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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 10, 1998
MINDSPRING ENTERPRISES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-27890 58-2113290
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1430 WEST PEACHTREE ST., SUITE 400, ATLANTA, GA 30309
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(Address of principal executive offices)
Registrant's telephone number, including area code: (404) 815-0770
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ITEM 5. OTHER EVENTS.
On September 10, 1998, MindSpring Enterprises, Inc., a Delaware
corporation (the "Company"), entered into an Asset Purchase Agreement (the
"Asset Purchase Agreement") with Spry, Inc., a Washington corporation ("Spry")
and America Online, Inc., a Delaware corporation ("AOL"), pursuant to which the
Company agreed to acquire certain of the tangible and intangible assets and
rights in connection with the consumer dial-up Internet access business
currently operated by Spry in the United States (the "Business"), including (i)
approximately 180,000 of Spry's subscriber contracts relating to the Business;
(ii) leases for a customer support facility and a network operations facility
located in Seattle, Washington; (iii) certain contracts with original equipment
manufacturers; (iv) the trademarks, service marks, registrations, and
applications for "Spry," "SpryNet" and design forms thereof; (v) certain
intellectual property of Spry used or useful in connection with the Business;
(vi) all engineering, business and other books, papers, files and records
directly related to the Business; (vii) all manufacturer's warranties with
respect to the assets being acquired, if any, to the extent assignable; and
(viii) certain other tangible assets such as computers and furniture used or
useful in connection with the Business (collectively, the "Assets"). The
Company intends to use the Assets in a manner similar to the manner in which
Spry used the Assets.
The Company agreed to purchase the Assets for an aggregate cash
purchase price equal to (a) the product of (i) Two Hundred Fifty Dollars
($250.00) and (ii) the number of Spry subscribers who successfully transition to
the Company's service after two full billing periods following the closing of
this transaction, less (b) the cost of certain obligations of Spry to be assumed
by the Company. The Company expects to pay Spry between $35 million and $45
million from cash on hand in connection with this transaction. The Company
expects the transaction to be completed later this fall, subject to certain
customary closing conditions.
The foregoing description of the Asset Purchase Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Asset Purchase Agreement, a copy of which is attached as Exhibit 2.1 and is
incorporated herein by reference. A copy of the press release, dated September
10, 1998, issued by the Company regarding the above-described transaction is
attached as Exhibit 99.1 hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
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2.1 Asset Purchase Agreement, dated as of September 10, 1998, by and
among America Online, Inc., Spry, Inc., and MindSpring Enterprises,
Inc.
99.1 Press release issued by the Company dated September 10, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MINDSPRING ENTERPRISES, INC.
/s/ Michael G. Misikoff
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Michael G. Misikoff
Vice President and Chief Financial Officer
Date: September 15, 1998
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EXHIBIT INDEX
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EXHIBIT NUMBER EXHIBIT
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2.1 Asset Purchase Agreement, dated as of September 10, 1998, by and
among America Online, Inc., Spry, Inc., and MindSpring Enterprises,
Inc.
99.1 Press release issued by the Company dated September 10, 1998.
</TABLE>
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ASSET PURCHASE AGREEMENT
BY AND AMONG
AMERICA ONLINE, INC.,
SPRY, INC.
AND
MINDSPRING ENTERPRISES, INC.
DATED AS OF
SEPTEMBER 10, 1998
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TABLE OF CONTENTS
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1. DEFINITIONS.......................................................1
2. SALE AND PURCHASE OF ASSETS; PURCHASE PRICE; ASSUMPTION OF
LIABILITIES......................................................1
2.1. Sale of Assets..............................................1
2.2. Purchase Price..............................................1
2.3. Payment of Purchase Price...................................2
2.4. Assumption of Specified Liabilities.........................4
2.5. Agreement on Disposition of Purchase Price..................4
3. ADDITIONAL UNDERTAKINGS AND COVENANTS.............................4
3.1. Consents and Approvals......................................5
3.2. Bulk Sales Laws; Transfer Taxes.............................6
3.3. Access to Seller Information................................6
3.4. Operation of Business of Seller.............................7
3.5. General.....................................................8
3.6. Notice of Developments......................................8
3.7. Exclusivity.................................................8
3.8. Confidentiality.............................................9
3.9. Publicity...................................................9
3.10. Cooperation................................................9
3.11. Transition Plan for Subscribers............................10
3.12. AOL Obligation.............................................10
3.13. Marketing to Continuing Subscribers........................10
3.14. Employees..................................................11
3.15. Miscellaneous..............................................11
3.16. Name.......................................................11
3.17. Consent Decree.............................................12
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND AOL..................12
4.1. Organization, Existence and Good Standing...................12
4.2. Power and Authority; Non-Contravention; Filings and
Consents...................................................12
4.3. Ownership of Capital Stock of Other Entities................13
4.4. Financial Information.......................................14
4.5. Subsequent Events...........................................14
4.6. Legal Proceedings...........................................15
4.7. Assets......................................................15
4.8. Contracts...................................................15
4.9. Accounts Receivable.........................................16
4.10. Taxes......................................................16
4.11. Employment Matters.........................................17
4.12. Compliance with Laws; Permits..............................18
4.13. Patents, Trademarks, Etc...................................19
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4.14. Labor Matters..............................................20
4.15. Real Property..............................................20
4.16. Employees..................................................20
5. REPRESENTATIONS AND WARRANTIES OF BUYER...........................21
5.1. Organization, Existence and Good Standing...................21
5.2. Power and Authority; Non-Contravention; Filings and
Consents...................................................21
5.3. Legal Proceedings...........................................22
