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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
CKS GROUP, INC.
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(Name of Issuer)
COMMON STOCK
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(Title of Class of Securities)
12561L109
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(CUSIP Number)
CAROLYN V. AVER
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
USWEB CORPORATION
2880 LAKESIDE DRIVE, SUITE 300
SANTA CLARA, CALIFORNIA 95054
(408) 987-3200
with a copy to:
Mark Bonham, Esq.
Wilson Sonsini Goodridge & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
September 1, 1998
-----------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
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CUSIP NO. 12561L109 PAGE 2 OF 8 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
USWEB CORPORATION (I.R.S. Employer Identification Number. 870551650)
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
N/A (b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS*
4
OO, WC
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5 N/A
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
STATE OF DELAWARE
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SOLE VOTING POWER
7 3,074,681 (1)
NUMBER OF
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8 5,196,839
OWNED BY
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EACH SOLE DISPOSITIVE POWER
9 3,074,681 (1)
REPORTING
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10 N/A
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 8,271,520
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 44.0%
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TYPE OF REPORTING PERSON*
14 CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
Note (1): Represents option, exercisable upon certain events, to purchase out
of the authorized but unissued shares of CKS Common Stock a number equal to
19.9% of the shares issued and outstanding as of the date of exercise. Assuming
that the option were exercisable and assuming that the shares of CKS Common
Stock issued and outstanding on the date of exercise equaled that of September
1, 1998, USWeb could purchase up to 3,074,681 shares of Common Stock.
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CUSIP NO. 12561L109 PAGE 3 OF 8 PAGES
_____________________ ___________________
Neither the filing of this Schedule 13D nor any of its contents shall be deemed
to constitute an admission by USWeb Corporation that it is the beneficial owner
of any of the Common Stock referred to herein for purposes of Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Act"), or for any other
purpose, and such beneficial ownership is expressly disclaimed.
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to shares of Common Stock of CKS
Group, Inc., a Delaware corporation ("CKS" or "Issuer"). The principal
executive offices of CKS are located at 10441 Bandley Drive, Cupertino,
California 95014.
ITEM 2. IDENTITY AND BACKGROUND.
The name of the corporation filing this statement is USWeb Corporation,
a Delaware corporation ("USWeb"). USWeb's principal business is to provide
Intranet, Extranet and Web site solutions and services to businesses. The
address of the principal executive offices of USWeb is 2880 Lakeside Drive,
Suite 300, Santa Clara, CA 95054. Set forth on Schedule A is the name and
present principal occupation or employment and the name, principal business
and address of any corporation or other organization in which such employment
is conducted, of each of USWeb's directors and executive officers, as of the
date hereof.
Neither USWeb, nor to USWeb's best knowledge, any person named on
Schedule A hereto is required to disclose legal proceedings pursuant to Items
2(d) or 2(e). With the exception of Klaus Schwab who is a citizen of
Switzerland, each person listed on Schedule A is a citizen of the United
States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to an Agreement and Plan of Reorganization dated September 1,
1998, (the "Merger Agreement"), among USWeb, USWeb Acquisition Corporation
134, a Delaware corporation and wholly owned subsidiary of USWeb ("Merger
Sub") and CKS, and subject to the conditions set forth therein (including
approval by stockholders of USWeb and CKS), Merger Sub will merge with and
into CKS and CKS will become a wholly owned subsidiary of USWeb (such events
constituting the "Merger"). Once the Merger is consummated, Merger Sub will
cease to exist as a corporation and all of the business, assets, liabilities
and obligations of Merger Sub will be merged into CKS with CKS remaining as
the surviving corporation (the "Surviving Corporation"). As a result of the
Merger, each outstanding share of CKS Common Stock, other than shares owned by
Merger Sub, USWeb or any directly or indirectly wholly owned subsidiary of
CKS or of USWeb, will be converted into the right to receive 1.5 shares (the
"Exchange Ratio") of USWeb Common Stock. At the effective time of the Merger,
each outstanding option to purchase CKS Common Stock under CKS's stock option
plans (each a "CKS Common Stock Option") will be assumed by USWeb (each an
"Assumed Option") and will become an option to purchase that number of shares
of USWeb Common Stock equal (subject to rounding) to the number of shares of
CKS Common Stock that was
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CUSIP NO. 12561L109 PAGE 4 OF 8 PAGES
_____________________ ___________________
subject to such option immediately prior to the Merger, multiplied by the
Exchange Ratio. The exercise price of each Assumed Option will be equal to
the quotient determined by dividing the exercise price per share of CKS Common
Stock at which such CKS Common Stock Option was exercisable immediately prior
to the effective time of the Merger by the Exchange Ratio, rounded up to the
nearest whole cent. Each of CKS's outstanding employee stock purchase plan
options ("ESPP Option") will also be assumed by USWeb at the effective time of
the Merger and will have the same terms and conditions set forth in CKS's
employee stock purchase plans except that: (i) the ESPP Options will be
exercisable for shares of USWeb Common Stock, (ii) the limit on the number of
shares of USWeb Common Stock an employee may purchase pursuant to an assumed
ESPP Option is nine hundred multiplied by the Exchange Ratio, rounded down to
the nearest whole share and (iii) the purchase price per share of USWeb Common
Stock shall be equal to 85% of the lesser of (A) the quotient of the closing
price of a share of CKS Common Stock on the first day of the offering period
divided by the Exchange Ratio, with the result rounded up to the nearest whole
cent, or (B) the closing price of a share of USWeb Common Stock on the date on
which the ESPP Option is exercised, rounded up to the nearest whole cent.
The foregoing summary of the Merger is qualified in its entirety by
reference to the copy of the Merger Agreement included as Exhibit 1 to this
Schedule 13D and incorporated herein in its entirety by reference.
No monetary consideration was paid by USWeb to the Issuer for the
Stock Option Agreement or the Voting Agreements (as those agreements are defined
below). Should the Stock Option Agreement be exercisable, USWeb anticipates
using working capital to exercise the option.
ITEM 4. PURPOSE OF TRANSACTION.
(a) - (b) As described in Item 3 above, this statement relates to the
Merger of Merger Sub, a wholly owned subsidiary of USWeb, with and into CKS in
a statutory merger pursuant to the Delaware General Corporation Law. At the
effective time of the Merger, the separate existence of Merger Sub will cease
to exist and CKS will continue as the Surviving Corporation and as a wholly
owned subsidiary of USWeb. Holders of outstanding CKS Common Stock will
receive, in exchange for each share of CKS Common Stock held by them, 1.5
shares of USWeb Common Stock. USWeb will assume the outstanding options
issued under CKS stock option plans.
As an inducement to enter into the Merger Agreement, CKS and USWeb
entered into reciprocal option agreements whereby each party granted to the
other options to acquire shares of its common stock upon certain triggering
events. With respect to the CKS Stock Option Agreement (the "Option
Agreement"), dated September 1, 1998, CKS granted to USWeb an irrevocable
option (the "Option") to acquire a number of the authorized but unissued
shares of CKS Common Stock (the "Option Shares") equal to 19.9% of the number
of shares CKS Common Stock issued and outstanding on the date the Option is
first exercised for Option Shares at a price per share equal to the lower of
(i) the Exchange Ratio times the closing of USWeb Common Stock on the trading
day before the date of the Option Agreement or (ii) the average closing price
of CKS Common Stock on the five trading days immediately prior to the first
public announcement or disclosure of a CKS Alternative Proposal (the "Exercise
Price"), payable in cash. For purposes of this Schedule, "CKS Alternative
Proposal" means any inquiry, proposal or offer from any person or "group" (as
defined under Section 13(d) of the Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder) relating to any
direct or indirect acquisition or purchase of a substantial amount of assets
of CKS or any of its
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CUSIP NO. 12561L109 PAGE 5 OF 8 PAGES
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subsidiaries (other than the purchase of CKS's products or services in the
ordinary course of business) or more than a 15% interest in the total
outstanding voting securities of CKS or any of its subsidiaries or any tender
offer or exchange offer that if consummated would result in any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) beneficially owning 15% or more of the total
outstanding voting securities of CKS or any of its subsidiaries or any merger,
consolidation, business combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction involving
CKS or any of its subsidiaries, other than the transactions contemplated by
this Agreement.
The Option may only be exercised by USWeb, in whole or in part, at any
time or from time to time, from and after:
(i) the commencement of a tender or exchange offer for 25% or more
of any class of CKS's capital stock, or
(ii) the failure to obtain the required vote of CKS stockholders for
approval of the Merger and approval and adoption of the Merger Agreement
upon a vote taken at a meeting of CKS stockholders duly convened therefor
(or at any adjournment thereof) if at the time of such failure a CKS
Alternative Proposal shall have been publicly announced or otherwise
publicly disclosed, or
(iii) the Merger Agreement is terminated by USWeb upon (a) the
withdrawal or modification by the Board of Directors of CKS or any
committee thereof in a manner adverse to USWeb its approval or
recommendation of the Merger or this Agreement, (b) the failure of CKS to
include in the proxy statement /prospectus the recommendation of the Board
of directors of CKS in favor of approval of the Merger and the Merger
Agreement, (c) action taken by the Board of Directors of CKS in connection
with a Rule 14d-9 disclosure other than a rejection of a Rule 14d-9
proposal, (d) the recommendation of the Board of Directors of CKS or any
committee thereof of any CKS Alternative Proposal or (e) any resolution by
the Board of Directors of CKS or any committee thereof to do any of the
foregoing, or
(iv) the Merger Agreement is terminated by CKS at any time prior to
the approval of the Merger by CKS stockholders and, in the case of any CKS
Superior Proposal other than a CKS Superior Proposal involving the filing
of a Registration Statement on Form S-4, following the earlier of (i) three
days following the date the Registration Statement is declared effective
pursuant to the Securities Act by the SEC or (ii) sixty days following the
date hereof, if the Board of Directors of CKS recommends a CKS Superior
Proposal to the stockholders of CKS. A "CKS SUPERIOR PROPOSAL" means any
bona fide proposal made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash
and/or securities, more than 50% of the voting power of CKS Common Stock or
all or substantially all the assets of CKS and otherwise on terms which the
Board of Directors of CKS determines in its good faith
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CUSIP NO. 12561L109 PAGE 6 OF 8 PAGES
_____________________ ___________________
judgment (after consultation with a financial advisor of nationally
recognized reputation) to be more favorable to CKS's stockholders than the
Merger and for which financing, to the extent required, is then committed
or which, in the good faith judgment of the Board of Directors of CKS, is
capable of being obtained by such third party.
The foregoing summary of the Option Agreement is qualified in its entirety
by reference to the copy of the Option Agreement included as Exhibit 2
to this Schedule 13D and incorporated herein in its entirety by reference.
As a further inducement to USWeb to enter into the Merger Agreement, each
stockholder who is a party to a Voting Agreement, dated as of September 1,
1998 (collectively, the "Voting Agreements"), among the parties thereto
(collectively, the "Voting Agreement Stockholders") and such Voting Agreement
Stockholders, have, by executing a Voting Agreement, irrevocably appointed
USWeb as his, her or its lawful attorney and proxy. Such proxies,
collectively, give USWeb the limited right to vote each of the 5,196,839
shares of CKS Common Stock beneficially and collectively owned by the Voting
Agreement Stockholders in all matters related to the Merger. The shared voting
power with the certain shareholders of CKS relates to the same 5,196,839
shares of CKS Common Stock (the "Shares"). The Voting Agreement Stockholders
and the number of shares beneficially owned by each of them is set forth in
Schedule B hereto which is hereby incorporated by this reference.
In exercising its right to vote the Shares as lawful attorney and proxy of
the Voting Agreement Stockholders, USWeb (or any nominee of the USWeb Board)
will be limited, at every CKS stockholders meeting and every written consent
in lieu of such meeting to vote the shares in favor of approval of the Merger
and the Merger Agreement. The Voting Agreement Stockholders may vote the
Shares on all other matters. The Voting Agreements terminate upon the earlier
to occur of (i) such date and time as the Merger shall become effective in
accordance with the terms and provisions of the Merger Agreement and (ii) the
date of termination of the Merger Agreement.
The foregoing summary of the Voting Agreement is qualified in its entirety
by reference to the copy of the form of Voting Agreement included as Exhibit 3
to this Schedule 13D and incorporated herein in its entirety by reference.
(c) Not applicable.
(d) It is anticipated that upon consummation of the Merger, the directors
of the Merger Sub immediately prior to the effective time of the Merger,
together with Pierre Lamonde, Alexandre Balkanski, Barry Linsky and Michael
Slade, the four outside directors of CKS as of the date of the Merger
Agreement, shall be the initial directors of the Merger Sub. It is
anticipated that the initial officers of the Merger Sub shall be the officers
of the Surviving Corporation, until their respective successors are duly
elected or appointed and qualified.
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CUSIP NO. 12561L109 PAGE 7 OF 8 PAGES
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(e) Upon consummation of the Merger, the number of shares CKS is
authorized to issue shall equal 1,000 to be designated Common Stock. Other
than the foregoing or as a result of the Merger described in Item 3 above, not
applicable.
(f) Not applicable.
(g) Upon consummation of the Merger, the Certificate of Incorporation of
CKS shall be amended and restated in its entirety. The Restated Certificate
of Incorporation of CKS (the "Restated Certificate") amends the Certificate of
Incorporation of CKS, filed September 19, 1995 (the Previous Certificate") by
providing: (1) that the name of the corporation is CKS Group Corporation, (2)
for a new registered address and agent in Delaware, (3) that aggregate number
of shares which CKS is authorized to issue is 1,000 to be designated Common
Stock, with the par value of $0.001 and (4) a delineation of the scope and
procedure for indemnification. The Restated Certificate also eliminates
reference to a classified Board of Directors and does not limit the ability of
stockholders to take action by written consent. The foregoing summary of the
Restated Certificate is qualified in its entirety by reference to the copy of
the form of the Restated Certificate included as Exhibit 4 to this Schedule
13D and incorporated herein in its entirety by reference. Upon consummation
of the Merger, the Bylaws of Merger Sub, as in effect immediately prior to the
Merger, shall be the Bylaws of the Surviving Corporation until thereafter
amended.
(h) - (i) If the Merger is consummated as planned, the CKS Common Stock
will be deregistered under the Act and delisted from The Nasdaq National
Market.
(j) Other than described above, USWeb currently has no plan or proposals
which relate to, or may result in, any of the matters listed in Items 4(a) -
(j) of Schedule 13D (although USWeb reserves the right to develop such plans).
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) - (b) As a result of the Voting Agreements and the Stock Option
Agreement, USWeb may be deemed to be the beneficial owner of at least
5,196,839 and 3,074,681 shares of CKS Common Stock, respectively, or an
aggregate of 8,271,520 shares. The 3,074,681 shares of CKS Common Stock
subject to the Stock Option Agreement is based a percentage of the shares of
CKS Common Stock issued and outstanding as of September 1, 1998, and is
subject to change should the issued and outstanding shares of CKS Common Stock
vary on the date of USWeb's first exercise, if any. The aggregate number of
shares for which USWeb may be deemed to be the beneficial owner as a result of
the Voting Agreements and the Stock Option Agreement represents 44.0% of the
issued and outstanding shares of CKS Common Stock.
USWeb has shared voting power of all 5,196,839 of the shares subject to the
Voting Agreements for the limited purposes described above and sole voting
power of the 3,047,095 shares subject to the Stock Option Agreement upon
exercise. Under the terms of the Stock Option Agreement, however, USWeb has
agreed to vote the shares subject to the Stock Option Agreement
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CUSIP NO. 12561L109 PAGE 8 OF 8 PAGES
_____________________ ___________________
in the same proportion as all other shares of the same class are voted. USWeb
has the sole power to dispose or to direct the disposition of the 3,074,681
shares of CKS Common Stock subject to the Stock Option Agreement upon
exercise.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Each of the persons listed in Schedule A has executed agreements dated
September 1, 1998 with CKS and USWeb restricting sales, dispositions or other
transactions reducing their risk of investment in respect the shares of USWeb
and CKS common stock beneficially owned or subsequently acquired to help ensure
that the Merger will be treated as a pooling of interests for accounting and
financial reporting purposes.
Other than the foregoing, the Merger Agreement, the Stock Option
Agreement and Voting Agreements, to the best knowledge of USWeb, there are no
contracts, arrangements, understandings or relationships (legal or otherwise)
among the persons named in Item 2 and between such persons and any person with
respect to any securities of CKS, including but not limited to transfer or
voting of any of the securities, finder's fees, joint ventures, loan or option
arrangement, puts or calls, guarantees of profits, division of profits or
loss, or the giving or withholding of proxies.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
The following documents are filed as exhibits:
1. Agreement and Plan of Reorganization, dated September 1, 1998, by
and among USWeb, Merger Sub, and CKS.
2. CKS Stock Option Agreement, dated September 1, 1998, by and
between USWeb and CKS.
3. Form of Voting Agreement, dated September 1, 1998, by and among
USWeb and certain stockholders of CKS.
4. Restated Certificate of Incorporation of the CKS Group
Corporation, to be filed upon the effective date of the Merger.
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SIGNATURE
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After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: September 11, 1998
USWEB CORPORATION
By: /s/Carolyn V. Aver
------------------
Carolyn V. Aver
Executive Vice President and
Chief Financial Officer
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Schedule A
DIRECTORS AND EXECUTIVE OFFICERS OF
USWEB CORPORATION
<TABLE>
<CAPTION>
Present Principal Occupation Including
Name and Title Name of Employer
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Joseph Firmage USWeb Corporation
Chief Executive Officer and Chairman of 2880 Lakeside Drive, Suite 300
the Board Santa Clara, California 95054
Tobin Corey USWeb Corporation
President, Chief Operating Officer and Director 2880 Lakeside Drive, Suite 300
Santa Clara, California 95054
Carolyn Aver USWeb Corporation
Executive Vice President and Chief Financial 2880 Lakeside Drive, Suite 300
Officer Santa Clara, California 95054
Sheldon Laube USWeb Corporation
Executive Vice President and Chief Technical 2880 Lakeside Drive, Suite 300
Officer Santa Clara, California 95054
Jeffrey Ballowe Retired
Director 85 Estrada Calabasa
Santa Fe, NM 87501
James Daley Retired
Director 201 E. 62nd Street
New York, NY 10021
James Heffernan Independent Consultant
Director 15908 Rose Avenue
Los Gatos, CA 95030
Robert Hoff General Partner
Director Crosspoint Venture Partners
18552 MacArthur Boulevard, Suite 400
Irvine, CA 92612
Joseph Marengi Senior Vice President
Director Dell Computer
One Dell Way
Round Rock, TX 78682
Gary Rieschel Senior Vice President
Director SOFTBANK Holdings
333 W. San Carlos Street, Suite 1225
San Jose, CA 95110
</TABLE>
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<TABLE>
<S> <C>
Barry Rubenstein President
Director InfoMedia Associates, Ltd.
68 Wheatley Road
Brookville, NY 11545
Klaus Schwab Professor
Director 70, chemin de Ruth
CH-1223 Cologny/Geneva
Switzerland
</TABLE>
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Schedule B
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<TABLE>
<CAPTION>
Stockholder (1) Shares Beneficially Owned
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<S> <C>
Carlton Baab 34,902
Chief Financial Officer and Vice President
of Finance and Administration
CKS Group, Inc.
Alexandre Balkanski 20,416
President and Chief Executive Officer
C-Cube Microsystems
1778 McCarthy Boulevard
Milpitas, CA 95035
Robert Clarkson 66,465
Executive Vice President, Business Development
and Secretary
CKS Group, Inc.
Kimberly Johnson 18,967
Executive Vice President of Operations,
CKS West
Mark Kvamme 1,555,337
Chief Executive Officer and Chairman of the
Board
CKS Group, Inc.
Pierre Lamonde 323,685
General Partner, Sequoia Capital
3000 Sand Hill Road
Bldg. 4, Suite 280
Menlo Park, California 95054
Barry Linsky* 6,250
Executive Vice President
The Interpublic Group of Companies, Inc.
1271 Avenue of the Americas
New York, NY 10020
Michael Slade 12,250
President and Chief Executive Officer
Starwave Corp.
13810 SE Eastgate Way
Bellevue, Washington 98005
Ian Small 28,417
Executive Vice President and Chief
Technology Officer
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Stockholder (1) Shares Beneficially Owned
- --------------- -------------------------
<S> <C>
Thomas Suiter 1,141,835
Chief Creative Officer and Director
CKS Group, Inc.
The Interpublic Group of Companies, Inc.* 1,988,315
1271 Avenue of the Americas
New York, NY 10020
</TABLE>
___________________
(1) Unless otherwise indicated, each of the stockholders may be reached at the
CKS's corporate headquarters at 10441 Bandley Drive, Cupertino, CA 95014.
/*/ Barry Linsky is a Senior Vice President at The Interpublic Group of
Companies, Inc. ("IPG"). For purposes of this table, the shares listed as
beneficially owned by Mr. Linsky and IPG relate to separate and distinct shares.
<PAGE>
EXHIBIT 1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
USWEB CORPORATION
USWEB ACQUISITION CORPORATION 134
AND
CKS GROUP, INC.
DATED AS OF SEPTEMBER 1, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
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ARTICLE I........................................................... 2
1.1 The Merger................................................... 2
1.2 Effective Time; Closing...................................... 2
1.3 Effect of the Merger......................................... 2
1.4 Certificate of Incorporation; Bylaws......................... 2
1.5 Directors and Officers....................................... 2
1.6 Effect on Capital Stock...................................... 3
1.7 Surrender of Certificates.................................... 3
1.8 No Further Ownership Rights in CKS Common Stock.............. 5
1.9 Lost, Stolen or Destroyed Certificates....................... 5
1.10 Tax and Accounting Consequences............................... 5
1.11 Taking of Necessary Action; Further Action.................... 5
ARTICLE II.......................................................... 5
2.1 Organization of CKS.......................................... 5
2.2 CKS Capital Structure........................................ 6
2.3 Obligations With Respect to Capital Stock.................... 6
2.4 Authority.................................................... 7
2.5 Section 203 of the Delaware General Corporation Law
Not Applicable............................................... 7
2.6 SEC Filings; CKS Financial Statements........................ 8
2.7 Absence of Certain Changes or Events......................... 8
2.8 Taxes........................................................ 8
2.9 Intellectual Property........................................ 10
2.10 Compliance; Permits; Restrictions............................ 10
2.11 Litigation................................................... 11
2.12 Brokers' and Finders' Fees................................... 11
2.13 Employee Matters and Benefit Plans........................... 11
2.14 Absence of Liens and Encumbrances............................ 12
2.15 Environmental Matters........................................ 12
2.16 Labor Matters................................................ 13
2.17 Agreements, Contracts and Commitments........................ 13
2.18 International Employee Plan.................................. 14
2.19 Pooling of Interests......................................... 14
2.20 Change of Control Payments................................... 14
2.21 Statements; Proxy Statement/Prospectus....................... 14
2.22 Board Approval............................................... 15
2.23 Fairness Opinion............................................. 15
ARTICLE III......................................................... 15
3.1 Organization of USWeb........................................ 15
3.2 USWeb and Merger Sub Capital Structure....................... 16
3.3 Obligations With Respect to Capital Stock.................... 17
3.4 Authority.................................................... 17
3.5 Section 203 of the Delaware General Corporation Law
Not Applicable............................................... 18
3.6 SEC Filings; USWeb Financial Statements...................... 18
3.7 Absence of Certain Changes or Events......................... 19
3.8 Taxes........................................................ 19
3.9 Intellectual Property........................................ 20
3.10 Compliance; Permits; Restrictions............................ 21
3.11 Litigation................................................... 21
3.12 Brokers' and Finders' Fees................................... 21
i
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
3.13 Employee Benefit Plans............................................. 21
3.14 Absence of Liens and Encumbrances.................................. 23
3.15 Environmental Matters.............................................. 23
3.16 Labor Matters...................................................... 23
3.17 Agreements, Contracts and Commitments.............................. 24
3.18 Pooling of Interests............................................... 25
3.19 Change of Control Payments......................................... 25
3.20 Statements; Proxy Statement/Prospectus............................. 25
3.21 Board Approval..................................................... 25
3.22 Fairness Opinion................................................... 25
ARTICLE IV................................................................ 25
4.1 Conduct of Business................................................ 25
ARTICLE V................................................................. 28
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings;
Board Recommendations................................................ 28
5.2 Meetings of Stockholders........................................... 28
5.3 Confidentiality.................................................... 29
5.4 No Solicitation.................................................... 29
5.5 Public Disclosure.................................................. 33
5.6 Legal Requirements................................................. 33
5.7 Third Party Consents............................................... 34
5.8 FIRPTA............................................................. 34
5.9 Notification of Certain Matters.................................... 34
5.10 Regulatory Filings; Reasonable Efforts............................. 34
5.11 Stock Options and Employee Benefits................................ 34
5.12 Form S-8........................................................... 36
5.13 Indemnification and Insurance...................................... 36
5.14 Nasdaq Listing..................................................... 37
5.15 USWeb Holder Agreement............................................. 37
5.16 CKS Holder Agreement............................................... 37
5.17 INTENTIONALLY OMITTED.............................................. 37
5.18 Board of Directors of the Combined Company......................... 37
5.19 Officers of Combined Company; Executive Committee.................. 37
5.20 Change of Name; Increase in Authorized Shares...................... 38
5.21 Voting Agreements.................................................. 38
5.22 Tax-Free Reorganization............................................ 38
ARTICLE VI................................................................ 38
6.1 Conditions to Obligations of Each Party to Effect the Merger....... 38
6.2 Additional Conditions to Obligations of CKS........................ 39
6.3 Additional Conditions to the Obligations of USWeb and Merger Sub... 40
ARTICLE VII............................................................... 40
7.1 Termination........................................................ 40
7.2 Notice of Termination; Effect of Termination....................... 42
7.3 Fees and Expenses.................................................. 42
7.4 Amendment.......................................................... 43
7.5 Extension; Waiver.................................................. 44
ARTICLE VIII.............................................................. 44
8.1 Non-Survival of Representations and Warranties..................... 44
8.2 Notices............................................................ 44
</TABLE>
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<TABLE>
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<S> <C>
8.3 Interpretation; Knowledge........................................... 45
8.4 Counterparts........................................................ 45
8.5 Entire Agreement; Third Party Beneficiaries......................... 45
8.6 Severability........................................................ 45
8.7 Other Remedies; Specific Performance................................ 45
8.8 Governing Law....................................................... 45
8.9 Rules of Construction............................................... 46
8.10 Assignment.......................................................... 46
</TABLE>
INDEX OF EXHIBITS
Exhibit A Form of CKS Stock Option Agreement
Exhibit B Form of USWeb Stock Option Agreement
Exhibit C Form of Certificate of Merger
Exhibit D Form of USWeb Holder Agreement
Exhibit E Form of CKS Holder Agreement
Exhibit F Form of Non-Competition Agreement
Exhibit G Form of CKS Voting Agreement
Exhibit H Form of USWeb Voting Agreement
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EXHIBIT 10.27
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
September 1, 1998 among USWeb Corporation, a Delaware corporation ("USWeb"),
USWeb Acquisition Corporation 134, a Delaware corporation and a wholly owned
subsidiary of USWeb ("Merger Sub"), and CKS Group, Inc., a Delaware
corporation ("CKS").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below) and in accordance with the Delaware General
Corporation Law ("Delaware Law"), USWeb and CKS intend to enter into a
business combination transaction to pursue their long-term business
strategies.
