, is there
any reasonable basis therefor) by or before any Governmental Body.
3.12 Taxes.
(a) Tax Definitions.
(i) "Tax" or, collectively, "Taxes" means (A) any and all federal,
state, local and foreign taxes, assessments and other governmental charges,
duties, impositions and liabilities, including taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts; (B) any liability for the payment of any
amounts of the type described in clause (A) as a result of being or ceasing to
be a member of an affiliated, consolidated, combined or unitary group for any
period (including, without limitation, any liability under Treas. Reg. Section
1.1502-6 or any comparable provision of foreign, state or local law); and (C)
any liability for the payment of any amounts of the type described in clause (A)
or (B) as a result of any express or implied obligation to indemnify any other
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(ii) "Tax Return" means any report, return, election, notice,
estimate, declaration, information statement and other forms and documents
(including, without limitation, all schedules, exhibits and other attachments
thereto) relating to and filing or required to be filed with a Taxing authority
in connection with any Taxes (including, without limitation, estimated Taxes).
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(iii) "Lien" means any lien, pledge, charge, claim, restriction or
transfer, mortgage, security interest or other encumbrance of any sort.
(b) Tax Returns and Audits.
(i) As of the Effective Time, the Company and the Company
Subsidiaries will have prepared and timely filed (or caused to be prepared and
timely filed) all required federal Tax Returns and all material, state, local
and foreign Tax Returns, relating to any and all Taxes concerning or
attributable to the Company and the Company Subsidiaries or their operations and
such Tax Returns shall be true and correct in all material respects and have
been completed in all material respects in accordance with applicable law.
Notwithstanding the foregoing, no representation is made hereby regarding the
size or availability of net operating losses of the Company or the Company
Subsidiaries.
(ii) Except to the extent the failure to do so would not be
material, as of the Effective Time, the Company and each of the Company
Subsidiaries (A) will have paid (or caused to be paid) all Taxes that the
Company or any Company Subsidiary is required to pay and will have withheld (or
caused to be withheld) with respect to employees of the Company and/or the
Company Subsidiaries, or otherwise, all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld, and (B) will have accrued on the
Company Financials, all Taxes attributable to the operations of the Company and
the Company Subsidiaries for the periods covered by the Company Financials in
accordance with GAAP. The Company and the Company Subsidiaries will not have
incurred any material liability for Taxes for the period from the date of the
Company Current Balance Sheet to the Effective Time other than in the ordinary
course of business;
(iii) There has been no delinquency in the payment of any
material, unaccrued Tax with respect to the Company, any of the Company
Subsidiaries or their operations, nor is there any material Tax deficiency
outstanding, assessed or proposed with respect to the operations of the Company
or any of the Company Subsidiaries, nor has the Company or any of the Company
Subsidiaries executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax relating to the Company
or any of the Company Subsidiaries;
(iv) No audit or other examination of any federal Tax Return or
any material state, local or foreign Tax Return relating to Taxes with respect
to the Company or any Company Subsidiary is presently in progress, nor has the
Company or any Company Subsidiary been notified in writing of any request for
such an audit or other examination;
(v) There are (and there will be immediately following the
Effective Time) no Liens on the assets of the Company or any of the Company
Subsidiaries relating to or attributable to Taxes other than Liens for Taxes not
yet due and payable;
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(vi) Other than with respect to Parent or its subsidiaries,
neither the Company nor any of the Company Subsidiaries is a party to any Tax
sharing, Tax indemnification or Tax allocation agreement nor does the Company or
any of the Company Subsidiaries owe any amount under any such agreement;
(vii) Neither the Company nor any of the Company Subsidiaries has
filed any consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(4) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by the Company or a Company
Subsidiary;
(viii) The Company and each of the Company Subsidiaries have made
available to Parent or its legal counsel, copies of all foreign, federal and
state income and all state sales and use Tax Returns for the Company and each
Company Subsidiary filed for all periods since its inception; and
(ix) Notwithstanding anything herein to the contrary, no
representation or warranty with respect to Taxes is made concerning any Tax
liability to Parent or any of its subsidiaries or any Tax matter whatsoever
arising out of transactions contemplated by this Agreement.
(c) Compensation Taxes.
There is no contract, agreement, plan or arrangement to which the Company
is a party as of the date of this Agreement, including, but not limited to, the
provisions of this Agreement, covering any service provider or former service
provider to the Company or any Company Subsidiary, which as a result of the
Merger (either alone or together with the occurrence of any additional or
subsequent events), could give rise to the payment of any amount that would not
be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
(d) Reorganization.
As of the date hereof, the Company does not have any knowledge of any
fact or circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization described in section 368(a) of the Code.
3.13 Employee Benefit Plans; Compensation.
(a) Definitions.
For purposes of this Section 3.13, the following terms shall have
the meanings set forth below:
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(i) As used in this Section 3.13, "Affiliate" shall mean any other
person or entity under common control with the Company within the meaning of
Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder.
(ii) As used in this Section 3.13 and Section 4.1(a), "Employee
Plan" shall refer to any plan, program, policy, contract, agreement or other
arrangement providing for bonuses, severance or retention payments or benefits,
termination pay, deferred compensation, pensions, profit sharing, performance
awards, stock or stock-related awards or fringe benefits of any kind, written or
otherwise, funded or unfunded, including, without limitation, any plan which is
or has been maintained, contributed to, or required to be contributed to, by the
Company or any Affiliate for the benefit of any Employee, and pursuant to which
the Company or any Affiliate has or may have any material liability, contingent
or otherwise.
(iii) As used in this Section 3.13 and Section 4.1(a), "Employee"
shall mean any current, former, or retired employee, consultant, officer, or
director of the Company or any Affiliate.
(iv) As used in this Section 3.13 and Section 4.1(a), "Employee
Agreement" shall refer to each employment, severance, retention, stock option,
stock purchase, restrictive covenant or other agreement or contract between the
Company or any Affiliate and any Employee;
(b) Schedule. Section 3.13(b) of the Company Disclosure Schedule
contains an accurate and complete list of each Employee Plan and each Employee
Agreement. The Company has provided or made available to Parent true and
complete copies of all Employee Plans and Employee Agreements, all written
summaries or material employee communications relating thereto, and all
governmental or regulatory filings, reports or material governmental or
regulatory communications relating thereto.
(c) Employee Plan Compliance.
(i) The Company has performed in all material respects all
obligations required to be performed by it under each Employee Plan and Employee
Agreement and each Employee Plan and Employee Agreement has been established and
maintained in material conformity with its terms and in material compliance with
all applicable laws, statutes, orders, rules and regulations, including ERISA
and the Code; (ii) each Employee Plan intended to qualify under Section 401(a)
of the Code and each trust intended to qualify under Section 501(a) of the Code
has either received a favorable determination letter with respect to each such
Plan from the IRS or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a determination
letter and make any amendments necessary to obtain a favorable determination;
(iii) there are no actions, suits or claims pending, or, to the knowledge of the
Company, threatened or anticipated (other than routine claims for benefits)
against any Employee Plan or against the assets of any Employee Plan; (iv) each
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to the Company,
any of the Company
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Subsidiaries, Parent, Acquisition Company or any Affiliate (other than ordinary
administration expenses typically incurred in a termination event); and (v)
there are no inquiries or proceedings pending or, to the knowledge of the
Company, threatened by the IRS or DOL with respect to any Employee Plan.
(d) No Pension Plans.
The Company or any of its Affiliates does not now, nor have
they ever, maintained, established, sponsored, participated in, or contributed
to, any Employee Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code.
(e) No Multiemployer Plans.
At no time has the Company or any of its Affiliates
contributed to or been requested to contribute to any Employer Plan that is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
(f) No Post-Employment Obligations.
No Employee Plan provides, or has any liability to provide,
life insurance, medical or other employee welfare benefits to any Employee upon
his or her retirement or termination of employment for any reason, except as may
be required by statute, and has not represented, promised or contracted (whether
in oral or written form) to any Employee (other than (i) benefit coverage
mandated by applicable law, including benefits provided pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and the
regulations thereunder ("COBRA"), (ii) benefits the full cost of which are borne
by current or former employees of the Company (or such employees' beneficiaries
or dependents); (iii) disability benefits under any of the Employee Plans; (iv)
benefits under any Employment Agreement and (v) life insurance benefits for any
Employee who dies while in service with the Company (either individually or to
Employees as a group)) that such Employees(s) would be provided with life
insurance, medical or other employee welfare benefits upon their retirement or
termination of employment, except to the extent required by statute.
(g) Effect of Transaction.
Except as set forth in Section 3.13(g) of the Company
Disclosure Schedule, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, stock option or restricted stock vesting acceleration,
distribution, increase in benefits or obligation to fund benefits with respect
to any Employee (except to the extent required by the Code and ERISA if Parent
causes a partial or full termination to occur under any Employee Plan).
(h) Employment Matters.
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The Company (i) is in compliance in all material respects with
all material applicable laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours, in
each case, with respect to Employees; (ii) has withheld all amounts required by
law or by agreement to be withheld from the wages, salaries and other payments
to Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; (iv) is not liable for
any payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for Employees.
(i) Labor.
The Company has not engaged in any unfair labor practices
which could, individually or in the aggregate, directly or indirectly result in
any material liability to the Company, the Company Subsidiaries or any
Affiliate. None of the Company or any Company Subsidiary is presently a party
to, or bound by, any collective bargaining agreement or union contract with
respect to Employees and no collective bargaining agreement is being negotiated
by the Company.
3.14 Compliance with Laws.
The Company and the Company Subsidiaries have complied in all material
respects with, are not in violation of, and have not received any notices of
violation with respect to, any material foreign, federal, state or local
statute, law or regulation.
3.15 Agreements, Contracts, Commitments.
The Company and each Company Subsidiary is in compliance in all material
respects with, and has not, in any material respects, breached, violated or
defaulted under, or received notice that it has breached, violated or defaulted
in such manner under, any of the terms or conditions of any agreement, contract,
covenant, instrument, lease, license or commitment that is included in any
Securities Act or Exchange Act filing of the Company as a "Material Contract"
(collectively, "Company Contracts"), nor does the Company have knowledge of any
event that would cause such a breach, violation or default with the lapse of
time, giving of notice or both. Each Company Contract is in full force and
effect and, to the knowledge of the Company, is not subject to any material
default thereunder by any party obligated to the Company or the Company
Subsidiaries pursuant thereto. The Company and each Company Subsidiary has
obtained, or will obtain prior to the Closing Date, all necessary consents,
waivers and approvals of parties to any Company Contract as are required
thereunder in connection with the Merger or for such Contracts to remain in
effect without material modification after the Effective Time. Following the
Effective Time, the Company and each Company Subsidiary will be permitted to
exercise all of their respective rights under each Contract then in effect
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company or Company Subsidiaries
would otherwise be required to pay had the transactions contemplated by this
Agreement not occurred.
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3.16 Intellectual Property.
(a) For purposes of this Agreement, "Company Intellectual Property"
shall mean any Intellectual Property owned by or exclusively licensed to the
Company (including, without limitation, Patent Number 5,751,956 ("Method and
Apparatus for Redirection of Server External Hyper-Link References")) (the
"Click-On Patent") or any of the Company Subsidiaries, but in all events
excluding: (i) Intellectual Property owned by or exclusively licensed to
Starwave Corporation as of the Effective Time as defined in that certain
Agreement and Plan of Reorganization, dated June 18, 1998, by and among Infoseek
Corporation, a California corporation, Infoseek Corporation, a Delaware
corporation, Starwave Corporation, a Washington corporation, and Disney
Enterprises, Inc., a Delaware corporation; (ii) Intellectual Property owned by
Parent, any of the Internet Group Companies or their respective subsidiaries
other than AIV and EIV which Intellectual Property is exclusively licensed to
AIV and EIV; (iii) Intellectual Property that is or was developed or owned by
AIV or EIV; (iv) Intellectual Property that is or was developed, funded or owned
by the Company or any of the Company Subsidiaries (other than AIV and EIV) on
the one hand and Parent or any of the Internet Group Companies or any of their
respective subsidiaries (other than AIV and EIV) on the other hand and (v)
Licensor Properties (as defined in that certain License Agreement, dated June
18, 1998 (the "License Agreement") by and among Infoseek Corporation, a
California corporation and Disney Enterprises, Inc., a Delaware corporation)
exclusively licensed to the Company as of the Effective Date (as defined in the
License Agreement).
(b) Section 3.16(b) of the Company Disclosure Schedule lists all
Registered Intellectual Property owned by, or filed in the name of, the Company
or any Company Subsidiary except such Registered Intellectual Property the
absence of which would not have a Material Adverse Effect on the Company or the
conduct of the Company's business (the "Company Registered Intellectual
Property") and lists any proceedings or actions before any court or tribunal
(including the PTO or equivalent authority anywhere in the world) related to any
of the Company Registered Intellectual Property, except for any proceeding
which, if adversely determined, would not have a Material Adverse Effect on the
Company.
(c) Except as set forth in Section 3.16(c) of the Company Disclosure
Schedule or as would not have a Material Adverse Effect on the Company or the
conduct of the Company's business, each item of Company Intellectual Property
owned by Company or the Company Subsidiaries, including all Company Registered
Intellectual Property listed in Section 3.16(b) of the Company Disclosure
Schedule, is free and clear of any Liens, except for Liens for Taxes not yet due
and payable or delinquent. Except as set forth in Section 3.16(c) of the Company
Disclosure Schedule or as would not have a Material Adverse Effect on the
Company, or the conduct of the Company's business, one or more of the Company
and the Company Subsidiaries, as the case may be: (i) is the exclusive owner of
or has valid and enforceable rights to use all trade names, logos common law
trademarks and service marks used in connection with the operation or conduct of
the business of the Company or any of the Company Subsidiaries as currently
conducted, including the sale of any products or technology or the provision of
any services by the Company or any of the Company Subsidiaries and (ii) is the
exclusive owner of or has
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valid and enforceable rights to use all copyrighted works that are the Company's
or the Company Subsidiaries' products or any works of authorship used in
connection with the operation or conduct of the business of the Company or any
of the Company Subsidiaries as currently conducted, including the sale of any
products or technology or the provision of any services by the Company or any of
the Company Subsidiaries.
(d) Except as set forth in Section 3.16(d) of the Company Disclosure
Schedule and except for any transfers, grants or authorizations that have not or
do not have a Material Adverse Effect on the Company or the conduct of the
Company's business, neither the Company nor any of the Company Subsidiaries has
transferred ownership of or authorized the retention of any rights to use any
Intellectual Property that is or was Company Intellectual Property to any other
person.
(e) Except (i) as set forth in Section 3.16(e) of the Company
Disclosure Schedule, (ii) for Intellectual Property the absence of which would
not have a Material Adverse Effect on the Company, (iii) "shrink-wrap" software
and similar widely available commercial end-user software used by the Company or
Company Subsidiaries or in the conduct or the Company's and the Company
Subsidiaries' businesses, and (iv) open source and similar free software
available generally without payment of any royalties or other license fees: the
Company Intellectual Property constitutes all of the Intellectual Property used
in or necessary to the conduct of the Company's and the Company Subsidiaries'
business as currently conducted, including, without limitation, the design,
development, copying, performance, display, creation of derivative works,
distribution, manufacture, use, import, license and sale of products, technology
and services of the Company and of any of the Company's Subsidiaries. Except as
set forth in Section 3.16(e) of the Company Disclosure Schedule, no person who
has licensed Intellectual Property to the Company or any of the Company
Subsidiaries has ownership rights or license rights to improvements in such
licensed Intellectual Property provided the foregoing shall apply only to
improvements (A) the absence of which would have a Material Adverse Effect on
the Company or the conduct of the Company's business and (B) which were made by
the Company or any of the Company's Subsidiaries.
(f) Except for "shrink-wrap" and similar widely available commercial
end-user licenses or contracts, licenses and agreements the existence,
termination or breach of which would not have a Material Adverse Effect on the
Company or the conduct of the Company's business, the contracts, licenses and
agreements listed in Section 3.16(f) of the Company Disclosure Schedule include
all contracts, licenses and agreements to which the Company or any of the
Company Subsidiaries is a party with respect to any Company Intellectual
Property.
(g) Except as set forth in Section 3.16(g) of the Company Disclosure
Schedule or except for matters which, if adversely determined, would not have a
Material Adverse Effect on the Company or the conduct of the Company's business:
the operation of the business of the Company and the Company Subsidiaries as it
currently is conducted, including, without limitation, the design, development,
copying, performance, display, creation of derivative works, distribution,
manufacture, use, import, license and sale of products, technology and services
of the Company or any of the Company Subsidiaries,
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does not infringe or misappropriate the Intellectual Property of any person,
violate the rights of any person (including, but not limited to, rights to
privacy or publicity), or constitute unfair competition or trade practices under
the law of any relevant jurisdiction, and neither the Company nor any of the
Company Subsidiaries has received notice from any person claiming that such
operation, or any act, product, technology or service of or by the Company or
any of the Company Subsidiaries infringes or misappropriates the Intellectual
Property of any person or that the Company or any of the Company Subsidiaries
has engaged in unfair competition or trade practices under the laws of any
relevant jurisdiction (nor does the Company or any Company Subsidiary have
knowledge of any basis therefor).
(h) To the Company's knowledge, there is no prior art that would
compromise the validity of the Click-On Patent under any subsection of 35 U.S.C.
Section 102. The Company has no knowledge of any public knowledge or use
anywhere, by anyone, of the subject matter disclosed in the Click-On Patent
before the invention date. The Company has no knowledge of the subject matter
disclosed in the Click-On Patent having been patented or described anywhere in a
printed publication by anyone before the invention date. The Company has no
knowledge of the subject matter disclosed in the Click-On Patent having been in
public use or on sale anywhere, by anyone, before February 22, 1995.
(i) All necessary registration, maintenance and renewal fees in
connection with Company Registered Intellectual Property the absence of which
would have a Material Adverse Effect on the Company or the conduct of the
Company's business have been paid and all necessary documents and certificates
in connection with such Company Registered Intellectual Property have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property when commercially reasonable.
(j) Except as set forth in Section 3.16(j) of the Company Disclosure
Schedule or for those contracts, licenses and agreements the existence,
termination or breach of which would not have Material Adverse Effect on the
Company or the conduct of the Company's business, there are no contracts,
licenses or agreements between the Company or any of the Company Subsidiaries
and any other person with respect to Company Intellectual Property under which
there is any dispute regarding the scope of such contract, license or agreement
or performance under such contract, license or agreement, including with respect
to any payments to be made or received by the Company or any Company Subsidiary
which, if adversely determined, would have a Material Adverse Effect on the
Company or the conduct of the Company's business.
(k) Except as set forth in Section 3.16(k) of the Company Disclosure
Schedule or for pending claims which, if successfully asserted, would not have a
Material Adverse Effect on the Company or the conduct of the Company's business,
there is no pending claim by the Company or any Company Subsidiary against any
person for infringing or misappropriating any Company Intellectual Property.
Without limiting the generality of the foregoing, to the knowledge of the
Company or any Company Subsidiary, there is no
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pending claim by any person other than the Company or any Company Subsidiary
against any person for infringing or misappropriating any Company Intellectual
Property which claim, if adversely determined, would have a Material Adverse
Effect on the Company or the conduct of the Company's business.
(l) Except as set forth in Section 3.16(l) of the Company Disclosure
Schedule or as would not have a Material Adverse Effect on the Company or the
conduct of the Company's business as currently conducted, no Company
Intellectual Property or product, technology or service of the Company or any of
the Company Subsidiaries is subject to any proceeding or outstanding decree,
order, judgment, settlement or other similar agreement or stipulation that
restricts in any manner the use, transfer or licensing thereof by the Company or
any Company Subsidiary or would affect the validity, use or enforceability of
such Company Intellectual Property.
(m) The consummation of the transactions contemplated by this Agreement
will not result in the loss of, or otherwise adversely affect, any ownership
rights of the Company or any of the Company Subsidiaries in any Company
Intellectual Property material to the Company, or result in the breach or
termination of any license, contract or agreement to which any of the foregoing
persons are a party with respect to any Company Intellectual Property material
to the Company. The consummation of the transactions contemplated by this
Agreement will not cause or obligate the Company or any of the Company
Subsidiaries to (i) grant to any third party any rights or licenses with respect
to any Company Intellectual Property material to the Company, or (ii) pay any
royalties or other amounts with respect to Company Intellectual Property
material to the Company in excess of those being paid prior to the Effective
Time.
3.17 Governmental Authorization.
Section 3.17 of the Company Disclosure Schedule accurately list each
consent, license, permit, grant or other authorization issued to the Company or
the Company Subsidiaries by a Governmental Body (i) pursuant to which the
Company currently operates or holds any interest in any of its properties or
(ii) which is required for the operation of the Company's business or the
holding of any such interest, in each case the absence of which would have a
Material Adverse Effect on the Company (herein collectively called the "Company
Authorizations"). The Company Authorizations are in full force and effect and
constitute all licenses, permits, grants or other authorization by Governmental
Bodies required to permit the Company to operate or conduct its business or hold
any interest in its properties or assets, in each case except as would not have
a Material Adverse Effect on the Company.
3.18 Environmental Matters.
(a) Hazardous Material. Except as would not have a Material Adverse
Effect on the Company, none of the Company and the Company Subsidiaries has: (i)
operated any underground storage tanks at any property that any of the Company
and the Company Subsidiaries has at any time owned, operated, occupied or
leased; or (ii) illegally released in violation of applicable environmental laws
as in effect at the time of
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such release any material amounts of Hazardous Material. No Hazardous Materials
are present as a result of the deliberate actions of the Company or any of the
Company Subsidiaries in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that any of the Company or
the Company Subsidiaries has at any time owned, operated, occupied or leased,
except for such Hazardous Materials which would not have a Material Adverse
Effect on the Company.
(b) Hazardous Materials Activities. Except as would not have a Material
Adverse Effect on the Company: none of the Company or the Company Subsidiaries
has illegally transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of any
environmental law as in effect at the time of such transport, manufacture,
disposal or sale, nor has any of the Company or the Company Subsidiaries has
engaged in illegal Hazardous Materials Activities.
(c) Permits. Except as would not have a Material Adverse Effect on the
Company, the Company and the Company Subsidiaries currently hold all
Environmental Permits necessary for the conduct of any Hazardous Material
Activities by any of the Company or the Company Subsidiaries, and the other
businesses of the Company and the Company Subsidiaries as such activities and
businesses are currently being conducted.
(d) Environmental Liabilities. Except as would not have a Material
Adverse Effect on the Company, no action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending as served or, to the
Company's knowledge threatened, against the Company or any Company Subsidiary
concerning any Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of the Company or the Company Subsidiaries. The Company has
no knowledge of any fact or circumstance which would reasonably be expected to
involve the Company or the Company Subsidiaries in any environmental litigation
or impose upon the Company or the Company Subsidiaries any environmental
liabilities, in each case which would have a Material Adverse Effect on the
Company.
The representations set forth in this Section 3.18 are the sole and exclusive
representations of the Company with respect to the subject matter hereof,
including, without limitation, with respect to environmental laws, Environmental
Permits, Hazardous Material or Hazardous Materials Activities.
3.19 Minute Books.
The minutes of the Company and the Company Subsidiaries made available to
counsel for Parent are the only minutes of the Company and the Company
Subsidiaries.