5.4. Compliance with Laws........................................22
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND AOL.............23
6.1. Representations and Warranties..............................23
6.2. Performance.................................................23
6.3. Legal Proceedings...........................................23
6.4. Hart-Scott-Rodino...........................................23
6.5. Officer's Certificate.......................................23
6.6. Documents at Closing........................................24
6.7. AIM Distribution Agreement..................................24
6.8. Opinion of Buyer's Counsel..................................24
6.9. Consent Decree..............................................24
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER......................24
7.1. Representations and Warranties..............................24
7.2. Performance.................................................24
7.3. Legal Proceedings...........................................25
7.4. Material Adverse Change in Number of Subscribers............25
7.5. Subscriber Contracts........................................25
7.6. Hart-Scott-Rodino...........................................25
7.7. Officers' Certificates......................................25
7.8. Documents at Closing........................................25
7.9. AIM Distribution Agreement..................................25
7.10. Opinions of Seller's Counsel...............................25
7.11. Required Consents..........................................26
7.12. Consent Decree.............................................26
8. CLOSING...........................................................26
8.1. Closing Procedures..........................................26
8.2. Deliveries by Seller and AOL at the Closing.................26
8.3. Deliveries by Buyer at the Closing..........................27
9. SURVIVAL; INDEMNIFICATION; REMEDIES...............................27
9.1. Survival of Representations and Warranties..................27
9.2. Indemnification by Seller and AOL...........................28
9.3. Indemnification by Buyer....................................28
9.4. Conditions of Indemnification...............................29
9.4.1. Notice..............................................29
9.4.2. Counsel.............................................29
9.4.3. Right to Defend.....................................29
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9.4.4. Non-monetary Harm...................................30
9.5. Limitations on Indemnification..............................30
9.5.1. Basket Amount.......................................30
9.5.2. Cap.................................................31
9.5.3. De Minimis..........................................31
9.5.4. Recoveries..........................................31
9.6. Exclusive Remedy............................................32
10. TERMINATION......................................................32
10.1. Termination Prior to October 15, 1998......................32
10.2. Termination After Extension of Closing Date................32
10.3. Effect of Termination......................................33
11. DEFAULTS AND REMEDIES............................................33
11.1. Seller or AOL Default......................................33
11.2. Buyer Default..............................................33
12. MISCELLANEOUS....................................................34
12.1. Additional Actions and Documents...........................34
12.2. No Brokers.................................................34
12.3. Expenses...................................................34
12.4. Assignment.................................................35
12.5. Entire Agreement; Amendment................................35
12.6. Waiver.....................................................35
12.7. Severability...............................................35
12.8. Governing Law..............................................36
12.9. Notices....................................................36
12.10. Headings..................................................37
12.11. Interpretation; Absence of Presumption....................37
12.12. Execution in Counterparts.................................37
12.13. Limitation on Benefits....................................38
12.14. Binding Effect............................................38
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as
of September 10, 1998 by and among America Online, Inc., a Delaware corporation
("AOL"), Spry, Inc., a Washington corporation and a wholly-owned subsidiary of
AOL ("Seller"), and MindSpring Enterprises, Inc., a Delaware corporation
("Buyer").
WHEREAS, Seller owns, holds, and uses certain tangible and
intangible assets and rights in connection with the consumer dial-up Internet
access business currently operated by Seller in the United States (the
"Business"); and
WHEREAS, Buyer desires to purchase the Assets (as defined in Exhibit
A) from Seller, and Seller desires to sell the Assets to Buyer, all in
accordance with and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. DEFINITIONS
Unless the context otherwise specifies or requires, capitalized
terms used herein without definition shall have the respective meanings assigned
thereto in Exhibit A for all purposes of this Agreement (such definitions to be
equally applicable to both the singular and plural forms of the terms defined).
Unless otherwise specified, all references herein to "Sections" are to Sections
of this Agreement.
2. SALE AND PURCHASE OF ASSETS; PURCHASE PRICE; ASSUMPTION OF
LIABILITIES
2.1. SALE OF ASSETS
In reliance upon the representations, warranties, covenants and
agreements contained herein, and subject to the terms and conditions hereof,
Seller agrees to sell, assign, transfer, convey and deliver to Buyer, and Buyer
agrees to purchase from Seller, the Assets at the Closing.
2.2. PURCHASE PRICE
For and in consideration of the conveyances and assignments described in
SECTION 2.1 and in addition to the assumption of liabilities as set forth in
SECTION 2.4, Buyer agrees to pay to Seller, and Seller agrees to accept from
Buyer, an aggregate purchase price (the "Purchase Price") equal to (a) the
number of U.S. dollars resulting from the product of (i) two hundred fifty (250)
and (ii) the number of Continuing Subscribers (but in no event shall the number
of Continuing Subscribers be deemed to exceed 225,000), less (b) the sum
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of (i) the aggregate cost of the obligations assumed by Buyer with respect to
the Employee Retention Plan (the "Employee Retention Plan Amount") and (ii) the
Transition Payment. The Purchase Price shall be payable as described in SECTION
2.3.
2.3. PAYMENT OF PURCHASE PRICE
The Purchase Price shall be payable to Seller as follows:
(a) Buyer shall deliver to Seller the amount of Twenty-five Million
Dollars ($25,000,000.00) in immediately available funds at the Closing (the
"First Payment");
(b) Buyer shall deliver to Seller the balance of the Purchase Price
calculated as of the First Measurement Date pursuant to SECTION 2.3(d), if any,
in immediately available funds, not more than 15 days following the First
Measurement Date; and
(c) Buyer shall deliver to Seller the balance of the Purchase Price
calculated as of the Second Measurement Date pursuant to SECTION 2.3(e), if any,
in immediately available funds, not more than 15 days following the Second
Measurement Date.