B. The combination of USWeb and CKS shall be effected by the terms of this
Agreement through a transaction in which Merger Sub will merge with and into
CKS, CKS will become a wholly owned subsidiary of USWeb and the stockholders
of CKS will become stockholders of USWeb.
C. The combined company following the Merger (as defined in Section 1.1)
will be called Reinvent Communications, Inc. In addition, immediately upon the
effectiveness of the Merger, the Board of Directors of the combined company
would consist of nine members, with designees of USWeb to hold seven of such
seats and designees of CKS to hold two of such seats. The senior management of
the combined company will consist of senior management from both USWeb and
CKS.
D. The Board of Directors of CKS (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of CKS
and fair to, and in the best interests of, CKS and its stockholders, (ii) has
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and (iii) has determined to recommend that the stockholders of
CKS adopt and approve this Agreement and approve the Merger.
E. The Board of Directors of USWeb (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of USWeb
and fair to, and in the best interests of, USWeb and its stockholders, (ii)
has approved this Agreement, the Merger and the other transactions
contemplated by this Agreement and (iii) has determined to recommend that the
stockholders of USWeb vote to approve the issuance of shares of USWeb Common
Stock (as defined below) to the stockholders of CKS pursuant to the terms of
the Merger.
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
G. It is also intended by the parties hereto that the Merger shall qualify
for accounting treatment as a pooling of interests.
H. Concurrently with the execution of this Agreement, and as a condition and
inducement to CKS's and USWeb's willingness to enter into this Agreement, CKS
shall execute and deliver a stock option agreement in favor of USWeb in
substantially the form attached hereto as Exhibit A (the "CKS Stock Option
Agreement"), and USWeb shall execute and deliver a stock option agreement in
favor of CKS in substantially the form attached as Exhibit B (the "USWeb Stock
Option Agreement" and, together with the CKS Stock Option Agreement, the
"Stock Option Agreements"). The Board of Directors of each of CKS and USWeb
have approved the Stock Option Agreements.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and
into CKS (the "Merger"), the separate corporate existence of Merger Sub shall
cease, and CKS shall continue as the surviving corporation. CKS as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger, substantially in the form of Exhibit C hereto (the
"Certificate of Merger"), with the Secretary of State of the State of Delaware
in accordance with the relevant provisions of Delaware Law (the time of such
filing (or such later time as may be agreed in writing by the parties and
specified in the Certificate of Merger) being the "Effective Time") on the
Closing Date (as herein defined). Unless the context otherwise requires, the
term "Agreement" as used herein refers collectively to this Agreement and Plan
of Reorganization. The closing of the Merger (the "Closing") shall take place
at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation
at a time and date to be specified by the parties, which shall be no later
than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI, or at such other time, date and location
as the parties hereto agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and in Section 261 of Delaware Law and
other applicable provisions of Delaware Law. Without limiting the generality
of the foregoing, and subject thereto, from and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises of a public as well as of a private nature, and be subject to all
the restrictions, disabilities and duties of each of CKS and Merger Sub; and
all and singular, the rights, privileges, powers and franchises of each of CKS
and Merger Sub, and all property, real, personal and mixed, and all debts due
to either of CKS and Merger Sub on whatever account, as well as for stock
subscriptions and all other things in action or belonging to each of CKS and
Merger Sub, shall be vested in the Surviving Corporation; and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation
as they were of CKS and Merger Sub, and the title to any real estate vested by
deed or otherwise under the laws of the State of Delaware, in either of CKS
and Merger Sub, shall not revert or be in any way impaired; but all rights of
creditors and all liens upon any property of either of CKS and Merger Sub
shall be preserved unimpaired, and all debts, liabilities and duties of CKS
and Merger Sub shall thereafter attach to the Surviving Corporation, and may
be enforced against it to the same extent as if such debts and liabilities had
been incurred or contracted by it.
1.4 Certificate of Incorporation; Bylaws.
(a) The Certificate of Incorporation of Merger Sub, as in effect immediately
prior to the Effective Time, shall be, at the Effective Time, the Certificate
of Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Certificate of Incorporation; provided, however, that
at the Effective Time the Certificate of Incorporation of the Surviving
Corporation shall be amended so that the name of the Surviving Corporation
shall be CKS Group Corporation.
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended as provided by law and such Bylaws.
1.5 Directors and Officers. The directors of Merger Sub immediately prior to
the Effective Time, together with Pierre Lamond, Alexandre Balkanski, Barry
Linsky, and Michael Slade, the four outside directors of CKS as of the date of
this Agreement, shall be the initial directors of the Surviving Corporation.
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The officers of Merger Sub immediately prior to the Effective Time shall be
the initial officers of the Surviving Corporation, until their respective
successors are duly appointed.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, CKS or the holders of any of
the following securities:
(a) Conversion of CKS Common Stock. Each share of Common Stock, $0.001 par
value, of CKS (the "CKS Common Stock") issued and outstanding immediately
prior to the Effective Time (other than any shares of CKS Common Stock to be
canceled pursuant to Section 1.6(b)) will be canceled and extinguished and
automatically converted (subject to Sections 1.6(e) and (f)) into the right to
receive 1.5 (the "Exchange Ratio") validly issued, fully paid and
nonassessable shares of Common Stock, $0.001 par value per share, of USWeb
(the "USWeb Common Stock") upon surrender of the certificate representing such
share of CKS Common Stock in the manner provided in Section 1.7 (or in the
case of a lost, stolen or destroyed certificate, upon delivery of an affidavit
(and bond, if required) in the manner provided in Section 1.9).
(b) Cancellation of USWeb-Owned Stock. Each share of CKS Common Stock held
by CKS or owned by Merger Sub, USWeb or any direct or indirect wholly owned
subsidiary of CKS or of USWeb immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof.
(c) Stock Options; Employee Stock Purchase Plans. At the Effective Time, all
options to purchase CKS Common Stock then outstanding under CKS's 1995 Series
B Common Stock Plan, 1995 Stock Plan, 1995 Director Option Plan, and 1996
Supplemental Stock Plan and the Site Specific, Inc. 1996 Stock Option Plan, in
each case as amended (collectively, the "CKS Stock Plans"), shall be assumed
by USWeb in accordance with Section 5.11 hereof. At the Effective Time, in
accordance with the terms of CKS's 1995 Employee Stock Purchase Plan and 1997
Employee Stock Purchase Plan, as the case may be, (collectively, the "CKS
ESPPs"), and in accordance with Section 5.11 hereof, USWeb shall assume the
CKS ESPPs.
(d) Capital Stock of Merger Sub. Each share of Common Stock, $0.001 par
value, of Merger Sub (the "Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into one validly
issued, fully paid and nonassessable share of Common Stock, $0.001 par value,
of the Surviving Corporation. Each certificate evidencing ownership of shares
of Merger Sub Common Stock shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to
reflect appropriately the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities
convertible into USWeb Common Stock or CKS Common Stock), reorganization,
recapitalization or other like change with respect to USWeb Common Stock or
CKS Common Stock occurring on or after the date of this Agreement and prior to
the Effective Time.
(f) Fractional Shares. No fraction of a share of USWeb Common Stock will be
issued by virtue of the Merger, but in lieu thereof each holder of shares of
CKS Common Stock who would otherwise be entitled to a fraction of a share of
USWeb Common Stock (after aggregating all fractional shares of USWeb Common
Stock to be received by such holder) shall receive from USWeb an amount of
cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the average closing price of one share of USWeb
Common Stock for the ten most recent days that USWeb Common Stock has traded
ending on the trading day immediately prior to the Effective Time, as reported
by the Nasdaq Stock Market.
1.7 Surrender of Certificates.
(a) Exchange Agent. ChaseMellon Shareholder Services LLP shall act as the
exchange agent (together with any successor exchange agent as may be
appointed, the "Exchange Agent") in the Merger pursuant to an exchange agency
agreement with USWeb which shall be in a form reasonably acceptable to CKS.
(b) USWeb to Provide Common Stock. Promptly (and in no event later than the
fifth business day) after the Effective Time, USWeb shall make available to
the Exchange Agent for exchange in accordance with this
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Article I, the shares of USWeb Common Stock issuable pursuant to Section 1.6
in exchange for outstanding shares of CKS Common Stock, and cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section 1.6(f)
and any dividends or distributions which holders of shares of CKS Common Stock
may be entitled pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly (and in no event later than the fifth
business day) after the Effective Time, USWeb 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 CKS Common Stock whose shares were
converted into the right to receive shares of USWeb Common Stock pursuant to
Section 1.6, cash in lieu of any fractional shares pursuant to Section 1.6(f)
and any dividends or other distributions pursuant to Section 1.7(d), (i) a
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery
of the Certificates to the Exchange Agent and shall be in such form and have
such other provisions as USWeb, in consultation with CKS prior to the
Effective Time, may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of USWeb Common Stock, cash in lieu of any fractional
shares pursuant to Section 1.6(f) and any dividends or other distributions
pursuant to Section 1.7(d). 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 USWeb Common Stock,
payment in lieu of fractional shares which such holders have the right to
receive pursuant to Section 1.6(f) and any dividends or distributions payable
pursuant to Section 1.7(d), and the Certificates so surrendered shall
forthwith be canceled. Until so surrendered, outstanding Certificates will be
deemed from and after the Effective Time, for all corporate purposes, subject
to Section 1.7(d) as to the payment of dividends, to evidence the ownership of
the number of full shares of USWeb Common Stock into which such shares of CKS
Common Stock shall have been so converted and the right to receive an amount
in cash in lieu of the issuance of any fractional shares in accordance with
Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the date of this Agreement with respect
to USWeb Common Stock with a record date after the Effective Time will be paid
to the holders of any unsurrendered Certificates with respect to the shares of
USWeb Common Stock represented thereby until the holders of record of such
Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall
promptly deliver to the record holders thereof, without interest, certificates
representing whole shares of USWeb Common Stock issued in exchange therefor
along with payment in lieu of fractional shares pursuant to Section 1.6(f)
hereof and the amount of any such dividends or other distributions with a
record date after the Effective Time payable with respect to such whole shares
of USWeb Common Stock.
(e) Transfers of Ownership. If certificates for shares of USWeb Common Stock
are to be issued in a name other than that in which the Certificates
surrendered in exchange therefor are registered, it will be a condition of the
issuance thereof that the Certificates so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to USWeb or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
for shares of USWeb Common Stock in any name other than that of the registered
holder of the Certificates surrendered, or established to the satisfaction of
USWeb or any agent designated by it that such tax has been paid or is not
payable.
(f) No Liability. Notwithstanding anything to the contrary in this Section
1.7, none of the Exchange Agent, USWeb, the Surviving Corporation and CKS and
none of their respective directors, officers, employees or agents hereto shall
be liable to a holder of shares of USWeb Common Stock or CKS Common Stock for
any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
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1.8 No Further Ownership Rights in CKS Common Stock. All shares of USWeb
Common Stock issued upon the surrender for exchange of shares of CKS Common
Stock in accordance with the terms hereof (including any cash paid in respect
thereof pursuant to Section 1.6(f) and 1.7(d)) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of CKS
Common Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of CKS Common Stock which were
outstanding immediately prior to the Effective Time. If after the Effective
Time Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of
an affidavit of that fact by the holder thereof, such shares of USWeb Common
Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.7(d); provided, however, that USWeb may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
USWeb, CKS or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
1.10 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code. The parties
hereto adopt this Agreement as a "plan of reorganization" within the meaning
of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
(b) It is intended by the parties hereto that the Merger shall qualify for
accounting treatment as a pooling of interests.
1.11 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges,
powers and franchises of CKS and Merger Sub, the officers and directors of CKS
and Merger Sub will take all such further action to the extent lawful and
necessary, as long as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CKS
CKS represents and warrants to USWeb and Merger Sub, subject to the
exceptions specifically disclosed in writing in the disclosure letter supplied
by CKS to USWeb dated as of the date hereof and certified by a duly authorized
officer of CKS (the "CKS Schedules"), as follows:
2.1 Organization of CKS.
(a) CKS and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation; has the corporate power and authority to own, lease and
operate its assets and property and to carry on its business as now being
conducted and as proposed to be conducted; and is duly qualified or licensed
to do business and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except where
the failure to be so qualified would not have a Material Adverse Effect (as
defined below) on CKS.
(b) CKS has delivered to USWeb a true and complete list of all of CKS's
subsidiaries, indicating the jurisdiction of incorporation of each subsidiary
and CKS's equity interest therein.
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(c) CKS has delivered or made available to USWeb a true and correct copy of
the Certificate of Incorporation and Bylaws of CKS and equivalent governing
instruments of each of its subsidiaries, each as amended to date, and each
such instrument is in full force and effect. Neither CKS nor any of its
subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation or Bylaws or equivalent governing instruments.
(d) When used in connection with CKS, the term "Material Adverse Effect"
means, for purposes of this Agreement, any change, event or effect that is
materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of CKS and its subsidiaries taken
as a whole (except for those changes, events and effects that are directly
caused by (i) conditions affecting national, regional or world economies, (ii)
conditions affecting the integrated marketing communications services and
internet services industries as a whole, (iii) the pendency or announcement of
this Agreement or the transactions contemplated hereby, including changes,
events or effects resulting from employee attrition or a delay of, reduction
in or cancellation or change in the terms of customer engagements, to the
extent attributable to the pendency or announcement of this Agreement or the
transactions contemplated hereby, (iv) failure of CKS's and its subsidiaries'
results of operations to meet any internal or external predictions,
projections, estimates or expectations, or (v) changes in the market price or
trading volume of CKS capital stock, which conditions (in the case of clauses
(i) and (ii)) do not affect CKS in a disproportionate manner).
2.2 CKS Capital Structure. The authorized capital stock of CKS consists of
30,000,000 shares of Common Stock, $0.001 par value, of which there were
15,312,037 shares issued and outstanding as of May 31, 1998 and 2,000,000
shares of Preferred Stock, $0.001 par value, of which no shares are issued or
outstanding. All outstanding shares of CKS Common Stock are duly authorized,
validly issued, fully paid and nonassessable and are not subject to preemptive
rights created by statute, the Certificate of Incorporation or Bylaws of CKS
or any agreement or document to which CKS is a party or by which it is bound.
As of August 28, 1998, CKS had reserved an aggregate of 750,000 shares,
2,600,000 shares, 200,000 shares and 1,000,000 shares, respectively, of CKS
Common Stock for issuance to employees, consultants and non-employee directors
pursuant to CKS's 1995 Series B Common Stock Plan, 1995 Stock Plan, 1995
Director Option Plan, and 1996 Supplemental Stock Plan. In addition, there are
options to purchase shares of CKS Common Stock pursuant to the Site Specific,
Inc. 1996 Stock Option Plan assumed by CKS in connection with CKS's
acquisition of Site Specific, Inc. All shares of CKS Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. CKS has provided a list of
options to acquire shares of CKS Common Stock on or about August 28, 1998, the
name of the holder of such option, the exercise price of such option, the
number of shares as to which such option will have vested at such date and
whether the exercisability of such option will be accelerated in any way by
the transactions contemplated by this Agreement, and indicate the extent of
acceleration, if any. As of August 28, 1998 an aggregate of 300,000 shares of
CKS Common Stock were reserved for issuance pursuant to the CKS 1995 Employee
Stock Purchase Plan.
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.2, there are no equity securities, partnership interests or similar
ownership interests of any class of CKS, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except for securities CKS owns, directly or indirectly through
one or more subsidiaries, there are no equity securities, partnership
interests or similar ownership interests of any class of any subsidiary of
CKS, or any security exchangeable or convertible into or exercisable for such
equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except as set forth in Section
2.2, there are no options, warrants, equity securities, partnership interests
or similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which CKS or any of its
subsidiaries is a party or by which it is bound obligating CKS or any of its
subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition, of any shares
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of capital stock, partnership interests or similar ownership interests of CKS
or any of its subsidiaries or obligating CKS or any of its subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option,
warrant, equity security, call, right, commitment or agreement. There are no
registration rights and, to the knowledge of CKS, as of the date of this
Agreement, there are no voting trusts, proxies or other agreements or
understandings with respect to any equity security of any class of CKS or with
respect to any equity security, partnership interest or similar ownership
interest of any class of any of its subsidiaries.
2.4 Authority.
(a) CKS has all requisite corporate power and authority to enter into this
Agreement and the CKS Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the CKS Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of CKS, subject only to the approval
and adoption of this Agreement and the approval of the Merger by CKS's
stockholders and the filing of the Certificate of Merger pursuant to Delaware
Law. A vote of the holders of at least a majority of the outstanding shares of
the CKS Common Stock is required for CKS's stockholders to approve and adopt
this Agreement and approve the Merger. This Agreement has been duly executed
and delivered by CKS and, assuming the due authorization, execution and
delivery by USWeb and, if applicable, Merger Sub, constitutes a valid and
binding obligation of CKS, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement and the CKS
Stock Option Agreement by CKS do not, and the performance of this Agreement
and the CKS Stock Option Agreement by CKS will not, (i) conflict with or
violate the Certificate of Incorporation or Bylaws of CKS or the equivalent
organizational documents of any of its subsidiaries, (ii) subject to obtaining
the approval and adoption of this Agreement and the approval of the Merger by
CKS's stockholders as contemplated in Section 5.2 and compliance with the
requirements set forth in Section 2.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to CKS or any of
its subsidiaries or by which its or any of their respective properties is
bound or affected, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or impair CKS's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of CKS or any of its
subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which CKS or any of its subsidiaries is a party or by which CKS
or any of its subsidiaries or its or any of their respective properties are
bound or affected. The CKS Schedules list all material consents, waivers and
approvals under any of CKS's or any of its subsidiaries' material agreements,
contracts, licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("Governmental Entity"), is required to be obtained or made by CKS in
connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (ii) the filing
of the Proxy Statement (as defined in Section 2.21) with the Securities and
Exchange Commission ("SEC") in accordance with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (iii) such consents, approvals, orders,
authorizations, registrations, declarations and other filings as may be
required under applicable federal and state securities laws and the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and the securities or antitrust laws of any foreign country, and (iv) such
other consents, authorizations, filings, approvals and registrations which if
not obtained or made would not be material to CKS or USWeb or have a material
adverse effect on the ability of the parties to consummate the Merger.
2.5 Section 203 of the Delaware General Corporation Law Not Applicable. The
Board of Directors of CKS has taken all actions so that the restrictions
contained in Section 203 of the Delaware Law applicable to
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a "business combination" (as defined in such Section 203) will not apply to
the execution, delivery or performance of this Agreement or to the
consummation of the Merger or the other transactions contemplated by this
Agreement.
2.6 SEC Filings; CKS Financial Statements.
(a) CKS has filed all forms, reports and documents required to be filed with
the SEC since December 1, 1995, and has made available to USWeb such forms,
reports and documents in the form filed with the SEC. All such required forms,
reports and documents (including those that CKS may file subsequent to the
date hereof) are referred to herein as the "CKS SEC Reports." As of their
respective dates, the CKS SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such CKS SEC Reports, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
CKS's subsidiaries is required to file any forms, reports or other documents
with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in CKS SEC Reports (the "CKS
Financials"), including any CKS SEC Reports filed after the date hereof until
the Closing, (x) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, (y) was
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may
be indicated in the notes thereto or, in the case of unaudited interim
financial statements, as may be permitted by the SEC on Form 10-Q under the
Exchange Act) and (z) fairly presented the consolidated financial position of
CKS and its subsidiaries as at the respective dates thereof and the
consolidated results of CKS's operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments. The balance sheet of CKS
contained in CKS SEC Reports as of May 31, 1998 is hereinafter referred to as
the "CKS Balance Sheet." Except as disclosed in the CKS Financials, since the
date of the CKS Balance Sheet neither CKS nor any of its subsidiaries has
incurred any liabilities (absolute, accrued, contingent or otherwise) of a
nature required to be disclosed on a balance sheet or in the related notes to
the consolidated financial statements prepared in accordance with GAAP which
are, individually or in the aggregate, material to the business, results of
operations or financial condition of CKS and its subsidiaries taken as a
whole, except liabilities (i) provided for in the CKS Balance Sheet, or (ii)
incurred since the date of the CKS Balance Sheet in the ordinary course of
business consistent with past practices and immaterial in the aggregate.
(c) CKS has heretofore furnished to USWeb a complete and correct copy of any
amendments or modifications, which have not yet been filed with the SEC but
which are required to be filed, to agreements, documents or other instruments
which previously had been filed by CKS with the SEC pursuant to the Securities
Act or the Exchange Act.
2.7 Absence of Certain Changes or Events. Since the date of the CKS Balance
Sheet through the date of this Agreement, there has not been: (i) any Material
Adverse Effect on CKS, (ii) any material change by CKS in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP, or (iii) any material revaluation by CKS of any of its assets,
including, without limitation, writing down the value of capitalized inventory
or writing off notes or accounts receivable other than in the ordinary course
of business.
2.8 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and
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liabilities relating to taxes, including those based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements
or arrangements with any other person with respect to such amounts and
including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) CKS and each of its subsidiaries have timely filed all federal,
state, local and foreign returns, estimates, information statements and
reports ("Returns") relating to Taxes required to be filed by CKS and each
of its subsidiaries, except such Returns which are not material to CKS, and
have paid all Taxes shown to be due on such Returns.
(ii) Except as is not material to CKS, CKS and each of its subsidiaries
as of the Effective Time will have withheld with respect to its employees
all federal and state income taxes, FICA, FUTA and other Taxes required to
be withheld.
(iii) Except as is not material to CKS, neither CKS nor any of its
subsidiaries has been delinquent in the payment of any Tax other than Taxes
not yet due and payable nor is there any Tax deficiency outstanding,
proposed or assessed against CKS or any of its subsidiaries, nor has CKS or
any of its subsidiaries executed any waiver of any statute of limitations
on or extending the period for the assessment or collection of any Tax.
(iv) Except as is not material to CKS, no audit or other examination of
any Return of CKS or any of its subsidiaries is presently in progress, nor
has CKS or any of its subsidiaries been notified of any request for such an
audit or other examination.
(v) Except as is not material to CKS, no adjustment relating to any
Returns filed by CKS or any of its subsidiaries has been proposed formally
or informally by any Tax authority to CKS or any of its subsidiaries or any
representative thereof and, to the knowledge of CKS, no basis exists for
any such adjustment which would be material to CKS.
(vi) Neither CKS nor any of its subsidiaries has any material liability
for unpaid Taxes other than Taxes not yet due which has not been accrued
for or reserved on the CKS Balance Sheet, whether asserted or unasserted,
contingent or otherwise, which is material to CKS.
(vii) None of CKS's assets are treated as "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(viii) There is no contract, agreement, plan or arrangement, including
but not limited to the provisions of this Agreement, covering any employee
or former employee of CKS or any of its subsidiaries that, individually or
collectively, could give rise to the payment of any amount that would not
be deductible pursuant to Sections 280G, 404 or 162 of the Code.
(ix) Neither CKS nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by CKS.
(x) CKS is not, and has not been at any time, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of
the Code.
(xi) No power of attorney that is currently in force has been granted
with respect to any matter relating to Taxes payable by CKS or any of its
subsidiaries.