3.20 Opinion of Financial Advisor.
The Board of Directors of the Company has received an opinion of Merrill
Lynch to the effect that as of the date hereof the consideration to be received
in the Merger is
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fair to the holders of the Company Capital Stock (other than Parent and its
affiliates) from a financial point of view.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of the Parties.
(a) Conduct of Business of the Company and the Company Subsidiaries.
Except as otherwise contemplated by this Agreement and the
other agreements by and between the Company and its affiliates, on the one hand,
and Parent and its affiliates, on the other hand, and the several transactions
contemplated hereby and thereby, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, the Company agrees (except to the extent that Parent
shall otherwise have previously consented in writing) to carry on the Company's
and the Company Subsidiaries' respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to pay
the debts and Taxes of the Company and the Company Subsidiaries when due (unless
debts and Taxes are subject to a dispute that the Company is reasonably and
actively seeking to resolve), to pay or perform other obligations when due
(unless such obligations are the subject of a dispute that the Company is
actively seeking to resolve) and, to the extent consistent with such businesses,
use their reasonable efforts consistent with past practice and policies to
preserve intact the Company's and the Company Subsidiaries' present business
organizations, keep available the services of the Company's and the Company
Subsidiaries' present officers and key employees and preserve the Company's and
the Company Subsidiaries' relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it, all with the
goal of preserving the Company's and the Company Subsidiaries' goodwill and
ongoing businesses at the Effective Time, and to refrain from taking such action
that would cause any of the conditions contained in Article VI hereof not to be
satisfied; provided, however, that the Company shall not be deemed in breach of
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this Section 4.1(a) because of attrition, if any, among the Company's employees
which may occur as a result of the transactions contemplated hereby, so long as
the Company uses all reasonable efforts to retain such employees at the Company.
Except as expressly contemplated by this Agreement or as set forth in Section
4.1(a) of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary shall, without the prior written consent of Parent pursuant to a
request made in accordance with the notice provisions set forth in Section 9.1
of this Agreement (which written consent will be granted or denied within
seventy-two (72) hours of receipt of such notice by Parent, provided that any
failure to reply within such time period will be deemed as non-consent, and
which consent will not be unreasonably withheld):
(i) Other than in the ordinary course of business consistent with
past practices, or as permitted by Section 4.1(a) (v) hereof, sell or transfer
to any person or entity any material rights to the Company Intellectual Property
or buy any material rights
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to Intellectual Property or enter into any material license agreement with any
person or entity with respect to the Company Intellectual Property;
(ii) Other than in the ordinary course of business, consistent with
past practices, enter into any agreement, or materially amend any Company
Contract, pursuant to which any other party is granted marketing or distribution
rights of any type or scope with respect to any material products or technology
of the Company or any Company Subsidiary;
(iii) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock or any other equity interests, as applicable, or split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities or any other equity interests of the Company (other than
issuances of, or agreements to issue, capital stock at fair market value in
connection with transactions permitted by Section 4.1(a)(v) hereof), as
applicable, in respect of, in lieu of or in substitution for shares of capital
stock of the Company or any other equity interests, as applicable, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares of
the capital stock of the Company or any Company Subsidiary or other equity
interests as applicable, of any Company Subsidiary (or options, warrants or
other rights exercisable therefor);
(iv) Except as set forth in Section 4.1(a)(iv) of the Company
Disclosure Schedule and except for (A) any grants of options to purchase Company
Common Stock (with an exercise price equal to the fair market value of the
Company Common Stock at the date of the option grant) granted to employees in
the ordinary course of the Company's business consistent with past practices,
not to exceed options with respect to 5.7 million shares of Company Common Stock
in the aggregate and (B) stock purchases pursuant to the Company's Employee
Stock Purchase Plan in accordance with its current terms, issue, grant, deliver
or sell or authorize the issuance, grant, delivery or sale of, or purchase of
any shares of Company Capital Stock (other than issuances of, or agreements to
issue, capital stock at fair market value in connection with transactions
permitted by Section 4.1(a)(v) hereof) or any other equity interests, as
applicable, or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue or purchase of any such shares or any other equity
interests of the Company or any of the Company Subsidiaries, as applicable, or
other convertible securities of the Company or any of the Company Subsidiaries;
(v) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or except in the ordinary course otherwise
acquire or agree to acquire any assets, in each case involving an investment
(including assumed liabilities) in excess of $1,000,000 individually or
$5,000,000 in the aggregate;
(vi) Without limiting any other provisions of clause 4.1(a)(i)
above, sell, lease, license or otherwise dispose of any of its properties or
assets, except in the
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ordinary course of business and consistent with past practices, and except in
the case of properties or assets of less than $1,000,000 individually or
$5,000,000 in the aggregate;
(vii) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee any debt
securities of others except for obligations (A) not exceeding $1,000,000
individually or $5,000,000 in the aggregate other than in the ordinary course in
connection with lease obligations or (B) incurred in connection with
transactions permitted by Section 4.1(a)(v) hereof;
(viii) Except as set forth in Section 4.1(a)(viii) of the Company
Disclosure Schedule, grant any severance, retention, or termination pay to any
director, officer or employee of the Company except in each case payments made
pursuant to the existing terms of any Employee Agreement outstanding on the date
hereof and disclosed in the Company Disclosure Schedule;
(ix) Except as set forth in Section 4.1(a)(ix) of the Company
Disclosure Schedule, adopt any Employee Plan, enter into any Employee Agreement,
amend any Employee Plan or Employee Agreement (except as required by law), pay
or agree to pay any special bonus or special remuneration to any director or
Employee, or increase the salaries or wage rates of its Employees other than
routine increases and promotions in the ordinary course of business, consistent
with past practices;
(x) Except with respect to Taxes, pay, discharge or satisfy, in an
amount in excess of $100,000 (in any one case) or $500,000 (in the aggregate),
any claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
liabilities in the ordinary course of business;
(xi) (a) Make or change any material election in respect of Taxes
relating to the operations of the Company or the Company Subsidiaries, (b) file
any amended Tax Return other than such amendments made in good faith in the
ordinary course of business or (c) adopt or change any accounting method in
respect of Taxes except as required by law;
(xii) Except as set forth in Section 4.1(a)(xii) of the Company
Disclosure Schedule, accelerate the vesting schedule of any of the outstanding
Company Options or Company Capital Stock;
(xiii) Hire any material number of employees or terminate any of
the Company's key employees, or encourage employees to resign, to the extent
costs associated with such termination or resignation would have a Material
Adverse Effect on the Company;
(xiv) Enter into any agreement which has a term greater than a
year, unless such agreement is terminable by the Company on no more than 90
days' prior notice without liability to the Company;
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(xv) Take, or agree to take, any of the actions described in the
foregoing clauses (i) to (xiv) or any other action that would prevent the
Company from performing or cause the Company not to perform its covenants
hereunder.
(b) Conduct of Business of the Internet Group.
Except as otherwise contemplated by this Agreement and the other
agreements by and between the Company and its affiliates, on the one hand,
and Parent and its affiliates, on the other hand, and the several transactions
contemplated hereby and thereby, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, Parent agrees (except to the extent that the Company
shall otherwise have previously consented in writing) to carry on the Internet
Group's business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted, to pay or perform other obligations when
due (unless such obligations are the subject of a dispute that the Internet
Group is reasonably and actively seeking to resolve), and, to the extent
consistent with such business, use its reasonable efforts consistent with past
practice and policies to preserve intact the Internet Group's present business
organizations, keep available the services of the Internet Group's present
officers and key employees and preserve the Internet Group's relationship with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, all with the goal of preserving the Internet Group's
goodwill and ongoing business at the Effective Time, and to refrain from taking
any action that would cause any of the conditions contained in Article VI hereof
not to be satisfied; provided, however, that Parent shall not be deemed in
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breach of this Section 4.1(b) because of attrition, if any, among the Internet
Group employees which may occur as a result of the transactions contemplated
hereby, so long as Parent uses all reasonable efforts to retain such employees.
Except as expressly contemplated by this Agreement or as set forth in Section
4.1(b) of the Parent Disclosure Schedule, neither Parent nor any Internet Group
Company shall, without the prior written consent of the Company pursuant to a
request made in accordance with the notice provisions set forth in Section 9.1
of this Agreement (which written consent will be granted or denied within
seventy-two (72) hours of receipt of such notice by the Company, provided that
any failure to reply within such time period will be deemed as non-consent, and
which consent will not be unreasonably withheld):
(i) Other than in the ordinary course of business consistent with
past practices, or as permitted by Section 4.1(b)(iv) hereof, sell or transfer
to any person or entity any material rights to the Internet Group Intellectual
Property or buy any material rights to Intellectual Property or enter into any
material license agreement with any person or entity with respect to the
Internet Group Intellectual Property;
(ii) Other than in the ordinary course of business, consistent with
past practices, enter into any agreement, or materially amend any Internet Group
Contract, pursuant to which any other party is granted marketing or distribution
rights of any type or scope with respect to any material products or technology
of the Internet Group;
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(iii) Except as set forth in Section 4.1 (b)(iii) of the Parent
Disclosure Schedule, issue, grant, deliver or sell or authorize the issuance,
grant, delivery or sale of, or purchase any shares of Internet Group Common
Stock, or securities convertible into, or subscriptions, rights, warrants or
options to acquire, or other agreements or commitments of any character
obligating it to issue or purchase any such shares of Internet Group Common
Stock (other than issuances of, or agreements to issue, capital stock at fair
market value in connection with transactions permitted by Section 4.1(b)(iv)
hereof); provided that any agreements or commitments to grant options to
purchase shares of Internet Group Common Stock (as listed in Section 4.1(b)(iii)
of the Parent Disclosure Schedule) shall have an exercise price that either (i)
is equal to the fair market value of the Internet Group Common Stock at the date
of the grant or (ii) takes into account (in a manner determined by Parent) the
value of an existing option to purchase shares of Parent Common Stock that is
converted into an option to purchase shares of the Internet Group Common Stock;
provided further, that in no event shall there be any grant of options prior to
- -------- --------
the Effective Time;
(iv) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof relating to, or being attributed to, the
Internet Group, or except in the ordinary course otherwise acquire or agree to
acquire any assets relating to, or being attributed to, the Internet Group, in
each case involving an investment (including assumed liabilities) in excess of
$5,000,000 individually or $25,000,000 in the aggregate;
(v) Without limiting the provisions of Section 4(b)(i) above, sell,
lease, license or otherwise dispose of any of the properties or assets of the
Internet Group, except in the ordinary course of business and consistent with
past practices, and except in the case of properties or assets of less than
$1,000,000 individually or $5,000,000 in the aggregate;
(vi) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee any debt
securities of others as such indebtedness or guarantee that relates to, or is
being attributed to, the Internet Group except for obligations (A) not exceeding
$1,000,000 individually or $5,000,000 in the aggregate, other than in the
ordinary course in connection with lease obligations or (B) incurred in
connection with transactions permitted by Section 4.1(b)(iv) hereof;
(vii) Except as would not have a Material Adverse Effect on the
Internet Group, grant any severance, retention, or termination pay to any
director, officer or employee of the Internet Group Companies except in each
case payments made pursuant to the existing terms of any employee agreement
outstanding on the date hereof and disclosed in the Parent Disclosure Schedule;
(viii) Terminate any of Internet Group's key employees, or
encourage employees to resign, to the extent costs associated with such
termination or resignation would have a Material Adverse Effect on the Internet
Group;
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(ix) Take, or agree to take, any of the actions described in the
foregoing clauses (i) to (viii) that would prevent Parent from performing or
cause Parent not to perform its covenants under Section 4.1(b).
4.2 No Solicitation.
(a) From and after the date hereof and until the earlier of the
Effective Time or the termination of this Agreement, the Company shall not, and
shall not authorize or permit any of the Company Subsidiaries or its officers,
directors, employees, accountants, counsel, investment bankers, financial
advisors and other representatives (collectively, its "Representatives") to,
directly or indirectly, solicit, initiate or encourage (including by way of
furnishing non-public information) or take any other action to facilitate
knowingly any inquiries or the making of any proposal which constitutes or may
reasonably be expected to lead to an Acquisition Proposal (as defined below) in
respect of the Company or any of the Company Subsidiaries from any person or
entity, or engage in any discussion or negotiations relating thereto or enter
into any agreement with any person providing for or contemplating any
Acquisition Proposal; provided, however, that notwithstanding any other
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provision hereof, the Company may (1) comply with applicable securities laws and
regulations, including, without limitation, the Exchange Act (and Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer)
and (2) prior to the time its stockholders shall have voted whether to approve
this Agreement, the Company may:
(i) engage in discussions or negotiations with a third party who
(without any solicitation, initiation or encouragement, directly or indirectly,
by the Company or its Representatives after the date hereof) seeks to initiate
such discussions or negotiations, and may furnish such third party information
concerning the Company and its business, properties and assets if and only to
the extent that:
(1) (a) the third party has first made an Acquisition
Proposal to acquire at least 100% of the consolidated assets or outstanding
voting power of the Company's securities that is financially superior to the
Merger and the transactions contemplated in connection with the Merger and not
subject to any financing condition, as determined in good faith in each case by
the Company's Board of Directors after consultation with its financial advisors
(a "Company Superior Proposal") and (b) the Company's Board of Directors shall
conclude in good faith, after considering applicable provisions of state law and
after consultation with outside counsel, that such action is necessary for the
board of directors to act in a manner consistent with its fiduciary duties under
applicable law; and
(2) prior to furnishing such information to or entering
into discussions or negotiations with such person or entity, the Company (y)
provides Parent with prompt notice of an Acquisition Proposal (which shall mean
within 24 hours after receipt of an Acquisition Proposal) and (z) receives from
such person or entity an executed confidentiality agreement in reasonably
customary form on terms no more favorable to such person or entity than those
contained in the Confidentiality Agreement (as defined in Section 5.4); and/or
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(ii) recommend to its stockholders that they accept a Company
Superior Proposal from a third party; provided that the conditions set forth in
--------
clauses 4.2(a)(i)(1) and 4.2(a)(i)(2) above have been satisfied and, prior to
entering into a definitive agreement providing for a Company Superior Proposal,
this Agreement is terminated pursuant to Section 8.1(g) or 8.1(h), as
applicable.
(b) The Company shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any party or parties conducted heretofore by the Company or its
Representatives with respect to any Acquisition Proposal. The Company shall
notify Parent orally and in writing of any Acquisition Proposal with respect to
the Company or any other transaction, the consummation of which would reasonably
be expected to prevent or materially interfere with or materially delay the
Merger (including the material terms and conditions of any such Acquisition
Proposal and the identity of the person making it), promptly, but in any event
within 72 hours, after actual knowledge thereof by the Company's directors,
executive officers, counsel or individuals representing it as its investment
bankers or financial advisors.
(c) As used in this Section 4.2, "Acquisition Proposal" shall mean:
(i) a bona fide proposal or offer (other than by another party
hereto) for a tender or exchange offer for the securities of the Company; or
(ii) a bona fide proposal or offer (other than by another party
hereto) for a merger, consolidation or other business combination involving an
acquisition of the Company or any material subsidiary of the Company; or
(iii) any proposal to acquire in any manner a substantial equity
interest in or a substantial portion of the assets of the Company or any
material subsidiary of the Company.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Registration Statement; Proxy Statement.
(a) As soon as practicable after the execution of this Agreement,
Parent shall, with the assistance and cooperation of the Company, prepare and
cause to be filed with the SEC the Joint Proxy Statement and the Form S-4
Registration Statement. The Parent Common Stock Policies shall be set forth and
described in detail in the Joint Proxy Statement and the Form S-4 Registration
Statement. Each of Parent and the Company shall use all reasonable efforts to
cause the Form S-4 Registration Statement and the Joint Proxy Statement to
comply with applicable law and the rules and regulations promulgated by the SEC,
to respond promptly to any comments of the SEC or its staff and to have the Form
S-4 Registration Statement declared effective under the Securities Act as
promptly as practicable after it is filed with the SEC, and Parent and the
Company
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shall use all reasonable efforts to cause the Joint Proxy Statement to be mailed
to their respective stockholders as promptly as practicable after the Form S-4
Registration Statement is declared effective under the Securities Act. Each of
the parties hereto shall promptly furnish to the other party all information
concerning itself, its stockholders and its affiliates that may be required or
reasonably requested in connection with any action contemplated by this Section
5.1. If any event relating to Parent or the Company occurs, or if Parent or the
Company becomes aware of any information, that should be disclosed in an
amendment or supplement to the Form S-4 Registration Statement or the Joint
Proxy Statement, then Parent or the Company, as applicable, shall inform the
other thereof and shall cooperate with each other in filing such amendment or
supplement with the SEC and, if appropriate, in mailing such amendment or
supplement to the stockholders of Parent and the Company. Each of Parent and the
Company will notify the other promptly upon the receipt of any comments from the
SEC or its staff or any other government officials and of any request by the SEC
or its staff or any other government officials for amendments or supplements to
the Form S-4 Registration Statement or the Joint Proxy Statement or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Form S-4 Registration Statement, the Joint Proxy
Statement or the Merger. The Joint Proxy Statement shall include (i) the
recommendation of the Board of Directors of the Company in favor of this
Agreement, the Merger and the transactions contemplated hereby; provided that
--------
such recommendation may not be included or may be withdrawn if the Company's
Board of Directors has recommended a Company Superior Proposal in accordance
with the terms of Section 4.2, and (ii) the recommendation of the Board of
Directors of Parent in favor of approval of the issuance of shares of Internet
Group Common Stock in the Merger and the Parent Charter Amendment and Parent
shall not take any action inconsistent with such recommendation.
(b) Prior to the Effective Time, Parent shall use reasonable efforts to
obtain all regulatory or other approvals needed to ensure that the Internet
Group Common Stock to be issued in the Merger: (i) will be registered or
qualified under the securities law of every jurisdiction of the United States in
which any registered holder of Company Common Stock who is receiving shares of
registered Internet Group Common Stock has an address of record or be exempt
from such registration and (ii) will be approved for quotation at the Effective
Time on the Nasdaq National Market or will be approved for listing at the
Effective Time on the New York Stock Exchange, in each case subject to official
notice of issuance; provided, however, that Parent shall not, pursuant to the
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foregoing, be required (A) to qualify to do business as a foreign corporation in
any jurisdiction in which it is not now qualified or (B) to file a general
consent to service of process in any jurisdiction with respect to matters
unrelated to the issuance of Internet Group Common Stock pursuant hereto.
(c) Each of Parent and the Company (in respect of the information
respectively supplied by it) agrees that: (i) none of the information to be
supplied by it or its affiliates for inclusion in the Form S-4 Registration
Statement will, at the time the Form S-4 Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
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therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; (ii) none of the
information to be supplied by it or its affiliates for inclusion in the Joint
Proxy Statement will, at the time the Company's Proxy Statement is mailed to the
stockholders of the Company or as of the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading and (iii) as to
matters respecting it, the Joint Proxy Statement and the Form S-4 Registration
Statement will comply as to form in all material respects with the provisions of
the Securities Act and the Exchange Act, as applicable, and the rules and
regulations promulgated by the SEC thereunder, except that no covenant,
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent for inclusion or incorporation by reference therein and no covenant,
representation or warranty is made by Parent with respect to statements made or
incorporated by reference therein based on information supplied by the Company
for inclusion or incorporation by reference therein.
5.2 Stockholder Meetings.
(a) The Company shall promptly after the date hereof take all action
necessary in accordance with applicable law and its Amended and Restated
Certificate of Incorporation and Bylaws to hold and convene a meeting of the
Company's stockholders (the "Company Stockholders Meeting") as soon as
practicable following the date the Registration Statement is declared effective
by the SEC. Except as required by the SEC or applicable court order and except
as may be required in order to amend or supplement the Registration Statement or
Joint Proxy Statement, the Company shall not postpone or adjourn (other than for
the absence of a quorum) the Company Stockholders Meeting without the consent of
Parent. The Company shall not in any way challenge the validity, enforceability
or effectiveness of the voting agreements entered into by certain stockholders
of the Company in connection with the Merger. Subject to the provisions of the
penultimate clause of Section 5.1(a) and Section 4.2(a)(ii), the Company shall
take all other action necessary or advisable to secure the vote or consent of
its stockholders required by applicable law and contract (which consent must
include approval by more than 50% of the Company's total current voting power
held by stockholders of the Company other than Parent and its subsidiaries) to
effect the Merger and the transactions contemplated hereby (the "Required
Company Stockholder Vote").
(b) Parent shall promptly after the date hereof take all action
necessary in accordance with applicable law and its Restated Certificate of
Incorporation and Bylaws to hold and convene a meeting of Parent's stockholders
(the "Parent Stockholders Meeting"). Except as required by the SEC or applicable
court order, Parent shall not postpone or adjourn (other than for the absence of
a quorum) the Parent Stockholders Meeting without the consent of the Company.
Subject to Section 5.1(a), Parent shall take all other action necessary or
advisable to secure the vote or consent of its stockholders required by
applicable law to effect the issuance of shares of Internet Group Common Stock
in the Merger and the Parent Charter Amendment (the "Required Parent Stockholder
Vote").
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5.3 Cooperation; Access to Information.
Upon reasonable prior notice, the Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to all of its
properties, books, contracts, commitments and records, all other information
concerning its business, properties and personnel (subject to restrictions
imposed by applicable law) as Parent may reasonably request and all its key
employees. Upon reasonable prior notice, the Company agrees to provide Parent
and its accountants, counsel and other representatives copies of internal
financial statements (including Tax Returns and supporting documentation)
promptly upon request. No information or knowledge obtained in any investigation
pursuant to this Section 5.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.4 Confidentiality.
Each of the parties hereto hereby agrees that the information obtained in
any investigation pursuant to Section 5.3, or pursuant to the negotiation and
execution of this Agreement or the effectuation of the transactions contemplated
hereby, shall be governed by the terms of the Confidentiality Agreement
effective as of March 1, 1999 (the "Confidentiality Agreement").
5.5 Expenses.
Except as set forth in Section 8.3, whether or not the Merger is
consummated, all fees and expenses incurred in connection with the Merger,
including, without limitation, all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties ("Third Party
Expenses") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party incurring
such fees and expenses; provided, however, that Parent and the Company shall
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share equally in all fees and expenses, other than Third Party Expenses,
incurred in relation to the filing and printing of Parent's Form S-4
Registration Statement and the Joint Proxy Statement (including any preliminary
materials related thereto); provided, further, that Parent shall not after the
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Effective Time allocate to the Internet Group such Third Party Expenses incurred
by Parent in excess of the Third Party Expenses incurred by the Company in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby. Without limiting the
foregoing, the Company agrees to pay the fees and expenses of the Company
Financial Advisor in connection with the transactions contemplated hereby.
5.6 Public Disclosure.
Parent and the Company shall consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement or the Merger or the transactions contemplated hereby or thereby and
shall not issue any such
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press release or make any such public statement prior to such consultation,
except as may be required by law, The Nasdaq Stock Market, The New York Stock
Exchange or any listing agreement with a national securities exchange. At any
time after the date hereof, the Company may file with the SEC a report on Form
8-K with respect to this Agreement and may file a copy of this Agreement and any
related agreements as an exhibit to such report, provided that Parent shall have
a reasonable opportunity to review such report prior to filing. The parties have
agreed to the text of the joint press release announcing the signing of this
Agreement.