(d) Not more than 15 days after the First Measurement Date, Buyer
shall deliver to Seller (i) a list of Continuing Subscribers as of the First
Measurement Date and a list of Closing Subscribers (other than Trial
Subscribers) which are not Continuing Subscribers as of the First Measurement
Date (including the reason therefore and the date of their deactivation), (ii) a
final calculation of the Employee Retention Plan Amount, (iii) a final
calculation of the Transition Payment, and (iv) a calculation (the "Initial
Purchase Price Calculation") of the Purchase Price as of the First Measurement
Date (the "Initial Purchase Price"), determined in accordance with the
provisions of SECTION 2.2. If the Initial Purchase Price (as set forth in the
Initial Purchase Price Calculation) is in excess of $25,000,000, Buyer shall pay
to Seller concurrently with the delivery of the Initial Purchase Price
Calculation the difference between the Initial Purchase Price and $25,000,000 by
wire transfer of immediately available funds. If the Initial Purchase Price (as
set forth in the Initial Purchase Price Calculation) is less than $25,000,000,
Seller shall remit to Buyer within 15 days following the delivery to Seller of
the Initial Purchase Price Calculation the difference between $25,000,000 and
the Initial Purchase Price, provided, however, that the amount to be remitted by
Seller pursuant to this sentence shall not exceed the sum of (i) the Employee
Retention Plan Amount and (ii) the Transition Payment.
(e) Not more than 15 days after the Second Measurement Date, Buyer
shall deliver to Seller (i) a final list of Continuing Subscribers and a final
list of Closing Subscribers which are not Continuing Subscribers as of the
Second Measurement Date (including the reason therefore and the date of their
deactivation) and (ii) a calculation (the "Final Purchase Price Calculation") of
the Purchase Price as of the Second Measurement Date (the "Final Purchase
Price"), determined in accordance with the provisions of
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SECTION 2.2. If the Final Purchase Price (as set forth in the Final Purchase
Price Calculation) is in excess of the Initial Purchase Price (as set forth in
the Initial Purchase Price Calculation), Buyer shall pay to Seller concurrently
with the delivery of the Final Purchase Price Calculation the difference between
the Final Purchase Price and the Initial Purchase Price by wire transfer of
immediately available funds.
(f) At any time during the 15 business day period following the
delivery to Seller of either the Initial Purchase Price Calculation or the Final
Purchase Price Calculation (each a "Purchase Price Calculation"), Seller shall
have the right to object to the calculation of the Purchase Price as of such
time (including the right to object following delivery of the Initial Purchase
Price Calculation to the calculation of Continuing Subscribers, the Employee
Retention Plan Amount and the Transition Payment). As promptly as practicable,
but in no event later than the fifteenth business day after the delivery to
Seller of a Purchase Price Calculation, Seller shall either inform Buyer in
writing that the Purchase Price Calculation is acceptable, or object to the
Purchase Price Calculation by delivering to Buyer a written statement setting
forth a description of Seller's objections to the Purchase Price Calculation
(the "Statement of Objections"). If no acceptance or Statement of Objections is
received by Buyer within such 15 business day period, the Purchase Price
Calculation shall be conclusively deemed correct and binding on both Seller and
Buyer. If Buyer does not notify Seller within 15 business days of receipt of the
Statement of Objections that it challenges the Statement of Objections, it shall
be deemed to have determined that the Statement of Objections is correct, and
Buyer shall make the appropriate adjustments and deliver the balance of the
Purchase Price as of such time to Seller, or Seller shall remit the revised
amount to Buyer, as the case may be, according to the revised calculation of the
Purchase Price as set forth in the Statement of Objections. Such payment shall
be made by Buyer or Seller by wire transfer of immediately available funds to
the other party within five business days thereafter. If Buyer objects to the
Statement of Objections within fifteen business days of its receipt, and if the
parties are unable to finally resolve such dispute and agree upon the final
calculation of the Purchase Price as of such time within an additional 10
business day period, then either Buyer or Seller may immediately request that
the dispute regarding the Statement of Objections be resolved by the Umpire as
provided in SECTION 2.3(g). Any determination reached or award granted by the
Umpire pursuant to SECTION 2.3(g) shall be final and binding on the parties and
any payment resulting therefrom shall be made as so determined within 5 business
days of the date of such award. The judgment upon the award rendered by the
Umpire may be entered in any court having jurisdiction. The Initial Purchase
Price Calculation shall be conclusively determined upon completion of the
procedures set forth in this SECTION 2.3(f) with respect to the period following
delivery of the Initial Purchase Price Calculation and neither party may
challenge such determination (or the elements thereof) as part of a challenge to
the Final Purchase Price Calculation.
(g) The Umpire shall be a firm of "Big 5" US certified public
accountants or its successor who is not the regular outside auditor of any of
the parties to this Agreement and who shall be appointed by agreement between
the parties within 14 days after a request by Buyer or Seller to refer the
Statement of Objections to an Umpire pursuant to SECTION 2.3(f) or, failing such
agreement, upon the application of either party to any judge of the Fairfax
County, Virginia Circuit Court. The Umpire shall act as an
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expert and not as an arbitrator, and the decision of the Umpire as to any
dispute regarding the Statement of Objections shall be final and binding among
the parties. Buyer and Seller each hereby agree and undertake that if any
disagreement or dispute under this Agreement is referred to the Umpire:
(i) it will use all reasonable best efforts to co-operate with
the Umpire in resolving such disagreement or dispute, and for that purpose will
promptly provide to the Umpire all such information and documentation as the
Umpire may reasonably require; and
(ii) the fees of the Umpire (and any professional fees
incurred by it) shall be borne as to half by the Buyer and as to half by the
Seller provided that if either fails to pay its share of any such fee within
five (5) business days of the relative invoice being rendered the other shall be
entitled to pay the full amount of the fee and thereupon to recover one half
thereof from the first-mentioned party as a debt due and payable on demand.