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(xii) Neither CKS nor any of its subsidiaries is party to or affected by
any tax-sharing or allocation agreement or arrangement.
(xiii) The CKS Schedules list (y) any Tax exemption, Tax holiday or other
Tax-sharing arrangement that CKS or any of its subsidiaries has in any
jurisdiction, including the nature, amount and lengths of such Tax
exemption, Tax holiday or other Tax-sharing arrangement and (z) any
expatriate tax programs or policies affecting CKS or any of its
subsidiaries. Each of CKS and its subsidiaries is in compliance with all
terms and conditions required to maintain any material Tax exemption, Tax
holiday or other Tax-sharing arrangement or order of any Governmental
Entity and the consummation of the transactions contemplated hereby will
not have any adverse effect in any material respects on the continued
validity and effectiveness of any such Tax exemption, Tax holiday or other
Tax-sharing arrangement or order.
2.9 Intellectual Property.
(a) CKS and its subsidiaries own, or have the right to use, sell or license
all intellectual property necessary or required for the conduct of their
respective businesses as presently conducted (such intellectual property and
the rights thereto are collectively referred to herein as the "CKS IP
Rights").
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any instrument or agreement governing any CKS IP Rights,
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any CKS IP Rights or materially impair the right
of CKS, the Surviving Corporation or USWeb to use, sell or license any CKS IP
Rights or portion thereof.
(c) Neither the manufacture, marketing, license, sale or intended use of any
product or technology currently licensed or sold or under development by CKS
or any of its subsidiaries violates in any material respect any license or
agreement between any third party and CKS or any of its subsidiaries or, to
the knowledge of CKS, infringes in any material respect any intellectual
property right of any other party; and there is no pending or, to the
knowledge of CKS, threatened claim or litigation contesting the validity,
ownership or right to use, sell, license or dispose of any CKS IP Rights, nor
has CKS received any written notice asserting that any CKS IP Rights or the
proposed use, sale, license or disposition thereof conflicts or will conflict
with the rights of any other party.
(d) CKS has taken reasonable and practicable steps designed to safeguard and
maintain the secrecy and confidentiality of, and its proprietary rights in,
all CKS IP Rights.
(e) There are no royalties, honoraria, fees or other payments payable by CKS
to any person by reason of the ownership, use, license, purchase, sale or
disposition or acquisition of the CKS IP Rights.
2.10 Compliance; Permits; Restrictions.
(a) Neither CKS nor any of its subsidiaries is, in any material respect, in
conflict with, or in default or violation of (i) any law, rule, regulation,
order, judgment or decree applicable to CKS or any of its subsidiaries or by
which CKS or any of its subsidiaries or any of their respective properties is
bound or affected, or (ii) any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which CKS or any of its subsidiaries is a party or by which CKS
or any of its subsidiaries or its or any of their respective properties is
bound or affected. To the knowledge of CKS, no investigation or review by any
Governmental Entity is pending or threatened against CKS or any of its
subsidiaries, nor has any Governmental Entity indicated an intention to
conduct the same. There is no material agreement, judgment, injunction, order
or decree binding upon CKS or any of its subsidiaries which has or could
reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of CKS or any of its subsidiaries, any
acquisition of material property by CKS or any of its subsidiaries or the
conduct of business by CKS as currently conducted.
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(b) CKS and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to the operation of the business of CKS (collectively, the "CKS
Permits"). CKS and its subsidiaries are in compliance in all material respects
with the terms of the CKS Permits.
2.11 Litigation. There is no action, suit, proceeding, claim, arbitration or
investigation pending or as to which CKS or any of its subsidiaries has
received any notice of assertion, nor, to CKS's knowledge, is there a
threatened action, suit, proceeding, claim, arbitration or investigation
against CKS or any of its subsidiaries which reasonably would be likely to be
material to CKS, or which in any manner challenges or seeks to prevent,
enjoin, alter or delay any of the transactions contemplated by this Agreement.
2.12 Brokers' and Finders' Fees. Except for fees payable to Goldman, Sachs &
Co. pursuant to an engagement letter dated June 18, 1998, CKS has not
incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.13 Employee Matters and Benefit Plans.
(a) The CKS Schedules contain a complete and accurate list of each plan,
program, policy, practice, contract, agreement or other arrangement providing
for employment, compensation, severance, relocation, repatriation,
expatriation, visas, work permits, termination pay, deferred compensation,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits, whether written or unwritten or otherwise, funded or
unfunded, including without limitation, each "employee benefit plan," within
the meaning of Section 3(3) of Employee Retirement Income Security Act of
1974, as amended ("ERISA") which is current, contributed to, or required to be
contributed to, by CKS or any person or entity under common control with CKS
within the meaning of Section 414(b), (c), (m) or (o) of the Code and the
regulations issued thereunder (an "ERISA Affiliate") for the benefit of any
current or former employee, consultant, director of CKS or any ERISA Affiliate
(the "CKS Employees"), or with respect to which CKS or any Affiliate has or
may have any liability or obligation (the "CKS Employee Plans"). CKS does not
have any plan or commitment to establish any new CKS Employee Plan, to modify
any CKS Employee Plan (except to the extent required by law or to conform any
such CKS Employee Plan to the requirements of any applicable law, in each case
as previously disclosed to USWeb in writing, or as required by this
Agreement), or to enter into any CKS Employee Plan.
(b) Documents. CKS has made available to USWeb correct and complete copies
of all documents relating to each CKS Employee Plan including (without
limitation) any and all amendments thereto and all related trust documents;
the most recent actuarial valuations, if any, prepared for each CKS Employee
Plan and any material contracts or agreements relating to each CKS Employee
Plan.
(c) Employee Plan Compliance. Except as otherwise set forth on CKS
Schedules: (i) CKS has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and
has no knowledge of any default or violation by any other party to each CKS
Employee Plan, and each CKS Employee Plan has been established and maintained
in all material respects in accordance with its terms and in compliance with
all applicable laws, rules and regulations; (ii) each CKS 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, opinion, notification or advisory letter from the Internal
Revenue Service ("IRS") with respect to each such CKS Employee Plan as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or has remaining a
period of time under applicable Treasury regulations or IRS pronouncements in
which to apply for such a letter and make any amendments necessary to obtain a
favorable determination as to the qualified status of each such CKS Employee
Plan; (iii) no "prohibited transaction," within the meaning of Section 4975 of
the Code or Sections 406 and 407 of ERISA, and not otherwise exempt under
Section 408 of ERISA, has occurred with respect to any CKS Employee Plan; (iv)
there are no actions,
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suits or claims pending, or, to the knowledge of CKS, threatened or reasonably
anticipated (other than routine claims for benefits) against any CKS Employee
Plan or against the assets of any CKS Employee Plan; (v) each CKS Employee
Plan can be amended, terminated or otherwise discontinued after the Effective
Time in accordance with its terms, without liability to USWeb, CKS or any of
its ERISA Affiliates (other than ordinary administration expenses); (vi) there
are no audits, inquiries or proceedings pending or, to the knowledge of CKS or
any ERISA Affiliates, threatened by the IRS or Department of Labor with
respect to any CKS Employee Plan; and (vii) neither CKS nor any ERISA
Affiliate is subject to any penalty or tax with respect to any CKS Employee
Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.
(d) Pension Plan. Neither CKS nor any ERISA Affiliate has ever maintained,
established, sponsored, participated in, or contributed to, any "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA which is
subject to Title IV of ERISA or Section 412 of the Code.
(e) Multiemployer Plans. At no time has CKS or any ERISA Affiliate
contributed to or been required to contribute to any "multiemployer plan" as
defined in Section 3(37) of ERISA.
(f) COBRA; HIPAA; FMLA. Neither CKS nor any ERISA Affiliate has, prior to
the Effective Time and in any material respect, violated any of the health
care continuation requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), the requirements of the
Health Insurance Portability and Accountability Act of 1996, the requirements
of Family Medical Leave Act of 1993, as amended, or any similar provisions of
state law applicable to CKS Employees.
(g) No Post-Employment Obligations. Except as set forth in Section 2.13(g)
of the CKS Schedules, no CKS Employee Plan provides, or reflects or represents
any liability to provide, retiree life insurance, retiree health or other
retiree employee welfare benefits to any person for any reason, except as may
be required by COBRA or other applicable statute, and CKS has never
represented, promised or contracted (whether in oral or written form) to any
CKS Employee (either individually or to CKS Employees as a group) or any other
person that such CKS Employee(s) or other person would be provided with
retiree life insurance, retiree health or other retiree employee welfare
benefit, except to the extent required by statute.
(h) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an
event under any CKS Employee Plan, trust, loan or other arrangements that will
or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any CKS Employee.
2.14 Absence of Liens and Encumbrances. CKS and each of its subsidiaries has
good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of its material tangible properties and
assets, real, personal and mixed, used in its business, free and clear of any
liens or encumbrances except as reflected in the CKS Financials and except for
liens for Taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which would not be material to CKS.
2.15 Environmental Matters.
(a) Hazardous Material. No underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste
pursuant to the United States Resource Conservation and Recovery Act of 1976,
as amended, and the regulations promulgated pursuant to said laws, (a
"Hazardous Material"), but excluding office and janitorial supplies, are
present, as a result of the actions of CKS or any of its subsidiaries or any
affiliate of CKS, or, to CKS's knowledge, as a result of any actions of any
third party or otherwise, in, on or
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under any property, including the land and the improvements, ground water and
surface water thereof, that CKS or any of its subsidiaries has at any time
owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Neither CKS nor any of its subsidiaries
has transported, stored, used, manufactured, disposed of, released or exposed
its employees or others to Hazardous Materials in material violation of any
law in effect on or before the Closing Date, nor has CKS or any of its
subsidiaries disposed of, transported, sold, used, released, exposed its
employees or others to or manufactured any product containing a Hazardous
Material (collectively "Hazardous Materials Activities") in material violation
of any rule, regulation, treaty or statute promulgated by any Governmental
Entity in effect prior to or as of the date hereof to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. CKS and its subsidiaries currently hold all environmental
approvals, permits, licenses, clearances and consents (the "CKS Environmental
Permits") necessary for the conduct of CKS's and its subsidiaries' Hazardous
Material Activities and other businesses of CKS and its subsidiaries as such
activities and businesses are currently being conducted.
(d) Environmental Liabilities. No material action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
CKS's knowledge, threatened concerning any CKS Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of CKS or any of its
subsidiaries. CKS is not aware of any fact or circumstance which could involve
CKS or any of its subsidiaries in any material environmental litigation or
impose upon CKS any material environmental liability.
2.16 Labor Matters. CKS (i) is and has been in compliance in all respects
with all applicable laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours,
in each case, with respect to CKS Employees; (ii) has withheld and reported
all amounts required by law or by agreement to be withheld and reported with
respect to wages, salaries and other payments to CKS 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; and (iv) is not liable for any payment to
any trust or other fund governed by or maintained by or on behalf of any
governmental authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for CKS Employees (other than
routine payments to be made in the normal course of business and consistent
with past practice). No work stoppage or labor strike against CKS is pending,
threatened or reasonably anticipated. CKS does not know of any activities or
proceedings of any labor union to organize any CKS Employees. There are no
actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of CKS, threatened or reasonably anticipated relating to any labor,
safety or discrimination matters involving any CKS Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to CKS. Neither CKS nor any ERISA
Affiliate has engaged in any unfair labor practices under applicable law. CKS
is not presently, nor has it been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to CKS
Employees and no collective bargaining agreement is being negotiated by CKS.
2.17 Agreements, Contracts and Commitments. Except as set forth in the CKS
Schedules, as of the date hereof, neither CKS nor any of its subsidiaries is a
party to or is bound by:
(a) any employment or consulting agreement, contract or commitment with any
officer or director level employee or member of CKS's Board of Directors,
other than those that are terminable by CKS or any of its subsidiaries on no
more than thirty days notice without liability or financial obligation, except
to the extent general principles of wrongful termination law may limit CKS's
or any of its subsidiaries' ability to terminate employees at will;
(b) any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will
be accelerated, by the occurrence of any of the transactions contemplated by
this Agreement or the value
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of any of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement;
(c) any agreement of indemnification or guaranty not entered into in the
ordinary course of business other than indemnification agreements between CKS
or any of its subsidiaries and any of its officers or directors;
(d) any agreement, contract or commitment containing any covenant limiting
the freedom of CKS or any of its subsidiaries to engage in any line of
business or compete with any person or granting any exclusive distribution
rights;
(e) any agreement, contract or commitment currently in force relating to the
disposition or acquisition of assets not in the ordinary course of business or
any ownership interest in any corporation, partnership, joint venture or other
business enterprise; or
(f) any material joint marketing or development agreement.
Neither CKS nor any of its subsidiaries, nor to CKS's knowledge any other
party to a CKS Contract (as defined below), has breached, violated or
defaulted under, or received notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which CKS or any of its subsidiaries
is a party or by which it is bound of the type described in clauses (a)
through (f) above (any such agreement, contract or commitment, a "CKS
Contract") in such a manner as would permit any other party to cancel or
terminate any such CKS Contract, or would permit any other party to seek
damages, which would be reasonably likely to be material to CKS.
2.18 International Employee Plan. Each CKS Employee Plan that has been
adopted or maintained by CKS or any ERISA Affiliate, whether informally or
formally, or with respect to which CKS or any ERISA Affiliate will or may have
any liability, for the benefit of CKS Employees who perform services outside
the United States (the "International Employee Plans") has been established,
maintained and administered in compliance with its terms and conditions and
with the requirements prescribed by any and all statutory or regulatory laws
that are applicable to such International Employee Plan. Furthermore, no
International Employee Plan has unfunded liabilities, that as of the Effective
Time, will not be offset by insurance or fully accrued. Except as required by
law, no condition exists that would prevent USWeb, CKS or any ERISA Affiliate
from terminating or amending any International Employee Plan at any time for
any reason without liability to USWeb, CKS or any ERISA Affiliate (other than
ordinary administration expenses).
2.19 Pooling of Interests. To the knowledge of CKS, based on consultation
with its independent accountants, neither CKS nor any of its directors,
officers, affiliates or stockholders has taken any action or agreed to take
any action which would preclude USWeb's ability to account for the Merger as a
pooling of interests.
2.20 Change of Control Payments. The CKS Schedules set forth each plan or
agreement pursuant to which any material amounts may become payable (whether
currently or in the future) to current or former officers and directors of CKS
as a result of or in connection with the Merger. No benefit payable or which
may become payable by CKS or any of the CKS Subsidiaries pursuant to any CKS
Employee Plan or any CKS Benefit Arrangement or as a result of or arising
under this Agreement shall constitute an "excess parachute payment" (as
defined in Section 280G(b)(1) of the Code) which is subject to the imposition
of an excise Tax under Section 4999 of the Code or which would not be
deductible by reason of Section 280G of the Code.
2.21 Statements; Proxy Statement/Prospectus. The information supplied by CKS
for inclusion in the Registration Statement (as defined in Section 3.4(b))
shall not at the time the Registration Statement is filed with the SEC and at
the time it becomes effective under the Securities Act, contain any untrue
statement of a
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material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information supplied by CKS for inclusion in the proxy statement/prospectus to
be sent to the stockholders of CKS and stockholders of USWeb in connection
with the meeting of CKS's stockholders to consider the approval and adoption
of this Agreement and the approval of the Merger (the "CKS Stockholders'
Meeting") and in connection with the meeting of USWeb's stockholders to
consider the approval of (i) the amendment of USWeb's Certificate of
Incorporation to increase its authorized share capital to allow for the
issuance of shares of USWeb Common Stock by virtue of the Merger, (ii) the
issuance of shares of USWeb Common Stock by virtue of the Merger, and (iii)
the amendment of USWeb's Certificate of Incorporation to change USWeb's
corporate name (subject to and conditional upon the effectiveness of the
Merger) (the "USWeb Stockholders' Meeting") (such proxy statement/prospectus
as amended or supplemented is referred to herein as the "Proxy Statement")
shall not, on the date the Proxy Statement is first mailed to CKS's
stockholders and USWeb's stockholders, at the time of the CKS Stockholders'
Meeting or the USWeb Stockholders' Meeting and at 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 are made, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the CKS Stockholders' Meeting or the USWeb Stockholders' Meeting
which has become false or misleading. The Proxy Statement will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder. If at any time prior to the Effective Time,
any event relating to CKS or any of its affiliates, officers or directors
should be discovered by CKS which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, CKS shall
promptly inform USWeb. Notwithstanding the foregoing, CKS makes no
representation or warranty with respect to any information supplied by USWeb
or Merger Sub which is contained in any of the foregoing documents.
2.22 Board Approval. The Board of Directors of CKS has, as of the date of
this Agreement, determined (i) that the Merger is fair to, and in the best
interests of CKS and its stockholders, and (ii) to recommend that the
stockholders of CKS approve and adopt this Agreement and approve the Merger.
2.23 Fairness Opinion. The Board of Directors of CKS has received an oral
opinion from Goldman, Sachs & Co. (to be confirmed in writing) to the effect
that as of the date hereof, the Exchange Ratio is fair to CKS's stockholders
from a financial point of view.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF USWEB AND MERGER SUB
USWeb and Merger Sub represent and warrant to CKS, subject to the exceptions
specifically disclosed in writing in the disclosure letter supplied by USWeb
to CKS dated as of the date hereof and certified by a duly authorized officer
of USWeb (the "USWeb Schedules"), as follows:
3.1 Organization of USWeb.
(a) USWeb and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation; has the corporate power and authority to own, lease and
operate its assets and property and to carry on its business as now being
conducted and as proposed to be conducted; and is duly qualified or licensed
to do business and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except where
the failure to be so qualified would not have a Material Adverse Effect (as
defined below) on USWeb.
(b) USWeb has delivered to CKS a true and complete list of all of USWeb's
subsidiaries, indicating the jurisdiction of incorporation of each subsidiary
and USWeb's equity interest therein. USWeb has no equity
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interest in Cloudbreak Consulting LLC. To the knowledge of USWeb, no officer
or director of USWeb has an equity interest in Cloudbreak Consulting LLC.
(c) USWeb has delivered or made available to CKS a true and correct copy of
the Certificate of Incorporation and Bylaws of USWeb and equivalent governing
instruments of each of its subsidiaries, each as amended to date, and each
such instrument is in full force and effect. Neither USWeb nor any of its
subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation or Bylaws or equivalent governing instruments.
(d) When used in connection with USWeb, the term "Material Adverse Effect"
means, for purposes of this Agreement, any change, event or effect that is
materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of USWeb and its subsidiaries
taken as a whole (except for those changes, events and effects that are
directly caused by (i) conditions affecting national, regional or world
economies, (ii) conditions affecting the Internet-related professional
services industry as a whole, (iii) the pendency or announcement of this
Agreement, or the transactions contemplated hereby, including changes or
effects resulting from employee attrition or a delay of, reduction in or
cancellation or change in the terms of customer engagements, to the extent
attributable to the pendency or announcement of this Agreement or the
transactions contemplated hereby, (iv) failure of USWeb's and its
subsidiaries' results of operations to meet any internal or external
predictions, projections, estimates or expectations, or (v) changes in the
market price or trading volume of USWeb capital stock, which conditions (in
the case of clause (i) and (ii)) do not affect USWeb in a disproportionate
manner).
3.2 USWeb and Merger Sub Capital Structure. The authorized capital stock of
USWeb consists of 100,000,000 shares of Common Stock, par value $0.001 per
share ("Common Stock") of which there were 45,176,418 shares issued and
outstanding as of August 28, 1998, including 1,000,000 shares of Preferred
Stock, par value $0.001 per share, of which no shares are issued or
outstanding. The authorized capital stock of Merger Sub consists of 1,000
shares of Common Stock, no par value, all of which, as of the date hereof, are
issued and outstanding and are held by USWeb. Merger Sub was formed on July
15, 1998, for the purpose of consummating the Merger and has no material
assets or liabilities except as necessary for such purpose. All outstanding
shares of USWeb Common Stock are duly authorized, validly issued, fully paid
and nonassessable and are not subject to preemptive rights created by statute,
the Certificate of Incorporation or Bylaws of USWeb or any agreement or
document to which USWeb is a party or by which it is bound. As of August 28,
1998, USWeb had reserved an aggregate of 600,000 shares, 7,000,000 shares and
20,000,000 shares, respectively, of USWeb Common Stock for issuance to
employees, consultants and non-employee directors pursuant to the USWeb 1996
Stock Option Plan, the 1996 Equity Compensation Plan, and the 1997 Acquisition
Stock Option Plan under which options are outstanding for an aggregate of
68,367 shares, 3,680,468 shares and 11,026,976 shares, respectively, and under
which no shares, 3,257,523 shares and 7,678,672 shares, respectively, are
available for grant as of August 28, 1998. In addition, there are options to
purchase shares of USWeb Common Stock pursuant to the Ikonic Interactive, Inc.
1997 Stock Option Plan assumed by USWeb in connection with its acquisition of
Ikonic Interactive, Inc. USWeb has reserved for issuance 333,333 shares,
2,000,000 shares (registered on Form S-8 currently commitments for
approximately 8,000,000 shares at current stock prices) and 55 shares,
respectively, under (i) USWeb's Affiliate Warrant Program, (ii) in connection
with acquisition-related employee stock bonuses, and (iii) upon exercise of
consultant warrants, respectively. USWeb has also issued warrants for
approximately 2,728,916 shares to venture capital investors and NBC
Multimedia, Inc. All shares of USWeb Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. USWeb has provided a list of
options to acquire 10,000 or more shares of USWeb Common Stock as of August
28, 1998, the name of the holder of such option, the number of shares subject
to such option, the exercise price of such option, the number of shares as to
which such option will have vested at such date, and whether the
exercisability of such option will be accelerated in any way by the
transactions contemplated by this Agreement, with an indication of the extent
of acceleration, if any. As of August 28, 1998, there were an aggregate of
3,000,000 shares of
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USWeb Common Stock reserved for issuance pursuant to USWeb's Employee Stock
Purchase Plan (the "USWeb Employee Stock Purchase Plan").
3.3 Obligations With Respect to Capital Stock. Except as set forth in the
USWeb Schedules and in Section 3.2, there are no equity securities,
partnership interests or similar ownership interests of any class of USWeb, or
any securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except for securities USWeb owns,
directly or indirectly through one or more subsidiaries, there are no equity
securities, partnership interests or similar ownership interests of any class
of any subsidiary of USWeb, or any security exchangeable or convertible into
or exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as
set forth in Schedule 3.3 and in Section 3.2, there are no options, warrants,
equity securities, partnership interests or similar ownership interests,
calls, rights (including preemptive rights), commitments or agreements of any
character to which USWeb or any of its subsidiaries is a party or by which it
is bound obligating USWeb or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, or repurchase, redeem or
otherwise acquire, or cause the repurchase, redemption or acquisition, of any
shares of capital stock, partnership interests or similar ownership interests
of USWeb or any of its subsidiaries or obligating USWeb or any of its
subsidiaries to grant, extend, accelerate the vesting of or enter into any
such option, warrant, equity security, call, right, commitment or agreement.
There are no registration rights and, to the knowledge of USWeb, as of the
date of this Agreement, there are no voting trusts, proxies or other
agreements or understandings with respect to any equity security of any class
of USWeb or with respect to any equity security, partnership interest or
similar ownership interest of any class of any of its subsidiaries.
3.4 Authority.
(a) Each of USWeb and Merger Sub has all requisite corporate power and
authority to enter into this Agreement and the USWeb Stock Option Agreement
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the USWeb Stock Option Agreement
and the consummation of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action on the part of USWeb
and, in the case of this Agreement, Merger Sub, subject only to the filing and
recordation of the Certificate of Merger pursuant to Delaware Law and the
approval by USWeb's stockholders of (i) the amendment of USWeb's Certificate
of Incorporation to increase its authorized shares to allow for the issuance
of shares of USWeb Common Stock by virtue of the Merger, (ii) the issuance of
shares of USWeb Common Stock by virtue of the Merger, and (iii) the amendment
of USWeb's Certificate of Incorporation to change USWeb's corporate name
(subject to and conditional upon the effectiveness of the Merger). A vote of
the holders of at least a majority of the outstanding shares of the USWeb
Common Stock is required for USWeb's stockholders to approve each of (i) the
amendment of USWeb's Certificate of Incorporation to increase its authorized
shares to allow for the issuance of shares of USWeb Common Stock by virtue of
the Merger, (ii) the issuance of shares of USWeb Common Stock by virtue of the
Merger, and (iii) the amendment of USWeb's Certificate of Incorporation to
change USWeb's corporate name (subject to and conditional upon the
effectiveness of the Merger). This Agreement has been duly executed and
delivered by each of USWeb and Merger Sub and, assuming the due authorization,
execution and delivery by CKS, constitutes the valid and binding obligation of
USWeb, enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy and other similar laws and general principles of
equity. The execution and delivery of this Agreement by each of USWeb and
Merger Sub do not, and the performance of this Agreement by each of USWeb and
Merger Sub will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of USWeb or the Articles of Incorporation or Bylaws of
Merger Sub or the equivalent organizational documents of any of USWeb's other
subsidiaries, (ii) subject to obtaining the approval of USWeb's stockholders
of (x) the amendment of USWeb's Certificate of Incorporation to increase its
authorized shares to allow for the issuance of shares of USWeb Common Stock by
virtue of the Merger, (y) the issuance of shares of USWeb Common Stock by
virtue of the Merger, and (z) the amendment of USWeb's Certificate of
Incorporation to change USWeb's corporate name (subject to
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and conditional upon the effectiveness of the Merger) as contemplated in
Section 5.2 and compliance with the requirements set forth in Section 3.4(b)
below, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to USWeb or any of its subsidiaries (including Merger Sub)
or by which its or any of their respective properties is bound or affected, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair
USWeb's rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of USWeb or any of its subsidiaries (including Merger
Sub) pursuant to, any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which USWeb or any of its subsidiaries (including Merger Sub) is a party or
by which USWeb or any of its subsidiaries or its or any of their respective
properties are bound or affected. The USWeb Schedules list all consents,
waivers and approvals under any of USWeb's or any of its subsidiaries'
material agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained
or made by USWeb or Merger Sub in connection with the execution and delivery
of this Agreement or the consummation of the Merger, except for (i) the filing
of a Form S-4 Registration Statement (the "Registration Statement") with the
SEC in accordance with the Securities Act, (ii) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, (iii) the
filing of the Proxy Statement with the SEC in accordance with the Exchange
Act, (iv) such consents, approvals, orders, authorizations, registrations,
declarations and other filings as may be required under applicable federal and
state securities laws and the HSR Act and the securities or antitrust laws of
any foreign country, and (v) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not be
material to USWeb or CKS or have a material adverse effect on the ability of
the parties to consummate the Merger.