5.7 Consents.
The Company and Parent shall use their best efforts to obtain the
consents, waivers, assignments and approvals under any of their respective
material contracts as may be required in connection with the Merger so as to
preserve all rights of, and benefits to, the Company and Parent thereunder.
5.8 Reasonable Efforts.
Subject to the terms and conditions provided in this Agreement, each of
the parties hereto shall use commercially reasonable efforts to take promptly,
or cause to be taken, all actions, and to do promptly, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents, tax opinions and approvals and to effect all
necessary registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement.
Notwithstanding the foregoing, (A) none of Parent, the Company or any of their
respective subsidiaries shall be required to agree to any divestiture or hold
separate or similar transaction by it or any of its subsidiaries or affiliates
of shares of capital stock or of any business, assets or property of any of them
or any of their subsidiaries or affiliates, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to own
or exercise control of such assets, properties and stock and (B) the Company
shall not, without Parent's prior written consent, commit to any divestiture or
hold separate or similar transaction by it or any of its subsidiaries or
affiliates of shares of capital stock or of any business, assets or property of
any of them or any of their subsidiaries or affiliates, or the imposition of any
material limitation on the ability of any of them to conduct their businesses or
to own or exercise control of such assets, properties and stock.
5.9 Notification of Certain Matters.
Each of the Company and Parent shall give prompt notice to the other
party of (i) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely to cause any representation or warranty of any
party contained in this Agreement to be untrue or inaccurate at or prior to the
Effective Time such that the conditions set forth in Section 6.2(b) or 6.3(b)
would not be satisfied and (ii) any failure
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of Parent or the Company, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder which is likely to cause any condition set in Article VI hereof not to
be satisfied); provided, however, that the delivery of any notice pursuant to
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this Section 5.9 shall not limit or otherwise affect any remedies available to
the party receiving such notice and no disclosure by Parent or the Company,
pursuant to this Section 5.9 shall be deemed to amend or supplement the Parent
Disclosure Schedule or the Company Disclosure Schedule, respectively, or prevent
or cure any misrepresentations, breach of warranty or breach of covenant.
5.10 Support Agreements.
Certain stockholders of the Company have delivered to Parent,
concurrently with the execution of this Agreement, executed Support Agreements,
copies of which are attached hereto as Exhibits E-1 and E-2, and such agreements
are in full force and effect in accordance with their terms.
5.11 Regulatory Filings; Reasonable Efforts.
As soon as may be reasonably practicable, Parent and the Company each
shall file with the United States Federal Trade Commission (the "FTC") and the
Antitrust Division of the United States Department of Justice ( the "DOJ")
Notification and Report Forms relating to the transactions contemplated herein
as required by the HSR Act, as well as comparable pre-merger notification forms
required by the merger notification or control laws and regulations of any
applicable jurisdiction, as agreed to by the parties. Parent and the Company
each shall promptly (a) supply the other with any information which may be
required in order to effectuate such filings and (b) supply any additional
information which reasonably may be required by the FTC, the DOJ or the
competition or merger control authorities of any other jurisdiction and which
the parties may reasonably deem appropriate.
5.12 Additional Documents and Further Assurances.
Each party hereto, at the request of another party hereto, shall execute
and deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
this Agreement, the Merger and the transactions contemplated hereby.
5.13 Assumption of Company Option Plans; Form S-8; Employee Plans.
(a) At the Effective Time, Parent shall assume all outstanding Company
Options (other than Unvested Non-Employee Director Options) under the Company
Option Plans (and shall assume the Company Option Plans) and agrees to file, no
later than five days after the Closing, a registration statement on Form S-8
covering the shares of Internet Group Common Stock issuable pursuant to
outstanding Company Options granted under the Company Option Plans. The Company
shall cooperate with and assist Parent in the preparation of such registration
statement.
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(b) Following the Effective Time, Parent shall cause each "employee
benefit plan" (as defined in Section 3(3) of ERISA) maintained by Parent or
affiliates of Parent that covers or will cover Employees of the Company or the
Company Subsidiaries who are active at the Effective Time (the "Company
Employees") to recognize all service, for purposes of eligibility and vesting of
benefits (but not for benefit accrual purposes), that is credited to Company
Employees for comparable purposes under the comparable benefit plans of the
Company or the Company Subsidiaries as of the Effective Time. Following the
Effective Time, Parent shall cause each "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) covering Company Employees (i) to reduce each
eligible employee's (and their eligible dependents') annual deductible limits
under such plans for the plan year in which the Effective Time occurs to the
extent deductible expenses were incurred and recognized for comparable purposes
under the comparable benefit plans covering the Company Employees immediately
prior to the Effective Time and (ii) to waive any pre-existing condition
limitations or exclusions that do not apply to Company Employees immediately
prior to the Effective Time.
5.14 Director Action with Respect to Company Option Plans and Stock Purchase
Plan.
Prior to the Effective Time, the Board of Directors of the Company shall
take such actions, including obtaining all necessary individual consents, as
shall ensure that (i) Company Options (other than Unvested Non-Employee Director
Options) outstanding under the Company Option Plans (and the Company Option
Plans) may be assumed by Parent in accordance with Section 1.7(c) hereof and
will not have their vesting accelerated as a result of the consummation of the
Merger and the transactions contemplated hereby and (ii) the Company's Employee
Stock Purchase Plan is terminated immediately prior to the Effective Time.
5.15 Officers' and Directors' Indemnification.
(a) From and after the Effective Time, Parent will indemnify each
officer and director of the Company as of the Effective Time (an "Indemnified
Party") to the fullest extent permitted under applicable law, the Amended and
Restated Certificate of Incorporation and Bylaws of the Company and any
agreement between the Indemnified Party and the Company, in each case as in
effect as of the date hereof with respect to any claim, liability, loss, damage,
judgment, fine, penalty, amount paid in settlement or compromise, cost or
expense based in whole or in part on, or arising in whole or in part out of, the
fact that the Indemnified Party was a director or officer of the Company at or
prior to the Effective Time. The rights under this Section 5.15 are contingent
upon the occurrence of, and will survive consummation of, the transactions
contemplated hereby and are expressly intended to benefit each Indemnified
Party.
(b) Without limiting the provisions of paragraph (a), after the
Effective Time Parent will indemnify and hold harmless each Indemnified Party
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative,
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to the extent arising out of or pertaining to any action or omission in his or
her capacity as a director or officer of the Company or any of the Company
Subsidiaries arising out of or pertaining to the transactions contemplated by
this Agreement (except in respect of actions or omissions that constitute bad
faith, willful misconduct or a breach of duty of loyalty) for a period of six
years after the Effective Time; provided, however, that if, at any time prior to
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the sixth anniversary of the Effective Time, any Indemnified Party delivers to
Parent a written notice asserting a claim for indemnification under this Section
5.15, then the claim asserted in such notice shall survive the sixth anniversary
of the Effective Time until such time as such claim is fully and finally
resolved. In the event of any such claim, action, suit, proceeding or
investigation Parent will pay the reasonable fees and expenses of counsel for
the Indemnified Party promptly after statements therefor are received (provided
that in the event that any Indemnified Party is not entitled to indemnification
hereunder, any amounts advanced on his or her behalf shall be remitted to
Parent); provided, however, that Parent will not be liable for any settlement
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effected without its express written consent. The Indemnified Parties as a group
may retain only one law firm (in addition to local counsel) to represent them
with respect to any single action unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more Indemnified Parties.
(c) Without limiting any of the obligations of Parent set forth
elsewhere in this Section 5.15, Parent shall maintain in effect, during the
three-year period commencing as of the Effective Time, a policy of directors'
and officers' liability insurance for the benefit of each of the Indemnified
Parties providing coverage and containing terms no less advantageous to the
Indemnified Parties than the coverage and terms of the Company's existing policy
of directors' and officers' liability insurance; provided, however, that Parent
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shall not be required to pay a per annum premium in excess of 150% of the per
annum premium that the Company currently pays for its existing policy of
directors' and officers' liability insurance (it being understood that, if the
premium required to be paid by Parent for such policy would exceed such 150%
amount, then the coverage of such policy shall be reduced to the maximum amount
that be obtained for a per annum premium in such 150% amount).
(d) This Section 5.15 will survive the consummation of the Merger, is
intended to benefit and may be enforced by each of the Indemnified Parties
following the Effective Time, and will be binding on all successors and assigns
of Parent.
5.16 Certain Tax Matters.
(a) Return Filing; Information Sharing. Until the Closing Date:
----------------------------------
(i) The Company shall prepare and file, or cause to be prepared and
filed, with the appropriate governmental authority all federal Tax Returns and
all material state, local and foreign Tax Returns required to be filed (with
extensions) by or with respect to the Company and the Company Subsidiaries on or
prior to the Closing Date;
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(ii) The Company agrees that it will, and will cause its affiliates
to, make available all such information, employees and records of or relating to
the Company and the Company Subsidiaries as Parent may request with respect to
matters relating to Taxes (including, without limitation, the right to make
copies of such information and records) and will cooperate with respect to all
matters relating to Taxes (including, without limitation, the filing of Tax
Returns, the filing of an amended Tax Return, audits, and proceedings); and
(iii) If any of the Company or any Company Subsidiary or affiliate
thereof receives any written notice from any Tax authority proposing any audit
or adjustment to any Tax relating to the Company or any Company Subsidiary or
affiliate thereof, Company or such Company Subsidiary or affiliate shall give
prompt written notice thereof to Parent, which notice shall describe in detail
each proposed adjustment.
(b) Certain Tax Opinions.
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(i) Parent represents, warrants and covenants that it has received
an opinion of Dewey Ballantine LLP, counsel to Parent, issued for the sole
reliance of Parent, in form and substance satisfactory to Parent, that the
Merger, if consummated in accordance with this Agreement, and based upon the
Initial Tax Certificates (defined below), will qualify as a reorganization
within the meaning of Section 368(a) of the Code as in effect as of the date
hereof (the "DB Initial Tax Opinion").
(ii) The Company represents, warrants and covenants that it has
received an opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel to the Company (the "WSGR Initial Tax Opinion"), issued for
the sole reliance of the Company, in form and substance satisfactory to the
Company, that the Merger, if consummated in accordance with this Agreement, and
based upon the Initial Tax Certificates (defined below), will qualify as a
reorganization within the meaning of Section 368(a) of the Code as in effect as
of the date hereof.
(iii) In connection with the rendering of the Initial Tax Opinions,
Parent and the Company have furnished Dewey Ballantine LLP and Wilson Sonsini
Goodrich & Rosati, Professional Corporation with certificates signed by officers
having authority to sign such certificates (the "Initial Tax Certificate").
Parent and the Company agree that they will furnish certificates dated as of the
Closing Date in substantially the same form (updated as necessary) as the
Initial Tax Certificates (the "Closing Tax Certificates") in connection with the
issuance of the DB Closing Tax Opinion (as defined in Section 6.2(a) of this
Agreement) and the WSGR Closing Tax Opinion (as defined in Section 6.3(a) of
this Agreement).
(iv) Parent and the Company shall cooperate in causing the Merger
to qualify as a tax-free reorganization under Code Section 368(a) and shall
treat the Merger as such a reorganization in which no other property or money
(within the meaning of Code Section 356) is received by Company stockholders for
all Tax purposes, including the reporting of the Merger as qualifying as such a
reorganization on all relevant federal, state, local and foreign Tax Returns.
Parent and the Company covenant and agree that
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they each shall not take any position or action inconsistent with the Initial
Tax Certificates or the Closing Tax Certificates. Parent and the Company
covenant and agree to (and to cause any affiliate or successor to their assets
or business to) vigorously and in good faith defend all challenges to the tax-
free status of the Merger.
(v) It is understood and agreed that both Dewey Ballantine LLP and
Wilson Sonsini Goodrich & Rosati, Professional Corporation, shall issue to their
respective clients substantially identical opinions to the effect that the
Merger will qualify as a reorganization under Code Section 368(a) and related
matters for description, and inclusion as Exhibits, in the S-4 Registration
Statement and the Joint Proxy Statement.
(c) Tax Covenants.
-------------
Parent and the Company covenant to each other that none of
Parent, the Company or any of their respective subsidiaries has taken (or will
take) any action, including, without limitation, any action inconsistent with
any representation, warranty, or covenant made or to be made in connection with
opinions to be delivered pursuant to Sections 6.2(a) or 6.3(a) hereof. In
addition, Parent and the Company each agree that in the event such party becomes
aware of any such fact or circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization described in section 368(a) of the
Code, it will promptly notify the other party in writing.
5.17 Working Capital Balance.
The Company shall deliver to Parent at least ten days prior to the
Closing Date, a consolidated balance sheet of the Company at October 2, 1999,
certified as to correctness by an officer of the Company (the "Closing Balance
Sheet"). Subject to adjustment as provided in Section 1.7(d) of this Agreement,
Parent agrees that a cash amount equal to the working capital (i.e., current
assets, including cash, minus current liabilities) reflected on the Closing
Balance Sheet less any amount paid by Parent pursuant to the Maintenance Rights
Letter Agreement, dated as of July 10, 1999, by and between the Company and
Parent shall be allocated to the Internet Group. Parent shall deliver to the
Company (i) at least ten days prior to the Closing Date, a consolidated balance
sheet of the Internet Group at October 2, 1999 and (ii) as soon as reasonably
practicable and in any event not later than forty-five days following June 30,
1999, an unaudited combined balance sheet of the Internet Group at June 30, 1999
and the related statements of operations and cash flow of the Internet Group for
the nine months ended June 30, 1999, each certified as to correctness by an
officer of Parent.
5.18 Undisclosed Liabilities.
Except (i) as reflected in the Current Balance Sheet, (ii) as set forth
in Section 5.18 of the Parent Disclosure Schedule or (iii) with respect to any
matter or matters arising since March 31, 1999, which in the aggregate
(excluding any liabilities incurred in connection with activities which are
expressly permitted by Section 4.1(b)(i) through (ix) hereof) shall not exceed
$10,000,000, any liability, indebtedness, obligation or claim of any type,
including any related to Taxes existing on or at the Effective Time, whether
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accrued, absolute, contingent, matured, unmatured or other relating to the
Internet Group, whether known or unknown, will not be attributed to the Internet
Group and shall be attributed to the Parent Group.
5.19 Governance Agreement
Solely with respect to the transactions contemplated by this Agreement
and the Support Agreement, the Company (with the approval of the Disinterested
Directors) hereby (i) waives the standstill obligations of Parent and DEI
contained in Section 2.1 of the Governance Agreement, dated June 18, 1998, by
and among the Company, Parent and DEI (the "Governance Agreement") so long as
this Agreement has not been terminated and remains in full force and effect and
(ii) agrees that the shares of Company Capital Stock that are subject to the
Support Agreement will be deemed to be shares held by Disinterested Shareholders
for purposes of the Governance Agreement. In addition, the Company and Parent
agree that the conversion of the shares of Company Capital Stock, pursuant to
Section 1.7(a) of this Agreement, in the Merger will be effective
notwithstanding, and will not violate, the Governance Agreement.
ARTICLE VI
----------
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party.
The respective obligations of each party to this Agreement to consummate
and effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) No Injunctions or Restraints; Illegality.
----------------------------------------
No temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation, injunction order or decree enacted,
entered, enforced, promulgated, issued or deemed applicable to the Merger which
makes the consummation of the Merger illegal. All waiting periods under the HSR
Act relating to the transactions hereby will have expired or terminated early.
(b) Stockholder Approvals.
---------------------
This Agreement shall have been approved and adopted, and the Merger
shall have been duly approved, by the requisite vote under applicable law and
the Governance Agreement of the stockholders of the Company and the Parent
Charter Amendment shall have been approved by the requisite vote under
applicable law, of the
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stockholders of Parent, and the Parent Charter Amendment shall have been filed
with the Secretary of State of Delaware.
(c) Listing.
The shares of Internet Group Common Stock to be issued in the
Merger to the stockholders of the Company shall have been approved for quotation
or listing (as the case may be), subject to official notice of issuance, on the
Nasdaq National Market or the New York Stock Exchange.
(d) Effectiveness of Registration Statement.
The Form S-4 Registration Statement shall have become effective
in accordance with the provisions of the Securities Act, and no stop order shall
have been issued by the SEC with respect thereto, and no similar proceeding in
respect of the Joint Proxy Statement shall have been initiated or threatened in
writing by the SEC.
6.2 Conditions to Obligations of Parent.
The obligations of Parent to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Tax Opinion.
Parent shall have received the opinion of Dewey Ballantine LLP,
counsel to Parent (the "DB Closing Tax Opinion"), based upon the Closing Tax
Certificates, which opinion shall be satisfactory to Parent in its reasonable
discretion, to the effect that the Merger will be treated as a reorganization
described in Section 368(a) of the Code, and neither Parent nor any of its
subsidiaries will recognize gain or loss by reason of the issuance of the
Internet Group Common Stock, in each case under the law in effect as of the
Closing Date. The parties to this Agreement agree to make such other reasonable
representations as requested by such counsel for the purpose of rendering any
such opinion.
(b) Representations, Warranties and Covenants.
The representations and warranties of the Company in this
Agreement shall be true and correct in all respects on and as of the Effective
Time as though such representations and warranties were made on and as of such
time, except for those representations and warranties which address matters only
as of a particular date (which shall be true and correct only as of such date)
and such inaccuracies as individually or in the aggregate would not have a
Material Adverse Effect on the Company, and the Company shall have performed and
complied in all material respects with all covenants and obligations of this
Agreement required to be performed and complied with by the Company as of the
Effective Time.
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(c) No Material Adverse Effect.
No Material Adverse Effect with respect to the Company shall
have occurred since the date of this Agreement and no events or circumstances
shall have occurred since the date hereof that would have a Material Adverse
Effect on the Company (except for any Material Adverse Effect that shall have
been cured without such cure resulting or reasonably being expected to result in
a Material Adverse Effect on the Company).
(d) Material Adverse Tax Consequence.
There shall not have been a Change of Law (as defined below)
that, in the good faith judgment of Parent after consultation with its external
advisors, could, if adopted, be reasonably likely to have a material adverse tax
consequence to Parent, the Company and/or their respective shareholders, arising
from the transactions contemplated by this Agreement. For purposes of this
Agreement, a "Change of Law" means (i) a published Treasury Regulation
(including a proposed or final regulation, Revenue Ruling, Revenue Procedure, or
notice of intention to issue a regulation), (ii) administrative or judicial
pronouncement (including a private letter ruling, case, technical advice
memorandum, or other form of notice), (iii) proposal made by or on behalf of any
United States Congressional tax writing committee (or any chair thereof), or
(iv) legislation introduced in either house of United States Congress (including
any committee thereof).
(e) Third Party Consents.
Any and all consents, waivers, assignments and approvals listed in
Section 3.3 of the Company Disclosure Schedule (other than those whose failure
to obtain, individually or in the aggregate, would not have a Material Adverse
Effect on the Company or Internet Group) shall have been obtained.
(f) Certificate of the Company.
Parent shall have been provided with a certificate executed on
behalf of the Company by its President and Chief Executive Officer, its Chief
Operating Officer or its Chief Financial Officer to the effect that, as of the
Effective Time, the conditions set forth in Sections 6.2(b) and (c) and 6.3(a)
and (d) have been met.
6.3 Conditions to the Obligations of the Company.
The obligations of the Company to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by the Company:
(a) Tax Opinion.
The Company shall have received the opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, counsel to the Company (the "WSGR
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Closing Tax Opinion"), based upon the Closing Tax Certificates, which opinion
shall be satisfactory to the Company in its reasonable discretion, to the effect
that the Merger will be treated as a reorganization described in Section 368(a)
of the Code under the law in effect as of the Closing Date. The parties to this
Agreement agree to make such other reasonable representations as requested by
such counsel for the purpose of rendering any such opinion.
(b) Representations, Warranties and Covenants.
The representations and warranties of Parent in this Agreement
shall be true and correct in all respects on and as of the Effective Time as
though such representations and warranties were made on and as of the Effective
Time, except for those representations and warranties which address matters only
as of a particular date (which shall be true and correct only as of such date)
and such inaccuracies as individually or in the aggregate would not have a
Material Adverse Effect on Parent or the Internet Group, and Parent shall have
performed and complied in all material respects with all covenants and
obligations of this Agreement required to be performed and complied with by them
as of the Effective Time.
(c) No Material Adverse Effect.
No Material Adverse Effect with respect to the Internet Group
shall have occurred since the date of this Agreement and no events or
circumstances shall have occurred since the date hereof that would have a
Material Adverse Effect on the Internet Group (except for any Material Adverse
Effect that shall have been cured without such cure resulting or reasonably
being expected to result in a Material Adverse Effect on the Internet Group).
(d) Material Adverse Tax Consequence.
There shall not have been a Change of Law that, in the good
faith judgment of the Company after consultation with its external advisors,
could, if adopted, be reasonably likely to have a material adverse tax
consequence to the Company, Parent and/or their respective shareholders, arising
from the transactions contemplated by this Agreement.
(e) Third Party Consents.
Any and all consents, waivers, assignments and approvals
listed in Sections 2.5 and 2.6 of the Parent Disclosure Schedule (other than
those whose failure to obtain, individually or in the aggregate, would not have
a Material Adverse Effect on the Internet Group's business) shall have been
obtained.
(f) The Walt Disney Catalog Working Capital Balance.
At the Effective Time, The Walt Disney Catalog, Inc. shall have
positive working capital (i.e., current assets, including cash, exceeds current
liabilities).
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(g) Certificate of Parent.
The Company shall have been provided with a certificate executed
on behalf of Parent by officers with titles of Senior Vice President or above to
the effect that, as of the Effective Time, the conditions set forth in Sections
6.2(a) and (d) and 6.3 (b) and (c) have been met.
ARTICLE VII
NON-SURVIVAL OF REPRESENTATIONS
7.1 No Survival.
Except as set forth in Section 8.2 hereof, the representations,
warranties, covenants and other agreements made by Parent and the Company
contained herein or in any instrument delivered pursuant to this Agreement shall
terminate and be of no further force or effect at the Effective Time.
Notwithstanding the foregoing, the covenants made by Parent set forth in
Sections 5.4, 5.5, 5.13, 5.15, 5.16, 5.17 and 5.18 hereof shall remain in force
and effect following the Effective Time.
7.2 Disclaimer of Other Representations and Warranties.
No party hereto makes any representation or warranty other than those
representations and warranties set forth in this Agreement (including Exhibits
and Schedules hereto).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination.
This Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(a) by mutual consent of Parent and the Company;
(b) by the Company or Parent if: (i) the Effective Time has not
occurred by February 29, 2000; provided, however, that the right to terminate
-------- -------
this Agreement under this Section 8.1(b)(i) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a material breach of this Agreement; provided, further, that
-------- -------
any party terminating this Agreement pursuant to this Section 8.1(b)(i) shall
provide the other party with written notice of such termination, which notice
(or Parent's response notice in Section 8.3(c)(ii)(B)) shall set forth those
conditions to such party's obligations hereunder that have not been satisfied as
of such date; (ii) there shall be a final nonappealable order of a federal or
state court in effect
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preventing consummation of the Merger; or (iii) there shall be any statute,
rule, regulation, injunction, order or decree enacted, entered, enforced,
promulgated, issued or deemed applicable to the Merger which makes consummation
of the Merger illegal.