2.4. ASSUMPTION OF SPECIFIED LIABILITIES
At the Closing, Buyer agrees to assume, pay, perform, discharge and
otherwise be solely responsible for the Assumed Liabilities. Except for the
Assumed Liabilities expressly assumed by Buyer pursuant to this SECTION 2.4,
Buyer shall assume no liabilities or obligations of Seller and shall have no
responsibility for any liabilities or obligations of any kind or description of
Seller, whether connected with the Business, the Assets or otherwise. The
foregoing provisions of this SECTION 2.4 shall in no way affect Buyer's other
obligations under this Agreement.
2.5. AGREEMENT ON DISPOSITION OF PURCHASE PRICE
Seller hereby agrees that the amount of the Purchase Price and the
manner in which it is to be paid (as set forth in this SECTION 2) as well as
Buyer's assumption of the Assumed Liabilities constitute adequate and sufficient
consideration for the sale to Buyer of all interests held by Seller in and to
the Assets and for the performance by Seller of all of its covenants and
agreements hereunder. Buyer and Seller agree to allocate the Purchase Price (and
all other capitalized costs) among the Assets (including for financial
accounting and tax purposes) in accordance with an allocation schedule to be
agreed upon prior to Closing.
3. ADDITIONAL UNDERTAKINGS AND COVENANTS
Buyer, on the one hand, and Seller and/or AOL, as the case may be,
on the other hand, hereby covenant and agree with each other as follows:
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3.1. CONSENTS AND APPROVALS
(a) Buyer and Seller shall use their commercially reasonable efforts
to secure such consents, authorizations and approvals of all Governmental
Entities and private individuals or entities with respect to the transactions
contemplated by this Agreement, and to the performance of all other obligations
of such parties hereunder, as may be required by any applicable statute or
regulation of the United States or any country, state or other jurisdiction or
by any agreement of any kind whatsoever to which Buyer or Seller is a party or
by which Buyer or Seller is bound, including, but not limited to, those consents
set forth on SCHEDULES 4.2(a), 4.2(b), 4.8(c), 5.2(a) AND 5.2(b). Subject to
SECTION 3.1(d), each party shall be responsible for any expenses incurred
relating to obtaining such consents, authorizations and approvals for which such
party bears the responsibility of obtaining.
(b) Notwithstanding anything else in this Agreement to the contrary
(except as provided in the last sentence of this paragraph), this Agreement
shall not constitute an agreement to assign or transfer any Asset or part
thereof or any rights or benefit arising thereunder or resulting therefrom if an
attempted assignment or transfer thereof, without the consent of a third party
thereto, would constitute a breach thereof, or make Buyer or Seller liable for
damages or other penalties. If such consent is not obtained prior to Closing, or
if an attempted assignment thereof would be ineffective or would affect the
rights of Buyer or Seller so that Buyer would not in fact receive substantially
all such rights, at Seller's cost and expense, Seller (i) shall continue to use
its commercially reasonable efforts to obtain such consent for a period of one
year after the Closing and (ii) if any such consent is unobtainable, shall
cooperate with Buyer in a mutually agreed-upon arrangement under which Buyer
would obtain the benefits and assume the obligations thereunder, or under which
Seller would enforce for the benefit of Buyer, with Buyer assuming Seller's
obligations, any and all rights of Seller against a third party thereto. To the
extent the benefits therefrom have been provided to Buyer by alternative
arrangements as provided above or a consent is obtained in such one-year period,
the contract, agreement or other asset shall be deemed to be an Asset
transferred to Buyer under the Agreement with respect to which Buyer assumes the
Assumed Liabilities in accordance with the terms of this Agreement. Buyer and
Seller acknowledge that the Subscriber Contracts to be transferred to Buyer
pursuant to the terms of this Agreement are assignable by Seller without the
consent of the Closing Subscribers.
(c) Buyer and Seller shall (i) cooperate in the filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to applicable statutes, rules, regulations or orders of any
Governmental Entities in connection with the transactions contemplated by this
Agreement and (ii) use their respective good faith efforts to cause any
applicable waiting periods thereunder to expire and any objections to the
transactions contemplated hereby to be withdrawn before the Closing.
(d) In addition to the obligations set forth in SECTION 3.1(c), as
promptly as practicable, and in any event no later than fifteen (15) days
following the execution of this Agreement, Buyer and Seller shall complete any
filing that may be required pursuant to Hart-Scott-Rodino, or shall mutually
agree that no such filing is required. Buyer and
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Seller shall diligently take (or fully cooperate in the taking of) all actions,
and provide any additional information, required or reasonably requested in
order to comply with the filing requirements of Hart-Scott-Rodino. Each of Buyer
and Seller shall pay one-half of the Hart-Scott-Rodino filing fee, if
applicable.
3.2. BULK SALES LAWS; TRANSFER TAXES
(a) Buyer and Seller agree to waive compliance with all bulk
transfer laws that may be applicable to this transaction.
(b) All transfer, documentary, sales, use, stamp, registration and
other Taxes and fees (including any penalties and interest) incurred in
connection with the transfer of the Assets shall be paid by the party obligated
to pay such taxes pursuant to applicable Laws.