3.5 Section 203 of the Delaware General Corporation Law Not Applicable. The
Board of Directors of USWeb has taken all actions so that the restrictions
contained in Section 203 of the Delaware General Corporation Law applicable to
a "business combination" (as defined in such Section 203) will not apply to
the execution, delivery or performance of this Agreement or to the
consummation of the Merger or the other transactions contemplated by this
Agreement.
3.6 SEC Filings; USWeb Financial Statements.
(a) USWeb has filed all forms, reports and documents required to be filed
with the SEC since October 1, 1997, and has made available to CKS such forms,
reports and documents in the form filed with the SEC. All such required forms,
reports and documents (including those that USWeb may file subsequent to the
date hereof) are referred to herein as the "USWeb SEC Reports." As of their
respective dates, the USWeb SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to such
USWeb SEC Reports, and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the
date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. None of USWeb's subsidiaries is required to
file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in USWeb SEC Reports (the "USWeb
Financials"), including any USWeb SEC Reports filed after the date hereof
until the Closing, (x) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, (y) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (z) fairly presented the consolidated
financial position of USWeb and its subsidiaries as at
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the respective dates thereof and the consolidated results of USWeb's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring year-
end adjustments. The balance sheet of USWeb contained in USWeb SEC Reports as
of June 30, 1998 is hereinafter referred to as the "USWeb Balance Sheet."
Except as disclosed in the USWeb Financials, since the date of the USWeb
Balance Sheet neither USWeb nor any of its subsidiaries incurred any
liabilities (absolute, accrued, contingent or otherwise) of a nature required
to be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually
or in the aggregate, material to the business, results of operations or
financial condition of USWeb and its subsidiaries taken as a whole, except
liabilities (i) provided for in the USWeb Balance Sheet, or (ii) incurred
since the date of the USWeb Balance Sheet in the ordinary course of business
consistent with past practices and immaterial in the aggregate.
(c) USWeb has heretofore furnished to CKS a complete and correct copy of any
amendments or modifications, which have not yet been filed with the SEC but
which are required to be filed, to agreements, documents or other instruments
which previously had been filed by USWeb with the SEC pursuant to the
Securities Act or the Exchange Act.
3.7 Absence of Certain Changes or Events. Since the date of the USWeb
Balance Sheet through the date of this Agreement, there has not been: (i) any
Material Adverse Effect on USWeb, (ii) any material change by USWeb in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP, or (iii) any material revaluation by USWeb of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable other than in the
ordinary course of business.
3.8 Taxes.
(a) Tax Returns and Audits.
(i) USWeb and each of its subsidiaries have timely filed all Returns
relating to Taxes required to be filed by USWeb and each of its
subsidiaries, except such Returns which are not material to USWeb, and have
paid all Taxes shown to be due on such Returns.
(ii) Except as is not material to USWeb, USWeb and each of its
subsidiaries as of the Effective Time will have withheld with respect to
its employees all federal and state income taxes, FICA, FUTA and other
Taxes required to be withheld.
(iii) Except as is not material to USWeb, neither USWeb nor any of its
subsidiaries has been delinquent in the payment of any Tax nor is there any
Tax deficiency outstanding, proposed or assessed against USWeb or any of
its subsidiaries, nor has USWeb or any of its subsidiaries executed any
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(iv) Except as is not material to USWeb, no audit or other examination of
any Return of USWeb or any of its subsidiaries is presently in progress,
nor has USWeb or any of its subsidiaries been notified of any request for
such an audit or other examination.
(v) Except as is not material to USWeb, no adjustment relating to any
Returns filed by USWeb or any of its subsidiaries has been proposed
formally or informally by any Tax authority to USWeb or any of its
subsidiaries or any representative thereof and, to the knowledge of USWeb,
no basis exists for any such adjustment which would be material to USWeb.
(vi) Neither USWeb nor any of its subsidiaries has any liability for
unpaid Taxes other than Taxes not yet due and Taxes being contested in good
faith by appropriate proceedings which has not been accrued for or reserved
on the USWeb Balance Sheet, whether asserted or unasserted, contingent or
otherwise, which is material to USWeb.
(vii) None of USWeb's assets are treated as "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
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(viii) There is no contract, agreement, plan or arrangement, including
but not limited to the provisions of this Agreement, covering any employee
or former employee of USWeb or any of its subsidiaries that, individually
or collectively, could give rise to the payment of any amount that would
not be deductible pursuant to Sections 280G, 404 or 162 of the Code.
(ix) Neither USWeb nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by USWeb.
(x) USWeb is not, and has not been at any time, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of
the Code.
(xi) No power of attorney that is currently in force has been granted
with respect to any matter relating to Taxes payable by USWeb or any of its
subsidiaries.
(xii) Neither USWeb nor any of its subsidiaries is party to or affected
by any tax-sharing or allocation agreement or arrangement.
(xiii) The USWeb Schedules list (y) any Tax exemption, Tax holiday or
other Tax-sharing arrangement that USWeb or any of its subsidiaries has in
any jurisdiction, including the nature, amount and lengths of such Tax
exemption, Tax holiday or other Tax-sharing arrangement and (z) any
expatriate tax programs or policies affecting USWeb or any of its
subsidiaries. Each of USWeb and its subsidiaries is in full compliance in
all material respects with all terms and conditions required to maintain
any Tax exemption, Tax holiday or other Tax-sharing arrangement or order of
any Governmental Entity and the consummation of the transactions
contemplated hereby will not have any adverse effect on the continued
validity and effectiveness of any such Tax exemption, Tax holiday or other
Tax-sharing arrangement or order.
3.9 Intellectual Property.
(a) USWeb and its subsidiaries own, or have the right to use, sell or
license all intellectual property necessary or required for the conduct of
their respective businesses as presently conducted (such intellectual property
and the rights thereto are collectively referred to herein as the "USWeb IP
Rights").
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any instrument or agreement governing any USWeb IP Rights,
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any USWeb IP Rights or materially impair the
right of USWeb, the Surviving Corporation or CKS to use, sell or license any
USWeb IP Rights or portion thereof.
(c) Neither the manufacture, marketing, license, sale or intended use of any
product or technology currently licensed or sold or under development by USWeb
or any of its subsidiaries violates in any material respect any license or
agreement between any third party and USWeb or any of its subsidiaries and any
third party or, to the knowledge of USWeb, infringes in any material respect
any intellectual property right of any other party; and there is no pending
or, to the knowledge of USWeb, threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any USWeb IP
Rights, nor has USWeb received any written notice asserting that any USWeb IP
Rights or the proposed use, sale, license or disposition thereof conflicts or
will conflict with the rights of any other party.
(d) There are no royalties, honoraria, fees or other payments payable by
USWeb to any person by reason of the ownership, use, license, purchase, sale
or disposition or acquisition of the USWeb IP Rights.
(e) USWeb has taken reasonable and practicable steps designed to safeguard
and maintain the secrecy and confidentiality of, and its proprietary rights
in, all USWeb IP Rights.
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3.10 Compliance; Permits; Restrictions.
(a) Neither USWeb nor any of its subsidiaries is, in any material respect,
in conflict with, or in default or violation of (i) any law, rule, regulation,
order, judgment or decree applicable to USWeb or any of its subsidiaries or by
which USWeb or any of its subsidiaries or any of their respective properties
is bound or affected, or (ii) any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which USWeb or any of its subsidiaries is a party or by which
USWeb or any of its subsidiaries or its or any of their respective properties
is bound or affected. To the knowledge of USWeb, no investigation or review by
any Governmental Entity is pending or threatened against USWeb or any of its
subsidiaries, nor has any Governmental Entity indicated an intention to
conduct the same. There is no material agreement, judgment, injunction, order
or decree binding upon USWeb or any of its subsidiaries which has or could
reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of USWeb or any of its subsidiaries, any
acquisition of material property by USWeb or any of its subsidiaries or the
conduct of business by USWeb as currently conducted.
(b) USWeb and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to the operation of the business of USWeb (collectively, the "USWeb
Permits"). USWeb and its subsidiaries are in compliance in all material
respects with the terms of the USWeb Permits.
3.11 Litigation. There is no action, suit, proceeding, claim, arbitration or
investigation pending or as to which USWeb or any of its subsidiaries has
received any notice of assertion, nor, to USWeb's knowledge, is there a
threatened action, suit, proceeding, claim, arbitration or investigation
against USWeb or any of its subsidiaries which reasonably would be likely to
be material to USWeb, or which in any manner challenges or seeks to prevent,
enjoin, alter or delay any of the transactions contemplated by this Agreement.
3.12 Brokers' and Finders' Fees. Except for fees payable to Morgan Stanley &
Co. Incorporated pursuant to an engagement letter dated August 7, 1998, USWeb
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.
3.13 Employee Benefit Plans.
(a) Employee Benefit Plans and Agreements. The USWeb Schedules contain a
complete and accurate list of each plan, program, policy, practice, contract,
agreement or other arrangement providing for employment, compensation,
severance, relocation, repatriation, expatriation, visas, work permits,
termination pay, deferred compensation, performance awards, stock or stock-
related awards, fringe benefits or other employee benefits, whether written or
unwritten or otherwise, funded or unfunded, including without limitation, each
"employee benefit plan," within the meaning of Section 3(3) of Employee
Retirement Income Security Act of 1974, as amended ("ERISA") which is
currently maintained, contributed to, or required to be contributed to, by
USWeb or any person or entity under common control with USWeb within the
meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations
issued thereunder (an "ERISA Affiliate") for the benefit of any current or
former employee, consultant, director of USWeb or any ERISA Affiliate (the
"USWeb Employees"), or with respect to which USWeb or any Affiliate has or may
have any liability or obligation (the "USWeb Employee Plans"). USWeb does not
have any plan or commitment to establish any new USWeb Employee Plan, to
modify any USWeb Employee Plan (except to the extent required by law or to
conform any such USWeb Employee Plan to the requirements of any applicable
law, in each case as previously disclosed to CKS in writing, or as required
by this Agreement), or to enter into any USWeb Employee Plan.
(b) Documents. USWeb has made available to CKS correct and complete copies
of all documents relating to each USWeb Employee Plan including (without
limitation) any and all amendments thereto and
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all related trust documents; the most recent actuarial valuations, if any,
prepared for each USWeb Employee Plan and any material contracts or agreements
relating to each USWeb Employee Plan.
(c) Employee Plan Compliance. Except as otherwise set forth on USWeb
Schedules: (i) USWeb has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and
has no knowledge of any default or violation by any other party to each USWeb
Employee Plan, and each USWeb Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, rules and regulations; (ii) each USWeb
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, opinion, notification or advisory letter from the
Internal Revenue Service ("IRS") with respect to each such USWeb Employee Plan
as to its qualified status under the Code, including all amendments to the
Code effected by the Tax Reform Act of 1986 and subsequent legislation, or has
remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a letter and make any amendments
necessary to obtain a favorable determination as to the qualified status of
each such USWeb Employee Plan; (iii) no "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 408 of ERISA, has occurred with respect to any
USWeb Employee Plan; (iv) there are no actions, suits or claims pending, or,
to the knowledge of USWeb, threatened or reasonably anticipated (other than
routine claims for benefits) against any USWeb Employee Plan or against the
assets of any USWeb Employee Plan; (v) each USWeb Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to CKS, USWeb or any of its ERISA
Affiliates (other than ordinary administration expenses); (vi) there are no
audits, inquiries or proceedings pending or, to the knowledge of USWeb or any
ERISA Affiliates, threatened by the IRS or Department of Labor with respect to
any USWeb Employee Plan; and (vii) neither USWeb nor any ERISA Affiliate is
subject to any penalty or tax with respect to any USWeb Employee Plan under
Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.
(d) Pension Plan. Neither USWeb nor any ERISA Affiliate has ever maintained,
established, sponsored, participated in, or contributed to, any "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA which is
subject to Title IV of ERISA or Section 412 of the Code.
(e) Multiemployer Plans. At no time has USWeb or any ERISA Affiliate
contributed to or been required to contribute to any "multiemployer plan" as
defined in Section 3(37) of ERISA.
(f) COBRA; HIPAA; FMLA. Neither USWeb nor any ERISA Affiliate has, prior to
the Effective Time and in any material respect, violated any of the health
care continuation requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), the requirements of the
Health Insurance Reportability and Accountability Act of 1996, the
requirements of Family Medical Leave Act of 1993, as amended, or any similar
provisions of state law applicable to USWeb Employees.
(g) No Post-Employment Obligations. Except as set forth in Section 3.13(g)
of the USWeb Schedules, no USWeb Employee Plan provides, or reflects or
represents any liability to provide, retiree life insurance, retiree health or
other retiree employee welfare benefits to any person for any reason, except
as may be required by COBRA or other applicable statute, and USWeb has never
represented, promised or contracted (whether in oral or written form) to any
USWeb Employee (either individually or to USWeb Employees as a group) or any
other person that such USWeb Employee(s) or other person would be provided
with retiree life insurance, retiree health or other retiree employee welfare
benefit, except to the extent required by statute.
(h) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an
event under any USWeb Employee Plan, trust, loan or other arrangements that
will or may
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result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any USWeb Employee.
(i) International Employee Plan. Each USWeb Employee Plan that has been
adopted or maintained by USWeb or any ERISA Affiliate, whether informally or
formally, or with respect to which USWeb or any ERISA Affiliate will or may
have any liability, for the benefit of USWeb Employees who perform services
outside the United States (the "International Employee Plans") has been
established, maintained and administered in compliance with its terms and
conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan.
Furthermore, no International Employee Plan has unfunded liabilities, that as
of the Effective Time, will not be offset by insurance or fully accrued.
Except as required by law, no condition exists that would prevent CKS, USWeb
or any ERISA Affiliate from terminating or amending any International Employee
Plan at any time for any reason without liability to CKS, USWeb or any ERISA
Affiliate (other than ordinary administration expenses).
3.14 Absence of Liens and Encumbrances. USWeb and each of its subsidiaries
has good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of its material tangible properties and
assets, real, personal and mixed, used in its business, free and clear of any
liens or encumbrances except as reflected in the USWeb Financials and except
for liens or Taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which would not be material to USWeb.
3.15 Environmental Matters.
(a) Hazardous Material. No underground storage tanks and no amount of any
Hazardous Material, but excluding office and janitorial supplies, are present,
as a result of the actions of USWeb or any of its subsidiaries or any
affiliate of USWeb, or, to USWeb's knowledge, as a result of any actions of
any third party or otherwise, in, on or under any property, including the land
and the improvements, ground water and surface water thereof, that USWeb or
any of its subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Neither USWeb nor any of its
subsidiaries has transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in material
violation of any law in effect on or before the Closing Date, nor has USWeb or
any of its subsidiaries engaged in any Hazardous Materials Activities in
material violation of any rule, regulation, treaty or statute promulgated by
any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) Permits. USWeb and its subsidiaries currently hold all environmental
approvals, permits, licenses, clearances and consents (the "USWeb
Environmental Permits") necessary for the conduct of USWeb's and its
subsidiaries' Hazardous Material Activities and other businesses of USWeb and
its subsidiaries as such activities and businesses are currently being
conducted.
(d) Environmental Liabilities. No material action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
USWeb's knowledge, threatened concerning any USWeb Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of USWeb or any of its
subsidiaries. USWeb is not aware of any fact or circumstance which could
involve USWeb or any of its subsidiaries in any material environmental
litigation or impose upon USWeb any material environmental liability.
3.16 Labor Matters.
(a) USWeb (i) is and has been in compliance in all respects with all
applicable laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each
case, with respect to USWeb Employees; (ii) has withheld and reported all
amounts required by law or
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by agreement to be withheld and reported with respect to wages, salaries and
other payments to USWeb 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; and (iv) is not liable for any payment to any trust or other fund
governed by or maintained by or on behalf of any governmental authority, with
respect to unemployment compensation benefits, social security or other
benefits or obligations for USWeb Employees (other than routine payments to be
made in the normal course of business and consistent with past practice).
(b) No work stoppage or labor strike against USWeb is pending, threatened or
reasonably anticipated. USWeb does not know of any activities or proceedings
of any labor union to organize any USWeb Employees. There are no actions,
suits, claims, labor disputes or grievances pending, or, to the knowledge of
USWeb, threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any USWeb Employee, including, without
limitation, charges of unfair labor practices or discrimination complaints,
which, if adversely determined, would, individually or in the aggregate,
result in any material liability to USWeb. Neither USWeb nor any ERISA
Affiliate has engaged in any unfair labor practices under applicable law.
USWeb is not presently, nor has it been in the past, a party to, or bound by,
any collective bargaining agreement or union contract with respect to USWeb
Employees and no collective bargaining agreement is being negotiated by USWeb.
3.17 Agreements, Contracts and Commitments. Except as set forth in the USWeb
Schedules, as of the date hereof, neither USWeb nor any of its subsidiaries is
a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment with any
officer or director level employee or member of USWeb's Board of Directors,
other than those that are terminable by USWeb or any of its subsidiaries on no
more than thirty days notice without liability or financial obligation, except
to the extent general principles of wrongful termination law may limit USWeb's
or any of its subsidiaries' ability to terminate employees at will;
(b) any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will
be accelerated, by the occurrence of any of the transactions contemplated by
this Agreement or the value of any of the benefits of which will be calculated
on the basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification or guaranty not entered into in the
ordinary course of business other than indemnification agreements between
USWeb or any of its subsidiaries and any of its officers or directors;
(d) any agreement, contract or commitment containing any covenant limiting
the freedom of USWeb or any of its subsidiaries to engage in any line of
business or compete with any person or granting any exclusive distribution
rights;
(e) any agreement, contract or commitment currently in force relating to the
disposition or acquisition of assets not in the ordinary course of business or
any ownership interest in any corporation, partnership, joint venture or other
business enterprise; or
(f) any material joint marketing or development agreement.
Neither USWeb nor any of its subsidiaries, nor to USWeb's knowledge any
other party to a USWeb Contract (as defined below), has breached, violated or
defaulted under, or received notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which USWeb or any of its subsidiaries
is a party or by which it is bound of the type described in clauses (a)
through (f) above (any such agreement, contract or commitment, a "USWeb
Contract") in such a manner as would permit any other party to cancel or
terminate any such USWeb Contract, or would permit any other party to seek
damages, which would be reasonably likely to be material to USWeb.
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3.18 Pooling of Interests. To the knowledge of USWeb, based on consultation
with its independent accountants, neither USWeb nor any of its directors,
officers, affiliates or stockholders has taken any action or agreed to take
any action which would preclude USWeb's ability to account for the Merger as a
pooling of interests.
3.19 Change of Control Payments. The USWeb Schedules set forth each plan or
agreement pursuant to which any material amounts may become payable (whether
currently or in the future) to current or former officers and directors of
USWeb as a result of or in connection with the Merger.
3.20 Statements; Proxy Statement/Prospectus. The information supplied by
USWeb for inclusion in the Registration Statement shall not at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The
information supplied by USWeb for inclusion in the Proxy Statement shall not,
on the date the Proxy Statement is first mailed to USWeb's stockholders and
CKS's stockholders, at the time of the USWeb Stockholders' Meeting or the CKS
Stockholders' Meeting and at 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 are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the USWeb
Stockholders' Meeting or the CKS Stockholders' Meeting which has become false
or misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time, any event relating to
USWeb or any of its affiliates, officers or directors should be discovered by
USWeb which should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement, USWeb shall promptly inform CKS.
Notwithstanding the foregoing, USWeb makes no representation or warranty with
respect to any information supplied by CKS which is contained in any of the
foregoing documents.
3.21 Board Approval. The Board of Directors of USWeb has, as of the date of
this Agreement, determined (i) that the Merger is fair to, and in the best
interests of USWeb and its stockholders, and (ii) to recommend that the
stockholders of USWeb approve (x) the amendment of USWeb's Certificate of
Incorporation to increase its authorized share capital to allow for the
issuance of shares of USWeb Common Stock by virtue of the Merger (subject to
and conditional upon the effectiveness of the Merger), (y) the issuance of
shares of USWeb Common Stock by virtue of the Merger, and (z) the amendment of
USWeb's Certificate of Incorporation to change USWeb's corporate name (subject
to and conditional upon the effectiveness of the Merger).
3.22 Fairness Opinion. The Board of Directors of USWeb has received an
opinion from Morgan Stanley & Co. Incorporated (to be confirmed in writing) to
the effect that as of the date hereof, the Exchange Ratio is fair to USWeb
from a financial point of view.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, each of CKS (which for the purposes of
this Article IV shall include CKS and each of its subsidiaries) and USWeb
(which for the purposes of this Article IV shall include USWeb and each of its
subsidiaries) agree, except (i) in the case of CKS as provided in Article IV
of the CKS Schedules and in the case of USWeb as provided in Article IV of the
USWeb Schedules, or (ii) to the extent that the other of them shall otherwise
consent in writing, to carry on its business diligently and in accordance with
good commercial practice and to carry on its business in the usual, regular
and ordinary course, in substantially the same manner as heretofore conducted
and in
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compliance with all applicable laws and regulations, to pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, to pay
or perform other material obligations when due, and use its commercially
reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others with which it has
business dealings. In addition, each of CKS and USWeb will promptly notify the
other of any material event involving its business or operations. CKS and
USWeb agree that USWeb may continue to execute its acquisition program in the
usual, regular and ordinary course, in substantially the same manner as
heretofore conducted without CKS's consent; provided, however, that USWeb must
obtain the written consent of CKS, which shall not be withheld unreasonably,
prior to completing an acquisition if (i) the business to be acquired, without
taking any other acquisition into account, would constitute a "significant
subsidiary" of USWeb pursuant to the conditions specified in Rule 1-02(w) of
SEC Regulation S-X, substituting 20 percent for 10 percent each place it
appears therein or (ii) the aggregate number of shares of USWeb Common Stock
issued in connection with all acquisitions after the date of this Agreement
and prior to the Effective Time shall exceed 5,000,000. Furthermore, CKS and
USWeb agree that during the period prior to the Effective Time they will
exchange monthly summary financial data and that their respective senior
management groups will participate in informational meetings on a monthly
basis, at such time and place as shall be mutually agreeable. No information
or knowledge obtained in any investigation will 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.