(c) by the Company or Parent if (i) the Company Stockholders Meeting
(including any adjournments or postponements thereof) shall have been held and
completed and the Company's stockholders shall have taken a final vote on the
matters set forth in Section 5.2 hereof, and such matters shall not have been
approved at such meeting by the Required Company Stockholder Vote (provided,
--------
further, that the right to terminate this Agreement under this Section 8.1(c)
- -------
shall not be available to the Company or Parent where the failure to obtain the
Required Company Stockholder Vote shall have been caused by the action or
failure to act of such party and such action or failure to act constitutes a
material breach by such party of this Agreement) or (ii) the Parent Stockholders
Meeting (including any adjournments or postponements thereof) shall have been
held and completed and Parent's stockholders shall have taken a final vote on
the matters set forth in Section 5.2 hereof, and such matters shall not have
been approved at such meeting by the Required Parent Stockholder Vote (provided,
--------
further, that the right to terminate this Agreement under Section 8.1(c) shall
- -------
not be available to Parent or the Company where the failure to obtain the
required Parent Stockholder Vote shall have been caused by the action or failure
to act of such party and such action or failure to act constitutes a material
breach by such party of this Agreement);
(d) by Parent or the Company if there shall be any governmental action
taken, or any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Merger by any Governmental Body, which would: (i)
prohibit Parent's ownership or operation of any material portion of the business
of the Company or the Internet Group or (ii) compel Parent or the Company to
dispose of or hold separate all or a material portion of the business assets of
the Company or the Internet Group as a result of the Merger;
(e) by the Company if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation, warranty
or covenant contained in this Agreement on the part of Parent, or if any
representation or warranty on the part of Parent shall have become untrue
(except for those representations and warranties which address matters only as
of a particular date, which shall be true and correct only as of such date), and
such inaccuracy in such representation or warranty or breach shall not have been
cured within thirty (30) calendar days after written notice to Parent, except
for such breaches and inaccuracies as individually or in the aggregate would not
have a Material Adverse Effect on the Internet Group; provided, however, that no
-------- -------
cure period shall be required for a breach which by its nature cannot be cured;
(f) by Parent if it is not in material breach of its obligations under
this Agreement and there has been a breach of any representation, warranty or
covenant contained in this Agreement on the part of the Company, or if any
representation or warranty of the Company shall have become untrue (except for
those representations and warranties which address matters only as of a
particular date, which shall be true and correct only as of such date) and such
inaccuracy in such representations and warranties
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or such breach shall not have been cured within thirty (30) calendar days after
written notice to the Company, except for such breaches and inaccuracies as
individually or in the aggregate would not have a Material Adverse Effect on the
Company; provided, however, that no cure period shall be required for a breach
-------- -------
which by its nature cannot be cured;
(g) by Parent, prior to the Company's obtaining the Required Company
Stockholder Vote and after receipt by the Company of an Acquisition Proposal, if
(x) by the end of the tenth business day following (but not including) the day
Parent notifies the Company that it wishes the Board of Directors of the Company
to publicly reaffirm its recommendation to the Company's stockholders to vote
for the Merger, the Board of Directors of the Company fails to so publicly
reaffirm; or (y) by the later of the end of (A) the tenth business day following
the public announcement of an Acquisition Proposal or (B) the third business day
following (but not including) the day Parent notifies the Company that it wishes
the Board of Directors of the Company to publicly reject such publicly announced
Acquisition Proposal, the Board of Directors of the Company fails to publicly
reject such Acquisition Proposal; or (z) the Board of Directors of the Company
shall have changed its recommendation to the Company's stockholders to vote in
favor of approval of the transactions contemplated hereby;
(h) by the Company, prior to obtaining the Required Company Stockholder
Vote, upon five days' prior notice to Parent (the "Company Superior Proposal
Notice"), if, as a result of a Company Superior Proposal by a party other than
Parent or any of its respective affiliates, the Board of Directors of the
Company determines in good faith, after considering applicable provisions of
state law and after consultation with outside counsel, that acceptance of the
Company Superior Proposal is necessary for the Company's Board of Directors to
act in a manner consistent with its fiduciary duties under applicable law;
provided, however, that the Company's Board of Directors, in making any such
- -------- -------
determination, shall have considered all concessions which have then been
offered by Parent (it being understood that prior to any such termination the
Company shall, and shall cause its respective financial and legal advisors to,
negotiate with Parent to make such adjustments in the terms and conditions of
this Agreement in favor of the Company as would induce the Company to proceed
with a transaction with Parent rather than consummation of a Company Superior
Proposal made by a third party). Notwithstanding the foregoing, prior to or
contemporaneous with any termination under this Section 8.1(h), the Company must
pay to Parent in immediately available funds the fees required to be paid
pursuant to Section 8.3(a) hereof.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors of the party taking such action.
8.2 Effect of Termination.
In the event of termination of this Agreement as provided in Section 8.1
and subject to the payment of any amounts due under Section 8.3, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of Parent,
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Acquisition Company or the Company, or their respective officers, directors or
stockholders, provided that each party shall remain liable for any willful
breaches of such party's covenants hereunder or intentional or willful breaches
of such party's representations and warranties hereunder prior to its
termination; provided, further, that the provisions of Sections 5.4, 5.5 and 8.3
-------- -------
of this Agreement shall remain in full force and effect and survive any
termination of this Agreement.
8.3 Termination Fees and other Events.
(a) If this Agreement is terminated by (i) Parent as a result of a
breach of Section 4.2 by the Company, or (ii) by Parent pursuant to its rights
under Section 8.1(g), or (iii) by the Company pursuant to its rights under
Section 8.1(h), then (A) the Company shall pay to Parent a fee of $75 million in
cash minus any amounts as may have been previously paid by such party pursuant
to this Section 8.3 and (B) if, within 12 months of any such termination
described in clauses (a)(i) through (iii) above, the Company becomes a majority
owned subsidiary of another person or entity or consummates an Acquisition
Proposal with another person or entity which would result in the acquisition of
50% or more of the voting power of the Company (a "Majority Acquisition
Proposal"), the agreements between Parent and/or certain of its subsidiaries and
affiliates and the Company set forth on Exhibit F hereto shall be terminated.
(b) If:
(i) this Agreement is terminated by a party pursuant to Section
8.1(c) following a failure of the Company's stockholders to grant the Required
Company Stockholder Approval; and
(ii) prior to such meeting of the Company's stockholders (and
following the date hereof), there shall have been publicly announced an
Acquisition Proposal (whether or not such Acquisition Proposal shall have been
rejected or shall have been withdrawn prior to the time of such termination or
of the Company Stockholders Meeting); and
(iii) within 12 months of any such termination described in clause
(b)(i) above, the Company becomes a majority-owned subsidiary of another person
or entity or accepts a written offer to consummate or consummates a Majority
Acquisition Proposal upon the signing of a definitive agreement relating to such
Majority Acquisition Proposal, or, if no such agreement is signed, then at the
closing (and as a condition of the closing) of the Company becoming such a
subsidiary or of such Majority Acquisition Proposal, (A) the Company shall pay
to Parent a fee of $75 million in cash, minus any amounts as may have been
previously paid by such party pursuant to this Section 8.3 and (B) the
agreements set forth in Exhibit F hereto shall be terminated.
(c) If this Agreement is terminated by (i) Parent pursuant to Section
8.1(b)(i) solely as a result of the failure of a condition set forth in Section
6.2(a) or (d) of this Agreement to be satisfied or (ii) by the Company pursuant
to Section 8.1(b)(i) and (A) the Company provides Parent with written notice
(the "Company Notice") to the
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effect that all of the conditions set forth in Sections 6.1 and 6.3 have been
satisfied or waived and (B) Parent notifies the Company in writing within ten
business days of the Company Notice that the basis for its failure to close is
solely due to the condition set forth in Section 6.2(a) or (d) not having been
satisfied (provided that Parent's failure to respond shall be deemed to be an
--------
admission of the failure of the condition in Section 6.2(a) or (d)), then Parent
shall purchase from the Company, at a price per share equal to the Termination
Share Price, a number of shares of Company Common Stock equal to $50,000,000
divided by the Termination Share Price. Such purchase and sale shall be effected
by Parent and the Company not later than five business days following the last
day of trading that is used in the calculation the Company Market Price as
described below. As used herein, the "Termination Share Price" means (i) if the
Company Market Price shall be $40.00 per share or more, then the Company Market
Price, or (ii) if the Company Market Price shall be less than $40.00 per share,
then 200% of the Company Market Price. As used herein, " Company Market Price"
means the average of the closing prices per share of Company Common Stock for
the ten trading days after the termination of this Agreement.
(d) If this Agreement is terminated by (i) Parent pursuant to its
rights under Section 8.1(c)(i) and the Required Parent Stockholder Vote is
obtained at the Parent Stockholders Meeting, then the Company shall pay Parent's
actual and documented fees and expenses, excluding any retainer or contingent,
success or similar fees up to $2,500,000 in cash in the aggregate and (ii) the
Company pursuant to pursuant to its rights under Section 8.1(c)(ii) and the
Required Company Stockholder Vote is obtained at the Company Stockholders
Meeting, then Parent shall pay the Company's actual and documented fees and
expenses, excluding any retainer or contingent, success or similar fees up to
$2,500,000 in cash in the aggregate.
(e) The Company acknowledges and agrees that the agreements contained
in this Section 8.3 are an integral part of the transactions contemplated by
this Agreement. No termination by the Company of this Agreement under this
Article VIII shall be effective unless and until all fees required to be then
paid by the Company pursuant to Section 8.3 hereof shall have been received in
immediately available funds by Parent. Notwithstanding anything to the contrary
contained in this Section 8.3, if the Company fails to pay Parent any fees or
expenses due under Section 8.3(a), (b), (c) or (d) within the time required
under this Agreement or, if no time period is specified, within 5 business days
of the event giving rise to the payment of such fees and expenses, in addition
to any other amounts paid or payable pursuant to this Agreement, the Company
shall pay the out-of-pocket costs and expenses (including reasonable legal fees
and expenses) in connection with any action, including the filing of any lawsuit
or other legal action, taken to collect payment together with interest on the
amount of any unpaid fees and expenses at the publicly announced prime rate of
Citibank N.A. from the date such fees and expenses were required to be paid. The
fees and expenses set forth in this Section 8.3 shall not be the exclusive
remedy available against either party if such party willfully breaches this
Agreement.
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8.4 Amendment.
This Agreement may be amended by the parties hereto at any time by
execution of an instrument in writing signed on behalf of Parent, Acquisition
Company and the Company.
8.5 Extension; Waiver.
At any time prior to the Effective Time, Parent and the Company may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial messenger or
courier service, or mailed by registered or certified (return receipt requested)
or overnight mail or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice); provided, however,
-------- -------
that notices sent by mail will not be deemed given until received:
(a) if to the Company:
Infoseek Corporation
1399 Moffett Park Drive
Sunnydale, California 94089
Attention: Harry M. Motro, President
Telephone No: (408) 543-6000
Facsimile No: (408) 734-9350
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with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: David J. Segre, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(b) if to Parent or Acquisition Company:
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Attention: Thomas O. Staggs, Chief Financial Officer
Telephone No.: (818) 560-1000
Facsimile No.: (818) 556-3889
with copies to:
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
Attention: David K. Thompson, Esq.
Telephone No.: (818) 560-1000
Facsimile No.: (818) 563-4160
and
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Morton A. Pierce, Esq.
Telephone No.: (212) 259-6640
Facsimile No.: (212) 259-6333
9.2 Interpretation.
The words "include," "includes" and "including" when used herein shall be
deemed in each case to be followed by the words "without limitation." The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
65
<PAGE>
9.3 Counterparts.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all parties need not sign
the same counterpart.
9.4 Entire Agreement; Assignment.
This Agreement, the Exhibits hereto the Confidentiality Agreement, and
the documents and instruments and other agreements among the parties and/or
their affiliates hereto referenced herein or entered into in connection
herewith: (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings
both written and oral, among the parties with respect to the subject matter
hereof; and (b) shall not be assigned (other than by operation of law) without
the written consent of the other party. The obligations of the parties hereto
shall be binding on the respective legal successor and assigns to the parties
and the successors in interest of all or substantially all of the business of
the respective parties.
9.5 Severability.
In the event that any provision of this Agreement or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
9.6 Other Remedies.
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
9.8 Rules of Construction.
The parties hereto agree that they have been represented by counsel
during the negotiation and execution of this Agreement and, therefor, waive the
application of any
66
<PAGE>
law, regulation, holding or rule of construction providing that ambiguities in
an agreement or other document will be construed against the party drafting such
agreement or document.
9.9 Specific Performance.
The parties hereto agree that irreparable damage could occur in the
event any provision of this Agreement was not performed in accordance with the
terms hereof and that the parties will be entitled to the remedy of specific
performance of the terms hereof, in addition to any other right or remedy any
person hereto may have at law or in equity.
67
<PAGE>
IN WITNESS WHEREOF, Parent, Acquisition Company and the Company have
caused this Agreement to be signed, all as of the date first written above.
THE WALT DISNEY COMPANY
By: /s/ Thomas O. Staggs
---------------------
Name: Thomas O. Staggs
Title: Executive Vice-President
and Chief Financial Officer
BINGO ACQUISITION CORP.
By: /s/ John Ball
--------------
Name: John Ball
Title: Vice-President
INFOSEEK CORPORATION
By: /s/ Harry M. Motro
--------------------
Name: Harry M. Motro
Title: President and Chief
Executive Officer
[SIGNATURE PAGE TO REORGANIZATION AGREEMENT]
68
<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
JULY 12, 1999 CONTACT: (FOR TODAY ONLY) 212-456-7381
Disney: John Dreyer
Christine Castro
Wendy Webb
Infoseek: Amanda Higgins
David Allen
THE WALT DISNEY COMPANY AND INFOSEEK CORPORATION TO COMBINE DISNEY'S BUENA VISTA
INTERNET GROUP WITH INFOSEEK AND CREATE SINGLE INTERNET BUSINESS CALLED GO.COM
New class of common stock to be issued to track performance
of combined enterprise
NEW YORK--The Walt Disney Company (NYSE:DIS) has reached an agreement with
Infoseek Corporation (Nasdaq:SEEK) to combine its Buena Vista Internet Group
(BVIG) with Infoseek and create a single Internet business called go.com. A new
class of common stock, which is expected to be traded on the New York Stock
Exchange under the ticker symbol GO, will be issued to track the performance of
the combined enterprise.
The announcement was made today by Michael D. Eisner, chairman and CEO of
The Walt Disney Company, and Harry Motro, president and CEO of Infoseek. It
follows unanimous approval of the transaction by the Disney Board of Directors
and the non-Disney members of the Infoseek Board of Directors.
In the merger, Infoseek shareholders will receive 1.15 shares of go.com for
each of their Infoseek shares. Given Disney's current approximate 42 percent
ownership of Infoseek and contribution of 52.5 percent of the assets to the
combined enterprise, Disney will have approximately a 72 percent retained
interest in go.com following the merger. The transaction,
1
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which requires approvals by Disney shareholders and non-Disney Infoseek
shareholders, is expected to close by the end of the calendar year.
"Combining Disney's Internet assets with Infoseek takes our online strategy
to the next level and reaffirms The Walt Disney Company's commitment to
maintaining a leadership position on the Internet," Eisner said. "go.com will
unlock the value and potential of our combined Internet assets and position them
to ignite the marketplace with new products and services reaching millions of
current and new users around the world."
"The unmatched combination of the Disney and Infoseek Internet assets will
create value for shareholders of both companies," Motro said. "go.com will have
the benefit of a management and operational structure that can leverage the
strength of The Walt Disney Company while retaining the operating flexibility
required for Internet success. I know of no other Internet company that will be
better positioned for success than go.com," he added.
"This represents an important and historic strategic move for The Walt
Disney Company," said Roy E. Disney, vice chairman. "It is consistent with the
bold and visionary thinking that Disney has used to embrace new technology and
media throughout its history."
The combined businesses are expected to generate approximately $350 million
in revenues for the current fiscal year, on a pro forma basis. Of this total,
approximately $200 million represents Internet-related revenue, with the balance
of the revenue coming from the Disney Catalog. Inclusion of the catalog will
provide product sourcing, fulfillment and customer service infrastructure to
support go.com's growth in online commerce.
The Disney assets being contributed to go.com include Disney.com, Disney's
Club Blast, The Disney Store Online, Disney Travel Online, Disney.com's
international sites, Family.com, ABC.com, Oscar.com and ABCSports.com.
Additional assets include a range of
2
<PAGE>
new web initiatives Disney is developing, such as: Family travel, Family
shopping and Disney auctions. Disney also is contributing its share of the 10-
year joint ventures it currently holds with Infoseek: ABC News Internet
Ventures, which includes ABCNEWS.com, Mr. Showbiz and Wall of Sound; and ESPN
Internet Ventures, which includes ESPN.com, NFL.com, NBA.com, WNBA.com,
NASCAR.com and The ESPN Store Online. Disney will also extend the terms of these
10-year ventures to 99 years.
go.com will continue to benefit from Disney's extensive media promotion
platform, including the ABC Television Network, ABC Radio Network, numerous
cable properties such as ESPN and Disney Channel, the Disney theme parks and
resorts and other Disney media properties. The new business also will have the
advantage of Disney's strong balance sheet and lower cost of capital.
"Disney's Internet business, like the Internet itself, is only beginning to
realize its potential," said Thomas O. Staggs, executive vice president and
chief financial officer of Disney, who has been one of the chief architects of
Disney's Internet strategy since its inception.
Although Disney's first serious Internet initiatives began only in 1995,
Staggs noted that the company already has created and assembled a wide variety
of sports, news, entertainment and family content sites that are leaders in
their respective categories. With Infoseek, it also launched the go.com portal,
which combined Infoseek's user reach, services and unrivaled Internet search
engine with Disney's global brand awareness. "Now, combining the businesses
under go.com should enable us to move the business more nimbly and effectively,"
Staggs added.
3
<PAGE>
The new structure will integrate management, align interests and eliminate
operational redundancies, making it easier to pursue initiatives such as
electronic commerce, international expansion, broadband, third-party
partnerships and cross-network sponsorship opportunities that will increase the
overall strength of the go.com portal. In addition, the tracking stock
structure maintains an Internet-based currency for potential future strategic
acquisitions.
"We believe that our unique network concept, which will integrate deep,
rich sites with a broad range of content and services, has the highest potential
for creating sustained user traffic and revenue growth," said Steve Wadsworth,
president of BVIG.
Motro will continue as president and CEO of Infoseek until closing of the
deal and through a transition period, at which point he has chosen to leave.
"I believe in this deal and in go.com's enormous potential for category
leadership," Motro said. "As I've had the chance to reflect on Infoseek's
tremendous accomplishments and growth, it has become clear that this is a
perfect opportunity for me to take some time off."
"Harry was instrumental in the creation and launch of the GO network and
recognized the value of combining traditional media assets with the Internet,"
Eisner said. "We are grateful to Harry for his leadership since the formation
of GO Network and look forward to his guidance during the transition period."
Staggs will lead an executive team that will manage the transition until
closing. Key team members from BVIG include Wadsworth; Chuck Davis, president,
e-commerce; Kevin Mayer, executive vice president, television network product
and international; and Larry Shapiro, executive vice president, business
development and operations. Team members from Infoseek will include Patrick
Naughton, executive vice president, products; and Beth Haggerty, senior vice
president, advertising sales and sponsorships.
4
<PAGE>
Infoseek Corporation is the home of GO Network (www.go.com), one of the top
five sites on the Internet, according to Media Metrix. In addition, Infoseek
licenses its Ultraseek Server search and navigation software to companies for
their own intranet, extranet and Internet sites. Infoseek is headquartered in
Sunnyvale, Calif.
Disney's Buena Vista Internet Group is responsible for creating and
operating a broad array of family, entertainment, news and sports Web sites,
including Disney.com, the top-ranking kids and family site; Family.com, the
Web's premiere parenting resource; ABC.com, the number one TV network Web site;
ABCNEWS.com, the fastest growing news site online; and ESPN.com, the Web's most
popular sports site.
Other popular BVIG Web offerings include The Disney Store Online, the
Disney Travel Web site, the ESPN Store Online, the official league sites of the
NFL, NBA, NASCAR, WNBA, Mr. Showbiz and Wall of Sound.
Disney and Infoseek management believe certain statements in this press release
may constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements include but are not
limited to those with respect to the potential for the combined Internet assets
to offer new products and services, generate an expanded user base and leverage
operational efficiencies, as well as the expected revenues and revenue growth of
the combined business. These statements are made on the basis of management's
views and assumptions regarding future events and business performance as of the
time the statements are made. Actual results may differ materially from those
expressed or implied. Such differences may result from the ability of the
combined business to successfully develop and introduce new products and
services in a competitive Internet marketplace and the ability of the companies
to combine their Internet operations effectively, as well as from developments
beyond the control of either company, including technological developments and
changes in the economic conditions that may affect the performance of Internet
operations. In addition, changes in competitive conditions and regulatory
developments may affect future business performance, and changing market
conditions may affect the valuation of Internet-related securities.
###
5
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Contacts after July 12:
DISNEY:
John Dreyer (818) 560-5300
Christine Castro (818) 560-6427
Wendy Webb (818) 560-5758
INFOSEEK:
Amanda Higgins (408) 543-6930
David Allen (408) 543-6664
###
6
<PAGE>
EXHIBIT 99.2
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE WALT DISNEY COMPANY
The undersigned, David K. Thompson, certifies that he is the Senior Vice
President-Assistant General Counsel of The Walt Disney Company, a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), and hereby further certifies as follows:
1. The name of the Corporation is The Walt Disney Company and the name
under which the corporation was originally incorporated is DC Holdco, Inc.
2. The original Certificate of Incorporation of the Corporation was filed
in the Office of the Secretary of State of the State of Delaware on July 28,
1995.
3. Restated Certificates of Incorporation were filed in the office of the
Secretary of State of Delaware on September 21, 1995, January 19, 1996, February
20, 1996, February 25, 1998 and June 10, 1998.
4. This Restated Certificate of Incorporation, which amends and restates
the Certificate of Incorporation of the Corporation as heretofore amended and
restated, was duly adopted in accordance with the provisions of Sections 242 and
245 of the General Corporation Law of the State of Delaware.
5. The text of the Restated Certificate of Incorporation, as amended or
supplemented heretofore, is further amended and restated to read as herein set
forth in full:
ARTICLE I
NAME
The name of the Corporation is The Walt Disney Company.
ARTICLE II
ADDRESS OF REGISTERED OFFICE;
NAME OF REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New
<PAGE>
Castle. The name of its registered agent at that address is The Corporation
Trust Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code, as in effect from time to time (the "DGCL").