3.3. ACCESS TO SELLER INFORMATION
(a) Seller shall, from the date hereof through the Closing Date,
provide to Buyer and its representatives reasonable access, in the presence of
Seller's or AOL's officers or their designees, to all premises, properties,
officers, directors, consultants, contractors, books, records (including,
without limitation, tax returns, tax records and correspondence with
accountants), contracts and documents pertaining to Seller as Buyer deems
reasonably necessary (the "Due Diligence"), and Buyer and its representatives
shall have the right to copy such books, records, contracts and documents at
Buyer's expense. Seller shall cooperate fully with Buyer and its representatives
in permitting reasonable access to Seller to conduct the Due Diligence. Such
access shall be during normal business hours and in such manner as will not
disrupt the normal operations of the Business, after the giving of reasonable
advance notice to Seller. Seller will furnish to Buyer and its representatives
such financial and operating data and other information with respect to the
businesses and assets of Seller as Buyer may reasonably request, including,
without limitation, financial statements, books and records and agreements with
clients, customers, vendors, lessors, licensors and suppliers of Seller.
(b) Buyer hereby agrees that to the extent that any representation
or warranty of Seller made herein is, to the Knowledge of Buyer acquired prior
to Closing, untrue or incorrect, Buyer's sole recourse against Seller as a
result thereof shall be to terminate this Agreement by written notice to Seller
(except in the event that such untruth or inaccuracy was made knowingly by
Seller), and provided that this provision shall in no way modify Buyer's rights
pursuant to SECTION 7.1 hereof or limit Buyer's rights with respect to any
representation or warranty which Buyer first discovers is untrue or incorrect
following Closing. Buyer agrees that to the extent that any representation or
warranty of Seller made herein is, to the Knowledge of Buyer acquired prior to
Closing, untrue or incorrect, Buyer shall inform Seller of such untruth or
inaccuracy within a reasonable time after Buyer obtains Knowledge of such
untruth or inaccuracy, provided Seller shall have no recourse against Buyer as a
result of Buyer's failure to notify Seller of such untruth or inaccuracy (unless
such failure is a result of Buyer's gross negligence or willful misconduct) and
provided further that such failure to notify Seller shall in no way affect the
obligations of Seller or AOL or the rights of Buyer under this Agreement (except
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as provided above). Buyer's investigation of the financial and operating data,
the Business, the Assets and other information with respect to Seller shall in
no way affect the obligations of Seller or AOL or the rights of Buyer with
respect to the agreements, representations, warranties, covenants and
indemnification provisions of Seller or AOL set forth in this Agreement.
3.4. OPERATION OF BUSINESS OF SELLER
(a) Seller shall, through the Closing Date, use its commercially
reasonable efforts to preserve its business organization, including, without
limitation, all licenses, permits or other Governmental Authorizations necessary
or useful to conduct its business, and its present relationships with customers,
suppliers, consultants, employees and any other persons having business
relations with Seller, in each case taking into account the existence and
announcement of the transactions referred to herein.
(b) Except as contemplated by this Agreement or with the prior
written consent of Buyer, or as reasonably required to carry out its obligations
hereunder, Seller shall, through the Closing Date, conduct the Business only in
the Ordinary Course of Business and, in addition, shall not: (i) make any
capital expenditures, or enter into any commitment therefor, aggregating more
than $100,000, provided, however, if the Closing Date is extended beyond October
15, 1998 pursuant to the terms of SECTION 8.1, this amount shall be increased by
$100,000 for each month that the Closing Date is extended; (ii) except in the
Ordinary Course of Business, grant any general or uniform increase in the rates
of pay of employees or any increase in compensation payable or to become payable
by Seller to any director, officer, employee, consultant or agent of Seller, or
by means of any bonus or pension plan, or similar contract or agreement,
increase the compensation of any director, officer or employee; (iii) except in
the Ordinary Course of Business, borrow or agree to borrow any funds, or
directly or indirectly guarantee or agree to guarantee the obligations of
others; (iv) enter into any agreement which may, insofar as can be reasonably
foreseen, have a Material Adverse Effect on the Business; (v) place, or allow to
be placed, an Encumbrance on any of the Assets; (vi) without the prior written
consent of Buyer, which consent shall not be unreasonably withheld, sell,
assign, transfer or encumber any Intellectual Property, provided, however,
Seller is permitted to assign Intellectual Property in the Ordinary Course of
Business that is not, individually or in the aggregate, material to the
Business; (vii) except in the Ordinary Course of Business, assign, transfer,
sell or otherwise dispose of any interest in any Asset; or (viii) commit any act
or omit to do any act, or engage in any activity or transaction or incur any
obligation (by conduct or otherwise), which would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Business. Prior to the Closing Date, Seller will maintain the Assets in
accordance with SECTION 4.7.
(c) Seller shall notify Buyer promptly of any Material Adverse
Change in the Business, the Assets or the operations, financial condition or
liabilities of Seller, including, without limitation, information (including,
without limitation, copies of all documents relating thereto) concerning all
claims instituted, threatened or asserted against or affecting Seller, the
Business or the Assets at law or in equity, before or by any court or
governmental authority.
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(d) Until the Closing, Seller shall keep proper books of record and
account in which true and complete entries will be made of all transactions in
accordance with GAAP applied on a basis consistent with prior periods, and shall
supply to Buyer monthly unaudited balance sheets and statements of income of
Seller, prepared in compliance with SECTION 4.4, as soon as practicable after
the end of each month, and such other documents (financial or otherwise) as
Buyer shall reasonably request.
3.5. GENERAL
Each of the parties hereto will use its reasonable best efforts to
take all actions and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in SECTIONS 6
and 7).