In addition, during the period from the date of this Agreement and
continuing until the earlier termination of this Agreement pursuant to its
terms or the Effective Time, except as permitted by the terms of this
Agreement, and except in the case of CKS as provided in Article IV of the CKS
Schedules, and except in the case of USWeb as provided in Article IV of the
USWeb Schedules, without the prior written consent of the other, neither CKS
nor USWeb shall do any of the following, and neither CKS nor USWeb shall
permit its subsidiaries to do any of the following:
(a) waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize
cash payments in exchange for any options granted under any of such plans;
(b) grant any severance or termination pay to any officer or employee except
payments in amounts consistent with policies and past practices or pursuant to
written agreements outstanding, or policies existing, on the date hereof and
as previously disclosed in writing to the other, or adopt any new severance
plan;
(c) transfer or license to any person or entity or otherwise extend, amend
or modify in any material respect any rights to the CKS IP Rights or the USWeb
IP Rights, as the case may be, or enter into grants to future patent rights,
other than in the ordinary course of business;
(d) declare or pay any dividends on or make any other distributions (whether
in cash, stock or property) in respect of any capital stock or split, combine
or reclassify any capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for any capital
stock;
(e) repurchase or otherwise acquire, directly or indirectly, any shares of
capital stock except pursuant to rights of repurchase of any such shares under
any employee, consultant or director stock plan existing on the date hereof;
(f) issue, deliver, sell, authorize or propose the issuance, delivery or
sale of, any shares of capital stock or any securities convertible into shares
of capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of capital
stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than
(i) shares of CKS Common Stock or USWeb Common Stock, as the case may be,
pursuant to the exercise of stock options therefor outstanding as of the date
of this Agreement, (ii) options to purchase shares
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of CKS Common Stock or USWeb Common Stock, as the case may be, to be granted
at fair market value in the ordinary course of business, consistent with past
practice and in accordance with stock option plans existing on the date
hereof, (iii) shares of CKS Common Stock or USWeb Common Stock, as the case
may be, issuable upon the exercise of the options referred to in clause (ii),
(iv) shares of CKS Common Stock or USWeb Common Stock, as the case may be,
issuable to participants in the USWeb Employee Stock Purchase Plan or the CKS
Employee Stock Purchase Plan consistent with past practice and the terms
thereof, and (v) shares of USWeb Common Stock and options to purchase USWeb
Common Stock in connection with (x) one or more acquisitions by USWeb,
provided that the business acquired, without taking any other acquisition into
account, would not constitute a "significant subsidiary" of USWeb pursuant to
the conditions specified in Rule 1-02(w) of SEC Regulation S-X, substituting
20 percent for 10 percent each place it appears therein and provided further
that, (y) the aggregate number of shares of USWeb Common Stock issued in
connection with all acquisitions after the date of this Agreement and prior to
the Effective Time shall not exceed 5,000,000;
(g) except as contemplated in this Agreement, cause, permit or propose any
amendments to any charter document or Bylaw (or similar governing instruments
of any subsidiaries);
(h) except for one or more acquisitions by USWeb of a business where (i) the
business acquired, without taking any other acquisition into account, would
not constitute a "significant subsidiary" of USWeb pursuant to the conditions
specified in Rule 1-02(w) of SEC Regulation S-X (substituting 20 percent for
10 percent each place it appears therein) or (ii) the aggregate number of
shares issued by USWeb in connection with all acquisitions from the date of
this Agreement and prior to the Effective Time would not exceed 5,000,000,
acquire or agree to acquire by merging or consolidating with, or by purchasing
any equity interest in or a material portion of the assets of, or by any other
manner, any business or any corporation, partnership interest, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets which are material, individually or in the aggregate, to
the business of CKS or USWeb, as the case may be, or enter into any material
joint ventures, strategic partnerships or alliances;
(i) sell, lease, license, encumber or otherwise dispose of any properties or
assets which are material, individually or in the aggregate, to the business
of CKS or USWeb, as the case may be, except in the ordinary course of business
consistent with past practice;
(j) incur any indebtedness for borrowed money (other than ordinary course
trade payables or pursuant to existing credit facilities in the ordinary
course of business) or guarantee any such indebtedness or issue or sell any
debt securities or warrants or rights to acquire debt securities of CKS or
USWeb, as the case may be, or guarantee any debt securities of others;
(k) adopt or amend any employee benefit or employee stock purchase or
employee option plan, or enter into any employment contract, pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates of its officers or employees other than in the ordinary
course of business, consistent with past practice, or change in any material
respect any management policies or procedures;
(l) pay, discharge or satisfy any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business;
(m) make any grant of exclusive rights to any third party, other than in the
ordinary course of business consistent with past practice;
(n) take any action that would be reasonably likely to interfere with
USWeb's ability to account for the Merger as a pooling of interests; or
(o) agree in writing or otherwise to take any of the actions described in
Article IV (a) through (n) above.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings; Board
Recommendations.
(a) As promptly as practicable after the execution of this Agreement, CKS
and USWeb will prepare, and file with the SEC, the Proxy Statement and USWeb
will prepare and file with the SEC the Registration Statement in which the
Proxy Statement will be included as a prospectus. Each of CKS and USWeb will
respond to any comments of the SEC, will use commercially reasonable best
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing and will cause the
Proxy Statement to be mailed to its respective stockholders at the earliest
practicable time after the Registration Statement is declared effective by the
SEC. As promptly as practicable after the date of this Agreement, CKS and
USWeb will prepare and file any other filings required under the Exchange Act,
the Securities Act or any other federal, foreign or state blue sky or related
laws relating to the Merger and the transactions contemplated by this
Agreement (the "Other Filings"). Each of CKS and USWeb 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 Registration
Statement, the Proxy Statement or any Other Filing 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 Registration Statement, the Proxy Statement, the Merger or any
Other Filing. Each of CKS and USWeb will cause all documents that it is
responsible for filing with the SEC or other regulatory authorities under this
Section 5.1(a) to comply in all material respects with all applicable
requirements of law and the rules and regulations promulgated thereunder.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement, the Registration Statement or any Other
Filing, CKS or USWeb, as the case may be, will promptly inform the other of
such occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of CKS or stockholders of
USWeb, such amendment or supplement.
(b) The Proxy Statement will include the recommendation of the Board of
Directors of CKS in favor of adoption and approval of this Agreement and
approval of the Merger, except that the Board of Directors of CKS may
withdraw, modify or refrain from making such recommendation to the extent that
the Board of Directors of CKS shall have withdrawn or modified its approval of
this Agreement or the Merger in accordance with Section 5.4(a)(ii).
(c) The Proxy Statement will include the recommendations of the Board of
Directors of USWeb in favor of (x) the amendment of USWeb's Certificate of
Incorporation to increase its authorized shares to allow for the issuance of
shares of USWeb Common Stock by virtue of the Merger, (y) the issuance of
shares of USWeb Common Stock by virtue of the Merger, and (z) the amendment of
USWeb's Certificate of Incorporation to change USWeb's corporate name, subject
to and conditional upon the effectiveness of the Merger, except that the Board
of Directors of USWeb may withdraw, modify or refrain from making such
recommendations to the extent that the Board of Directors of USWeb shall have
withdrawn or modified its approval of this Agreement or the Merger in
accordance with Section 5.4(b)(ii).
5.2 Meetings of Stockholders. Promptly after the date hereof, CKS will take
all action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to convene the CKS Stockholders' Meeting to be held
as promptly as practicable, and in any event (to the extent permissible under
applicable law) within forty-five (45) days after the declaration of
effectiveness of the Registration Statement, for the purpose of voting upon
this Agreement and the Merger. CKS will consult with USWeb and use its
commercially reasonable efforts to hold the CKS Stockholders' Meeting on the
same day and at the same time as the USWeb Stockholders' Meeting. Promptly
after the date hereof, USWeb will take all action necessary in accordance with
the Delaware Law and its Certificate of Incorporation and Bylaws to convene
the USWeb Stockholders' Meeting to be held as promptly as practicable, and in
any event (to the extent
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permissible under applicable law) within forty-five (45) days after the
declaration of effectiveness of the Registration Statement, for the purpose of
(i) amending its Certificate of Incorporation to increase its authorized
shares to allow for the issuance of shares of USWeb Common Stock by virtue of
the Merger, (ii) voting upon the issuance of shares of USWeb Common Stock by
virtue of the Merger, and (iii) amending its Certificate of Incorporation to
change its corporate name (subject to and conditional upon the effectiveness
of the Merger). USWeb will consult with CKS and will use commercially
reasonable best efforts to hold the USWeb Stockholders' Meeting on the same
day and at the same time as the CKS Stockholders' Meeting. CKS will use
commercially reasonable best efforts including, without limitation, the hiring
of a proxy solicitor, to solicit from its stockholders proxies in favor of the
adoption and approval of this Agreement and the approval of the Merger and
will take all other action necessary or advisable to secure the vote or
consent of its stockholders required by the rules of Nasdaq or Delaware Law to
obtain such approvals, except to the extent that the Board of Directors of CKS
shall have withdrawn or modified its approval of this Agreement or the Merger
in accordance with Section 5.4(a)(ii). USWeb will use commercially reasonable
best efforts, including without limitation, the hiring of a proxy solicitor,
to solicit from its stockholders proxies in favor of (i) the amendment of
USWeb's Certificate of Incorporation to increase its authorized shares to
allow for the issuance of shares of USWeb Common Stock by virtue of the
Merger, (ii) the issuance of shares of USWeb Common Stock by virtue of the
Merger, and (iii) the amendment of USWeb's Certificate of Incorporation to
change USWeb's corporate name (subject to and conditional upon the
effectiveness of the Merger) and will take all other action necessary or
advisable to secure the vote or consent of its stockholders required by the
rules of Nasdaq or the Delaware Law to obtain such approvals, except to the
extent that the Board of Directors of USWeb shall have withdrawn or modified
its approval of such matters in accordance with Section 5.4(b)(ii). In the
event that insufficient proxies have been obtained to secure the stockholder
approval for the matters set forth above at the CKS Stockholders' Meeting or
the USWeb Stockholders' Meeting, CKS and USWeb (as the case may be) shall take
all lawful action required to postpone or adjourn such meeting for up to
thirty (30) days to attempt to permit the solicitation of additional proxies
for approval of such matters.
5.3 Confidentiality.
(a) The parties acknowledge that CKS and USWeb have previously executed a
Confidentiality Agreement, dated July 30, 1998 (the "Confidentiality
Agreement"), which Confidentiality Agreement will continue in full force and
effect in accordance with its terms, except that in the event of a termination
of this Agreement pursuant to Section 7.1(h), Section 9 of the Confidentiality
Agreement shall terminate and be of no further force or effect, and in the
event of a termination of this Agreement pursuant to Section 7.1(k), Section
10 of the Confidentiality Agreement shall terminate and be of no further force
or effect.
(b) Each of CKS and USWeb will afford the other and the other's accountants,
counsel and other representatives reasonable access during normal business
hours to its properties, books, records and personnel during the period prior
to the Effective Time to obtain all information concerning its business,
including the status of product development efforts, properties, results of
operations and personnel, as such other party may reasonably request. No
information or knowledge obtained by any party hereto in any investigation
pursuant to this Section 5.3 will 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 No Solicitation.
(a) Obligations of CKS.
(i) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to its terms, CKS
and its subsidiaries will not, nor will they authorize or permit any of
their respective officers, directors or employees or any investment banker,
attorney or other advisor or representative retained by any of them to,
directly or indirectly, (x) solicit, initiate or encourage the submission
of any CKS Alternative Proposal (as hereinafter defined) or (y) participate
in any
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discussions or negotiations regarding, or furnish to any person any non-
public information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes or would
reasonably be expected to lead to, any CKS Alternative Proposal; provided,
however, that if, at any time prior to obtaining the approval of the
stockholders of CKS of this Agreement and the Merger by the requisite vote
under applicable law (the "CKS Stockholder Approval") the Board of
Directors of CKS determines in good faith, after consultation with outside
legal counsel, that it is necessary to do so in order to comply with its
fiduciary duties to CKS's stockholders under applicable law, CKS may, in
response to a CKS Alternative Proposal that was unsolicited or that did not
otherwise result from a breach of this Section 5.4(a), and subject to
compliance with Section 5.4(a)(iii) and Section 5.4(a)(v), furnish
information with respect to CKS and participate in negotiations regarding
such CKS Alternative Proposal. CKS and its subsidiaries will immediately
cease any and all existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any CKS Alternative Proposal.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding two sentences by any officer,
director or employee of CKS or any of its subsidiaries or any investment
banker, attorney or other advisor or representative of CKS or any of its
subsidiaries shall be deemed to be a breach of this Section 5.4(a) by CKS.
For purposes of this Agreement, "CKS Alternative Proposal" means any
inquiry, proposal or offer from any person or "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder)
relating to any direct or indirect acquisition or purchase of a substantial
amount of assets of CKS or any of its subsidiaries (other than the purchase
of CKS's products or services in the ordinary course of business) or more
than a 15% interest in the total outstanding voting securities of CKS or
any of its subsidiaries or any tender offer or exchange offer that if
consummated would result in any person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder)
beneficially owning 15% or more of the total outstanding voting securities
of CKS or any of its subsidiaries or any merger, consolidation, business
combination, sale of substantially all the assets, recapitalization,
liquidation, dissolution or similar transaction involving CKS or any of its
subsidiaries, other than the transactions contemplated by this Agreement.
(ii) Neither the Board of Directors of CKS nor any committee thereof
shall (x) withdraw or modify, or propose publicly to withdraw or modify, in
a manner adverse to USWeb or Merger Sub, the approval or recommendation by
such Board of Directors or any such committee of this Agreement or the
Merger or (y) cause CKS to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (a "CKS
Acquisition Agreement") with respect to any CKS Alternative Proposal. In
addition, subject to the other provisions of this Section 5.4(a), from and
after the date of this Agreement until the earlier of the Effective Time
and termination of this Agreement pursuant to its terms, CKS and its
subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors or employees or any investment banker,
attorney or other advisor or representative retained by any of them to,
directly or indirectly, make or authorize any public statement,
recommendation or solicitation in support of any CKS Alternative Proposal.
Notwithstanding the foregoing or anything else contained in this Agreement,
prior to obtaining the CKS Stockholder Approval, the Board of Directors of
CKS, to the extent it determines in good faith, after consultation with
outside legal counsel, that it is necessary to do so in order to comply
with its fiduciary duties to CKS's stockholders under applicable law, may
withdraw or modify its approval or recommendation of this Agreement or the
Merger (and, to the extent it does so, CKS may refrain from soliciting
proxies to secure the vote of its stockholders as may otherwise be required
by Section 5.2) or approve or recommend any CKS Superior Proposal (as
hereinafter defined), in each case at any time after the third business day
following USWeb's receipt of bona fide written notice (a "Notice of CKS
Superior Proposal") advising USWeb that the Board of Directors of CKS has
received a CKS Superior Proposal, specifying the material terms and
conditions of the CKS Superior Proposal and identifying the person making
such CKS Superior Proposal (it being understood that any amendment to the
price or material terms of a CKS Superior Proposal shall require an
additional Notice of CKS Superior Proposal and an additional three business
day period thereafter to the extent permitted under applicable law);
provided, that unless this Agreement is terminated pursuant to Section 7.1,
nothing contained in this Section shall limit CKS's obligation to hold and
convene the CKS Stockholders' Meeting
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(regardless of whether the recommendation of the Board of Directors of CKS
shall have been withdrawn, modified or not yet made) or to provide CKS
stockholders with material information relating to such meeting. For
purposes of this Agreement, a "CKS Superior Proposal" means any bona fide
proposal made by a third party to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash
and/or securities, more than 50% of the voting power of CKS Common Stock or
all or substantially all the assets of CKS and otherwise on terms which the
Board of Directors of CKS determines in its good faith judgment (after
consultation with a financial advisor of nationally recognized reputation)
to be more favorable to CKS's stockholders than the Merger and for which
financing, to the extent required, is then committed or which, in the good
faith judgment of the Board of Directors of CKS, is capable of being
obtained by such third party.
(iii) In addition to the obligations of CKS set forth in paragraphs (i)
and (ii) of this Section 5.4(a), CKS as promptly as practicable shall
advise USWeb orally and in writing of any request for non-public
information which CKS reasonably believes would lead to a CKS Alternative
Proposal or of any CKS Alternative Proposal, the material terms and
conditions of such request or CKS Alternative Proposal, and the identity of
the person making any such request, CKS Alternative Proposal or inquiry.
CKS will keep USWeb informed of all material changes regarding the terms of
the CKS Alternative Proposal and all material changes in the status of the
CKS Alternative Proposal.
(iv) Nothing contained in this Section 5.4(a) or elsewhere in this
Agreement shall prohibit CKS from (x) taking and disclosing to its
stockholders a position contemplated by Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or (y) making any disclosure to CKS's
stockholders if, in the good faith judgment of the majority of the members
of the Board of Directors of CKS, after consultation with independent legal
counsel, failure to so disclose would be inconsistent with applicable
securities laws; provided that none of CKS nor its Board of Directors nor
any committee thereof shall, except in accordance with the provisions of
Section 5.4(a)(ii), withdraw or modify, or publicly propose to withdraw or
modify, its position with respect to this Agreement or the Merger or
approve or recommend, or propose to approve or recommend, a CKS Alternative
Proposal.
(v) Notwithstanding anything to the contrary in this Section 5.4(a), CKS
will not provide any non-public information regarding CKS to a third party
unless: (x) CKS provides such non-public information pursuant to a
nondisclosure agreement with terms regarding the protection of confidential
information at least as restrictive as such terms in the Confidentiality
Agreement; and (y) such non-public information has been previously or is
contemporaneously delivered to USWeb.
(b) Obligations of USWeb.
(i) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to its terms USWeb
and its subsidiaries will not, nor will they authorize or permit any of
their respective officers, directors or employees or any investment banker,
attorney or other advisor or representative retained by any of them to,
directly or indirectly, (x) solicit, initiate or encourage the submission
of any USWeb Alternative Proposal (as hereinafter defined) or (y)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes
or would reasonably be expected to lead to, any USWeb Alternative Proposal;
provided, however, that if, at any time prior to obtaining the approval of
the stockholders of USWeb of the issuance of USWeb Common Stock by virtue
of the Merger (the "USWeb Stockholder Approval") the Board of Directors of
USWeb determines in good faith, after consultation with outside legal
counsel, that it is necessary to do so in order to comply with its
fiduciary duties to USWeb's stockholders under applicable law, USWeb may,
in response to a USWeb Alternative Proposal that was unsolicited or that
did not otherwise result from a breach of this Section 5.4(b), and subject
to compliance with Section 5.4(b)(iii) and Section 5.4(b)(v), furnish
information with respect to USWeb and participate in negotiations regarding
such USWeb Alternative Proposal. USWeb and its subsidiaries will
immediately cease any and all existing
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activities, discussions or negotiations with any parties conducted
heretofore with respect to any USWeb Alternative Proposal. Without limiting
the foregoing, it is understood that any violation of the restrictions set
forth in the preceding two sentences by any officer, director or employee
of USWeb or any of its subsidiaries or any investment banker, attorney or
other advisor or representative of USWeb or any of its subsidiaries shall
be deemed to be a breach of this Section 5.4(b) by USWeb. For purposes of
this Agreement, "USWeb Alternative Proposal" means any inquiry, proposal or
offer from any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) relating to any
direct or indirect acquisition or purchase of a substantial amount of
assets of USWeb or any of its subsidiaries (other than the purchase of
USWeb's products or services in the ordinary course of business) or more
than a fifteen (15) percent interest in the total outstanding voting
securities of USWeb or any of its subsidiaries or any tender offer or
exchange offer that if consummated would result in any person or "group"
(as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) beneficially owning fifteen (15) percent or more of
the total outstanding voting securities of USWeb or any of its subsidiaries
or any merger, consolidation, business combination, sale of substantially
all the assets, recapitalization, liquidation, dissolution or similar
transaction involving USWeb or any of its subsidiaries, other than (i) the
transactions contemplated by this Agreement and (ii) any acquisition by
USWeb, provided that the business to be acquired, without taking any other
acquisition into account, would not constitute a "significant subsidiary"
of USWeb pursuant to the conditions specified in Rule 1-02(w) of SEC
Regulation S-X, substituting twenty (20) percent for ten (10) percent each
place it appears therein, and provided further that the aggregate number of
shares of USWeb Common Stock issued in connection with all acquisitions
after the date of this Agreement and prior to the Effective Time shall not
exceed 5,000,000.
(ii) Neither the Board of Directors of USWeb nor any committee thereof
shall (x) withdraw or modify, or propose publicly to withdraw or modify, in
a manner adverse to CKS, the approval or recommendation by such Board of
Directors or any such committee of this Agreement or the Merger or (y)
cause USWeb to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (a "USWeb Acquisition
Agreement") with respect to any USWeb Alternative Proposal. In addition,
subject to the other provisions of this Section 5.4(b), from and after the
date of this Agreement until the earlier of the Effective Time and
termination of this Agreement pursuant to its terms, USWeb and its
subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors or employees or any investment banker,
attorney or other advisor or representative retained by any of them to,
directly or indirectly, make or authorize any public statement,
recommendation or solicitation in support of any USWeb Alternative
Proposal. Notwithstanding the foregoing or anything else contained in this
Agreement, prior to obtaining the USWeb Stockholder Approval, the Board of
Directors of USWeb, to the extent it determines in good faith, after
consultation with outside legal counsel, that it is necessary to do so in
order to comply with its fiduciary duties to USWeb's stockholders under
applicable law, may withdraw or modify its approval or recommendation of
this Agreement or the Merger (and, to the extent it does so, USWeb may
refrain from soliciting proxies to secure the vote of its stockholders as
may otherwise be required by Section 5.2) or approve or recommend any USWeb
Superior Proposal (as hereinafter defined), in each case at any time after
the third business day following CKS's receipt of bona fide written notice
(a "Notice of USWeb Superior Proposal") advising CKS that the Board of
Directors of USWeb has received a USWeb Superior Proposal, specifying the
material terms and conditions of the USWeb Superior Proposal and
identifying the person making such USWeb Superior Proposal (it being
understood that any amendment to the price or material terms of a USWeb
Superior Proposal shall require an additional Notice of USWeb Superior
Proposal and an additional three business day period thereafter to the
extent permitted under applicable law); provided, that unless this
Agreement is terminated pursuant to Section 7.1, nothing contained in this
Section shall limit USWeb's obligation to hold and convene the USWeb
Stockholders' Meeting (regardless of whether the recommendation of the
Board of Directors of USWeb shall have been withdrawn, modified or not yet
made) or to provide USWeb stockholders with material information relating
to such meeting. For purposes of this Agreement, a "USWeb Superior
Proposal" means any bona
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fide proposal made by a third party to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash
and/or securities, more than 50% of the voting power of USWeb Common Stock
or all or substantially all the assets of USWeb and otherwise on terms
which the Board of Directors of USWeb determines in its good faith judgment
(after consultation with a financial advisor of nationally recognized
reputation) to be more favorable to USWeb's stockholders than the Merger
and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Board of Directors of USWeb, is
capable of being obtained by such third party.
(iii) In addition to the obligations of USWeb set forth in paragraphs (i)
and (ii) of this Section 5.4(b), USWeb as promptly as practicable shall
advise CKS orally and in writing of any request for non-public information
which USWeb reasonably believes would lead to a USWeb Alternative Proposal
or of any USWeb Alternative Proposal, the material terms and conditions of
such request or USWeb Alternative Proposal, and the identity of the person
making any such request, USWeb Alternative Proposal or inquiry. USWeb will
keep CKS informed of all material changes regarding the terms of the USWeb
Alternative Proposal and all material changes of the status of the USWeb
Alternative Proposal.
(iv) Nothing contained in this Section 5.4(b) or elsewhere in this
Agreement shall prohibit USWeb from (x) taking and disclosing to its
stockholders a position contemplated by Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or (y) making any disclosure to USWeb's
stockholders if, in the good faith judgment of the majority of the members
of the Board of Directors of USWeb, after consultation with independent
legal counsel, failure to so disclose would be inconsistent with applicable
securities laws; provided that none of USWeb nor its Board of Directors nor
any committee thereof shall, except in accordance with the provisions of
Section 5.4(b)(ii), withdraw or modify, or publicly propose to withdraw or
modify, its position with respect to this Agreement or the Merger or
approve or recommend, or propose to approve or recommend, a USWeb
Alternative Proposal.
(v) Notwithstanding anything to the contrary in this Section 5.4(b),
USWeb will not provide any non-public information regarding USWeb to a
third party unless: (x) USWeb provides such non-public information pursuant
to a nondisclosure agreement with terms regarding the protection of
confidential information at least as restrictive as such terms in the
Confidentiality Agreement; and (y) such non-public information has been
previously or is contemporaneously delivered to CKS.
5.5 Public Disclosure. USWeb and CKS will consult with each other, and to
the extent practicable, before issuing any press release or otherwise making
any public statement with respect to the Merger, this Agreement or an
Acquisition Proposal and will not issue any such press release without the
approval of the other party, except as may be required by law or any listing
agreement with a national securities exchange or the Nasdaq Stock Market.
5.6 Legal Requirements. Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use commercially
reasonable best efforts to take, or cause to be taken, such actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, such things as are necessary, proper or advisable to consummate and
make effective, as expeditiously as reasonably practicable, the Merger and the
other transactions contemplated by this Agreement, including using reasonable
efforts to accomplish the following: (i) the taking of such reasonable acts as
are necessary to cause the conditions precedent set forth in Article VI to be
satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers,
consents, approvals, orders and authorizations from Governmental Entities and
the making of all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any)
and the taking of such reasonable steps as may be necessary to avoid any suit,
claim, action, investigation or proceeding by any Governmental Entity, (iii)
the obtaining of all necessary consents, approvals or waivers from third
parties, (iv) the defending of any suits, claims, actions, investigations or
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (v) the execution or delivery of
any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the
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purposes of, this Agreement. In connection with and without limiting the
foregoing, CKS and its Board of Directors shall, if any state takeover statute
or similar statute or regulation is or becomes applicable to the Merger, this
Agreement or any of the transactions contemplated by this Agreement, use
commercially reasonable best efforts to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger, this
Agreement and the transactions contemplated hereby. Notwithstanding anything
herein to the contrary, nothing in this Agreement shall be deemed to require
USWeb or CKS or any subsidiary or affiliate thereof to agree to any
divestiture by itself or any of its affiliates of shares of capital stock or
of any business, assets or property, 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.
5.7 Third Party Consents. As soon as practicable following the date hereof,
USWeb and CKS will each use its commercially reasonable best efforts to obtain
all material consents, waivers and approvals under any of its or its
subsidiaries' agreements, contracts, licenses or leases required to be
obtained in connection with the consummation of the transactions contemplated
hereby.
5.8 FIRPTA. At or prior to the Closing, CKS shall deliver to the IRS a
notice that the CKS Common Stock is not a "U.S. Real Property Interest" as
defined and in accordance with the requirements of Treasury Regulation Section
1.897-2(h)(2).