ARTICLE IV
CAPITAL STOCK
1. AUTHORIZATION.
-------------
The total number of shares of stock which the Corporation shall have
authority to issue is 4,700,000,000, of which 3,600,000,000 shares shall
initially be shares of a class of common stock designated as "Disney Common
Stock," having a par value of $.01 per share (the "Parent Stock"), 1,000,000,000
shares shall initially be shares of a class of common stock designated as
"Disney Internet Group Common Stock," having a par value of $.01 per share (the
"Internet Stock"), and 100,000,000 shares shall be shares of a class of
preferred stock having a par value of $.01 per share ("Preferred Stock") and
issuable in one or more series as hereinafter provided. The Parent Stock and
the Internet Stock shall hereinafter collectively be called "Common Stock" and
either shall sometimes be called a class of Common Stock.
For purposes of this Article IV, references to the "Board of Directors"
shall refer to the Board of Directors of the Corporation, as established in
accordance with Article V of the Certificate of Incorporation of the Corporation
and references to "the Certificate of Incorporation of the Corporation" shall
refer to this Restated Certificate of Incorporation as the same may be amended
from time to time. Certain capitalized terms used in this Article IV shall have
the meanings set forth in subsection 2.6 of this Article. For purposes of this
Article IV, the Parent Stock, when issued, shall be considered issued in respect
of the Parent Group and the Internet Stock, when issued, shall be considered
issued in respect of the Internet Group. The number of authorized shares of any
class or classes of capital stock of the Corporation may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the voting power of the stock
of the Corporation entitled to vote generally in the election of directors. The
number of authorized shares of each class of Common Stock as set forth in the
preceding paragraph may be increased or decreased to the extent permitted by law
by the Board of Directors of the Corporation at any time and from time to time
in its sole discretion; provided that the number of authorized shares of either
--------
class of Common Stock shall not at any time be less than the sum of the number
of outstanding shares of such class of Common Stock plus the number of shares of
such class of Common Stock that may be acquired upon the exercise, exchange or
conversion of any outstanding
2
<PAGE>
Convertible Securities; and provided, further, that any such increase when
-------- -------
added to the aggregate number of authorized shares of the other class of Common
Stock shall not exceed the total number of authorized shares of Common Stock. A
record of any such increase or decrease shall be filed with the records of the
actions of the Board of Directors, provided that the failure to so file such
record shall not invalidate any such increase or decrease made by the Board of
Directors.
2. COMMON STOCK.
------------
The voting powers, preferences and relative, participating, optional or
other special rights of the Common Stock, and the qualifications and
restrictions thereon, shall be as follows in this Section 2.
2.1 DIVIDENDS.
---------
Subject to any preferences and relative, participating, optional or other
special rights of any outstanding series of Preferred Stock and any
qualifications or restrictions on the Common Stock or any class thereof created
thereby, dividends may be declared and paid upon each class of Common Stock,
upon the terms, with respect to each such class, and subject to the limitations
provided for in this subsection 2.1, as the Board of Directors may determine.
2.1.1 LIMITATION ON DIVIDENDS ON PARENT STOCK.
---------------------------------------
Dividends on Parent Stock may be declared and paid only out of the
lesser of (i) the funds of the Corporation legally available therefor and (ii)
the Parent Group Available Dividend Amount.
2.1.2 LIMITATION ON DIVIDENDS ON INTERNET STOCK.
-----------------------------------------
Dividends on Internet Stock may be declared and paid only out of the
lesser of (i) the funds of the Corporation legally available therefor and (ii)
the Internet Group Available Dividend Amount.
2.1.3 DISCRIMINATION IN DIVIDENDS BETWEEN CLASSES OF COMMON STOCK.
-----------------------------------------------------------
The Board of Directors, subject to the provisions of subsections 2.1.1
and 2.1.2, may at any time declare and pay dividends exclusively on Parent
Stock, exclusively on Internet Stock or on both such classes in equal or unequal
amounts, notwithstanding the relative amounts of the Parent Group Available
Dividend Amount and the Internet Group Available Dividend Amount, the amount of
dividends previously declared on each class of Common Stock, the respective
voting or liquidation rights of each class of Common Stock or any other factor.
2.1.4 SHARE DISTRIBUTIONS.
-------------------
3
<PAGE>
Subject to subsections 2.1.1 and 2.1.2, as the case may be, the Board
of Directors may declare and pay dividends or distributions of shares of Common
Stock (or Convertible Securities convertible into or exchangeable or exercisable
for shares of Common Stock) on shares of Common Stock or shares of Preferred
Stock only as follows:
(A) dividends or distributions of shares of Parent Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of Parent Stock) on shares of Parent Stock or shares of Preferred Stock
attributed as provided by Section 3 to the Parent Group;
(B) dividends or distributions of shares of Internet Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of Internet Stock) on shares of Internet Stock or shares of Preferred
Stock attributed as provided by Section 3 to the Internet Group; and
(C) dividends or distributions of shares of Internet Stock (or
Convertible Securities convertible into or exchangeable or exercisable for
shares of Internet Stock) on shares of Parent Stock or shares of Preferred
Stock attributed as provided by Section 3 to the Parent Group, but only if the
sum of (1) the number of shares of Internet Stock to be so issued (or the number
of such shares which would be issuable upon conversion, exchange or exercise of
any Convertible Securities to be so issued) and (2) the number of shares of
Internet Stock which are issuable upon conversion, exchange or exercise of any
Convertible Securities then outstanding that are attributed in accordance with
this Article IV to the Parent Group, is less than or equal to the Number of
Shares Issuable with Respect to the Retained Interest.
For purposes of this subsection 2.1.4, any outstanding Convertible
Securities that are convertible into or exchangeable or exercisable for any
other Convertible Securities which are themselves convertible into or
exchangeable or exercisable for Parent Stock or Internet Stock (or other
Convertible Securities that are so convertible, exchangeable or exercisable)
shall be deemed to have been converted, exchanged or exercised in full for such
Convertible Securities.
2.2 VOTING POWERS.
-------------
2.2.1 CALCULATION OF RELATIVE VOTING RIGHTS.
-------------------------------------
Except as otherwise provided in subsection 2.2.2 or by law or by the
terms of any outstanding series of Preferred Stock or any provision of the
Certificate of Incorporation or bylaws of the Corporation, the entire voting
power of the stockholders of the Corporation shall be vested in the holders of
Common Stock of the Corporation, who shall be entitled to vote on any matter on
which the holders of stock of the Corporation shall, by law or by the provisions
of the Certificate of Incorporation or bylaws of the Corporation, be entitled to
vote, and each class of Common Stock shall vote thereon together as though one
class. On each matter to be voted on by the holders of all classes of Common
Stock voting together as one class, (i) each outstanding share of Parent Stock
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<PAGE>
shall have one vote and (ii) each outstanding share of Internet Stock shall have
a number of votes (including a fraction of one vote) equal to (A) prior to the
thirty-first Trading Day after the Effective Date, one vote and (B) thereafter,
the average Market Value of a share of Internet Stock during the twenty
consecutive Trading Days next preceding the tenth Trading Day prior to the
record date for determining the stockholders entitled to vote divided by the
average over the same twenty Trading Days of the Market Value of a share of the
Parent Stock, expressed as a decimal fraction rounded to the nearest five
decimal places; provided, that, in the event that the foregoing calculation
--------
results in the holders of Internet Stock holding in excess of 40% of the total
voting power of all outstanding shares of Common Stock, the vote of each share
of Internet Stock shall be reduced such that all of the outstanding shares of
Internet Stock in the aggregate represent 40% of the total voting power of all
outstanding shares of Common Stock.
2.2.2 MATTERS AS TO WHICH SEPARATE CLASS VOTE IS REQUIRED.
---------------------------------------------------
Notwithstanding the foregoing provisions of subsection 2.2.1, in
addition to any other approvals as may be required by applicable provisions of
law or by the terms of any outstanding series of Preferred Stock or any
provision of the Certificate of Incorporation or bylaws of the Corporation:
(i) any amendment of the Certificate of Incorporation of
the Corporation that would have the effect of altering the voting powers of the
Internet Stock as set forth in subsection 2.2.1 shall require the approval of
the holders of a majority of the outstanding shares of Internet Stock voting as
a separate class;
(ii) any amendment of the Certificate of Incorporation of
the Corporation that would have the effect of altering the voting powers of the
Parent Stock as set forth in subsection 2.2.1 shall require the approval of the
holders of a majority of the outstanding shares of Parent Stock voting as a
separate class;
(iii) other than pursuant to (a) Section 2.3 hereof or (b)
any contract, agreement or arrangement involving the Internet Group and the
Parent Group in the ordinary course of business of each such Group as
contemplated in the Common Stock Policies, including with respect to cash
management policies, (A) the use of any proceeds from the Disposition of the
properties or assets allocated to the Internet Group by the Parent Group (or the
transfer or allocation of such proceeds to the Parent Group) without fair
compensation being allocated to the Internet Group or (B) the use of any
properties or assets allocated to the Internet Group by the Parent Group (or the
transfer or allocation of such properties or assets to the Parent Group) or the
dividend or other distribution to the holders of any other class or series of
capital stock of the Corporation of any of the properties or assets allocated to
the Internet Group without fair compensation being allocated to the Internet
Group shall, in each case, require the approval of the holders of a majority of
the outstanding shares of Internet Stock voting as a separate class; provided
--------
that, the Corporation may without such approval use any such
5
<PAGE>
proceeds or properties or assets for the benefit of the Parent Group or effect
such a dividend or distribution to the extent that the Number of Shares Issuable
With Respect to the Retained Interest is decreased as a result thereof.
Notwithstanding the foregoing, if the Board of Directors has determined (a) to
allocate to, or permit the use by, the Parent Group of the assets or properties
(or proceeds of assets or properties) of the Internet Group and (b)(1) without
such allocation or use, that the Parent Group will be unable to satisfy the
liabilities allocated to it as they become due or (2) the Corporation is the
debtor in pending United States bankruptcy proceedings, whether voluntary or
involuntary, the Parent Group may, after reducing the Number of Shares Issuable
With Respect to the Retained Interest to zero (whether or not in connection with
the allocation or use of assets or properties (or proceeds of assets or
properties)) of the Internet Group to or by the Parent Group, be allocated or
use such assets or properties (or proceeds of assets or properties) of the
Internet Group without complying with the above provisions of this clause (iii).
(iv) any merger or business combination as a result of
which (A) the holders of all classes and series of Common Stock of the
Corporation shall no longer own at least 50% of the voting power of the
surviving corporation and (B) the holders of all classes and series of Common
Stock of the Corporation do not receive consideration distributed among such
holders in proportion to the Market Capitalization of each class and series of
Common Stock as of the date of the first public announcement of such merger or
business combination shall require the approval of the holders of a majority of
the outstanding shares of Internet Stock voting as a separate class; provided,
--------
that there shall be no separate class vote of holders of Internet Stock if the
merger or business combination occurs after the first anniversary of the
Effective Date and the consideration received by the holders of Internet Stock
is equal to or greater than what holders of Internet Stock would otherwise be
entitled if the Internet Stock had been converted pursuant to Section 2.4.1(C)
hereof as of the record date for determining the stockholders of the Corporation
entitled to vote on such merger or business combination.
(v) with respect to any matter as to which the holders of
Internet Stock and/or the holders of Parent Stock shall be entitled, under
applicable law, to vote as a separate class, the holders of Internet Stock
and/or the holders of Parent Stock, as the case may be, shall be entitled to
vote as a separate class; and
(vi) all such other matters as the Board of Directors, in
its sole discretion, may determine shall require the approval of the holders of
the outstanding shares of Internet Stock voting as a separate class.
With respect to any matter as to which the holders of Internet Stock
or Parent Stock are entitled to vote as a separate class, each share of that
class of Common Stock shall, for purposes of such separate class vote, be
entitled to one vote on such matter.
2.2.3 VOTING RIGHTS IF ONE CLASS OF COMMON STOCK OUTSTANDING.
------------------------------------------------------
6
<PAGE>
Notwithstanding the foregoing provisions of this subsection 2.2, if
shares of only one class of Common Stock are outstanding on the record date for
determining the holders of Common Stock entitled to vote on any matter, then
each share of that class shall be entitled to one vote.
2.3 LIQUIDATION RIGHTS.
------------------
In the event of the voluntary or involuntary dissolution of the
Corporation or the liquidation and winding up of the Corporation, after payment
or provision for payment of the debts and other liabilities of the Corporation
and the full preferential amounts (including any accumulated and unpaid
dividends) to which the holders of Preferred Stock are entitled (regardless of
the Group to which such shares of Preferred Stock were attributed in accordance
with this Article IV), unless otherwise provided in respect of a series of
Preferred Stock by the resolution of the Board of Directors fixing the
liquidation rights and preferences of such series of Preferred Stock, the
holders of the outstanding shares of Common Stock shall be entitled to receive
the remaining assets of the Corporation on a per share basis in proportion to
the respective liquidation units per shares of such class. Each share of Parent
Stock shall have one liquidation unit and each share of Internet Stock shall
have a number of liquidation units (including a fraction of one liquidation
unit) equal to the average Market Value of a share of Internet Stock during the
twenty consecutive Trading Days next preceding the 90/th/ Trading Day after the
Effective Date (or in the event that the voluntary or involuntary dissolution or
the liquidation and winding up of the Corporation occurs prior to the 90/th
/Trading Day after the Effective Date, the average Market Value of a share of
Internet Stock over either (i) the twenty consecutive Trading Days immediately
preceding such dissolution or the liquidation and winding up of the Corporation
or (ii) such lesser number of consecutive Trading Days in the event that the
dissolution or liquidation and winding up of the Corporation occurs prior to the
21/st/ Trading Day after the Effective Date) divided by the average over the
same twenty Trading Days (or such shorter period) of the Market Value of a share
of Parent Stock, expressed as a decimal fraction rounded to the nearest five
decimal places. Neither the merger nor consolidation of the Corporation into or
with any other company, nor the merger or consolidation of any other company
into or with the Corporation, nor a sale, transfer or lease of all or any part
of the assets of the Corporation, shall, alone, be deemed a liquidation or
winding up of the Corporation, or cause the dissolution of the Corporation, for
purposes of this subsection 2.3.
If the Corporation shall in any manner subdivide (by stock split,
reclassification or otherwise) or combine (by reverse stock split,
reclassification or otherwise) the outstanding shares of Parent Stock or
Internet Stock, or declare a dividend in shares of either class to holders of
such class, the per share liquidation units of either class of Common Stock
specified in the preceding paragraph of this Section 2.3, as adjusted from time
to time, shall be appropriately adjusted as determined by the Board of
Directors, so as to avoid dilution in the aggregate of the relative liquidation
rights of the shares of any class of Common Stock.
2.4 CONVERSION OF INTERNET STOCK.
----------------------------
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Shares of Internet Stock are subject to conversion or redemption, as
the case may be, upon the terms provided below in this subsection 2.4.
2.4.1 CONVERSION OF INTERNET STOCK.
----------------------------
(A) In the event of the Disposition, in one transaction or a
series of related transactions, by the Corporation and/or its subsidiaries of
all or substantially all of the properties and assets attributed to the Internet
Group to one or more persons or entities (other than the Disposition (1) by the
Corporation of its properties and assets in one transaction or a series of
related transactions in connection with the dissolution or the liquidation and
winding up of the Corporation and the distribution of assets to stockholders as
referred to in subsection 2.3, (2) of the properties and assets attributed to
the Internet Group to all holders of shares of Internet Stock and to the
Corporation or subsidiaries thereof, divided among such holders and the
Corporation or subsidiaries thereof on a pro rata basis in accordance with the
number of shares of Internet Stock outstanding and the Number of Shares Issuable
with Respect to the Retained Interest, (3) to any person or entity controlled
(as determined by the Board of Directors) by the Corporation or (4) pursuant to
a Related Business Transaction), the Corporation shall, on or prior to the 45th
Trading Day after the date of consummation of such Disposition (the "Internet
Group Disposition Date"), declare that each outstanding share of Internet Stock
shall be converted as of the Conversion Date provided by paragraph (A) of
subsection 2.4.4 into a number of fully paid and nonassessable shares of Parent
Stock (or, if the Parent Stock is not Publicly Traded at such time and shares of
another class or series of common stock of the Corporation (other than Internet
Stock) are then Publicly Traded, of such other class or series of common stock
as has the largest Market Capitalization as of the close of business on the
Trading Day immediately preceding the date of the notice of such conversion
required by paragraph (A) of subsection 2.4.4) equal to the lesser of (i) 110%
of the ratio, expressed as a decimal fraction rounded to the nearest five
decimal places, of the average Market Value of one share of Internet Stock over
the twenty consecutive Trading Days next preceding the first public announcement
of a definitive agreement with respect to such Disposition to the average Market
Value of one share of Parent Stock (or such other class or series of common
stock) over the same twenty Trading Day period and (ii) what holders of Internet
Stock would otherwise be entitled to pursuant to Section 2.4.1(C) hereof upon
the conversion of Internet Stock into shares of Parent Stock.
(B) For purposes of this subsection 2.4.1:
(1) as of any date, "substantially all of the properties
and assets" attributed to the Internet Group shall mean a portion of such
properties and assets (A) that represents at least 80% of the Fair Value of the
properties and assets attributed to the Internet Group as of such date or (B)
from which were derived at least 80% of the aggregate revenues for the
immediately preceding twelve fiscal quarterly periods of the Corporation
(calculated on a pro forma basis to include revenues derived from any of such
--- -----
properties or assets acquired during such period) derived from the properties
attributed to the Internet Group as of such date; and
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(2) in the case of a Disposition of the properties and
assets attributed to the Internet Group in a series of related transactions,
such Disposition shall not be deemed to have been consummated until the
consummation of the last of such transactions.
(C) The Board of Directors may, at any time or from time to
time after either the first anniversary of the Effective Date or the occurrence
of a Tax Event (defined below) in its sole discretion, declare that all of the
outstanding shares of Internet Stock shall be converted, as of the Conversion
Date provided by paragraph (A) of subsection 2.4.4, into the number of fully
paid and nonassessable shares of Parent Stock (or, if the Parent Stock is not
Publicly Traded at such time and shares of any other class or series of common
stock of the Corporation (other than Internet Stock) are then Publicly Traded,
of such other class or series of common stock as has the largest Market
Capitalization as of the close of business on the Trading Day immediately
preceding the date of the notice of conversion required by paragraph (A) of
subsection 2.4.4) equal to the applicable percentage, on the Conversion Date set
forth below, of the Market Value Ratio of the Internet Stock to the Parent Stock
as of the fifth Trading Day prior to the date of the notice of such conversion
required by paragraph (A) of subsection 2.4.4:
ANY CONVERSION DATE
OCCURRING AFTER THE
FOLLOWING ANNIVERSARY OF
THE EFFECTIVE DATE AND ON OR PERCENTAGE OF MARKET
PRIOR TO THE NEXT SUCH VALUE RATIO OF THE INTERNET
ANNIVERSARY STOCK TO THE PARENT STOCK
- ---------------------------- ---------------------------
First 120%
Second 115%
Third through Ninth 110%
Tenth and Thereafter 105%
However, if a Tax Event has occurred, the applicable percentage of the
Market Value Ratio of the Internet Stock to the Parent Stock shall equal 110%
irrespective of the Conversion Date. "Tax Event" means the receipt by the
Corporation of an opinion of tax counsel of the Corporation's choice experienced
in such matters, who shall not be an officer or employee of the Corporation or
any of its affiliates, to the effect that, as a result of any amendment to, or
change in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein (including any
announced proposed change by an administrative agency in such regulations), or
as a result of any official or administrative pronouncement or action or
judicial decision interpreting or applying such laws or regulations, it is more
likely than not that for United States federal income tax purposes (1) the
Corporation, its subsidiaries or affiliates, or any of its successors or its
stockholders is or, at any time in the future, will be subject to tax upon the
issuance of shares of either Parent Stock or Internet Stock or (2) either Parent
Stock or Internet Stock is not or, at any time in the future, will not be
treated solely as stock of the Corporation. For purposes of rendering such
opinion, tax counsel shall assume that any administrative proposals will be
adopted as proposed. However, in
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the event a change in law is proposed, tax counsel shall render an opinion only
in the event of enactment.
2.4.2 CONVERSION OF PARENT STOCK.
--------------------------
At any time following the tenth anniversary of the Effective Date, the
Board of Directors may declare that all of the outstanding shares of Parent
Stock shall be converted, as of the Conversion Date provided by paragraph (A) of
subsection 2.4.4, into, with respect to each such share to be converted, the
number of fully paid and nonassessable shares of Internet Stock (or, if the
Internet Stock is not Publicly Traded at such time and shares of any other class
or series of common stock of the Corporation (other than Parent Stock) are then
Publicly Traded, of such other class or series of common stock as has the
largest Market Capitalization as of the close of business on the Trading Day
immediately preceding the date of the notice of conversion required by paragraph
(A) of subsection 2.4.4) equal to 100% of the Market Value Ratio of the Parent
Stock to the Internet Stock as of the fifth Trading Day prior to the date of the
notice of such conversion required by paragraph (A) of subsection 2.4.4.
2.4.3 TREATMENT OF CONVERTIBLE SECURITIES.
-----------------------------------
After any Conversion Date on which all outstanding shares of any class
of Common Stock were converted, any share of such class of Common Stock that is
to be issued on conversion, exchange or exercise of any Convertible Securities
shall, immediately upon such conversion, exchange or exercise and without any
notice from or to, or any other action on the part of, the Corporation or its
Board of Directors or the holder of such Convertible Security, in the event the
shares of any class of Common Stock outstanding on such Conversion Date were
converted into shares of the other class of Common Stock (or another class or
series of common stock of the Corporation) pursuant to paragraph (A) or
paragraph (C) of subsection 2.4.1 or subsection 2.4.2, be converted into the
amount of cash and/or the number of shares of the kind of capital stock and/or
other securities or property of the Corporation that the number of shares of
such class of Common Stock that were to be issued upon such conversion, exchange
or exercise would have received had such shares been outstanding on such
Conversion Date.
The provisions of the immediately preceding sentence shall not apply
to the extent that other adjustments in respect of such conversion or exchange
of a class of Common Stock are otherwise made pursuant to the provisions of such
Convertible Securities.
2.4.4 NOTICE AND OTHER PROVISIONS.
---------------------------
(A) Not later than the 35th Trading Day prior to the
Conversion Date pursuant to paragraph (A) or paragraph (C) of subsection 2.4.1,
the Corporation shall cause notice to be given to each holder of shares of
Internet Stock and to each holder of Convertible Securities that are convertible
into or exchangeable or exercisable for shares of Internet Stock (unless
alternate provision for such notice to the holders of such Convertible
Securities is made pursuant to the terms of such Convertible Securities)
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<PAGE>
setting forth (1) a statement that all outstanding shares of Internet Stock
shall be converted, (2) the Conversion Date (which, in the case of a conversion
after a Disposition, shall not be more than 45 Trading Days following the
consummation of such Disposition), (3) the per share number of shares of Parent
Stock or another class or series of Common Stock of the Corporation, as the case
may be, to be received with respect to each share of Internet Stock, including
information as to the calculation thereof, (4) the place or places where
certificates for shares of Internet Stock, properly endorsed or assigned for
transfer (unless the Corporation shall waive such requirement), are to be
surrendered for delivery of certificates for shares of Parent Stock, (5) the
number of outstanding shares of Parent Stock and the number of shares of Parent
Stock into or for which outstanding Convertible Securities are then convertible,
exchangeable or exercisable, (6) a statement to the effect that, subject to
paragraph (D) of this subsection 2.4.4, dividends on such shares of Internet
Stock shall cease to be paid as of such Conversion Date and (7) in the case of
notice to holders of such Convertible Securities, a statement to the effect that
a holder of such Convertible Securities shall be entitled to receive shares of
common stock upon such conversion only if such holder properly converts,
exchanges or exercises such Convertible Securities on or prior to such
Conversion Date and a statement as to what, if anything, such holder will be
entitled to receive pursuant to the terms of such Convertible Securities or, if
applicable, this subsection 2.4 if such holder thereafter converts, exchanges or
exercises such Convertible Securities. Such notice shall be sent by first-class
mail, postage prepaid, to each such holder at such holder's address as the same
appears on the transfer books of the Corporation or by such other methods as may
be determined from time to time by the Board of Directors of the Corporation.