3.6. NOTICE OF DEVELOPMENTS
Upon learning thereof, each party hereto will give prompt written
notice to the others of any adverse development causing a breach of any of such
party's own representations and warranties or of any material development
affecting the ability of any party hereto to consummate the transactions
contemplated hereby and carry out its obligations hereunder. No disclosure by
any party hereto pursuant to this SECTION 3.6 shall be deemed to amend or
supplement any disclosure schedule to this Agreement or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant by such party
hereto, except in the case of termination, where the party terminating the
Agreement for any such misrepresentation or breach by the other party shall have
no further recourse against such party (except in the event such
misrepresentation was made knowingly or such breach was done willfully).
3.7. EXCLUSIVITY
(a) Seller and AOL agree that from the date of the execution of this
Agreement through the Closing, or the earlier termination of this Agreement in
accordance with its terms, neither Seller, AOL nor Seller's or AOL's officers,
directors, affiliates, agents or representatives will, directly or indirectly:
(i) submit, solicit, initiate or discuss with third parties any
proposal or offer from any person or entity relating to any (1) reorganization,
dissolution or recapitalization of Seller, (2) merger or consolidation involving
Seller, (3) sale of the stock of Seller, or (4) sale of any assets of Seller
outside the Ordinary Course of Business (the transactions in the foregoing
clauses are collectively referred to as a "Seller Transaction"); or
(ii) furnish any information with respect to, assist or
participate in, or facilitate in any other manner a Seller Transaction or any
effort or attempt by any person or entity to seek a Seller Transaction.
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(b) Seller and AOL will terminate all discussions with any
third-party regarding a Seller Transaction and will notify the Buyer immediately
if any person or entity makes any proposal or offer with respect to a Seller
Transaction. Seller or AOL may respond to inquiries from other prospective
purchasers, but (A) only to the extent that Seller or AOL informs such
prospective purchasers that Seller is under contract for sale, and (B) Seller
and AOL cannot provide (and will not provide) any other information to such
prospective purchasers.
(c) Seller and AOL represent and warrant that neither Seller, AOL
nor any of Seller's or AOL's officers, directors, affiliates, agents, or
representatives has entered into any executory agreements or accepted any
commitments concerning any Seller Transaction.
3.8. CONFIDENTIALITY
AOL and Buyer acknowledge and confirm that they have entered into a
Confidentiality Agreement dated January 16, 1998 by and between AOL and Buyer
(the "Confidentiality Agreement") and that the Confidentiality Agreement shall
remain in full force and effect in accordance with its terms, notwithstanding
the parties hereto entering into this Agreement and whether or not the
transactions contemplated by this Agreement are consummated or terminated.
3.9. PUBLICITY
Buyer, Seller and AOL shall consult with each other before issuing
any press release or other public statement with respect to the transactions
contemplated by this Agreement, and shall not issue any such press release or
make any public statement prior to such consultation except as may be required
by applicable law or requirements of the Securities Exchange Act of 1934, as
amended, as advised by counsel, in which case the parties shall use their
reasonable best efforts to consult with each other prior to issuing such a
release or making such a statement. As the initial public announcement of the
transactions contemplated hereby, Buyer, Seller and AOL shall issue a press
release or press releases, mutually acceptable to them, promptly upon execution
and delivery of this Agreement.
3.10. COOPERATION
Subject to the terms and conditions hereof, prior to the Closing the
parties hereto will not take any action which reasonably could be expected to
render any representation or warranty or covenant contained in this Agreement
untrue or incorrect in any material respect (except to the extent a
representation or warranty or covenant is qualified by materiality, in which
case the parties hereto will refrain from taking any action that would render
such representation or warranty or covenant untrue or incorrect in any respect)
as of the Closing.
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3.11. TRANSITION PLAN FOR SUBSCRIBERS
Buyer shall use its reasonable best efforts in accordance with the
terms of the Transition Plan attached hereto as Exhibit B to achieve the
objective that all Closing Subscribers become Continuing Subscribers.
3.12. AOL OBLIGATION
AOL shall authorize and instruct Seller to satisfy Seller's
obligations, covenants and responsibilities hereunder and AOL shall not rescind
or undermine such instruction or take any action that might impede Seller's
satisfaction of such obligations, covenants and responsibilities.
3.13. MARKETING TO CONTINUING SUBSCRIBERS
Seller and AOL shall not, from the date hereof through the First
Measurement Date (and with respect to the Trial Subscribers, through the Second
Measurement Date), employ any marketing scheme or advertising program targeted
specifically at any individual who is a Subscriber at any time from the date
hereof through the Closing Date and designed to encourage any such Subscriber to
use a product or service that competes with any product or service offered by
Buyer. Seller and AOL shall not, from the First Measurement Date through the
first anniversary of the Closing Date, employ any marketing scheme or
advertising program targeted specifically at the Continuing Subscribers and
designed to encourage any Continuing Subscriber to use a product or service that
competes with any product or service offered by Buyer. The foregoing shall not
prohibit any general solicitation by Seller or AOL that is not specifically
targeted at the individuals who are Subscribers at any time from the date hereof
through the Closing Date or the Continuing Subscribers, as the case may be;
provided, however, that AOL will not use any lists of Subscribers or other
customer information obtained from Seller, and Seller will not use any lists of
Subscribers or other customer information of Seller, to market to such
Subscribers prior to the First Measurement Date (or with respect to the Trial
Subscribers, prior to the Second Measurement Date) or Continuing Subscribers
from the First Measurement Date through the first anniversary of the Closing
Date, and, following the Closing Date, AOL and Seller agree to purge their
marketing databases of information obtained from Seller relating to Continuing
Subscribers.