5.9 Notification of Certain Matters. CKS shall give prompt notice to USWeb
of any representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate, or any failure of CKS to comply with or satisfy
in any material respect any covenant, condition or agreement to be complied
with or satisfied by it under this Agreement, in each case, such that, if
uncured, the conditions set forth in Section 6.3(a) or 6.3(b) would not be
satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement. USWeb shall
give prompt notice to CKS of any representation or warranty made by it or
Merger Sub contained in this Agreement becoming untrue or inaccurate, or any
failure of USWeb or Merger Sub to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement, in each case, such that, if uncured, the
conditions set forth in Section 6.2(a) or 6.2(b) would not be satisfied;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
5.10 Regulatory Filings; Reasonable Efforts. As soon as may be reasonably
practicable, CKS and USWeb each shall file with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("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. CKS and USWeb 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.
5.11 Stock Options and Employee Benefits.
(a) At the Effective Time, each outstanding option to purchase shares of CKS
Common Stock (each a "CKS Stock Option") under the CKS Stock Plans, whether or
not exercisable, will be assumed by USWeb. Each CKS Stock Option so assumed by
USWeb under this Agreement will continue to have, and be subject to, the same
terms and conditions set forth in the applicable CKS Stock Plan immediately
prior to the Effective Time (including, without limitation, any repurchase
rights), except that (i) each CKS Stock Option will be exercisable (or will
become exercisable in accordance with its terms) for that number of whole
shares
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of USWeb Common Stock equal to the product of the number of shares of CKS
Common Stock that were issuable upon exercise of such CKS Stock Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of USWeb Common Stock, and
(ii) the per share exercise price for the shares of USWeb Common Stock
issuable upon exercise of such assumed CKS Stock Option will be equal to the
quotient determined by dividing the exercise price per share of CKS Common
Stock at which such CKS Stock Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
After the Effective Time, USWeb will issue to each holder of an outstanding
CKS Stock Option a notice describing the foregoing assumption of such CKS
Stock Option by USWeb. At the Effective Time, each outstanding CKS 1997 ESPP
and 1995 Employee Stock Purchase Plan Option (the "ESPP Options") will be
assumed by USWeb. Each ESPP Option assumed by USWeb will continue to have, and
be subject to, the same terms and conditions set forth in the CKS ESPPs, as
the case may be, immediately prior to the Effective Time, except that (i) each
ESPP Option will become exercisable for shares of USWeb Common Stock, (ii) the
limit on number of shares of USWeb Common Stock that an employee may purchase
pursuant to an assumed ESPP Option shall be equal to two thousand five hundred
(2,500) per purchase period multiplied by the Exchange Ratio, rounded down to
the nearest whole share, and (iii) the purchase price per share of USWeb
Common Stock shall be equal to eighty-five percent (85%) of the lesser of (A)
the quotient of the closing price of a share of CKS Common Stock on the first
day of the offering period divided by the Exchange Ratio, with the result
rounded up to the nearest whole cent, or (B) the closing price of a share of
USWeb Common Stock on the date on which the ESPP Option is exercised rounded
up to the nearest whole cent.
(b) It is the intent of the parties that the CKS Stock Options assumed by
USWeb shall qualify following the Effective Time as incentive stock options as
defined in Section 422 of the Code to the extent CKS Stock Options qualified
as incentive stock options immediately prior to the Effective Time. It is also
the intent of the parties that the ESPP Options shall qualify, following the
Effective Time as options granted under an employee stock purchase plan as
defined in Section 423 of the Code to the extent the ESPP Options qualified as
such immediately prior to the Effective Time.
(c) USWeb will reserve sufficient shares of USWeb Common Stock for issuance
under Section 5.11(a) and under Section 1.6(c) hereof.
(d) USWeb will, or will cause CKS or the appropriate subsidiary of CKS to
give individuals who are employed by CKS or any of its subsidiaries as of the
Effective Time and who remain employees of CKS or such subsidiary following
the Effective Time (each such employee, an "Affected Employee") full credit to
the extent each such Affected Employee has been credited with service under
each comparable employee benefit plan or arrangement maintained by CKS
immediately prior to the Effective Time for purposes of eligibility, vesting,
benefit, accrual and determination of the level of benefits under each
employee benefit plan or arrangement maintained by USWeb, CKS or any such
subsidiary for such Affected Employees' service with CKS or any affiliate
thereof.
(e) USWeb will make commercially reasonable best efforts to, or will cause
CKS or the appropriate subsidiary of CKS to (i) waive all limitations as to
pre-existing conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Affected Employees
under any welfare benefit plans that such Affected Employees may be eligible
to participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such Affected Employees and
that have not been satisfied as of the Effective Time under any welfare plan
maintained for the Affected Employees immediately prior to the Effective Time,
and (ii) provide each Affected Employee with credit for the remaining short
plan year for any co-payments and deductibles paid under each comparable
welfare plan maintained by CKS prior to the Effective Time in satisfying any
applicable deductible or co-payment requirements under any welfare plans that
such Affected Employees are eligible to participate in after the Effective
Time.
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(f) As of the Effective Time, USWeb shall expressly assume and agree to
perform in accordance with their terms, all employment, stay-put and other
compensation agreements then existing between CKS or any subsidiary with any
director, officer or employee thereof, provided such agreements are described
in the CKS Schedules.
(g) USWeb shall make its commercially reasonable best efforts to adopt,
maintain and sponsor for the Affected Employees each employee welfare benefit
plan, as defined in Section 3(1) of ERISA, (excluding any reimbursement
policies, arrangements or programs and any severance plans) that are
maintained and sponsored by CKS as of the Effective Time, that are set forth
on the CKS Schedule under a reference to Section 2.13 of this Agreement (the
"CKS Benefits Plans"), for one (1) year following the date of this Agreement
(the "Benefit Period"); provided, however, that (i) such plans have been
established and maintained in substantial compliance with all applicable laws,
rules and regulations, up to and including the Effective Time, (ii) that the
costs of such plans are not substantially in excess of their historical costs
(as adjusted for price increases reasonably in line with price increases
affecting such products generally), and (iii) the insurance carriers of the
CKS Benefits Plans permit USWeb to adopt, maintain and sponsor such plans. In
the event that the insurance carriers of the CKS Benefits Plans do not permit
USWeb to adopt such plans, or to extend such plans (and related contracts) for
the Affected Employees for the outstanding portion of the Benefit Period which
extends beyond the current plan (contract) year on substantially similar terms
as currently in effect, then USWeb shall not be obligated to maintain such
plans beyond the current plan (contract) year, but shall use commercially
reasonable best efforts to offer a comparable plan (or as reasonably close to
comparable as possible while remaining in line with historical costs).
(h) Subject to the foregoing, from and after the Effective Time, the
Affected Employees shall be eligible to participate in USWeb's employee
benefit plans and arrangements in which similarly situated employees of USWeb
or affiliates of USWeb participate, to the same extent as such similarly
situated employees of USWeb or affiliates of USWeb.
(i) CKS hereby agrees to terminate any and all CKS Employee Plans subject to
Section 401(k) of the Internal Revenue Code of 1986, as amended (the "Code")
as well as any and all severance or separation pay, policy, plan or
arrangement prior to the Effective Time.
5.12 Form S-8. USWeb agrees to file a registration statement on Form S-8 for
the shares of USWeb Common Stock issuable with respect to assumed CKS Stock
Options and CKS 1997 ESPP Options no later than two (2) business days after
the Closing Date.
5.13 Indemnification and Insurance.
(a) From and after the Effective Time, USWeb will fulfill and honor and will
cause the Surviving Corporation to fulfill and honor in all respects the
obligations of CKS pursuant to any indemnification agreements between CKS and
its directors and officers as of the Effective Time (the "Indemnified
Parties") and any indemnification provisions under CKS's Certificate of
Incorporation or Bylaws as in effect on the date hereof. The Certificate of
Incorporation and Bylaws of the Surviving Corporation will contain provisions
with respect to exculpation and indemnification that are at least as favorable
to the Indemnified Parties as those contained in the Certificate of
Incorporation and Bylaws of CKS as in effect on the date hereof, which
provisions will not be amended, repealed or otherwise modified for a period of
ten (10) years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, immediately prior to the
Effective Time, were directors, officers, employees or agents of CKS, unless
such modification is required by law.
(b) For a period of six (6) years after the Effective Time, USWeb will
maintain or cause the Surviving Corporation to maintain in effect, if
available, directors' and officers' liability insurance covering those persons
who are currently covered by CKS's directors' and officers' liability
insurance policy on terms comparable to those applicable to the current
directors and officers of CKS; provided, however, that in no event will USWeb
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or the Surviving Corporation be required to expend in excess of two hundred
(200) percent of the annual premium currently paid by CKS for such coverage
(or such coverage as is available for such two hundred (200) percent of such
annual premium).
5.14 Nasdaq Listing. USWeb agrees to use its commercially reasonable efforts
to authorize for listing on the Nasdaq National Market the shares of USWeb
Common Stock issuable, and those required to be reserved for issuance, in
connection with the Merger, upon official notice of issuance.
5.15 USWeb Holder Agreement. Set forth in Section 5.15 of the USWeb
Schedules is a list of those persons who may be deemed to be, in USWeb's
reasonable judgment, affiliates of USWeb within the meaning of Rule 145
promulgated under the Securities Act (each a "USWeb Holder"). USWeb will
provide CKS with such information and documents as CKS reasonably requests for
purposes of reviewing such list. USWeb will use its best efforts to deliver or
cause to be delivered to CKS, as promptly as practicable on or following the
date hereof, from each USWeb Holder an executed affiliate agreement in
substantially the form attached hereto as Exhibit D (the "USWeb Holder
Agreement"), each of which will be in full force and effect as of the
Effective Time. USWeb will be entitled to place appropriate legends on the
certificates evidencing any USWeb Common Stock to be received by a USWeb
Holder pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the USWeb Common Stock,
consistent with the terms of the USWeb Holder Agreement.
5.16 CKS Holder Agreement. Set forth in Section 5.16 of the CKS Schedules is
a list of those persons who may be deemed to be, in CKS's reasonable judgment,
affiliates of CKS within the meaning of Rule 145 promulgated under the
Securities Act (each a "CKS Holder"). CKS will provide USWeb with such
information and documents as USWeb reasonably requests for purposes of
reviewing such list. CKS will use its best efforts to deliver or cause to be
delivered to USWeb, as promptly as practicable on or following the date
hereof, from each CKS Holder an executed holder agreement in substantially the
form attached hereto as Exhibit E (the "CKS Holder Agreement"), each of which
will be in full force and effect as of the Effective Time. USWeb will be
entitled to place appropriate legends on the certificates evidencing any USWeb
Common Stock to be received by a CKS Holder pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the USWeb Common Stock, consistent with the terms of the CKS Holder
Agreement.
5.17 INTENTIONALLY OMITTED.
5.18 Board of Directors of the Combined Company. The Board of Directors of
USWeb will take all actions within its power to cause the Board of Directors
of USWeb, effective no later than one day following the Effective Time, to
consist of nine persons, seven of whom shall have served on the Board of
Directors of USWeb immediately prior to the Effective Time, and two of whom
shall have served on the Board of Directors of CKS immediately prior to the
Effective Time (including the Chief Executive Officer and the Chief Creative
Officer of CKS as of the date of this Agreement). If, prior to the Effective
Time, any of the CKS or USWeb designees shall decline or be unable to serve as
a CKS or USWeb director, CKS (if such person was designated by CKS) or USWeb
(if such person was designated by USWeb) shall designate another person to
serve in such person's stead, which person shall be reasonably acceptable to
the other party.
5.19 Officers of Combined Company; Executive Committee. At the Effective
Time, the Chief Executive Officer and the Chief Creative Officer of CKS as of
the date of this Agreement will be offered positions as the Chairman of the
Board of USWeb and the Chief Creative Officer of USWeb, respectively. It is
contemplated that the Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer of USWeb shall remain in such positions after the
execution and delivery of this Agreement and that following the Effective Time
an executive committee comprised of senior management from both CKS and USWeb
would be formed to jointly determine the management of USWeb following the
Effective Time; the executive committee would meet regularly to review the
overall strategy, product direction and operations of the combined company.
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5.20 Change of Name; Increase in Authorized Shares. Subject to the terms
hereof, at the USWeb Stockholders' Meeting, USWeb shall propose and recommend
that its Certificate of Incorporation be amended at the Effective Time to
change its name to "Reinvent Communications, Inc." In addition, subject to the
terms hereof, at the USWeb Stockholders' Meeting, USWeb shall propose and
recommend that its Certificate of Incorporation be amended to increase the
authorized number of shares of Common Stock thereunder to 200 million shares,
provided that USWeb may propose and recommend an increase of such lesser
number as in good faith it determines (provided that, subject to the terms
hereof, such lesser number is not less than the number required to issue
shares by virtue of the Merger and the other transactions contemplated
hereby).
5.21 Voting Agreements. CKS and USWeb will use reasonable efforts to deliver
or cause to be delivered to the other party, as promptly as practicable on or
following the date hereof, from each individual listed in Section 5.21 of the
CKS Schedules and the USWeb Schedules, voting agreements in substantially the
forms attached hereto as Exhibit G and Exhibit H, respectively, each of which
shall be and remain in full force and effect through and until the last to
occur of (i) the effective date of any written consent controlling any vote
regarding the Merger or (ii) any stockholder meeting (including adjournments)
at which a vote regarding the Merger is taken.
5.22 Tax-Free Reorganization. USWeb and CKS shall each use its best efforts
to cause the Merger to be treated as a reorganization within the meaning of
Section 368(a) of the Code, and to obtain the opinion of its respective
counsel contemplated by Section 6.1(d). Each party shall make, and shall use
all reasonable efforts to cause those of its respective stockholders that
counsel to the parties reasonably request to make, such representations and
certificates as counsel to the parties shall reasonably request to enable them
to render such opinions.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted, and the Merger shall have been duly approved, by the requisite vote
under applicable law, by the stockholders of CKS; and an increase in the
authorized number of shares of USWeb Common Stock so as to permit the issuance
of shares of USWeb Common Stock by virtue of the Merger, as well as such
issuance, shall have been duly approved by the requisite vote under applicable
law and the rules of the Nasdaq by the stockholders of USWeb.
(b) Registration Statement Effective; Proxy Statement. The SEC shall have
declared the Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose, and no similar proceeding in
respect of the Proxy Statement, shall have been initiated or threatened in
writing by the SEC.
(c) No Order; HSR Act. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger. All waiting
periods under the HSR Act relating to the transactions contemplated hereby
will have expired or terminated early.
(d) Tax Opinions. USWeb and CKS shall each have received written opinions
from their respective counsel, Wilson Sonsini Goodrich & Rosati, Professional
Corporation, and Gray Cary Ware & Freidenrich LLP, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a)
of
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the Code; provided, however, that if the counsel to either USWeb or CKS does
not render such opinion, this condition shall nonetheless be deemed to be
satisfied with respect to such party if counsel to the other party renders
such opinion to such party. The parties to this Agreement agree to make
reasonable representations as requested by such counsel for the purpose of
rendering such opinions.
(e) Nasdaq Listing. The shares of USWeb Common Stock issuable to
stockholders of CKS pursuant to this Agreement and such other shares required
to be reserved for issuance in connection with the Merger shall have been
authorized for listing on the Nasdaq National Market upon official notice of
issuance.
(f) Opinion of Accountants. Each of USWeb and CKS shall have received a
letter from PricewaterhouseCoopers LLP and KPMG Peat Marwick LLP, each dated
within two (2) business days prior to the Effective Time, regarding that
firm's concurrence with the conclusions of the management of USWeb and the
conclusions of the management of CKS as to the appropriateness of pooling of
interest accounting for the Merger under Accounting Principles Board Opinion
No. 16, if the Merger is consummated in accordance with this Agreement.
6.2 Additional Conditions to Obligations of CKS. The obligation of CKS to
consummate and effect the Merger 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 CKS:
(a) Representations and Warranties. The representations and warranties of
USWeb and Merger Sub contained in this Agreement shall (i) have been true and
correct in all material respects as of the date of this Agreement and (ii) be
true and correct in all material respects on and as of the Effective Time and
except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such particular date), with
the same force and effect as if made on and as of the Effective Time, and in
the case of clauses (i) and (ii) in this Section 6.2(a) (other than with
respect to the representations in Sections 3.2, 3.3, 3.18 and 3.22) except for
breaches, inaccuracies and omissions of such representations and warranties
which have neither had nor reasonably would be expected to have a Material
Adverse Effect on USWeb. CKS shall have received a certificate with respect to
the foregoing signed on behalf of USWeb by the Chief Executive Officer and the
Chief Financial Officer of USWeb.
(b) Agreements and Covenants. USWeb and Merger Sub shall have in all
material respects performed or complied with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time, and CKS shall have received a certificate to such
effect signed on behalf of USWeb by the Chief Executive Officer and the Chief
Financial Officer of USWeb.
(c) Fairness Opinion. Goldman Sachs & Co. shall have delivered an opinion to
the Board of Directors of CKS dated as of the date of this Agreement to the
effect that, as of such date, the Exchange Ratio is fair to CKS's stockholders
from a financial point of view.
(d) Material Adverse Effect. Except as set forth in Section 3.7 of the USWeb
Schedules, no Material Adverse Effect (as defined in Section 3.1(d)) with
respect to USWeb shall have occurred since the date of this Agreement.
(e) Holder Agreements. Each of the USWeb affiliates, as "affiliate" is
defined within the meaning of Rule 145 promulgated under the Securities Act,
shall have entered into the USWeb Holder Agreement and each of such agreements
shall be in full force and effect as of the Effective Time.
(f) Consents. USWeb shall have obtained all consents, waivers and approvals
required in connection with the consummation of the transactions contemplated
hereby in connection with the agreements, contracts, licenses or leases set
forth in Section 6.2(f) of the USWeb Schedules.
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6.3 Additional Conditions to the Obligations of USWeb and Merger Sub. The
obligations of USWeb and Merger Sub to consummate and effect the Merger 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 USWeb:
(a) Representations and Warranties. The representations and warranties of
CKS contained in this Agreement shall (i) have been true and correct in all
material respects as of the date of this Agreement, and (ii) be true and
correct in all material respects on and as of the Effective Time except for
changes contemplated by this Agreement and except for those representations
and warranties which address matters only as of a particular date (which shall
remain true and correct as of such particular date), with the same force and
effect as if made on and as of the Effective Time, and in the case of clauses
(i) and (ii) in this Section 6.3(a), (other than the representations in
Sections 2.2, 2.3, 2.19 and 2.23) except for such breaches, inaccuracies or
omissions of such representations and warranties which have neither had nor
reasonably would be expected to have a Material Adverse Effect on CKS. USWeb
shall have received a certificate with respect to the foregoing signed on
behalf of CKS by the Chief Executive Officer and the Chief Financial Officer
of CKS.
(b) Agreements and Covenants. CKS shall have in all material respects
performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time, and USWeb shall have received a certificate to such effect signed on
behalf of CKS by the Chief Executive Officer and the Chief Financial Officer
of CKS.
(c) Fairness Opinion. Morgan Stanley & Co. Incorporated shall have delivered
an opinion to the Board of Directors of USWeb as of the date of this
Agreement, to the effect that, as of such date, the Exchange Ratio is fair to
USWeb's stockholders from a financial point of view.
(d) Non-Competition Agreements. Mark D. Kvamme and Thomas K. Suiter shall
have entered into a non-competition agreement with USWeb or Merger Sub in the
form attached hereto as Exhibit F, and such agreements shall be in full force
and effect.
(e) Material Adverse Effect. Except as set forth in Section 2.7 of the CKS
Schedules, no Material Adverse Effect (as defined in Section 2.1(d)) with
respect to CKS shall have occurred since the date of this Agreement.
(f) Holder Agreements. Each of the CKS affiliates, as "affiliate" is defined
within the meaning of Rule 145 promulgated under the Securities Act, shall
have entered into the CKS Holder Agreement and each of such agreements shall
be in full force and effect as of the Effective Time.
(g) Consents. CKS shall have obtained all consents, waivers and approvals
required in connection with the consummation of the transactions contemplated
hereby in connection with the agreements, contracts, licenses or leases set
forth on Section 6.3(g) of the CKS Schedules.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of the Merger
by the stockholders of CKS or the approval of the issuance of USWeb Common
Stock in connection with the Merger by the stockholders of USWeb:
(a) by mutual written consent duly authorized by the Boards of Directors of
USWeb and CKS;
(b) by either CKS or USWeb if the Merger shall not have been consummated by
February 28, 1999; provided, however, that the right to terminate this
Agreement under this Section 7.1(b) 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
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to occur on or before such date and such action or failure to act constitutes
a breach of this Agreement; and provided further, that such date may be
extended by up to ninety (90) days by either party by written notice to the
other party if the Merger would have been consummated but for the absence of
one or more required approvals, consents, orders or authorizations of any
Governmental Entity or any required third-party consent, waiver or approval,
under the HSR Act or like foreign competition or merger control laws and
regulations.
(c) by either CKS or USWeb if a Governmental Entity shall have issued an
order, decree or ruling or taken any other action (an "Order"), in any case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree or ruling is final and
nonappealable;
(d) by either CKS or USWeb if the required approvals of the stockholders of
CKS contemplated by this Agreement shall not have been obtained by reason of
the failure to obtain the required vote upon a vote taken at a meeting of the
CKS stockholders, duly convened therefor or at any adjournment thereof
(provided that the right to terminate this Agreement under this Section 7.1(d)
shall not be available to CKS where the failure to obtain CKS Stockholder
Approval of such party shall have been caused by the action or failure to act
of CKS and such action or failure to act constitutes a material breach by CKS
of this Agreement);
(e) by either CKS or USWeb if the required approval of the stockholders of
USWeb contemplated by this Agreement shall not have been obtained by reason of
the failure to obtain the required vote at a meeting of USWeb stockholders
duly convened therefor or at any adjournment thereof (provided that the right
to terminate this Agreement under this Section 7.1(e) shall not be available
to USWeb where the failure to obtain USWeb Stockholder Approval shall have
been caused by the action or failure to act of USWeb and such action or
failure to act constitutes a material breach by USWeb of this Agreement);
(f) by USWeb if (i) the Board of Directors of CKS or any committee thereof
shall have withdrawn or modified in a manner adverse to USWeb its approval or
recommendation of the Merger or this Agreement, (ii) CKS shall have failed to
include in the Proxy Statement the recommendation of the Board of Directors of
CKS in favor of approval of the Merger and this Agreement, (iii) in connection
with a Rule 14d9 disclosure, the Board of Directors of CKS shall have taken
any action other than a rejection of a Rule 14d-9 proposal, (iv) the Board of
Directors of CKS or any committee thereof shall have recommended any CKS
Alternative Proposal or (v) the Board of Directors of CKS or any committee
thereof shall have resolved to do any of the foregoing;
(g) by CKS if (i) the Board of Directors of USWeb or any committee thereof
shall have withdrawn or modified in a manner adverse to CKS its recommendation
of approval of the issuance of shares of USWeb Common Stock pursuant to the
Merger, (ii) USWeb shall have failed to include in the Proxy Statement the
recommendation of the Board of Directors of USWeb in favor of approval of the
issuance of shares of USWeb Common Stock pursuant to the Merger, (iii) in
connection with a Rule 14d-9 disclosure, the Board of Directors of USWeb shall
have taken any action other than a rejection of the Rule 14d-9 proposal, (iv)
the Board of Directors of USWeb or any committee thereof shall have
recommended any USWeb Alternative Proposal or (v) the Board of Directors of
USWeb or any committee thereof shall have resolved to do any of the foregoing;
(h) by CKS at any time prior to the approval of the Merger by CKS
stockholders and, in the case of any CKS Superior Proposal other than a CKS
Superior Proposal involving the filing of a Registration Statement on Form S-
4, following the earlier of (i) three (3) days following the date the
Registration Statement is declared effective pursuant to the Securities Act by
the SEC or (ii) sixty (60) days following the date hereof, if the Board of
Directors of CKS recommends a CKS Superior Proposal to the stockholders of
CKS;
(i) by CKS, upon a breach of any representation, warranty, covenant or
agreement on the part of USWeb set forth in this Agreement, or if any
representation or warranty of USWeb shall have become untrue, in either case
such that the conditions set forth in Section 6.2(a) or Section 6.2(b) would
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that
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CKS may not terminate this Agreement under this Section 7.1(i) if such
inaccuracy in USWeb's representations and warranties or breach by USWeb is
curable by USWeb through the exercise of its commercially reasonable efforts
prior to February 28, 1999, provided USWeb continues to exercise commercially
reasonable efforts to cure such breach (it being understood that CKS may not
terminate this Agreement pursuant to this paragraph (i) if it shall have
materially breached this Agreement or if such breach by USWeb is cured prior
to February 28, 1999);
(j) by USWeb, upon a breach of any representation, warranty, covenant or
agreement on the part of CKS set forth in this Agreement, or if any
representation or warranty of CKS shall have become untrue, in either case
such that the conditions set forth in Section 6.2(a) or Section 6.2(b) would
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that USWeb may
not terminate this Agreement under Section 7.1(k) if such inaccuracy in CKS's
representations and warranties or breach by CKS is curable by CKS through the
exercise of its commercially reasonable best efforts prior to February 28,
1999, provided CKS continues to exercise commercially reasonable efforts to
cure such breach (it being understood that USWeb may not terminate this
Agreement pursuant to this paragraph (j) if it shall have materially breached
this Agreement or if such breach by CKS is cured prior to February 28, 1999);
or
(k) By USWeb at any time prior to the approval of the Merger by USWeb
stockholders and, in the case of any USWeb Superior Proposal other than a
USWeb Superior Proposal involving the filing of a Registration Statement on
Form S-4, following the earlier of (i) three days following the date the
Registration Statement is declared effective pursuant to the Securities Act by
the SEC or (ii) sixty days following the date hereof, if the Board of
Directors of USWeb recommends a USWeb Superior Proposal to the stockholders of
USWeb.