(B) The Corporation shall not be required to issue or deliver
fractional shares of any capital stock or of any other securities to any holder
of Internet Stock upon any conversion or other distribution pursuant to this
subsection 2.4. If more than one share of Internet Stock shall be held at the
same time by the same holder, the Corporation may aggregate the number of shares
of any capital stock that shall be issuable or any other securities or property
that shall be distributable to such holder upon any conversion or other
distribution (including any fractional shares). If there are fractional shares
of any capital stock or of any other securities remaining to be issued or
distributed to the holders of Internet Stock, the Corporation shall, if such
fractional shares are not issued or distributed to the holder, pay cash in
respect of such fractional shares in an amount equal to the Fair Value thereof
on the fifth Trading Day prior to the date such payment is to be made (without
interest).
(C) No adjustments in respect of dividends shall be made upon
the conversion of any shares of Internet Stock; provided that if the Conversion
--------
Date, with respect to any shares of Internet Stock shall be subsequent to the
record date for the payment of a dividend or other distribution thereon or with
respect thereto, the holders of such shares of Internet Stock at the close of
business on such record date shall be entitled to receive the dividend or other
distribution payable on or with respect to such shares on the date set for
payment of such dividend or other distribution, in each case without interest,
notwithstanding the subsequent conversion of such shares.
11
<PAGE>
(D) Before any holder of Internet Stock shall be entitled to
receive any cash payment and/or certificates or instruments representing shares
of any capital stock and/or other securities or property to be distributed to
such holder with respect to such shares of Internet Stock pursuant to this
subsection 2.4, such holder shall surrender at such place as the Corporation
shall specify certificates for such shares of Internet Stock, properly endorsed
or assigned for transfer (unless the Corporation shall waive such requirement).
The Corporation shall as soon as practicable after receipt of certificates
representing such shares of Internet Stock deliver to the person for whose
account such shares of Internet Stock were so surrendered, or to such person's
nominee or nominees, the cash and/or the certificates or instruments
representing the number of whole shares of the kind of capital stock and/or
other securities or property to which such person shall be entitled as
aforesaid, together with any payment in respect of fractional shares
contemplated by paragraph (B) of this subsection 2.4.4, in each case without
interest.
(E) From and after any applicable Conversion Date, all rights
of a holder of shares of Internet Stock that were converted shall cease except
for the right, upon surrender of the certificates representing such shares of
Internet Stock as required by paragraph (D) of this subsection 2.4.4, to receive
the cash and/or the certificates or instruments representing shares of the kind
of capital stock and/or other securities or property for which such shares were
converted, together with any payment in respect of fractional shares
contemplated by paragraph (B) of this subsection 2.4.4 and rights to dividends
as provided in paragraph (C) of this subsection 2.4.4, in each case without
interest. No holder of a certificate that immediately prior to the applicable
Conversion Date represented shares of Internet Stock shall be entitled to
receive any dividend or other distribution or interest payment with respect to
shares of any kind of capital stock or other security or instrument for which
Internet Stock was converted until the surrender as required by this subsection
2.4 of such certificate in exchange for a certificate or certificates or
instrument or instruments representing such capital stock or other security.
Upon such surrender, there shall be paid to the holder the amount of any
dividends or other distributions (without interest) which theretofore became
payable on any class of capital stock of the Corporation as of a record date
after the Conversion Date, but that were not paid by reason of the foregoing,
with respect to the number of whole shares of the kind of capital stock
represented by the certificate or certificates issued upon such surrender. From
and after a Conversion Date, the Corporation shall, however, be entitled to
treat the certificates for Internet Stock that have not yet been surrendered for
conversion as evidencing the ownership of the number of whole shares of the kind
or kinds of capital stock of the Corporation for which the shares of Internet
Stock represented by such certificates shall have been converted,
notwithstanding the failure to surrender such certificates.
(F) The Corporation shall pay any and all documentary, stamp
or similar issue or transfer taxes that may be payable in respect of the
issuance or delivery of any shares of capital stock and/or other securities upon
conversion of shares of Internet Stock pursuant to this subsection 2.4.4. The
Corporation shall not, however, be required to pay any tax that may be payable
in respect of any transfer involved in the issuance or delivery of any shares of
capital stock and/or other securities in a name other than that in
12
<PAGE>
which the shares of Internet Stock so converted were registered, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance or delivery has paid to the Corporation the amount of any such tax or
has established to the satisfaction of the Corporation that such tax has been
paid.
(G) Neither the failure to mail any notice required by this
subsection 2.4.4 to any particular holder of Internet Stock or of Convertible
Securities nor any defect therein shall affect the sufficiency thereof with
respect to any other holder of outstanding shares of Internet Stock or of
Convertible Securities or the validity of any such conversion.
(H) The Board of Directors may establish such rules and
requirements to facilitate the effectuation of the transactions contemplated by
this subsection 2.4 as the Board of Directors shall determine to be appropriate.
2.5 APPLICATION OF THE PROVISIONS OF ARTICLE IV.
-------------------------------------------
2.5.1 CERTAIN DETERMINATIONS BY THE BOARD OF DIRECTORS.
------------------------------------------------
In addition to the determinations regarding Preferred Stock to be made
by the Board of Directors as provided by Section 3, the Board of Directors shall
make such determinations with respect to the assets and liabilities to be
attributed to the Groups, the items of income and expenses attributed to the
Groups for purposes of determining the Parent Group Net Earnings (Loss) and the
Internet Group Net Earnings (Loss) and the application of the provisions of this
Section 2 to transactions to be engaged in by the Corporation, including,
without limiting the foregoing, the determinations referred to in the following
paragraphs (A), (B), (C) and (D) of this subsection 2.5.1. A record of any such
determination shall be filed with the records of the actions of the Board of
Directors, provided that the failure to so file such record shall not invalidate
any such determination made by the Board of Directors.
(A) Upon any acquisition by the Corporation or its
subsidiaries of any assets or business, or any assumption of liabilities,
outside of the ordinary course of business of the Internet Group or the Parent
Group, as the case may be, and subject to the Common Stock Policies then in
effect, the Board of Directors shall determine whether such assets, business and
liabilities (or an interest therein) shall be for the benefit of the Parent
Group or the Internet Group or that an interest therein shall be partly for the
benefit of the Parent Group and partly for the benefit of the Internet Group
and, accordingly, shall be attributed to the Internet Group or the Parent Group,
or partly to each, in accordance with subsection 2.6.7 or 2.6.16, as the case
may be.
(B) Upon any issuance of any shares of Internet Stock at a
time when the Number of Shares Issuable with Respect to the Retained Interest is
more than zero, the Board of Directors shall determine, based on the use of the
proceeds of such issuance and any other relevant factors, whether all or any
part of the shares of Internet Stock so issued should reduce the Number of
Shares Issuable with Respect to the
13
<PAGE>
Retained Interest and, if so, the Number of Shares Issuable with Respect to the
Retained Interest shall be adjusted accordingly.
(C) Upon any issuance by the Corporation or any subsidiary
thereof of any Convertible Securities that are convertible into or exchangeable
or exercisable for shares of Internet Stock, if at the time such Convertible
Securities are issued the Number of Shares Issuable with Respect to the Retained
Interest is greater than zero, the Board of Directors shall determine, based on
the use of the proceeds of such issuance of Convertible Securities and any other
relevant factors, whether, upon conversion, exchange or exercise thereof, the
issuance of shares of Internet Stock pursuant thereto shall, in whole or in
part, reduce the Number of Shares Issuable with Respect to the Retained
Interest.
(D) Upon any redemption or repurchase by the Corporation or
any subsidiary thereof of shares of any Preferred Stock of any class or series
or of other securities or debt obligations of the Corporation, if some of such
shares, other securities or debt obligations were attributed to the Parent Group
and some of such shares, other securities or debt obligations were attributed to
the Internet Group, the Board of Directors shall determine which, if any, of
such shares, other securities or debt obligations redeemed or repurchased shall
be attributed to the Parent Group and which, if any, of such shares, other
securities or debt obligations shall be attributed to the Internet Group and,
accordingly, how many of the shares of such series of Preferred Stock or of such
other securities, or how much of such debt obligations, that remain outstanding,
if any, continue to be attributed to the Parent Group or to the Internet Group.
2.5.2 CERTAIN DETERMINATIONS NOT REQUIRED.
-----------------------------------
Notwithstanding the foregoing provisions of this subsection 2.5, the
provisions of subsections 2.6.7, 2.6.9, 2.6.16 or 2.6.18 or any other provision
of this Article IV, at any time when there are not outstanding both (i) one or
more shares of Parent Stock or Convertible Securities convertible into or
exchangeable or exercisable for Parent Stock and (ii) one or more shares of
Internet Stock or Convertible Securities convertible into or exchangeable or
exercisable for Internet Stock, the Corporation need not (A) attribute any of
the assets or liabilities of the Corporation or any of its subsidiaries to the
Parent Group or the Internet Group or any of the earnings (or any loss) of the
Corporation or any of its subsidiaries to the Parent Group Net Earnings (Loss)
or the Internet Group Net Earnings (Loss) or (B) make any determination required
in connection therewith, nor shall the Board of Directors be required to make
any of the determinations otherwise required by this Article IV, and in such
circumstances the holders of the shares of Parent Stock or Internet Stock
outstanding, as the case may be, shall (unless otherwise specifically provided
by the Certificate of Incorporation of the Corporation) be entitled to all the
voting powers, preferences, optional or other special rights of both classes of
the Common Stock without differentiation between the Parent Stock and the
Internet Stock and any provision of this Article IV to the contrary shall no
longer be in effect or operative and the Board of Directors may cause the
Certificate of Incorporation of the Corporation to be amended as permitted by
law to delete such provisions as are no longer operative or of further effect.
14
<PAGE>
2.5.3 BOARD DETERMINATIONS BINDING.
----------------------------
Subject to applicable law, any determinations made in good faith by
the Board of Directors of the Corporation under any provision of this subsection
2.5 or otherwise in furtherance of the application of this Section 2 shall be
final and binding on all stockholders.
2.6 CERTAIN DEFINITIONS.
-------------------
As used in this Section 2 of this Article IV, the following terms
shall have the following meanings (with terms defined in the singular having
comparable meaning when used in the plural and vice versa), unless the context
otherwise requires. As used in this subsection 2.6, a "contribution" or
"transfer" of assets or properties from one Group to another shall refer to the
reattribution of such assets or properties from the contributing or transferring
Group to the other Group (as opposed to an actual transfer, assignment,
contribution or comparable transaction) and correlative phrases shall have
correlative meanings.
2.6.1 CONVERSION DATE shall mean the date fixed by the Board of
Directors as the effective date for the conversion of shares of Internet Stock
into shares of Parent Stock (or another class or series of common stock of the
Corporation), or the conversion of shares of Parent Stock into shares of
Internet Stock (or another class or series of common stock of the Corporation),
as the case may be, as shall be set forth in the notice to holders of shares of
Internet Stock or Parent Stock, as the case may be, and to holders of any
Convertible Securities that are convertible into or exchangeable or exercisable
for shares of Internet Stock or Parent Stock, as the case may be, required
pursuant to paragraph (A) of subsection 2.4.4.
2.6.2 CONVERTIBLE SECURITIES at any time shall mean any securities
of the Corporation or of any subsidiary thereof (other than shares of Internet
Stock), including warrants and options, outstanding at such time that by their
terms are convertible into or exchangeable or exercisable for or evidence the
right to acquire any shares of any class of Common Stock, whether convertible,
exchangeable or exercisable at such time or a later time or only upon the
occurrence of certain events, but in respect of antidilution provisions of such
securities only upon the effectiveness thereof.
2.6.3 DISPOSITION shall mean a sale, transfer, assignment or other
disposition (whether by merger, consolidation, sale or contribution of assets or
stock or otherwise) of properties or assets (including stock, other securities
and goodwill).
2.6.4 EFFECTIVE DATE shall mean the date on which this Restated
Certificate of Incorporation shall become effective.
2.6.5 FAIR VALUE shall mean, (i) in the case of equity securities
or debt securities of a class that is Publicly Traded, the Market Value thereof
(if such value, as so defined, can be determined) or, in the case of an equity
security or debt security that is not Publicly Traded (or for which such value
cannot be determined), shall mean the fair value per share of stock or per other
unit of such other security, on a fully diluted basis,
15
<PAGE>
as determined by an independent investment banking firm experienced in the
valuation of securities selected in good faith by the Board of Directors; and
(ii) in the case of property other than securities, an amount determined in good
faith by the Board of Directors based upon such appraisals or valuation reports
of such independent experts as the Board of Directors shall in good faith
determine to be appropriate in accordance with good business practice. Any such
determination of Fair Value shall be described in a statement filed with the
records of the actions of the Board of Directors.
2.6.6 GROUP shall mean, as of any date, the Parent Group or the
Internet Group, as the case may be.
2.6.7 INTERNET GROUP shall mean, as of any date from and as of the
Effective Date:
(A) all of the businesses, assets and liabilities of the
Corporation and its subsidiaries that the Board of Directors has, at any time,
attributed to the Internet Group pursuant to the "Common Stock Policies", as
amended from time to time;
(B) all properties and assets transferred to the Internet
Group from the Parent Group (other than a transaction pursuant to paragraph (C)
of this subsection 2.6.7) after the Effective Date pursuant to transactions in
the ordinary course of business of both the Parent Group and the Internet Group
or otherwise as the Board of Directors may have directed as permitted by this
Article IV;
(C) all properties and assets transferred to the Internet
Group from the Parent Group in connection with an increase in the Number of
Shares Issuable with Respect to the Retained Interest; and
(D) the interest of the Corporation or any of its subsidiaries
in any business or asset acquired and any liabilities assumed by the Corporation
or any of its subsidiaries outside of the ordinary course of business and
attributed to the Internet Group in accordance with the Common Stock Policies
then in effect, as determined by the Board of Directors as contemplated by
paragraph (A) of subsection 2.5.1; provided that (1) from and after the payment
--------
date of any dividend or other distribution with respect to shares of Internet
Stock (other than a dividend or other distribution payable in shares of Internet
Stock, with respect to which adjustment shall be made as provided in paragraph
(A) of subsection 2.6.14, or in securities of the Corporation attributed to the
Internet Group, for which provision shall be made as set forth in clause (2) of
this proviso), the Internet Group shall no longer include an amount of assets or
properties previously attributed to the Internet Group of the same kind as so
paid in such dividend or other distribution having a Fair Value on the record
date for such dividend or distribution equal to the product of (a) the Fair
Value on such record date of the aggregate of such dividend or distribution to
holders of shares of Internet Stock declared multiplied by (b) a fraction the
numerator of which is equal to the Retained Interest Fraction in effect on the
record date for such dividend or distribution and the denominator of which is
equal to the Outstanding Internet Fraction in effect on the record date for such
dividend or
16
<PAGE>
distribution, (2) if the Corporation shall pay a dividend or make some other
distribution with respect to shares of Internet Stock payable in securities of
the Corporation that are attributed to the Internet Group for purposes of this
Article IV (other than Internet Stock), there shall be excluded from the
Internet Group an interest in the Internet Group equivalent to the number or
amount of such securities that is equal to the product of the number or amount
of securities so distributed to holders of Internet Stock multiplied by the
fraction specified in clause 1(b) of this proviso (determined as of the record
date for such distribution) (and such interest in the Internet Group shall be
attributed to the Parent Group) and, to the extent interest is or dividends are
paid on the securities so distributed, the Internet Group shall no longer
include a corresponding ratable amount of the kind of assets paid as such
interest or dividends as would have been paid in respect of the securities
equivalent to such interest in the Internet Group deemed held by the Parent
Group if the securities equivalent to such interest were outstanding (and in
such eventuality such assets as are no longer included in the Internet Group
shall be attributed to the Parent Group) and (3) from and after any transfer of
any assets or properties from the Internet Group to the Parent Group, the
Internet Group shall no longer include such assets or properties so contributed
or transferred. The Corporation may also, to the extent a dividend or
distribution on the Internet Stock has been paid in Convertible Securities that
are convertible into or exchangeable or exercisable for Internet Stock, cause
such Convertible Securities as are deemed to be held by the Parent Group in
accordance with the third to last sentence of subsection 2.6.16 and clause (2)
of the proviso to the immediately preceding sentence to be deemed to be
converted, exchanged or exercised as provided in the penultimate sentence of
subsection 2.6.16, in which case such Convertible Securities shall no longer be
deemed to be held by the Parent Group. Notwithstanding the foregoing, the
Internet Group shall not include any liabilities (the "Undisclosed Liabilities")
of or related to the businesses and assets attributed to the Internet Group by
the Corporation (other than those liabilities associated with the businesses or
assets of Infoseek Corporation) existing on or prior to the Effective Date other
than (i) those liabilities reflected on the Current Balance Sheet as defined in
Section 2.9 of the Reorganization Agreement (as defined below), (ii) those
liabilities set forth in Section 5.18 of the Parent Disclosure Schedule to the
Agreement and Plan of Reorganization by and among Infoseek Corporation, the
Corporation and Bingo Acquisition Corp., dated as of July 10, 1999 (the
"Reorganization Agreement"), or (iii) with respect to any matter or matters
arising since March 31, 1999 which in the aggregate (excluding any liabilities
incurred in connection with activities which are expressly permitted by Section
4.1(b)(i) through (ix) of the Reorganization Agreement) shall not exceed
$10,000,000, and all of such Undisclosed Liabilities shall be attributed, and
included in, the Parent Group.
2.6.8 INTERNET GROUP AVAILABLE DIVIDEND AMOUNT, on any date, shall
mean the product of (a) the Outstanding Internet Fraction as of such date
multiplied by (b) the amount that would be legally available for the payment of
dividends to the holders of Internet Stock determined in accordance with the
applicable provisions of the DGCL and any other applicable law as if the
Internet Group were a separate corporation. Notwithstanding the foregoing
provisions of this subsection 2.6.8, and consistent with subsection 2.5.2, at
any time when there are not outstanding both (i) one or more shares of Parent
Stock or Convertible Securities convertible into or exchangeable
17
<PAGE>
or exercisable for Parent Stock and (ii) one or more shares of Internet Stock or
Convertible Securities convertible into or exchangeable or exercisable for
Internet Stock, the "Available Dividend Amount," on any calculation date during
such time period, with respect to the Parent Stock or the Internet Stock, as the
case may be (depending on which of such classes of Common Stock or Convertible
Securities convertible into or exchangeable or exercisable for such class of
Common Stock is outstanding), shall mean the amount available for the payment of
dividends on such Common Stock in accordance with law.
2.6.9 INTERNET GROUP NET EARNINGS (LOSS), for any period through any
date, shall mean the net income or loss of the Internet Group for such period
(or in respect of the fiscal periods of the Corporation commencing prior to the
Effective Date, the pro forma net income or loss of the Internet Group for such
period as if the Effective Date had been the first day of such period)
reflecting income and expense of the Corporation attributed to the Internet
Group on a basis substantially consistent with attributions of income and
expense made in the calculation of the Parent Group Net Earnings (Loss),
including, without limitation, corporate administrative costs, net interest,
other financial costs and income taxes.
2.6.10 MARKET CAPITALIZATION of any class or series of Common Stock
on any date shall mean the product of (i) the Market Value of one share of such
class of common stock on such date and (ii) the number of shares of such class
of common stock outstanding on such date.
2.6.11 MARKET VALUE of a share of any class or series of capital
stock of the Corporation on any day shall mean the average of the high and low
reported sales prices of a share of such class or series on such Trading Day or,
in case no such reported sale takes place on such Trading Day, the average of
the reported closing bid and asked prices regular way of a share of such class
or series on such Trading Day, in either case, as reported on the New York Stock
Exchange Composite Tape or, if the shares of such class or series are not listed
or admitted to trading on such Exchange on such Trading Day, on the principal
national securities exchange in the United States on which the shares of such
class or series are listed or admitted to trading or, if not listed or admitted
to trading on any national securities exchange on such Trading Day, on the
Nasdaq National Market or, if the shares of such class or series are not listed
or admitted to trading on any national securities exchange or quoted on the
Nasdaq National Market on such Trading Day, the average of the closing bid and
asked prices of a share of such class or series in the over-the-counter market
on such Trading Day as furnished by any New York Stock Exchange member firm
selected from time to time by the Corporation or, if such closing bid and asked
prices are not made available by any such New York Stock Exchange member firm on
such Trading Day, the Fair Value of a share of such class or series; provided
that, for purposes of determining the market value of a share of any class or
series of capital stock for any period, (i) the "Market Value" of a share of
capital stock on any day prior to any "ex-dividend" date or any similar date
occurring during such period for any dividend or distribution (other than any
dividend or distribution contemplated by clause (ii)(B) of this sentence) paid
or to be paid with respect to such capital stock shall be reduced by the Fair
Value of the per share amount of such dividend
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or distribution and (ii) the "Market Value" of any share of capital stock on any
day prior to (A) the effective date of any subdivision (by stock split or
otherwise) or combination (by reverse stock split or otherwise) of outstanding
shares of such class of capital stock occurring during such period or (B) any
"ex-dividend" date or any similar date occurring during such period for any
dividend or distribution with respect to such capital stock to be made in shares
of such class or series of capital stock or Convertible Securities that are
convertible, exchangeable or exercisable for such class or series of capital
stock shall be appropriately adjusted, as determined by the Board of Directors,
to reflect such subdivision, combination, dividend or distribution.
2.6.12 MARKET VALUE RATIO OF THE INTERNET STOCK TO THE PARENT STOCK,
as of any date, shall mean the fraction, expressed as a decimal (rounded to the
nearest five decimal places), of a share of Parent Stock (or another class or
series of common stock of the Corporation, if so provided by subsection 2.4.1
because Parent Stock is not then Publicly Traded) to be issued in respect of a
share of Internet Stock upon a conversion of Internet Stock into Parent Stock
(or another class or series of common stock of the Corporation) in accordance
with subsection 2.4.1, the numerator of which shall be the average Market Value
of one share of Internet Stock over the twenty consecutive Trading Days ending
on the tenth Trading Day prior to such date and the denominator of which shall
be the average Market Value of one share of Parent Stock (or such other common
stock) over the same twenty Trading Days.