Buyer shall not, from the date hereof through the Closing Date,
employ any marketing scheme or advertising program targeted specifically at any
individual who is a Subscriber at any time from the date hereof through the
Closing Date and designed to encourage any such Subscriber to use a product or
service that competes with any product or service offered by Seller or AOL. From
the Closing Date through the First Measurement Date (and with respect to the
Trial Subscribers, through the Second Measurement Date), Buyer's marketing
schemes and advertising programs targeted specifically at any Closing
Subscribers shall be consistent with the Transition Plan and SECTION 3.11
hereof. Buyer shall not, from the First Measurement Date (or with respect to the
Trial Subscribers, from the Second Measurement Date) through the first
anniversary of the Closing Date, employ any marketing scheme or advertising
program targeted specifically at the Closing
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Subscribers who fail to become Continuing Subscribers and designed to encourage
any such Subscriber to use a product or service that competes with any product
or service offered by Seller or AOL. The foregoing shall not prohibit any
general solicitation by Buyer that is not specifically targeted at the
individuals who were Closing Subscribers; provided, however, that Buyer will not
use any lists of Subscribers or other customer information obtained from Seller
to market to such non-Continuing Subscribers and, following the Second
Measurement Date, Buyer agrees to purge its marketing databases of information
relating to those Closing Subscribers who fail to become Continuing Subscribers.
3.14. EMPLOYEES
Buyer may make offers of employment effective following the Closing
to any employees of Seller employed with respect to the Business, and Seller
shall use its reasonable best efforts to encourage such employees to accept any
such offers of employment. Seller shall notify Buyer within a reasonable period
of time if any such employee of Seller ceases to be employed by Seller prior to
the Closing or if any such employee advises Seller, orally or in writing after
the date hereof and before the Closing, that he or she intends to terminate his
or her employment with Seller or to refuse employment by Buyer after the
Closing. In the event that Buyer fails to (i) make offers of employment to at
least 105 of the full-time active employees of Seller set forth on SCHEDULE 3.14
on substantially the same terms as each is currently employed by Seller and (ii)
employ such individuals for at least the minimum period required by the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. 2101, et seq. (1988) (the
"WARN Act"), Buyer shall assume any responsibilities to employees of Seller
arising out of the WARN Act and agrees to indemnify Seller from any liabilities
arising under the WARN Act as a result of a breach of the covenants contained in
this sentence.
3.15. MISCELLANEOUS
Prior to Closing:
(a) Seller shall not initiate or conduct any line of business that
is different than the Business without providing prior written notice of such
proposed action to Buyer; and
(b) Seller shall not make any change in any method of accounting
practice.
3.16. NAME
As of Closing, Seller shall change its corporate name to a name
dissimilar to its current name, which name shall not include the word "Spry,"
and thereafter shall cause its name to remain changed.
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3.17. CONSENT DECREE
To the extent that the Decision and Order dated March 16, 1998,
Docket No. C-3789, of the United States Federal Trade Commission, in the matter
styled "CompuServe, Inc., a corporation" (the "Consent Decree"), shall be deemed
to apply to Buyer, or its successors and assigns (or their respective officers,
directors, agents, servants, divisions and employees) as a result of the
transactions contemplated by this Agreement, Buyer hereby agrees to comply with
the terms of the Consent Decree. Seller and AOL also hereby agree to comply with
the terms of the Consent Decree to the extent failure to comply has or may
result in any liability to Buyer or its successors or assigns as a result of the
transactions contemplated hereby. In no event shall the provisions of this
SECTION 3.17 be deemed an acknowledgment by Buyer that the Consent Decree
applies to it or to its successors and assigns (or their respective officers,
directors, agents, servants, divisions and employees).
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND AOL
Seller and AOL, jointly and severally, represent and warrant to
Buyer as follows; provided, however, that with respect to AOL, the
representations and warranties set forth in SECTIONS 4.1 and 4.2 shall, insofar
as they relate to events occurring, or circumstances existing, with respect to
Seller prior to February 1, 1998, be deemed given to AOL's Knowledge:
4.1. ORGANIZATION, EXISTENCE AND GOOD STANDING
AOL is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington. Seller has all necessary corporate power and authority to own, lease
and operate the Assets and its properties and to conduct the Business as
currently conducted. Seller is duly qualified to do business as a foreign
corporation and, to the extent such concept is applicable in such jurisdictions,
is in good standing in each jurisdiction in which the properties owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so duly qualified and in
good standing would not have a Material Adverse Effect on the Assets or Seller's
ability to consummate the transactions contemplated hereby. AOL and Seller have
made available to Buyer complete and correct copies of their respective
certificates of incorporation (or equivalent charter document) and bylaws, in
each case as amended as of the date of this Agreement.