7.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement as provided in
Section 7.1, this Agreement shall be of no further force or effect, except (i)
as set forth in this Section 7.2, Section 7.3 and Article 8 (Miscellaneous),
each of which shall survive the termination of this Agreement, and (ii)
nothing herein shall relieve any party from liability for any breach of this
Agreement. No termination of this Agreement shall affect the obligations of
the parties contained in the Confidentiality Agreement or the Stock Option
Agreements, all of which obligations shall survive termination of this
Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses whether or not the
Merger is consummated; provided, however, that USWeb and CKS shall share
equally all fees and expenses, other than attorneys' and accountants' fees and
expenses, incurred in relation to the printing and filing of the Proxy
Statement (including any preliminary materials related thereto) and the
Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
(b) CKS Payments. In the event that this Agreement is terminated by USWeb
pursuant to Section 7.1(f) or CKS pursuant to Section 7.1(h), CKS shall
promptly, but in no event later than two (2) days after the date of such
termination, pay USWeb a fee equal to $12 million in immediately available
funds (the "CKS Termination Fee"). If this Agreement shall be terminated by
any party hereto pursuant to Section 7.1(d) and prior to such termination an
Alternative Proposal shall have been publicly announced or otherwise publicly
disclosed, and prior to the date twelve (12) months following the date of the
termination of this Agreement either (i) a CKS Acquisition (as hereinafter
defined) shall be consummated or (ii) CKS shall enter into an Acquisition
Agreement providing for a CKS Acquisition, then CKS shall pay to USWeb the CKS
Termination Fee in immediately available funds in the case of clause (i)
concurrently with the consummation of such CKS Acquisition or in the case of
clause (ii) one half of the CKS Termination Fee concurrently with the
execution of such Acquisition Agreement and the remaining half of the CKS
Termination Fee upon the consummation
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of any CKS Acquisition occurring with twelve (12) months following such
execution. CKS acknowledges that the agreements contained in this Section
7.3(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, USWeb would not enter into this
Agreement; accordingly, if CKS fails promptly to pay the amounts due pursuant
to this Section 7.3(b), and, in order to obtain such payment, USWeb commences
a suit which results in a judgment against CKS for the amounts set forth in
this Section 7.3(b) and such judgment is not set aside or reversed, CKS shall
pay to USWeb its reasonable costs and expenses (including attorneys' fees and
expenses) in connection with such suit, together with interest on the amounts
set forth in this Section 7.3(b) at the prime rate of The Chase Manhattan Bank
in effect on the date such payment was required to be made. "CKS Acquisition"
shall mean any of the following transactions or series of related
transactions: (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
CKS pursuant to which the stockholders of CKS immediately preceding such
transaction or series of related transactions hold less than 50% of the equity
interests in the surviving or resulting entity of such transaction or
transactions (without respect to any overlap in the companies' stockholder
bases) (other than the transactions contemplated by this Agreement); (ii) a
sale or other disposition by CKS of assets (excluding inventory and used
equipment sold in the ordinary course of business) representing in excess of
50% of the fair market value of CKS's business immediately prior to such sale;
or (iii) the acquisition by any person or group (including by way of a tender
offer or an exchange offer or issuance by CKS), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of 50% or more
of the then outstanding shares of capital stock of CKS.
(c) Payment of fees described in Sections 7.3(b) and (d) shall not be in
lieu of damages incurred in the event of material and willful breach of this
Agreement.
(d) USWeb Payments. In the event that this Agreement is terminated by CKS
pursuant to Section 7.1(g) or by USWeb pursuant to Section 7.1(k), USWeb shall
promptly, but in no event later than two (2) days after the date of such
termination, pay CKS a fee equal to $12 million in immediately available funds
(the "USWeb Termination Fee"). If this Agreement shall be terminated by any
party hereto pursuant to Section 7.1(e) and prior to the time of the
occurrence of the event entitling such party to terminate this Agreement
pursuant to such provision a USWeb Contingent Proposal shall have been
publicly announced or otherwise publicly disclosed, and prior to the date
twelve (12) months following the date of the termination of this Agreement
either (i) the transaction contemplated by such USWeb Contingent Proposal
shall be consummated or (ii) USWeb shall enter into a written agreement
providing for the consummation of the transaction contemplated by such USWeb
Contingent Proposal, then USWeb shall pay to CKS the USWeb Termination Fee in
immediately available funds, in the case of clause (i) concurrently with the
consummation of the transaction contemplated by such USWeb Contingent Proposal
and in the case of clause (ii) one half of the USWeb Termination Fee
concurrently with the execution of such agreement and the remaining half of
the USWeb Termination Fee upon the consummation of the transaction
contemplated by such agreement. USWeb acknowledges that the agreements
contained in this Section 7.3(d) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, CKS would
not enter into this Agreement; accordingly, if USWeb fails promptly to pay the
amounts due pursuant to this Section 7.3(d), and, in order to obtain such
payment, CKS commences a suit which results in a judgment against USWeb for
the amounts set forth in this Section 7.3(d) and such judgment is not set
aside or reversed, USWeb shall pay to CKS its reasonable costs and expenses
(including attorneys' fees and expenses) in connection with such suit,
together with interest on the amounts set forth in this Section 7.3(d) at the
prime rate of The Chase Manhattan Bank in effect on the date such payment was
required to be made. Payment of the fees described in this Section 7.3(d)
shall not be in lieu of damages incurred in the event of material and willful
breach of this Agreement. "USWeb Contingent Proposal" shall mean a USWeb
Proposal, which proposal is and is publicly disclosed to be contingent upon
the issuance of shares of USWeb Common Stock pursuant to the Merger not being
approved by the stockholders of USWeb or the Merger otherwise not being
consummated.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of the parties hereto.
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7.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties 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. Delay in exercising any
right under this Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations and
warranties of CKS, USWeb and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at
the following addresses or telecopy numbers (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) if to USWeb or Merger Sub, to:
USWeb Corporation
2880 Lakeside Drive, Suite 300
Santa Clara, California 95054
Attention: Chief Executive Officer
Telephone No.: (408) 987-3200
Telecopy No.: (408) 987-3240
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Mark Bonham
Telephone No.: (650) 493-9300
Telecopy No.: (650) 493-6811
(b) if to CKS, to:
CKS Group, Inc.
10441 Bandley Drive
Cupertino, California 95014
Attention: Chief Executive Officer
Telephone No.: (408) 366-5100
Telecopy No.: (408) 366-5120
with a copy to:
Gray Cary Ware & Freidenrich LLP
400 Hamilton Ave.
Palo Alto, California 94304
Attention: Rod J. Howard
Telephone No.: (650) 833-2496
Telecopy No.: (650) 327-3699
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8.3 Interpretation; Knowledge.
(a) When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. 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.
When reference is made herein to "the business of" an entity, such reference
shall be deemed to include the business of all direct and indirect
subsidiaries of such entity. Reference to the subsidiaries of an entity shall
be deemed to include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "knowledge" means, with respect
to any matter in question, (i) as to CKS, that any of the Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer, Chief Technology
Officer, Director of Finance, Executive Vice President of West Coast
Operations and Executive Vice President of CKS and (ii) as to USWeb, that any
of the Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer and Chief Technology Officer of USWeb, as the case may be, have actual
knowledge of such matter.
8.4 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.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including CKS Schedules and the USWeb
Schedules (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, it being understood that the Confidentiality Agreement
shall continue in full force and effect until the Effective Time and shall
survive any termination of this Agreement; and (b) are not intended to confer
upon any other person any rights or remedies hereunder, except with respect to
the matters set forth in Section 5.13.
8.6 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.
8.7 Other Remedies; Specific Performance. 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. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions hereof
in any court of the United States or any state having jurisdiction, this being
in addition to any other remedy to which they are entitled at law or in
equity.
8.8 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 law
thereof; provided that issues involving the corporate governance of any of the
parties hereto
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shall be governed by their respective jurisdictions of incorporation. Each of
the parties hereto irrevocably consents to the exclusive jurisdiction of any
state or federal court within the Northern District of California, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, other than issues involving the corporate
governance of any of the parties hereto, agrees that process may be served
upon them in any manner authorized by the laws of the State of California for
such persons and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any 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.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
USWEB CORPORATION
/s/ Joseph Firmage
By: _________________________________
Name: Joseph Firmage
Title: Chief Executive Officer and
Chairman of the Board
USWEB ACQUISITION CORPORATION 134
/s/ Carolyn V. Aver
By: _________________________________
Name: Carolyn V. Aver
Title: Executive Vice President and
Chief Financial Officer
CKS GROUP, INC.
/s/ Mark D. Kvamme
By: _________________________________
Name: Mark D. Kvamme
Title: Chief Executive Officer and
Chairman of the Board
<PAGE>
EXHIBIT 2
CKS STOCK OPTION AGREEMENT
THIS CKS STOCK OPTION AGREEMENT dated as of September 1, 1998 (the
"Agreement") is entered into by and between USWeb Corporation, a Delaware
corporation ("USWeb"), and CKS Group, Inc., a Delaware corporation ("CKS").
RECITALS
Concurrently with the execution and delivery of this Agreement, CKS, USWeb
and USWeb Acquisition Corporation 134, a Delaware corporation and a wholly
owned subsidiary of USWeb ("Merger Sub"), are entering into an Agreement and
Plan of Reorganization (the "Merger Agreement"), which provides that, among
other things, upon the terms and subject to the conditions thereof, Merger Sub
will be merged with and into CKS (the "Merger") with CKS continuing as the
surviving corporation and as a wholly owned subsidiary of USWeb.
As a condition and inducement to USWeb's willingness to enter into the
Merger Agreement, USWeb has required that CKS agree, and CKS has so agreed, to
grant to USWeb an option to acquire shares of CKS Common Stock, par value
$0.001 per share ("CKS Common Stock") upon the terms and subject to the
conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option
On the terms and subject to the conditions set forth in this Agreement, CKS
hereby grants to USWeb an irrevocable option (the "Option") to acquire a
number of the authorized but unissued shares of CKS Common Stock (the "Option
Shares") equal to 19.9% of the number of shares of CKS Common Stock issued and
outstanding on the date the Option is first exercised for any Option Shares,
in the manner set forth below, at a price per share equal to the lower of (i)
the Exchange Ratio (as defined in the Merger Agreement) times closing price of
USWeb Common Stock on the last trading day before the date of this Agreement
or (ii) the average closing price of CKS Common Stock on the five trading days
immediately prior to the first public announcement or disclosure of a CKS
Alternative Proposal (as defined in the Merger Agreement) (the "Exercise
Price"), payable in cash. Capitalized terms used in this Agreement but not
defined herein shall have the meanings ascribed thereto in the Merger
Agreement.
2. Exercise of Option
The Option may only be exercised by USWeb, in whole or in part, at any time
or from time to time, from and after (i) the commencement of a tender or
exchange offer for 25% or more of any class of CKS's capital stock, or (ii)
the failure to obtain the required vote of CKS stockholders for approval of
the Merger and approval and adoption of the Merger Agreement upon a vote taken
at a meeting of CKS stockholders duly convened therefor (or at any adjournment
thereof) if at the time of such failure a CKS Alternative Proposal (as defined
in the Merger Agreement) shall have been publicly announced or otherwise
publicly disclosed, or (iii) the occurrence of any of the events specified in
Sections 7.1(f) or 7.1(h) of the Merger Agreement (any of the events specified
in clauses (i), (ii) and (iii) of this sentence being referred to herein as an
"Exercise Event"). In the event USWeb wishes to exercise the Option, USWeb
shall deliver to CKS a
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written notice (an "Exercise Notice") specifying the total number of Option
Shares it wishes to acquire. Each closing of a purchase of Option Shares
hereunder (a "Closing") shall occur on a date and at a time designated by
USWeb in an Exercise Notice delivered to CKS at least five (5) business days
prior to the date of such Closing, which Closing shall be held at the offices
of counsel to USWeb. The Option shall terminate upon the earliest to occur of
(i) the Effective Time, (ii) sixty (60) days following the termination of the
Merger Agreement pursuant to Article VII thereof, if an Exercise Event shall
have occurred on or prior to the date of such termination, (iii) the date on
which the Merger Agreement is terminated pursuant to Article VII thereof if an
Exercise Event shall not have occurred on or prior to such date, and (iv) the
termination of the Merger Agreement pursuant to Section 7.1(a) or 7.1(c)
thereof; provided, however, with respect to the preceding clause (ii) of this
sentence, that if the Option cannot be exercised by reason of any applicable
government order or because the waiting period related to the issuance of the
Option Shares under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), if applicable, shall not have expired or been
terminated, then the Option shall not terminate until the tenth business day
after such impediment to exercise shall have been removed or shall have become
final and not subject to appeal. Notwithstanding the foregoing, but subject to
the further limitations set forth in Section 7(a), (i) the Option may not be
exercised if USWeb is in breach in any material respect of any of its
covenants or agreements contained in the Merger Agreement; and (ii) in the
event USWeb receives more than an aggregate of (x) eighteen million dollars
($18,000,000) plus (y) the Exercise Price multiplied by the Number of Option
Shares purchased by USWeb pursuant to the Option minus (z) any amounts paid to
USWeb by CKS pursuant to Section 7.3(b) of the Merger Agreement, in connection
with a sale or other disposition of the Option Shares, all proceeds in excess
of such amount shall be remitted to CKS.
3. Conditions to Closing
The obligation of CKS to issue the Option Shares to USWeb hereunder is
subject to the conditions that (a) any waiting period under the HSR Act
applicable to the issuance of the Option Shares hereunder shall have expired
or been terminated; (b) all consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, any federal, state or local
administrative agency or commission or other federal state or local
governmental authority or instrumentality, if any, required in connection with
the issuance of the Option Shares hereunder shall have been obtained or made,
as the case may be; and (c) no preliminary or permanent injunction or other
order by any court of competent jurisdiction prohibiting or otherwise
restraining such issuance shall be in effect.
4. Closing
At any Closing, (a) CKS shall deliver to USWeb a single certificate in
definitive form representing the number of Option Shares designated by USWeb
in its Exercise Notice, such certificate to be registered in the name of USWeb
and to bear the legend set forth in Section 11 hereof, and (b) USWeb shall pay
to CKS the aggregate purchase price for the Option Shares so designated and
being purchased by wire transfer of immediately available funds or by delivery
of a certified check or bank check. At any Closing at which USWeb is
exercising the Option in part, USWeb shall present and surrender this
Agreement to CKS, and CKS shall deliver to USWeb an executed new agreement
with the same terms as this Agreement evidencing the right to purchase the
balance of the Option Shares purchasable hereunder.
5. Representations and Warranties of CKS
CKS represents and warrants to USWeb that (a) CKS is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder; (b) the execution and
delivery of this Agreement by CKS and consummation by CKS of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of CKS and no other corporate proceedings on the part of
CKS are necessary to authorize this Agreement or any of the transactions
contemplated hereby; (c) this Agreement has been duly executed and delivered
by CKS and constitutes a legal, valid and binding
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obligation of CKS and, assuming this Agreement constitutes a legal, valid and
binding obligation of USWeb, is enforceable against CKS in accordance with its
terms, except as enforceability may be limited by bankruptcy and other laws
affecting the rights and remedies of creditors generally and general
principles of equity; (d) except for any filings as may be required under the
HSR Act and foreign antitrust or similar laws, CKS has taken all necessary
corporate and other action to authorize and reserve for issuance and to permit
it to issue upon exercise of the Option, and at all times from the date hereof
until the termination of the Option will have reserved for issuance, a
sufficient number of unissued Option Shares for USWeb to exercise the Option
in full and will take all necessary corporate or other action to authorize and
reserve for issuance all additional Option Shares or other securities which
may be issuable pursuant to Section 10 upon exercise of the Option, all of
which, upon their issuance and delivery in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable; (e) upon
delivery of the Option Shares and any other securities to USWeb upon exercise
of the Option, USWeb will acquire such Option Shares or other securities free
and clear of all material claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever, excluding those imposed by USWeb;
(f) the execution and delivery of this Agreement by CKS does not, and the
performance of this Agreement by CKS will not, (i) violate the Certificate of
Incorporation or Bylaws of CKS, (ii) conflict with or violate any order
applicable to CKS or any of its subsidiaries or by which they or any of their
property is bound or (iii) result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of CKS or any of its subsidiaries pursuant to, any
contract or agreement to which CKS or any of its subsidiaries is a party or by
which CKS or any of its subsidiaries or any of their property is bound,
except, in the case of clauses (ii) and (iii) above, for violations,
conflicts, breaches, defaults, rights of termination, amendment, acceleration
or cancellation, liens or encumbrances which would not, individually or in the
aggregate, have a Material Adverse Effect on CKS; and (g) the execution and
delivery of this Agreement by CKS does not, and the performance of this
Agreement by CKS will not, require any consent, approval, authorization or
permit of, or filing with, or notification to, any Governmental Entity except
as may be required pursuant to the HSR Act, foreign antitrust or similar laws,
and Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
6. Representations and Warranties of USWeb
USWeb represents and warrants to CKS that (a) USWeb is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder; (b) the execution and
delivery of this Agreement by USWeb and the consummation by USWeb of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of USWeb and no other corporate proceedings on
the part of USWeb are necessary to authorize this Agreement or any of the
transactions contemplated hereby; (c) this Agreement has been duly executed
and delivered by USWeb and constitutes a legal, valid and binding obligation
of USWeb and, assuming this Agreement constitutes a legal, valid and binding
obligation of CKS, is enforceable against USWeb in accordance with its terms,
except as enforceability may be limited by bankruptcy and other laws affecting
the rights and remedies of creditors generally and general principles of
equity; (d) the execution and delivery of this Agreement by USWeb do not, and
the performance of this Agreement by USWeb will not, (i) violate the
Certificate of Incorporation or Bylaws of USWeb, (ii) conflict with or violate
any order applicable to USWeb or any of its subsidiaries or by which they or
any of their property is bound or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become
a default) under, or give rise to any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the property or assets of USWeb or any of its
subsidiaries pursuant to, any contract or agreement to which USWeb or any of
its subsidiaries is a party or by which USWeb or any of its subsidiaries or
any of their property is bound, except, in the case of clauses (ii) and (iii)
above, for violations, conflicts, breaches, defaults, rights of termination,
amendment, acceleration or cancellation, liens or encumbrances which would
not, individually or in the aggregate, have a Material Adverse Effect on
USWeb; (e) the execution and delivery of
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this Agreement by USWeb does not, and the performance of this Agreement by
USWeb will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity except as may be
required pursuant to the HSR Act, foreign antitrust or similar laws, and
Section 13(d) of the Exchange Act; and (f) any Option Shares acquired upon
exercise of the Option will not be acquired by USWeb with a view to the public
distribution thereof and USWeb will not sell or otherwise dispose of such
shares in violation of applicable law or this Agreement.
7. Certain Rights
(a) Put. At the request of USWeb at any time during the period during which
the Option is exercisable pursuant to Section 2, provided that an event
specified in Sections 7.1(f) or 7.1(h) of the Merger Agreement shall have
occurred and the CKS Termination Fee (as defined in the Merger Agreement) has
become payable pursuant to Section 7.3(b) of the Merger Agreement (the
"Purchase Period"), CKS (or any successor entity thereof) shall purchase from
USWeb the Option Shares, if any, acquired by USWeb pursuant to this Agreement,
at a price equal to the sum of (i) the Exercise Price paid by USWeb for the
Option Shares acquired pursuant to the Option plus (ii) the difference between
the "Market Price" for such Option Shares as of the date USWeb gives notice of
its intent to exercise its rights under this Section 7(a) and such Exercise
Price (but only if the Market Price is greater than the Exercise Price),
multiplied by the number of Option Shares so purchased. Notwithstanding any
other provision of this Agreement, CKS shall not be required pursuant to this
Section 7 to pay USWeb any amount in excess of an aggregate of (x) twelve
million dollars ($12,000,000) plus (y) the Exercise Price paid by USWeb for
the Option Shares acquired pursuant to the Option minus (z) any amounts paid
to USWeb by CKS pursuant to Sections 7.3(b) of the Merger Agreement. For
purpose of this Section 7(a), "Market Price" means the average closing sale
price of CKS Common Stock on the Nasdaq National Market during the five (5)
trading days ending on the trading day immediately preceding such date).
(b) Payment and Redelivery of Option or Shares. In the event USWeb exercises
its rights under Section 7(a), CKS shall, within ten (10) business days after
USWeb delivers notice pursuant to Section 7(a) (which notice may be delivered
prior to consummation of the exercise of the Option), pay the required amount
to USWeb in immediately available funds and USWeb shall surrender to CKS the
certificates evidencing the Option Shares purchased by USWeb pursuant thereto,
and USWeb shall represent and warrant that such shares are then free and clear
of all claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever.
8. Certain Restrictions
(a) Restrictions on Transfer. Prior to the fifth anniversary of the date
hereof (the "Expiration Date"), USWeb shall not directly or indirectly, by
operation of law or otherwise, sell, assign, pledge, or otherwise dispose of
or transfer any shares of capital stock of CKS acquired by USWeb pursuant to
this Agreement, ("Restricted Shares"), other than (i) pursuant to Section 7 or
(ii) in accordance with Sections 8(b) or 9.
(b) Permitted Sales. Following the termination of the Merger Agreement,
USWeb shall be permitted to sell any Restricted Shares beneficially owned by
it if such sale is made (i) pursuant to a tender or exchange offer or other
business combination transaction that has been approved or recommended, or
otherwise determined to be fair to and in the best interests of the holders of
CKS Common Stock, by a majority of the members of the Board of Directors of
CKS, or (ii) subject to Section 8(c) or (d) as the case may be, to a person
who, immediately following such sale, would beneficially own (within the
meaning of Rule 13d-3 promulgated under the Exchange Act), either alone or as
part of a "group" (as used in Rule 13d-5 under the Exchange Act), not more
than ten percent (10%) of CKS's outstanding voting securities, which person is
a passive institutional investor who would be eligible under Rule 13d-1(b)(1)
under the Exchange Act to report such holdings of Restricted Shares on
Schedule 13G under the Exchange Act.
(c) CKS's Right of First Refusal. At any time after the first occurrence of
a Exercise Event and prior to the Expiration Date, if USWeb shall desire to
sell, assign, transfer or otherwise dispose of all or any of the
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Option Shares acquired pursuant to this Agreement, it shall give CKS written
notice of the proposed transaction (an "USWeb Offer Notice"), identifying the
proposed transferee, accompanied by a copy of a binding offer to purchase such
shares or other securities signed by such transferee and setting forth the
terms of the proposed transaction. A USWeb Offer Notice shall be deemed an
offer by USWeb to CKS, which may be accepted within five (5) business days of
the receipt of such USWeb Offer Notice, on the same terms and conditions and
at the same price at which USWeb is proposing to transfer such shares or other
securities to such transferee. The purchase of any such shares or other
securities by CKS shall be settled within five (5) business days of the date
of the acceptance of the offer and the purchase price shall be paid to USWeb
in immediately available funds. In the event of the failure or refusal of CKS
to purchase all the shares or other securities covered by a USWeb Offer
Notice, USWeb may sell all, but not less than all, of such shares or other
securities to the proposed transferee at no less than the price specified and
on terms no more favorable to the transferee than those set forth in the USWeb
Offer Notice as long as such sale is completed within ninety (90) days of the
receipt by CKS of the applicable USWeb Offer Notice; provided that the
provisions of this sentence shall not limit the rights USWeb may otherwise
have in the event CKS has accepted the offer contained in the USWeb Offer
Notice and wrongfully refuses to purchase the shares or other securities
subject thereto.
(d) Additional Restrictions. Prior to any permitted sales of any Restricted
Shares under Section 8(b)(ii), the holder thereof shall give written notice to
the issuer of such Restricted Shares of its intention to effect such transfer.
Each such notice shall describe the manner of the proposed transfer and, if
requested by the issuer of such Restricted Shares, shall be accompanied by an
opinion of counsel satisfactory to such issuer (it being agreed that each of
Gray Cary Ware & Freidenrich LLP, and Wilson Sonsini Goodrich & Rosati,
Professional Corporation, shall be satisfactory) to the effect that such sale
may be effected without registration under the Securities Act and any
applicable state securities laws. Each certificate for Restricted Shares
transferred as above provided shall bear the legend set forth in Section 11,
except that such certificate shall not bear such legend if (i) such transfer
is in accordance with the provisions of Rule 144 (or any other rule permitting
public sale without registration under the Securities Act) or (ii) the opinion
of counsel referred to above is to the further effect that the transferee and
any subsequent transferee would be entitled to transfer such securities in a
public sale without registration under the Securities Act and any applicable
state securities laws. The restrictions provided for in this Section 8(d)
shall not apply to securities which are not required to bear the legend
prescribed by Section 11 in accordance with the provisions of this Agreement.