2.6.13 MARKET VALUE RATIO OF THE PARENT STOCK TO THE INTERNET STOCK
as of any date shall mean the fraction, expressed as a decimal (rounded to the
nearest five decimal places), of a share of Internet Stock (or another class or
series of common stock of the Corporation, if so provided by subsection 2.4.2
because Internet Stock is not then Publicly Traded) to be issued in respect of a
share of Parent Stock upon a conversion of Parent Stock into Internet Stock (or
another class or series of common stock of the Corporation) in accordance with
subsection 2.4.2, the numerator of which shall be the average Market Value of
one share of Parent Stock over the twenty consecutive Trading Days ending on the
tenth Trading Day prior to such date and the denominator of which shall be the
average Market Value of one share of Internet Stock (or such other common stock)
over the twenty consecutive Trading Days ending on the tenth Trading Day prior
to such date.
2.6.14 NUMBER OF SHARES ISSUABLE WITH RESPECT TO THE RETAINED
INTEREST shall as of the Effective Date be:
Number of shares of the common ((Number of shares of Infoseek
stock of Infoseek Corporation Common Stock outstanding at
(the "Infoseek Common Stock") minus the Effective Date - Number of
outstanding at the Effective shares of Infoseek Common Stock
Date X 1.15 owned by The Walt Disney Company
- ------------------------------ and Disney Enterprises, Inc. at
.475 the Effective Date) X 1.15)
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; provided, however, that such number shall from time to time thereafter be:
-------- -------
(A) adjusted, if before such adjustment greater than zero, as
determined by the Board of Directors to be appropriate to reflect equitably any
subdivision (by stock split or otherwise) or combination (by reverse stock split
or otherwise) of the Internet Stock or any dividend or other distribution of
shares of Internet Stock to holders of shares of Internet Stock or any
reclassification of Internet Stock;
(B) decreased (but to not less than zero), if before such
adjustment greater than zero, by action of the Board of Directors by (1) the
number of shares of Internet Stock issued or sold by the Corporation that,
immediately prior to such issuance or sale, were included (as determined by the
Board of Directors pursuant to paragraph (C) of this subsection 2.6.14) in the
Number of Shares Issuable with Respect to the Retained Interest, (2) the number
of shares of Internet Stock issued upon conversion, exchange or exercise of
Convertible Securities that, immediately prior to the issuance or sale of such
Convertible Securities, were included in the Number of Shares Issuable with
Respect to the Retained Interest, (3) the number of shares of Internet Stock
issued by the Corporation as a dividend or other distribution (including in
connection with any reclassification or exchange of shares) to holders of Parent
Stock (or any other class of Common Stock other than Internet Stock), (4) the
number of shares of Internet Stock issued upon the conversion, exchange or
exercise of any Convertible Securities issued by the Corporation as a dividend
or other distribution (including in connection with any reclassification or
exchange of shares) to holders of Parent Stock (or any other class of Common
Stock other than Internet Stock) and (5) the number (rounded, if necessary, to
the nearest whole number) equal to the quotient of (a) the aggregate Fair Value
as of the date of transfer of properties or assets (including cash) transferred
from the Internet Group to the Parent Group in consideration for a reduction in
the Number of Shares Issuable with Respect to the Retained Interest divided by
(b) the average Market Value of one share of Internet Stock during the twenty
consecutive Trading Days ending on the tenth Trading Day prior to the date of
such transfer;
(C) increased by (1) the number of outstanding shares of
Internet Stock repurchased by the Corporation for consideration that was
theretofore attributed as provided by subsection 2.6.16 to the Parent Group, (2)
the number (rounded, if necessary, to the nearest whole number) equal to the
quotient of (a) the Fair Value of properties or assets (including cash)
theretofore attributed as provided by subsection 2.6.16 to the Parent Group that
are contributed to the Internet Group in consideration of an increase in the
Number of Shares Issuable with Respect to the Retained Interest, divided by (b)
the average Market Value of one share of Internet Stock during the twenty
consecutive Trading Days ending on the tenth Trading Day prior to the date of
such contribution, and (3) the number of shares of Internet Stock into or for
which Convertible Securities are deemed converted, exchanged or exercised
pursuant to the penultimate sentence of the definition of "Parent Group" in
subsection 2.6.16; and
(D) increased by up to (i) 6,026,000 shares of Internet
Stock, in the event that the Corporation, in its sole discretion, shall at any
time and from time to time from and after thirty (30) Trading Days following the
Effective Date attribute to the
20
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Internet Group an amount of cash equal to the product of (a) the number of such
increased shares multiplied by (b) 120% of the average of the closing sale
prices for the Internet Stock on the New York Stock Exchange (or any other stock
exchange or national market on which the Internet Stock is primarily traded) for
the thirty (30) Trading Days following the Effective Date and (ii) 12,052,000
shares of Internet Stock, in the event that the Corporation, in its sole
discretion, shall at any time and from time to time from and after November 18,
2000 attribute to the Internet Group an amount of cash equal to the product of
(a) the number of such increased shares multiplied by (b) 120% of the average of
the closing sale prices for the Internet Stock on the New York Stock Exchange
(or any other stock exchange or national market on which the Internet Stock is
primarily traded) for the thirty (30) Trading Days prior to November 18, 2000;
provided, that in each such case the number of such increased shares and the
- --------
amount of cash to be attributed to the Internet Group shall be subject to
adjustment in a manner consistent with the adjustments set forth in the Infoseek
Common Stock Warrant (the "Warrant"), dated November 18, 1998, issued to the
Corporation after giving effect to the transactions contemplated by the
Reorganization Agreement; and provided, further, that notwithstanding anything
-------- -------
to the contrary herein or in the Warrant, in no event shall either of the prices
per share computed pursuant to the preceding clause exceed the quotient of fifty
dollars ($50.00) divided by 1.15, as adjusted pursuant to the terms of this
subparagraph (D). Solely for purposes of providing for the adjustments after the
Effective Date contemplated by this subparagraph (D), the terms of the Warrant,
including the defined terms therein, shall be incorporated herein by reference
to appropriately take into account the transactions contemplated by the
Reorganization Agreement.
2.6.15 OUTSTANDING INTERNET FRACTION, as of any date, means a
fraction, the numerator of which shall be the number of shares of Internet Stock
outstanding on such date and the denominator of which shall be the sum of the
number of shares of Internet Stock outstanding on such date and the Number of
Shares Issuable with Respect to the Retained Interest on such date. A statement
setting forth the Outstanding Internet Fraction as of the record date for the
payment of any dividend or distribution on any class of Common Stock and as of
the end of each fiscal quarter of the Corporation shall be filed by the
Secretary of the Corporation in the records of the actions of the Board of
Directors not later than ten days after such date, provided that the failure to
so file such statement shall not invalidate any action taken by the Corporation
or the Board of Directors in connection therewith.
2.6.16 PARENT GROUP shall mean, as of any date from and after the
Effective Date:
(A) the interest of the Corporation or any of its
subsidiaries on such date in all of the assets, liabilities and businesses of
the Corporation or any of its subsidiaries (and any successor companies), other
than any assets, liabilities and businesses attributed in accordance with this
Article IV to the Internet Group;
(B) a proportionate interest in each and every business,
asset and liability attributed to the Internet Group equal to the Retained
Interest Fraction as of such date;
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(C) from and after the payment date of any dividend or other
distribution with respect to shares of Internet Stock (other than a dividend or
other distribution payable in shares of Internet Stock, with respect to which
adjustment shall be made as provided in paragraph (A) of subsection 2.6.14, or
in securities of the Corporation attributed to the Internet Group, for which
provision shall be made as set forth in the third to last sentence of this
definition), an amount of assets or properties previously attributed to the
Internet Group of the same kind as were paid in such dividend or other
distribution as have a Fair Value on the record date for such dividend or
distribution equal to the product of (1) the Fair Value on such record date of
the aggregate of such dividend or distribution to holders of shares of Internet
Stock declared multiplied by (2) a fraction the numerator of which is equal to
the Retained Interest Fraction in effect on the record date for such dividend or
distribution and the denominator of which is equal to the Outstanding Internet
Fraction in effect on the record date for such dividend or distribution; and
(D) Such liabilities as have been excluded from the Internet
Group and attributed to the Parent Group pursuant to the last sentence of
Section 2.6.7.
If the Corporation shall pay a dividend or make some other distribution
with respect to shares of Internet Stock payable in securities of the
Corporation that are attributed to the Internet Group for purposes of this
Article IV (other than Internet Stock), the Parent Group shall be deemed to hold
an interest in the Internet Group equivalent to the number or amount of such
securities that is equal to the product of the number or amount of securities so
distributed to holders of Internet Stock multiplied by the fraction specified in
clause (2) of paragraph (C) of this subsection 2.6.16 (determined as of the
record date for such distribution) and, to the extent interest is or dividends
are paid on the securities so distributed, the Parent Group shall include, and
there shall be attributed thereto out of the Internet Group, a corresponding
ratable amount of the kind of assets paid as such interest or dividends as would
have been paid in respect of such securities so deemed to be held by the Parent
Group if such securities were outstanding. The Corporation may also, to the
extent the securities so paid as a dividend or other distribution to the holders
of Internet Stock are Convertible Securities and at the time are convertible
into or exchangeable or exercisable for shares of Internet Stock, treat such
Convertible Securities as are so deemed to be held by the Parent Group to be
deemed to be converted, exchanged or exercised, and shall do so to the extent
such Convertible Securities are mandatorily converted, exchanged or exercised
(and to the extent the terms of such Convertible Securities require payment of
consideration for such conversion, exchange or exercise, the Parent Group shall
then no longer include an amount of the kind of properties or assets required to
be paid as such consideration for the amount of Convertible Securities deemed
converted, exchanged or exercised (and the Internet Group shall be attributed
such properties or assets)), in which case, from and after such time, the
securities into or for which such Convertible Securities so deemed to be held by
the Parent Group were so considered converted, exchanged or exercised shall be
deemed held by the Parent Group (as provided in clause (3) of paragraph (C) of
subsection 2.6.14) and such Convertible Securities shall no longer be deemed to
be held by the Parent Group. A statement setting forth the election to
effectuate any such deemed conversion, exchange or exercise of Convertible
Securities so deemed to be held by the
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<PAGE>
Parent Group and the properties or assets, if any, to be attributed to the
Internet Group in consideration of such conversion, exchange or exercise (if
any) shall be filed in the records of the actions of the Board of Directors and,
upon such filing, such deemed conversion, exchange or exercise shall be
effectuated.
2.6.17 PARENT GROUP AVAILABLE DIVIDEND AMOUNT, on any date, shall
mean the amount that would be legally available for the payment of dividends to
the holders of Common Stock determined in accordance with the applicable
provisions of the DGCL and any other applicable law less the Internet Group
Available Dividend Amount. Notwithstanding the foregoing provisions of this
subsection 2.6.17, and consistent with subsection 2.5.2, at any time when there
are not outstanding both (i) one or more shares of Parent Stock or Convertible
Securities convertible into or exchangeable or exercisable for Parent Stock and
(ii) one or more shares of Internet Stock or Convertible Securities convertible
into or exchangeable or exercisable for Internet Stock, the "Available Dividend
Amount," on any calculation date during such time period, with respect to the
Parent Stock or the Internet Stock, as the case may be (depending on which of
such classes of Common Stock or Convertible Securities convertible into or
exchangeable or exercisable for such class of Common Stock is outstanding),
shall mean the amount available for the payment of dividends on such Common
Stock in accordance with law.
2.6.18 PARENT GROUP NET EARNINGS (LOSS), for any period through any
date, shall mean the net income or loss of the Corporation for such period (or
in respect of fiscal periods of the Corporation commencing prior to the
Effective Date, the pro forma net income or loss of the Parent Group for such
period as if the Effective Date had been the first day of such period).
2.6.19 PUBLICLY TRADED with respect to any security shall mean a
security (i) registered under Section 12 of the Securities Exchange Act of 1934,
as amended (or any successor provision of law) and (ii) listed for trading on
the New York Stock Exchange or any national securities exchange registered under
Section 7 of the Securities Exchange Act of 1934, as amended (or any successor
provision of law) that is the successor to such exchange or quoted in the
National Association of Securities Dealers Automation Quotation System (or any
successor system).
2.6.20 RELATED BUSINESS TRANSACTION means any Disposition of all or
substantially all the properties, assets, stocks and securities attributed to
the Internet Group in a transaction or series of related transactions that
result in the Corporation receiving in consideration of such properties and
assets primarily equity securities (including, without limitation, capital
stock, debt securities convertible into or exchangeable for equity securities or
interests in a general or limited partnership or limited liability company,
without regard to the voting power or other management or governance rights
associated therewith) of any entity which (i) acquires such properties, assets,
stock or securities or succeeds (by merger, formation of a joint venture or
otherwise) to the business conducted with such properties or assets or controls
such acquiror or successor and (ii) is primarily engaged or proposes to engage
primarily in one
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<PAGE>
or more businesses similar or complementary to the businesses conducted by such
Group prior to such Disposition, as determined by the Board of Directors.
2.6.21 RETAINED INTEREST FRACTION as of any date shall mean a
fraction the numerator of which shall be the Number of Shares Issuable with
Respect to the Retained Interest on such date and the denominator of which shall
be the sum of (A) such Number of Shares Issuable with Respect to the Retained
Interest and (B) the aggregate number of shares of Internet Stock outstanding on
such date. A statement setting forth the Retained Interest Fraction as of the
record date for any dividend or distribution on any class of Common Stock, as of
the effective date of any conversion, exchange or exercise of Convertible
Securities into or for shares of Internet Stock and as of the end of each fiscal
year of the Corporation shall be filed by the Secretary of the Corporation in
the records of the Board of Directors of the Corporation not later than ten days
after such date; provided that the failure to so file such statement shall not
invalidate any action taken by the Corporation or the Board of Directors in
connection therewith.
2.6.22 TRADING DAY shall mean each weekday other than any day on
which the relevant class of Common Stock of the Corporation is not traded on any
national securities exchange or quoted in the Nasdaq National Market or in the
over-the-counter market.
3. PREFERRED STOCK.
---------------
Shares of the Preferred Stock of the Corporation may be issued from time to
time in one or more classes or series, each of which class or series shall have
such distinctive designation, number of shares, or title as shall be fixed by
the Board of Directors prior to the issuance of any shares thereof. Each such
class or series of Preferred Stock shall consist of such number of shares, and
have such voting powers, full or limited, or no voting powers, and such
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof, as shall be stated in
such resolution or resolutions providing for the issue of such class or series
of Preferred Stock as may be adopted from time to time by the Board of Directors
prior to the issuance of any shares thereof pursuant to the authority hereby
expressly vested in it, all in accordance with the laws of the State of
Delaware.
Upon any issuance of any shares of Preferred Stock of any series after the
Effective Date, the Board of Directors shall attribute for purposes of this
Article IV the shares so issued entirely to the Parent Group or entirely to the
Internet Group or partly to the Parent Group and partly to the Internet Group in
such proportion as the Board of Directors shall determine and, further, in the
case of the issuance of shares of Preferred Stock that are convertible into or
exchangeable or exercisable for Internet Stock, if at the time such shares of
Preferred Stock are issued the Number of Shares Issuable with Respect to the
Retained Interest shall be greater than zero, then the Board of Directors shall
also determine what portion (which may be some, all or none) of such shares of
Preferred Stock shall reduce the Number of Shares Issuable with Respect to the
Retained Interest, taking into consideration the use of the proceeds of such
issuance of shares of Preferred Stock in the business of the Parent Group or the
Internet Group and any other
24
<PAGE>
relevant factors. Upon any redemption or repurchase of shares of Preferred
Stock, the Board of Directors shall determine the proper attribution thereof in
accordance with paragraph (D) of subsection 2.5.1. Notwithstanding any such
attribution of shares of Preferred Stock to the Parent Group or the Internet
Group, any dividends or distributions or other payments which may be made by the
Corporation on such shares of Preferred Stock may be made, and as required by
the preferences and relative, participating, optional or other special rights
thereof shall be made, out of any of the properties or assets of the
Corporation, regardless of the Group to which such properties or assets are
attributed in accordance with subsections 2.6.8 or 2.6.14, except as otherwise
provided by the resolution of the Board of Directors fixing the preferences and
relative, participating, optional or other special rights of a series of
Preferred Stock.
ARTICLE V
BOARD OF DIRECTORS
1. NUMBER OF DIRECTORS.
-------------------
The business and affairs of the Corporation shall be managed by or under
the direction of a Board of Directors consisting of not less than nine directors
or more than twenty-one directors, the exact number of directors to be
determined from time to time solely by resolution adopted by the Board of
Directors.
2. TERM OF OFFICE.
--------------
Until the annual meeting of stockholders in 2001, the directors shall be
divided into three classes, consisting initially of five, six and five directors
and designated Class I, Class II and Class III, respectively. Each director
elected at or prior to the 1998 annual meeting shall serve for the full term for
which he or she was elected, such that the term of each director elected at the
1996 annual meeting (Class III) shall have ended at the annual meeting in 1999,
the term of each director elected at the 1997 annual meeting (Class I) shall end
at the annual meeting in 2000, and the term of each director elected at the 1998
annual meeting (Class II) shall end at the annual meeting in 2001. The term of
each director elected after the 1998 annual meeting, whether at an annual
meeting or to fill a vacancy in the Board of Directors arising for any reason,
including an increase in the size of the Board of Directors, shall end at the
first annual meeting following his or her election. Commencing with the annual
meeting in 2001, the foregoing classification of the Board of Directors shall
cease, and all directors shall be of one class and serve for a term ending at
the annual meeting following the annual meeting at which the director was
elected. In no case shall a decrease in the number of directors shorten the
term of any incumbent director. Each director shall hold office after the
annual meeting at which his or her term is scheduled to end until his or her
successor shall be elected and shall qualify, subject, however, to prior death,
resignation, disqualification or removal from office.
3. VACANCIES.
---------
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Any newly created directorship resulting from an increase in the number of
directors may be filled by a majority of the Board of Directors then in office,
provided that a quorum is present, and any other vacancy on the Board of
Directors may be filled by a majority of the directors then in office, even if
less than a quorum, or by a sole remaining director.
4. SPECIAL VOTING RIGHTS OF PREFERRED STOCK HOLDERS.
------------------------------------------------
Notwithstanding the foregoing provisions, whenever the holders of any one
or more classes or series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation or the resolution or resolutions
adopted by the Board of Directors pursuant to Article IV applicable thereto.
5. SELECTION BY WRITTEN BALLOT.
---------------------------
Elections of directors at an annual or special meeting of stockholders
shall be by written ballot unless the Bylaws of the Corporation shall otherwise
provide.
ARTICLE VI
SPECIAL MEETINGS OF STOCKHOLDERS
Special meetings of the stockholders of the Corporation for any purpose or
purposes may be called at any time by the Board of Directors, the Chairman of
the Board of Directors or the President. Special meetings of the stockholders
of the Corporation may not be called by any other person or persons.
ARTICLE VII
CERTAIN BUSINESS COMBINATIONS
1. VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS.
-----------------------------------------------
Except as set forth in subsection 2 of this Article VII, the affirmative
vote of the holders of four-fifths (4/5) of the voting power of the outstanding
Common Stock of the Corporation entitled to vote shall be required for:
1.1 any merger or consolidation to which the Corporation, or any of
its subsidiaries, and an Interested Person (as hereinafter defined) are parties;
1.2 any sale or other disposition by the Corporation, or any of its
subsidiaries, of all or substantially all of its assets to an Interested Person;
1.3 any purchase or other acquisition by the Corporation, or any of
its subsidiaries, of all or substantially all of the assets or stock of an
Interested Person; and
1.4 any other transaction with an Interested Person which requires
the
26
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approval of the stockholders of the Corporation under the Delaware General
Corporation Law.
2. EXCEPTIONS.
----------
The provisions of subsection 1 of this Article VII shall not be applicable
to any transaction described therein if (i) such transaction is approved by
resolution of the Corporation's Board of Directors, provided that a majority of
the members of the Board of Directors voting for the approval of such
transaction were duly elected and acting members of the Board of Directors prior
to the date that the person, firm or corporation, or any group thereof, with
whom such transaction is proposed, became an Interested Person, or (ii) the
provision of a vote in excess of that required by the Delaware General
Corporation Law for such transaction violates the express provisions of the
Delaware General Corporation Law.
3. DEFINITION OF INTERESTED PERSON.
-------------------------------
As used in this Article VII, the term "Interested Person" shall mean any
person, firm or corporation, or any group thereof, acting or intending to act in
concert, including any person directly or indirectly controlling or controlled
by or under direct or indirect common control with such person, firm or
corporation or group, which owns of record or beneficially, directly or
indirectly, five percent (5%) or more of any class of voting securities of the
Corporation.
ARTICLE VIII
AMENDMENT OF ARTICLE VII
The affirmative vote of the owners of four-fifths (4/5) of the voting power
of the outstanding Common Stock of the Corporation entitled to vote shall be
required to amend, alter or repeal Article VII.
ARTICLE IX
INDEMNIFICATION; LIMITATION ON LIABILITY OF DIRECTORS
1. INDEMNIFICATION.
---------------
The Corporation shall indemnify to the full extent authorized or permitted
by law (as now or hereinafter in effect) any person made, or threatened to be
made, a defendant or witness to any action, suit or proceeding (whether civil or
criminal or otherwise) by reason of the fact that he, his testator or intestate,
is or was a director or officer of the Corporation or by reason of the fact that
such director or officer, at the request of the Corporation, is or was serving
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, in any capacity. Nothing contained herein shall affect any
rights to indemnification to which employees other than directors and officers
may be entitled by law. No amendment or repeal of this subsection 1 of this
Article VIII shall apply to or have any effect on any right to indemnification
provided
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hereunder with respect to any acts or omissions occurring prior to such
amendment or repeal.
2. LIMITATION OF LIABILITY.
-----------------------
A director of this Corporation shall not be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the DGCL. Any repeal or modification of the
foregoing sentence shall not adversely affect any right or protection of a
director of the Corporation existing hereunder with respect to any act or
omission occurring prior to such repeal or modification.
3. INSURANCE; TRUST FUNDS.
----------------------
In furtherance and not in limitation of the powers conferred by statute:
3.1 the Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of law; and
3.2 the Corporation may create a trust fund, grant a security
interest and/or use other means (including, without limitation, letters of
credit, surety bonds and/or other similar arrangements), as well as enter into
contracts providing indemnification to the full extent authorized or permitted
by law and including as part thereof provisions with respect to any or all of
the foregoing to ensure the payment of such amounts as may become necessary to
effect indemnification as provided therein, or elsewhere.
ARTICLE X
BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to adopt, repeal, alter, amend or
rescind the Bylaws of the Corporation. In addition, the Bylaws of the
Corporation may be adopted, repealed, altered, amended or rescinded by the
affirmative vote of sixty-six and two-thirds percent (66-2/3%) of the voting
power of the outstanding stock of the Corporation entitled to vote thereon.
ARTICLE XI
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to repeal, alter, amend or rescind any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed
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by statute, and all rights conferred on stockholders herein are granted subject
to this reservation.
IN WITNESS WHEREOF, Parent has caused its corporate seal to be hereunto affixed
and this Certificate of Incorporation to be signed by David K. Thompson, its
Senior Vice President-Assistant General Counsel, this ____ day of ____, 1999.
THE WALT DISNEY COMPANY
____________________________________
David K. Thompson
Senior Vice President - Assistant General Counsel
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EXHIBIT 99.3
THE WALT DISNEY COMPANY
COMMON STOCK POLICIES
The following policies pertaining to the Common Stock of The Walt Disney
Company (the "Corporation") may be modified, amended, suspended, added to or
rescinded from time to time by the Board of Directors of the Corporation (the
"Board"), acting in its sole discretion, and exceptions thereto may be made from
time to time by the Board, acting in its sole discretion, with or without the
approval of the Corporation's stockholders, subject in each case to any
limitations set forth in the Restated Certificate of Incorporation (the
"Certificate of Incorporation") of the Corporation and to any limitations
imposed by the fiduciary duties of the Board or applicable law. All capitalized
terms used but not defined herein have the respective meanings assigned thereto
in the Certificate of Incorporation. Notwithstanding anything contained herein
to the contrary, the following policies shall not become effective until the
Effective Date.
1. Internet Group
--------------
The following interests shall be attributed to the Internet Group:
(i) all of the interests of the Corporation and its subsidiaries in each of
the following:
. Buena Vista Internet Group, a California corporation;
. Buena Vista Internet Group Commerce, a California corporation;
. Infoseek Corporation, a Delaware corporation;
. Infoseek Corporation, a California corporation;
. Starwave Corporation, a Washington corporation;
. DOL Online Investments, Inc., a California corporation;
. ABC News/Starwave Partners, d/b/a ABC News Internet Ventures, a New
York general partnership;
. ESPN Online Investments, Inc., a Delaware corporation;
. ESPN/Starwave Partners, d/b/a ESPN Internet Ventures, a New York
general partnership;
. ABC Multimedia Inc., a Delaware corporation;
. Subtle Differences Internet Service, a California corporation;
. Disney Direct Marketing Services, Inc., a Delaware corporation;
. The Walt Disney Catalog, Inc., a California corporation; and
. GO Online Inc., a California corporation.
(ii) all of the rights, title and interests attributed to the Internet Group
pursuant to the resolutions of the Board entitled "Internet Stock Attributed
Interests" approved concurrently with the Board's approval of these Common Stock
Policies, including, without limitation, the current internet operations
identified on Annex A hereto; and
(iii) any subsidiaries or equity investees of or successors to the companies
or interests identified in the foregoing clauses (i) and (ii).
<PAGE>
Such companies, investees and subsidiaries thereof or successors thereto are
referred to collectively as the "Internet Group Companies."
It is the current intention of the Corporation to (i) attribute all of the
Corporation's present and future interests worldwide in its internet businesses
to the Internet Group and (ii) pursue a broadband internet distribution business
through the Internet Group. For the avoidance of doubt, content owned by the
Corporation and attributed to the Parent Group shall not be attributed to the
Internet Group. Such content may be made available to the Internet Group on a
non-exclusive basis on terms determined from time to time by or under the
supervision of the Board.
Any liabilities and expenses relating to Goto.com v. The Walt Disney Company,
------------------------------------
Disney Enterprises, Inc., Infoseek Corporation and Montrose Corporation,
- -----------------------------------------------------------------------
U.S.D.C. for the Central District of California (Case No. 99-01674 TJH) will be
attributed to the Parent Group and shall not be attributed to the Internet
Group.
2. Dividend Policy
---------------
Pursuant to the Certificate of Incorporation, (i) dividends on Parent Stock
may be declared and paid only out of the lesser of the funds of the Corporation
legally available therefor and the Parent Group Available Dividend Amount and
(ii) dividends on Internet Stock may be declared and paid only out of the lesser
of the funds of the Corporation legally available therefor and the Internet
Group Available Dividend Amount.
Subject to the foregoing limitations and any preferential rights of any
series of preferred stock of the Corporation, holders of shares of Common Stock
of either class will be entitled to receive dividends on such stock when, as and
if authorized and declared by the Board. The payment of dividends on the Common
Stock will be a business decision to be made by the Board from time to time
based upon the results of operations, financial condition and capital
requirements of the Corporation and such other factors as the Board considers
relevant. Payment of dividends on the Common Stock may be restricted by loan
agreements, indentures and other transactions entered into by the Corporation
from time to time.
Pursuant to the Certificate of Incorporation, the Board may at any time
declare and pay dividends exclusively on Parent Stock, exclusively on Internet
Stock or on both such classes in equal or unequal amounts, notwithstanding the
relative amounts of the Parent Group Available Dividend Amount and the Internet
Group Available Dividend Amount, the amount of dividends previously declared on
each class of Common Stock, the respective voting or liquidation rights of each
class of Common Stock or any other factor.
With respect to the Internet Stock, because the Internet Group is expected
to require significant capital commitments to finance its operations and fund
its future
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growth, the Corporation does not expect to pay any dividends on shares of
Internet Stock for the foreseeable future.
3. Treasury and Cash Management Policies
-------------------------------------
The Corporation will manage most treasury activities on a centralized,
consolidated basis. These activities will include the investment of surplus
cash, the issuance, repayment and repurchase of short-term and long-term debt
and the issuance and repurchase of Common Stock and preferred stock. Each Group
will remit its cash receipts (other than receipts of foreign operations or
subsidiaries that are not wholly owned) to the Corporation, and the Corporation
will generally fund each Group's cash disbursements (other than disbursements of
foreign operations or subsidiaries that are not wholly owned), on a daily basis.
After the date on which Internet Stock is first issued, the following will
apply:
(i) The Corporation will attribute each future incurrence or issuance of
external debt or preferred stock (and the proceeds thereof) to the Parent Group,
except in cases where the Board determines otherwise. The Board may determine
from time to time to attribute an incurrence or issuance of debt or preferred
stock (and the proceeds thereof) to the Internet Group to the extent that the
Corporation incurs or issues the debt or preferred stock for the benefit of the
Internet Group, but the Board will not be required to do so.
(ii) The Corporation will attribute each future issuance of Parent Stock
(and the proceeds thereof) to the Parent Group. The Corporation may attribute
any future issuance of Internet Stock (and the proceeds thereof) to the Parent
Group in respect of the Number of Shares Issuable with Respect to the Retained
Interest or to the Internet Group.
(iii) Dividends on Parent Stock will be charged against the Parent Group,
and dividends on Internet Stock will be charged against the Internet Group. At
the time of any dividend on Internet Stock while the Number of Shares Issuable
with Respect to the Retained Interest is greater than zero, the Corporation will
attribute to the Parent Group in proportion to the Number of Shares Issuable
with Respect to the Retained Interest a corresponding amount in respect of the
Number of Shares Issuable with Respect to the Retained Interest.
(iv) Repurchases of Parent Stock will be charged against the Parent Group.
Repurchases of Internet Stock may be charged either against the Internet Group
or the Parent Group as determined by the Board in its sole discretion. If a
repurchase of Internet Stock is charged against the Parent Group, the Number of
Shares Issuable with Respect to the Retained Interest will be increased by the
number of shares so repurchased.
(v) Whenever the Internet Group holds cash (other than cash of the
Internet Group's foreign operations or cash of the Internet Group's subsidiaries
that are not wholly
3
<PAGE>
owned), the Internet Group will normally transfer that cash to the Corporation,
which will attribute interest on such cash, at the Corporation's short-term
borrowing rate, to the Internet Group. Conversely, whenever the Internet Group
has a cash need (other than cash needs of the Internet Group's foreign
operations or cash needs of the Internet Group's subsidiaries that are not
wholly owned), the Corporation will normally fund that cash need. However, the
Board will retain ultimate authority at all times to determine, in its sole
discretion, whether to provide any particular funds to either Group and will not
be obligated to do so. As of immediately prior to the first Issuance of Internet
Stock, cash and cash equivalents aggregating an amount equal to the amount of
working capital (i.e., current assets, including cash, minus current
liabilities) reflected on the balance sheet of Infoseek Corporation ("Infoseek")
as of October 2, 1999, less (i) any amount paid by the Corporation pursuant to
the Maintenance Rights Letter Agreement, dated as of July 10, 1999 by and
between the Corporation and Infoseek and (ii) the sum of the exercise price of
each option exercised under Infoseek's Employee Stock Purchase Plan on or after
July 10, 1999 multiplied by the respective number of shares of each such option,
shall have been allocated to the Internet Group.
(vi) The Corporation will account for all cash transfers from one Group to
or for the account of the other Group (other than transfers in return for assets
or services rendered or transfers in respect of the Number of Shares Issuable
with Respect to the Retained Interest that correspond to dividends paid on
Internet Stock) as inter-Group short-term loans unless (i) the Board determines
that a given transfer (or type of transfer) should be accounted for as a long-
term loan, (ii) the Board determines that a given transfer (or type of transfer)
should be accounted for as a capital contribution increasing the Number of
Shares Issuable with Respect to the Retained Interest, or (iii) the Board
determines that a given transfer (or type of transfer) should be accounted for
as a return of capital reducing the Number of Shares Issuable with Respect to
the Retained Interest. There are no specific criteria to determine when the
Corporation will account for a cash transfer as a long-term loan, a capital
contribution or a return of capital rather than an inter-Group revolving credit
advance; provided, however, that cash advances from the Corporation or the
-------- -------
Parent Group to the Internet Group up to $250 million on a cumulative basis
(except as contemplated by Section 2.6.14(D) of the Certificate of
Incorporation) shall be accounted for as short-term or long-term loans at
interest rates at which the Corporation could borrow such funds and shall not be
accounted for as a capital contribution. The Board will make such a
determination in the exercise of its business judgment at the time of such
transfer based upon all relevant circumstances. Factors the Board may consider
include, without limitation, the current and projected capital structure of each
Group; the financing needs and objectives of the recipient Group; the
availability, cost and time associated with alternative financing sources; and
prevailing interest rates and general economic conditions.
4
<PAGE>
(vii) Cash transfers accounted for as inter-Group short-term loans will
bear interest at the rate at which the Corporation could borrow such funds. In
addition, any cash transfers accounted for as a long-term loan will have
interest rates, amortization, maturity, redemption and other terms that reflect
the then-prevailing terms on which the Corporation could borrow such funds.
(viii) Any cash transfer from the Parent Group to the Internet Group (or
for its account) accounted for as a capital contribution will correspondingly
increase the Internet Group's equity account and the Number of Shares Issuable
with Respect to the Retained Interest.
(ix) Any cash transfer from the Internet Group to the Parent Group (or
for its account) accounted for as a return of capital will correspondingly
reduce the Internet Group's equity account and the Number of Shares Issuable
with Respect to the Retained Interest.
(x) In the event that the Corporation exercises any convertible
securities or similar rights to increase the Number of Shares Issuable with
Respect to the Retained Interest, the cash proceeds of such exercise shall be
allocated to the Internet Group.
4. Corporate General and Administrative Services and Facilities
------------------------------------------------------------
The Corporation will allocate the cost of corporate general and
administrative services and facilities between the Groups generally based upon
utilization. Where determinations based on utilization alone are impracticable,
the Corporation will use other methods and criteria that management believes to
be equitable and to provide a reasonable estimate of the cost attributable to
each Group. Except as otherwise determined by management, the allocated costs
of providing such services and facilities will include, without limitation, the
following:
(i) all costs and expenses of personnel employed in connection with such
services and facilities, including, without limitation, all direct costs of such
personnel, such as payroll, payroll taxes and fringe benefit costs (calculated
at the appropriate annual composite rate therefor);
(ii) all overhead costs and expenses directly related to such personnel
and the services or facilities provided by them (including, without limitation,
departmental, divisional and administrative overhead and a reasonable allocation
of capital charges for assets used to provide such services or facilities,
including, without limitation, facilities, equipment and training); and
(iii) all materials used in connection with such services or facilities,
billed at their net cost to the provider of the services or facilities plus all
overhead costs and expenses related to such materials (including, without
limitation, departmental, divisional and administrative overhead and a
reasonable allocation of capital charges for assets used to provide such
materials).
5
<PAGE>
Except as may otherwise be specifically provided pursuant to the terms of
any agreements between the Groups or any resolutions of the Board, the corporate
general and administrative services and facilities to be allocated between the
Groups will include, without limitation, the following:
(a) legal services;
(b) accounting services (tax and financial);
(c) treasury services;
(d) tax planning services;
(e) strategic planning services;
(f) insurance and deductibles payable in connection therewith;
(g) employee benefit plans and administration thereof;
(h) information and telecommunications systems;
(i) purchasing and material procurement;
(j) advertising, marketing and promotions;
(k) public relations and investor relations;
(l) shareholder services;
(m) corporate reporting;
(n) corporate travel;
(o) intranet support services (i.e., hosting, maintenance, operational and
other technical support for intranet computer systems);
(p) employee services (i.e., employees of either Group may from time to
time provide services to the other Group), including the services of
senior executives of the Corporation;
(q) services relating to the board of directors; and
(r) corporate offices, warehouses and other facilities.
6
<PAGE>
Notwithstanding anything contained in this Paragraph 7 to the contrary, the
costs associated with corporate general and administrative services and
facilities allocated to the Internet Group (less costs associated with direct
incentive compensation for employees of the Internet Group) for each of fiscal
year 1999, 2000 and 2001 will not exceed $7.5 million.
5. Taxes
-----
The Board intends that financial statement income tax expense or benefit,
as the case may be, will be allocated to the Internet Group in an amount equal
to the difference between (x) the consolidated income tax expense or benefit of
the Corporation for financial statement purposes, and (y) the consolidated
income tax expense or benefit of the Corporation for financial statement
purposes computed without including the Internet Group financial statement pre-
tax income and any other relevant amounts properly allocable to the Internet
Group. If the above computation results in a positive amount, such amount will
be allocated to the Internet Group as a tax expense. If the above computation
results in a negative amount, such amount will be allocated to the Internet
Group as a tax benefit.
6. Corporate Opportunities
----------------------
Taking into account the provisions of the last paragraph of Section 1
hereof, the Board will allocate any business opportunities and operations, any
acquired assets and businesses and any assumed liabilities between the Parent
Group and the Internet Group, in whole or in part, as it considers to be in the
best interests of the Corporation and its stockholders as a whole and as
contemplated by the provisions of these Common Stock Policies. To the extent a
business opportunity or operation, an acquired asset or business, or an assumed
liability would be suitable to be undertaken by or allocated to either Group, it
will be allocated by the Board in its business judgment or in accordance with
procedures adopted by the Board from time to time to ensure that decisions will
be made in the best interests of the Corporation and its stockholders as a
whole. Any such allocation may involve the consideration of a number of factors
that the Board determines to be relevant, including, without limitation, whether
the business opportunity or operation, the acquired asset or business or the
assumed liability is principally within the existing scope of a Group's
business, whether it is principally within a geographic area served by a Group
and whether a Group is better positioned to undertake or have allocated to it
such business opportunity or operation, acquired asset or business or assumed
liability.
7. Inter-Group Contracts and Agreements
------------------------------------
(i) The terms of all current and future material transactions,
relationships and other matters between the Parent Group and the Internet Group,
including those as to which the Groups may have potentially divergent interests,
will be determined on a basis that the Board, or management following guidelines
or principles established by the Board, considers to be in the best interests of
the Corporation and its stockholders as a whole.
7
<PAGE>
(ii) Certain business operations involving activities by both the
Internet Group and the Parent Group will be allocated as provided in this
paragraph, subject to the general authority of the Board to modify, amend,
suspend, add to or rescind such allocations as set forth herein:
(A) Use of Intellectual Property. The Parent Group will license to
the Internet Group the nonexclusive worldwide right to use and exploit all
of the Parent Group's Intellectual Property in the conduct of the Internet
Group's businesses. "Intellectual Property" shall include all fanciful,
cartoon, artistic, literary, historical, scientific, nature or fictional
characters (collectively, "Characters"); copyrights; all copyrightable
subject matter; trademarks; service marks; logos; trade names; trade dress
and other similar works; utility models; literary, musical (including
lyrics) and dramatic works; photographs; pictorial, graphic and sculptural
works; motion pictures and other audio-visual works; sound recordings;
works of art; patents and other patent rights; computer software,
including, without limitation, underlying code; know-how; designs,
including designs of Characters, in each case belonging to any member of
the Parent Group or the necessary rights to which belong to any member of
the Parent Group; provided, that nothing contained in this Paragraph shall
--------
be construed as granting to the Internet Group a right to use content owned
by the Corporation that is attributed to the Parent Group. Intellectual
Property currently made available to the Internet Group will continue to be
made available to the Internet Group without any additional royalty, except
as provided in this Paragraph A. No royalty or other fee for the use or
exploitation of such Intellectual Property shall be charged to the Internet
Group, except for a royalty equal to 1.25% of all Internet Group revenue
(excluding revenue derived from the operation of Disney Store.com, but
including revenue derived from the sale of products offered by direct
mail), less the following deductions: (a) advertising commissions, (b)
credit card charges, (c) customs duties and taxes and taxes other than
taxes based upon the Internet Group's income (e.g., sales, excise,
withholding and value added taxes) and (d) discounts, rebates, returns or
credits, freight, insurance, packaging and other shipment expenses (the
"Deductions"). Furthermore, in the event that the Internet Group collects
revenue with respect to the sale, license or other distribution of Goods
(as defined in the License Agreement, dated as of June 18, 1998, between
Disney Enterprises, Inc. and Infoseek) effectively as an agent or
distributor for the vendor, including Parent Group or the Corporation, only
the distributor or agency fee or commission (and not the amount of the
revenues derived from such sale) will be included in the revenues upon
which such 1.25% royalty is based. However, in the event that any Goods are
purchased from third-party licensees of the Parent Group who are under an
obligation to pay royalties to Parent Group with respect to such Goods,
then no royalty will be charged to the Internet Group with respect to such
Goods.
Notwithstanding the foregoing, the royalties described above will not be
deemed earned or accrued until the completion of the first full fiscal year
of the Internet Group in which there are positive earnings before interest,
taxes and amortization
8
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("EBITA"), and such royalties in any fiscal year will in the aggregate not
exceed 25% of EBITA of the Internet Group in such fiscal year. All use of
Parent Group Intellectual Property will be in conformity with Parent
Group's standard licensing terms and conditions for such Intellectual
Property.
The royalty provisions of this Paragraph A and of Paragraph C below replace
and supersede any prior agreements for the payment of royalties by the
Internet Group Companies to the Parent Group.
(B) Online Travel Services. The Internet Group will operate one or
more travel and ticketing services, offering travel packages to Parent
Group attractions and resorts as well as family travel packages to other
destinations. The Internet Group will be the Parent Group's preferred
online seller of such packages. For its travel packages, the Internet Group
will be offered terms and credited with commissions at a rate consistent
with market rates afforded by Parent to unaffiliated third parties for
comparable services (which rate has initially been determined to be 10
percent of gross revenues), as determined from time to time by or under the
supervision of the Board.
(C) Disney Store.com. The Internet Group will operate Disney
Store.com, the Corporation's online seller of Disney-branded consumer
merchandise. The Parent Group will be allocated a royalty equal to 8% of
(i) Disney Store.com's actual costs for Disney-branded merchandise sourced
from Parent Group's suppliers or sourced directly by the Internet Group and
(ii) Parent Group's actual costs for Disney-branded consumer merchandise
sourced from Parent Group; provided, that the 8% royalty will not apply to
--------
the sale of products offered by direct mail and not ordered over the
internet. However, in the event that any Disney-branded consumer
merchandise is purchased from third-party licensees of the Parent Group who
are under an obligation to pay royalties to the Parent Group with respect
to such Disney-branded consumer merchandise, then no royalty will be
allocated to the Parent Group with respect to such Goods.
Notwithstanding the foregoing, the royalties described above will not be
deemed earned or accrued until the completion of the first full fiscal year
of the Internet Group in which there are positive EBITA, and such royalties
in any fiscal year will in the aggregate not exceed 30% of EBITA of Disney
Store.com in such fiscal year.
(D) Website Development. The Internet Group will develop (or manage
the development by third parties of) websites for all Parent Group
businesses wishing to develop such sites. For such services, the Internet
Group will be compensated on the basis of the Internet Group's actual costs
including an allocation of the cost of general and administrative services
and facilities generally based upon utilization, plus a margin consistent
with market rates for comparable services between unaffiliated third
parties (which margin has initially been determined to be 10 percent), as
determined from time to time by or under
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the supervision of the Board. Notwithstanding the foregoing, any Parent
Group business may choose to have a third-party developer develop its site
if more cost effective, provided, that any such third-party developer shall
comply with all policies, procedures and technical specifications set by
the Internet Group. In addition, the Internet Group will sell and advertise
for such website, with the Internet Group and the applicable participating
business unit of the Parent Group splitting evenly all advertising revenues
derived from any such websites.
(E) Promotional Services. The Parent Group will provide promotional
services to the Internet Group in such forms and amounts as determined from
time to time by or under the supervision of the Board. Cost allocations, if
any, to the Internet Group with respect to such services will in all cases
be on terms and rates no less favorable to the Internet Group than those
that would apply to comparable services provided to unaffiliated third
parties and may be provided on substantially more favorable terms, in each
case as determined from time to time by or under the supervision of the
Board.
8. Capital Stock Committee
-----------------------
The Corporation's bylaws will provide for a standing committee of the
Board to be known as the Capital Stock Committee. The Capital Stock Committee
will have and exercise such powers, authority and responsibilities as the Board
may delegate to such Committee, which will initially include authority to (i)
interpret, make determinations under, and oversee the implementation of these
Common Stock Policies, other than as they relate to dividends, with respect to
which all determinations will be made solely by the Board, (ii) adopt additional
general policies governing the relationships between the two Groups, and (iii)
engage the services of accountants, investment bankers, appraisers, attorneys
and other service providers to assist in discharging its duties. In making
determinations in connection with the Common Stock Policies, the members of the
Board and the Capital Stock Committee will act in a fiduciary capacity and
pursuant to legal guidance concerning their respective obligations under
applicable law.
9. Common Stock Ownership of Directors and Officers
------------------------------------------------
The Board currently intends that its members and officers of the
Corporation, over time, hold shares of Parent Common Stock and Internet Group
Common Stock (or options or rights therefor).
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Annex A
- -------
The following is a nonexclusive list of the internet operations of the
Corporation that are being allocated to the Internet Group:
(1) ABC.com and related ABC internet operations, including, without limitation,
ABCRadio.com, ABCNEWS.com and ABCSports.com
(2) Disney-branded internet operations, including, without limitation,
Disney.com, Disneyblast.com, Disneystore.com, Disneychannel.com,
Disneyland.com and WaltDisneyWorld.com
(3) Other internet operations based on Disney-owned content, including, without
limitation, Family.com and related family-oriented sites, such as
familytravel.com; and sites based on motion pictures and television
programming, such as touchstonepictures.com, abugslife.com and
onesaturdaymorning.com
(4) All ESPN-branded internet operations, including, without limitation,
ESPN.com
(5) GO.com and related GO internet operations (e.g., Goshop.com)
(6) Internet operations conducted under license from third parties, including,
without limitation, NBA.com, NFL.com and NASCAR.com
(7) International internet operations, including, without limitation,
DOLInternational ESPN International go.com.uk and disney.co.uk
(8) Miscellaneous operations, including, without limitation, movies.com,
Tvplex.com, kid.com, video.com and foods.com.
In addition, it is currently contemplated that internet operations under
development will be allocated to the Internet Group, including online auction
operations, narrowband and broadband private label access operations and
broadband portal development.
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