The foregoing restrictions on transferability shall terminate as to any
particular shares when such shares shall have been effectively registered
under the Securities Act and any applicable state securities laws and sold or
otherwise disposed of in accordance with the registration statement covering
such shares.
(e) Voting of Shares. Following the date hereof and prior to the Expiration
Date, USWeb (i) shall vote all Restricted Shares, on each matter submitted to
a vote of the stockholders of CKS, for and against such matter in the same
proportion as all other shares of the same class of capital stock of CKS are
voted (whether by proxy or otherwise) for and against such matter, and (ii)
shall execute written consents with respect to the Restricted Shares in the
same proportion as written consents are executed by other holders of such
class of capital stock of CKS. Before acquiring any Restricted Shares
hereunder, USWeb shall execute and deliver a proxy to CKS authorizing CKS to
vote and execute written consents with respect to all Restricted Shares held
by USWeb in accordance with the provisions of this paragraph.
9. Registration Rights
(a) Following the termination of the Merger Agreement, USWeb may by written
notice (a "Registration Notice") to CKS request CKS to register under the
Securities Act all or any part of the shares acquired by USWeb pursuant to
this Agreement (the "Registrable Securities") in order to permit the sale or
other disposition of such shares pursuant to a bona fide firm commitment
underwritten public offering in which USWeb and the underwriters shall effect
as wide a distribution of such Registrable Securities as is reasonably
practicable and shall use reasonable efforts to prevent any person or group
from purchasing through such offering shares representing more than 1% of the
outstanding shares of Common Stock of CKS
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on a fully diluted basis; provided, however, that any such Registration Notice
must relate to a number of shares equal to at least 2% of the outstanding
shares of Common Stock of CKS on a fully diluted basis and that any rights to
require registration hereunder shall terminate with respect to any shares that
may be sold pursuant to Rule 144(k) under the Securities Act.
(b) CKS shall use commercially reasonable best efforts to effect, as
promptly as practicable, the registration under the Securities Act of the
Registrable Securities; provided, however, that (i) USWeb shall not be
entitled to more than an aggregate of two effective registration statements
hereunder and (ii) CKS will not be required to file any such registration
statement during any period of time (not to exceed 40 days after a
Registration Notice in the case of clause (A) below or 90 days after a
Registration Notice in the case of clauses (B) and (C) below) when (A) CKS is
in possession of material non-public information which it reasonably believes
would be detrimental to be disclosed at such time and, in the written opinion
of counsel to CKS, such information would have to be disclosed if a
registration statement were filed at that time; (B) CKS is required under the
Securities Act to include audited financial statements for any period in such
registration statement and such financial statements are not yet available for
inclusion in such registration statement; or (C) CKS determines, in its
reasonable judgment, that such registration would interfere with any
financing, acquisition or other material transaction involving CKS. If
consummation of the sale of any Registrable Securities pursuant to a
registration hereunder does not occur within 180 days after the filing with
the SEC of the initial registration statement therefor, the provisions of this
Section 9 shall again be applicable to any proposed registration, it being
understood that USWeb shall not be entitled to more than an aggregate of two
effective registration statements hereunder. CKS shall use commercially
reasonable best efforts to cause any Registrable Securities registered
pursuant to this Section 9 to be qualified for sale under the securities or
blue sky laws of such jurisdictions as USWeb may reasonably request and shall
continue such registration or qualification in effect in such jurisdictions;
provided, however, that CKS shall not be required to qualify to do business
in, or consent to general service of process in, any jurisdiction by reason of
this provision.
(c) The registration rights set forth in this Section 9 are subject to the
condition that USWeb shall provide CKS with such information with respect to
USWeb's Registrable Securities, the plan for distribution thereof, and such
other information with respect to USWeb as, in the reasonable judgment of
counsel for CKS, is necessary to enable CKS to include in a registration
statement all material facts required to be disclosed with respect to a
registration thereunder.
(d) A registration effected under this Section 9 shall be effected at CKS's
expense, except for underwriting discounts and commissions and the fees and
expenses of counsel to USWeb, and CKS shall provide to the underwriters such
documentation (including certificates, opinions of counsel and "comfort"
letters from auditors) as are customary in connection with underwritten public
offerings and as such underwriters may reasonably require. In connection with
any registration, the parties agree (i) to indemnify each other and the
underwriters in the customary manner and (ii) to enter into an underwriting
agreement in form and substance customary for transactions of this type with
the underwriters participating in such offering.
10. Adjustment Upon Changes in Capitalization
In the event of any change in the Option Shares by reason of stock
dividends, split-ups, mergers (other than the Merger), recapitalizations,
combinations, exchanges of shares and the like, the type and number of shares
or securities subject to the Option, the Exercise Price shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that USWeb shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that USWeb would
have received in respect of the Option Shares if the Option had been exercised
immediately prior to such event or the record date therefor, as applicable.
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11. Restrictive Legends
Each certificate representing Option Shares issued to USWeb hereunder shall
include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF AUGUST 31,
1998, A COPY OF WHICH MAY BE OBTAINED FROM CKS CORPORATION.
12. Listing and HSR Filing
CKS, upon the request of USWeb, shall promptly file an application to list
the Option Shares to be acquired upon exercise of the Option for quotation on
the Nasdaq National Market and shall use its best efforts to obtain approval
of such listing as soon as practicable. Promptly after the date such a filing
is permitted to be made, each of the parties hereto shall file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice all required premerger notification and report forms and
other documents and exhibits required to be filed under the HSR Act, if any,
to permit the acquisition of the Option Shares subject to the Option at the
earliest possible date.
13. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon
any person other than the parties hereto and their respective successors and
permitted assigns any rights or remedies of any nature whatsoever by reason of
this Agreement. Any shares sold by a party in compliance with the provisions
of Section 9 shall, upon consummation of such sale, be free of the
restrictions imposed with respect to such shares by this Agreement and any
transferee of such shares shall not be entitled to the rights of such party.
Certificates representing shares sold in a registered public offering pursuant
to Section 9 shall not be required to bear the legend set forth in Section 11.
14. Specific Performance
The parties recognize and agree that if for any reason any of the provisions
of this Agreement are not performed in accordance with their specific terms or
are otherwise breached, immediate and irreparable harm or injury would be
caused for which money damages would not be an adequate remedy. Accordingly,
each party agrees that in addition to other remedies the other party shall be
entitled to an injunction restraining any violation or threatened violation of
the provisions of this Agreement. In the event that any action shall be
brought in equity to enforce the provisions of the Agreement, neither party
will allege, and each party hereby waives the defense, that there is an
adequate remedy at law.
15. Entire Agreement
This Agreement and the Merger Agreement (including the appendices thereto)
constitute the entire agreement between the parties with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
A-7
<PAGE>
16. Further Assurances
Each party will execute and deliver all such further documents and
instruments and take all such further action as may be necessary in order to
constitute the transactions contemplated hereby.
17. Validity
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of the other provisions of this
Agreement, which shall remain in full force and effect. In the event any
Governmental Entity of competent jurisdiction holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall
negotiate in good faith and shall execute and deliver an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision.
18. Notices
All notices and other communications hereunder shall be in writing and shall
be deemed given if delivered personally or by commercial delivery service, or
sent via telecopy (receipt confirmed) to the parties at the following
addresses or telecopy numbers (or at such other address or telecopy numbers
for a party as shall be specified by like notice):
(a) if to USWeb, to:
USWeb Corporation
2880 Lakeside Drive, Suite 300
Santa Clara, CA 95054
Attention: Chief Financial Officer
Telephone No.: (408) 989-3200
Telecopy No.: (408) 987-3240
with a copy at the same address to the
attention of the General Counsel, and
with a copy to:
Wilson Sonsini Goodrich & Rosati, Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Mark Bonham
Telephone No. (650) 493-9300
Telecopy No.: (650) 493-6811
(b) if to CKS, to:
CKS Group, Inc.
10441 Bandley Drive
Cupertino, CA 95014
Attention: Chief Financial Officer
Telephone No.: (40) 366-5100
Telecopy No.: (408) 366-5120
A-8
<PAGE>
with a copy at the same address to the
attention of the General Counsel, and
with a copy to:
Gray Cary Ware & Freidenrich LLP
400 Hamilton Ave.
Palo Alto, CA 94034
Attention: Rod J. Howard
Telephone No.: 650-833-2496
Telecopy No.: 650-327-3699
19. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to agreements made and to be
performed entirely within such State.
20. Counterparts
This Agreement may be executed in two counterparts, each of which shall be
deemed to be an original, but both of which, taken together, shall constitute
one and the same instrument.
21. Expenses
Except as otherwise expressly provided herein or in the Merger Agreement,
all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
22. Amendments; Waiver
This Agreement may be amended by the parties hereto and the terms and
conditions hereof may be waived only by an instrument in writing signed on
behalf of each of the parties hereto, or, in the case of a waiver, by an
instrument signed on behalf of the party waiving compliance.
23. Assignment
Neither of the parties hereto may sell, transfer, assign or otherwise
dispose of any of its rights or obligations under this Agreement or the Option
created hereunder to any other person, without the express written consent of
the other party, except that USWeb may assign its rights and obligations
hereunder to Merger Sub.
[Remainder of Page Intentionally Blank]
A-9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
USWEB CORPORATION
/s/ Carolyn V. Aver
By: _________________________________
Name: Carolyn V. Aver
Title: Executive Vice President and
Chief Financial Officer
CKS GROUP, INC.
/s/ Mark D. Kvamme
By: _________________________________
Name: Mark D. Kvamme
Title: Chief Executive Officer and
Chairman of the Board
*CKS STOCK OPTION AGREEMENT*
A-10
<PAGE>
EXHIBIT 3
CKS VOTING AGREEMENT
This Voting Agreement ("Agreement") is made and entered into as of
September 1, 1998, by and between USWeb Corporation, a Delaware corporation
("USWeb"), and the undersigned stockholder ("Stockholder") of CKS Group, Inc., a
Delaware corporation ("CKS").
RECITALS
A. Concurrently with the execution of this Agreement, USWeb, CKS and
USWeb Acquisition Corporation 134, a Delaware corporation and a wholly owned
subsidiary of USWeb ("Merger Sub"), have entered into an Agreement and Plan of
Reorganization (the "Merger Agreement") which provides for the merger (the
"Merger") of Merger Sub with and into CKS. Pursuant to the Merger, shares of
capital stock of CKS will be converted into Common Stock of USWeb on the basis
described in the Merger Agreement.
B. The Stockholder is the record holder and beneficial owner (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of such number of shares of the outstanding capital stock of
CKS as is indicated on the final page of this Agreement (the "Shares").
C. USWeb desires the Stockholder to agree, and the Stockholder is willing
to agree, not to transfer or otherwise dispose of any of the Shares, or any
other shares of capital stock of CKS acquired hereafter and prior to the
Expiration Date (as defined in Section 1.1 below, except as otherwise permitted
hereby), and to vote the Shares and any other such shares of capital stock of
CKS so as to facilitate consummation of the Merger.
D. As an inducement to the Stockholder's willingness to enter into this
Agreement, USWeb has agreed (i) to file with the Securities and Exchange
Commission (the "SEC") certain financial information regarding the operations of
the combined company as contemplated hereby and by that certain CKS Group, Inc.
Holder Agreement to be entered into by the Stockholder in connection with the
Merger (the "Holder Agreement") and (ii) to register, in accordance with the
terms of the Holder Agreement, the shares of USWeb Common Stock to be received
by the Stockholder in the Merger.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Agreement to Vote Shares.
------------------------
1.1 Definition. As used herein, the term "Expiration Date" shall
----------
mean the earlier to occur of (i) such date and time as the Merger shall become
effective in accordance with the terms
<PAGE>
and provisions of the Merger Agreement and (ii) such date and time as the Merger
Agreement shall be terminated pursuant to Article VII thereof.
1.2 Additional Purchases. Stockholder agrees that any shares of
--------------------
capital stock of CKS that Stockholder purchases or with respect to which
Stockholder otherwise acquires beneficial ownership after the execution of this
Agreement and prior to the Expiration Date ("New Shares") shall be subject to
the terms and conditions of this Agreement to the same extent as if they
constituted Shares. Any Shares with respect to which Stockholder ceases to be
the beneficial owner without violation of Stockholder's obligations pursuant to
the Holder Agreement shall cease to be included in the definition of "Shares."
2. Agreement to Vote Shares. At every meeting of the stockholders of CKS
------------------------
called with respect to any of the following, and at every adjournment thereof,
and on every action or approval by written consent of the stockholders of CKS
with respect to any of the following, Stockholder shall vote the Shares and any
New Shares beneficially owned or controlled by Stockholder in favor of approval
of the Merger Agreement and the Merger; provided that the Stockholder shall not
--------
be required to vote in favor of, or consent to, any action that would (i) impose
any obligation on the Stockholder not contemplated hereby or in the Holder
Agreement or (ii) reduce the amount of USWeb Common Stock to be received by the
Stockholder in the Merger. Stockholder agrees not to take any actions contrary
to Stockholder's obligations under this Agreement.
3. Irrevocable Proxy. Concurrently with the execution of this Agreement,
-----------------
Stockholder agrees to deliver to USWeb a proxy in the form attached hereto as
Exhibit A (the "Proxy"), which shall be irrevocable to the extent provided in
Section 212 of the Delaware General Corporation Law, with respect to the Shares
beneficially owned (as such term is defined in Rule 13d-3 under the Exchange
Act) by Stockholder set forth therein; provided, however, that the Proxy shall
be revoked upon expiration or termination of this Voting Agreement in accordance
with its terms and shall be revoked with respect to any Shares with respect to
which Stockholder ceases to be the beneficial owner without violation of
Stockholder's obligations pursuant to the Holder Agreement upon such event.
4. Representations, Warranties and Covenants of the Stockholder.
------------------------------------------------------------
Stockholder hereby represents, warrants and covenants to USWeb that Stockholder
(i) is the beneficial owner of the Shares, which at the date hereof and at all
times up until the Expiration Date will be free and clear of any liens, claims,
options, charges or other encumbrances; (ii) does not beneficially own any
shares of capital stock of CKS other than the Shares and any New Shares
(excluding shares as to which Stockholder currently disclaims beneficial
ownership in accordance with applicable law); and (iii) has full power and
authority to make, enter into and carry out the terms of this Agreement and the
Proxy.
5. No Limitation on Discretion as Director. This Agreement is intended
---------------------------------------
solely to apply to the exercise by Stockholder in his, her its individual
capacity as a stockholder of rights attaching to ownership of the Shares, and
nothing herein shall be deemed to apply to, or to limit in any manner the
discretion of Stockholder or any of its designees, employees or agents with
respect to, any action
-2-
<PAGE>
which may be taken or omitted by such person acting in his or her fiduciary
capacity as a director of CKS.
6. Publication of Financial Results. USWeb shall use its commercially
--------------------------------
reasonable best efforts to publish, in accordance with ASR 135 and other
applicable accounting rules, as promptly as practicable, consolidated financial
results covering at least thirty (30) days of post-Merger combined operations of
USWeb and CKS.
7. Additional Documents. Stockholder and USWeb hereby covenant and agree
--------------------
to execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of USWeb or Stockholder, as the case may be, to carry out the
intent of this Agreement and the Proxy.
8. Consent and Waiver. Stockholder hereby gives any consents or waivers
------------------
that are reasonably required for the consummation of the Merger under the terms
of any agreements to which Stockholder is a party or pursuant to any rights
Stockholder may have.
9. Termination. This Agreement and the Proxy delivered in connection
-----------
herewith shall terminate and shall have no further force or effect as of 5:00
p.m. (Pacific Time) on the Expiration Date.
10. Miscellaneous.
-------------
10.1 Severability. If any term, provision, covenant or restriction
------------
of this Agreement is held by a court of competent jurisdiction to be invalid
void or unenforceable, then the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
10.2 Binding Effect and Assignment. This Agreement and all of
-----------------------------
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor any
of the rights, interests or obligations of the parties hereto may be assigned by
either party without prior written consent of the other.
10.3 Amendments and Modification. This Agreement may not be
---------------------------
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
10.4 Specific Performance; Injunctive Relief. The parties hereto
---------------------------------------
acknowledge that USWeb will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to USWeb upon any such violation, USWeb
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to USWeb at law
or in equity.
-3-
<PAGE>
10.5 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and sufficient if delivered in
person, by cable, telegram or facsimile, or sent by mail (registered or
certified mail, postage prepaid, return receipt requested) or overnight courier
(prepaid) to the respective parties as follows:
If to USWeb: USWeb Corporation
2880 Lakeside Drive, Suite 300
Santa Clara, California 95054
Attn: Chief Financial Officer
Telephone: (408) 987-3200
Facsimile: (408) 987-3240
With a copy to its General Counsel at the same
address, and
With a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: Mark Bonham
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
If to the Stockholder: To the address for notice set forth on the
last page hereof.
With a copy to: Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, California 94304
Attn: Rod J. Howard
Telephone: (650) 833-2496
Facsimile: (650) 327-3699
and
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attn: Barry Fox
Telephone: (212) 225-2350
Facsimile: (212) 225-3999
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall only be
effective upon receipt.
10.6 Governing Law. This Agreement shall be governed by, and construed
-------------
and enforced in accordance with, the internal laws of the State of Delaware.
-4-
<PAGE>
10.7 Entire Agreement. This Agreement contains the entire understanding
----------------
of the parties in respect of the subject matter hereof, and supersedes all prior
negotiations and understandings between the parties with respect to such subject
matter.
10.8 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
10.9 Effect of Headings. The section headings herein are for convenience
------------------
only and shall not affect the construction of interpretation of this Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be
duly executed on the date and year first above written.
USWEB CORPORATION
By:
------------------------------------------
Title:
---------------------------------------
STOCKHOLDER:
By:
------------------------------------------
Stockholder's Address for Notice:
----------------------------------------------
----------------------------------------------
----------------------------------------------
Shares beneficially owned:
_______________ shares of Common Stock
Shares subject to outstanding options:
_______________ shares of Common Stock
***VOTING AGREEMENT***
<PAGE>
Exhibit A
IRREVOCABLE PROXY
The undersigned stockholder of CKS Group, Inc., a Delaware corporation
("CKS"), hereby irrevocably (to the extent provided in Section 212 of the
Delaware General Corporation Law and except as otherwise provided herein)
appoints the directors on the Board of Directors of USWeb Corporation, a
Delaware corporation ("USWeb"), and each of them individually, as the sole and
exclusive attorneys and proxies of the undersigned, with full power of
substitution and resubstitution, to the full extent of the undersigned's rights
with respect to the shares of capital stock of CKS beneficially owned by the
undersigned, which shares are listed on the final page of this Proxy (the
"Shares"), and any and all other shares or securities issued or issuable in
respect thereof on or after the date hereof, until such time as that certain
Agreement and Plan of Reorganization dated as of September 1, 1998 (the "Merger
Agreement"), among USWeb, USWeb Acquisition Corporation, a Delaware corporation
and a wholly owned subsidiary of USWeb ("Merger Sub"), and CKS, shall be
terminated in accordance with its terms or the Merger (as defined in the Merger
Agreement) is effective. Upon the execution hereof, all prior proxies given by
the undersigned with respect to the Shares and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof are
hereby revoked and no subsequent proxies will be given.
Notwithstanding any other provision of this Proxy, upon notice by the
Stockholder to USWeb of any transfer permitted pursuant to that certain CKS
Group, Inc. Holder Agreement of even date herewith, the proxy granted hereby
shall automatically be revoked with respect to any Shares so transferred and any
such notice shall be attached as an exhibit hereto and shall be deemed to reduce
the number of Shares with respect to which a proxy is granted hereunder.
Except as otherwise provided herein, this proxy is irrevocable (to the
extent provided in Section 212 of the Delaware General Corporation Law), is
granted pursuant to the Voting Agreement dated as of September 1, 1998 between
USWeb and the undersigned stockholder (the "Voting Agreement"), and is granted
in consideration of USWeb entering into the Merger Agreement. The attorneys and
proxies named above will be empowered at any time prior to termination of the
Merger Agreement to exercise all voting rights (including, without limitation,
the power to execute and deliver written consents with respect to the Shares) of
the undersigned at every annual, special or adjourned meeting of CKS
stockholders, and in every written consent in lieu of such a meeting, or
otherwise, in favor of approval of the Merger and the Merger Agreement.
The attorneys and proxies named above may only exercise this proxy to vote
the Shares subject hereto at any time prior to termination of the Merger
Agreement at every annual, special or adjourned meeting of the stockholders of
CKS and in every written consent in lieu of such meeting, in favor of approval
of the Merger and the Merger Agreement and may not exercise this proxy on any
other matter. The undersigned stockholder may vote the Shares on all other
matters.
-7-
<PAGE>
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This proxy is irrevocable.
Dated:___________________, 1998
Signature of Stockholder:
----------------------------------------------
Print Name of Stockholder:
---------------------------------------------
Shares beneficially owned:
shares of Common Stock
------------------------------
****IRREVOCABLE PROXY****
<PAGE>
EXHIBIT 4
---------
RESTATED CERTIFICATE OF INCORPORATION
OF CKS GROUP CORPORATION
ARTICLE I
---------
The name of this corporation is CKS Group Corporation (the "Corporation").
ARTICLE II
----------
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
-----------
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE IV
----------
The aggregate number of shares which the Corporation shall have authority
to issue is 1,000 to be designated Common Stock, with the par value of $0.001
per share.
ARTICLE V
---------
The Corporation is to have perpetual existence.
ARTICLE VI
----------
Elections of directors need not be by written ballot unless a stockholder
demands election by written ballot at the meeting and before voting begins or
unless the Bylaws of the Corporation shall so provide.
<PAGE>
ARTICLE VII
-----------
The number of directors which constitute the whole Board of Directors of
the Corporation shall be designated in the Bylaws of the Corporation.
ARTICLE VIII
------------
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
ARTICLE IX
----------
(a) To the fullest extent permitted by the Delaware General Corporation Law
as the same exists or as may hereafter be amended, a director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
(b) Neither any amendment nor repeal of this Article IX, nor the adoption
of any provision of this Corporation's Certificate of Incorporation inconsistent
with this Article IX, shall eliminate or reduce the effect of this Article IX,
in respect of any matter occurring, or any action or proceeding accruing or
arising or that, but for this Article IX, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE X
---------
1. Actions, Suits and Proceedings Other than by or in the Right of the
-------------------------------------------------------------------
Corporation. The Corporation shall indemnify each person who was or is a party
- ------------
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order,
-2-
<PAGE>
settlement, conviction or upon a plea of nolo contendere or its equivalent,
---- ----------
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in, or not opposed to,
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Notwithstanding anything to the contrary in this Article, except as set forth in
Section 7 below, the Corporation shall not indemnify an Indemnitee seeking
indemnification in connection with a proceeding (or part thereof) initiated by
the Indemnitee unless the initiation thereof was approved by the Board of
Directors of the Corporation.
2. Actions or Suits by or in the Right of the Corporation. The
------------------------------------------------------
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware or such other court shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding
------------------------------------------------
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
---- ----------
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
-3-
<PAGE>
4. Notification and Defense of Claim. As a condition precedent to his
---------------------------------
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below, in
-------------------
the event that the Corporation does not assume the defense pursuant to Section 4
of this Article of any action, suit, proceeding or investigation of which the
Corporation receives notice under this Article, any expenses (including
attorneys' fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid
by the Corporation in advance of the final disposition of such matter; provided,
--------
however, that the payment of such expenses incurred by an Indemnitee in advance
- -------
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such undertaking may be accepted without reference to the financial ability of
such person to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or
-----------------------------
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect
-4-
<PAGE>
to requests under Section 1, 2 or 5 the Corporation determines within such 60-
day period that the Indemnitee did not meet the applicable standard of conduct
set forth in Section 1 or 2, as the case may be. Such determination shall be
made in each instance by (a) a majority vote of a quorum of the directors of the
Corporation consisting of persons who are not at that time parties to the
action, suit or proceeding in question ("disinterested directors"), (b) if no
such quorum is obtainable, a majority vote of a committee of two or more
disinterested directors, (c) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, (d) independent
legal counsel (who may be regular legal counsel to the Corporation), or (e) a
court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by
--------
the Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
the Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnity has not met the applicable
standard of conduct shall be a defense to the action or create a presumption
that the Indemnitee has not met the applicable standard of conduct. The
Indemnitee's expenses (including attorneys' fees) incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
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Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses
------------
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time
to time by its Board of Directors, grant indemnification rights to other
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<PAGE>
employees or agents of the Corporation or other persons serving the Corporation
and such rights may be equivalent to, or greater or less than, those set forth
in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
-----------------------
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance,
---------
at its expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss 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
such person against such expense, liability or loss under the General
Corporation Law of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
-----------------------
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
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Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of
----------------------
Delaware is amended after adoption of this Article to expand further the
indemnification permitted to Indemnitees, then the Corporation shall indemnify
such persons to the fullest extent permitted by the General Corporation Law of
Delaware, as so amended.
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<PAGE>
ARTICLE XI
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Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
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