4.2. POWER AND AUTHORITY; NON-CONTRAVENTION; FILINGS AND CONSENTS
(a) Each of Seller and AOL has full corporate power and authority to
execute, deliver and perform its obligations under this Agreement and all other
agreements and documents executed and delivered, or to be executed and
delivered, by it pursuant to this Agreement. Each of Seller and AOL has taken
all actions required by Law, its respective certificates of incorporation (or
other equivalent charter document) and bylaws, or otherwise to duly and validly
authorize the execution, delivery and performance of this
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Agreement and all other agreements and documents executed and delivered, or to
be executed and delivered, by it pursuant to this Agreement and the consummation
of the transactions contemplated hereby and thereby, and the approval of the
stockholders of AOL is not required in connection therewith. The execution,
delivery and performance by Seller and AOL of this Agreement and all other
agreements and documents executed and delivered, or to be executed and
delivered, by it pursuant to this Agreement do not, and the consummation of the
transactions contemplated by this Agreement by Seller and AOL will not (assuming
receipt of the consents and waivers listed on SCHEDULE 4.2(a) prior to Closing),
(i) conflict with or violate any provisions of their respective certificates of
incorporation (or other equivalent charter document) or bylaws, (ii) constitute
a breach of or default under or result in the creation of any lien, charge or
other Encumbrance or Tax on or against any of the Assets or give rise, with or
without notice or lapse of time, to any third-party right of termination,
cancellation, material modification or acceleration under any note, bond,
mortgage, pledge, lien, lease, agreement, license, commitment or instrument
applicable to Seller or to which Seller is a party or by which Seller is bound,
which breach, default, lien, charge, Encumbrance, Tax, termination,
cancellation, modification or acceleration would have a Material Adverse Effect
on the Assets or which would prevent or materially delay the consummation of the
transactions contemplated by this Agreement or otherwise prevent either Seller
or AOL from performing their respective obligations hereunder in any material
respect, or (iii) violate or conflict with any Law, order, writ, judgment,
award, statute or rule of any Governmental Entity or arbitrator, or NASDAQ or
NYSE, which, if violated or accelerated, would have a Material Adverse Effect on
the Assets or which would prevent or materially delay the consummation of the
transactions contemplated by this Agreement or otherwise prevent either Seller
or AOL from performing their respective obligations hereunder in any material
respect. The execution and delivery of this Agreement have been approved by the
Board of Directors of each of Seller and AOL. This Agreement has been duly
executed and delivered by each of Seller and AOL and, assuming this Agreement
constitutes a valid and binding obligation of Buyer, enforceable against it in
accordance with its terms, constitutes a valid and binding obligation of each of
Seller and AOL, enforceable against each of Seller and AOL in accordance with
its terms.
(b) Except as set forth on SCHEDULE 4.2(b), no consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained, made or filed by Seller or AOL
in connection with the execution, delivery and performance of this Agreement by
Seller and AOL or the consummation by Seller and AOL of the transactions
contemplated by this Agreement.
4.3. OWNERSHIP OF CAPITAL STOCK OF OTHER ENTITIES
Except as set forth on SCHEDULE 4.3, Seller does not own,
beneficially or otherwise, any shares of capital stock or other securities of,
or any direct or indirect interest of any nature in, any other corporation,
partnership, limited liability company, joint venture or other entity.
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4.4. FINANCIAL INFORMATION
Attached hereto as SCHEDULE 4.4 are true and complete copies of the
unaudited balance sheet of Seller as of July 31, 1998 (the "Seller Balance
Sheet") and the related unaudited statements of income and cash flows (or the
equivalent) for the period ended July 31, 1998 (together with the Seller Balance
Sheet, the "Seller Financial Statements"). To the Knowledge of Seller and AOL,
the Seller Financial Statements (including in all cases the notes thereto, if
any) present fairly in all material respects the financial position, results of
operations and cash flows of Seller as of the times and for the periods referred
to therein, and such Seller Financial Statements (including all reserves
included therein) have been prepared in accordance with GAAP, consistently
applied.
4.5. SUBSEQUENT EVENTS
Except as set forth on SCHEDULE 4.5 or as otherwise contemplated
hereunder, Seller has not since the date of the Seller Balance Sheet to the date
hereof:
(a) Suffered any Material Adverse Effect;
(b) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) other than liabilities incurred since the date
of the Seller Balance Sheet in the Ordinary Course of Business, the incurrence
of which would not have a Material Adverse Effect on Seller;
(c) Increased or established any reserve for Taxes or any other
liability on its books or otherwise provided therefor which, if paid in full,
would have a Material Adverse Effect on Seller;
(d) Mortgaged, pledged or subjected to any other Encumbrance, any of
the Assets;
(e) Sold or transferred any of the assets of Seller, including any
Intellectual Property, other than in the Ordinary Course of Business, or
canceled any debts or claims or waived any rights material to Seller;
(f) Granted any general or uniform increase in the rates of pay of
employees or any increase in compensation payable or to become payable by Seller
to any director, officer or employee, consultant or agent of Seller other than
increases in the Ordinary Course of Business, or by means of any bonus or
pension plan, or similar contract or agreement, increased the compensation of
any director, officer or employee other than increases in the Ordinary Course of
Business;
(g) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the Ordinary Course of Business or as expressly permitted under
other provisions hereof;
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(h) Adopted a plan of complete or partial liquidation, dissolution,
merger, consolidation, share exchange, restructuring, recapitalization or other
reorganization of Seller;
(i) Changed in any material respect Seller's Tax or accounting
methods, principles or practices (including any changes in depreciation or
amortization policies or rates or any changes in any assumptions underlying any
method of calculating reserves), other than as required by a change in GAAP or
other applicable law; or
(j) Entered into any agreement, contract, commitment or arrangement
to take any of the actions contemplated in the foregoing clauses (a) through
(i), or authorized, recommended, proposed or announced an intention to take any
such action.
4.6. LEGAL PROCEEDINGS
Except as set forth on SCHEDULE 4.6, there is no action, suit,
claim, demand, proceeding or investigation pending or, to the best of Seller's
or AOL's Knowledge, threatened against Seller or AOL which, if resolved
adversely to Seller or AOL, would have a Material Adverse Effect on the Assets
or which could prevent or materially delay the consummation of the transactions
contemplated by this Agreement. There are no material judgments, decrees,
injunctions or orders of any Governmental Entity or arbitrator against or
binding upon Seller that would have a Material Adverse Effect on the Assets or
which could prevent or materially delay the consummation of the transaction
contemplated hereby.
4.7. ASSETS
To the Knowledge of Seller and AOL, Seller has good and valid title
to the Assets, free and clear of all Encumbrances, except as set forth on
SCHEDULE 4.7. The Assets are suitable and adequate for the uses for which they
are intended or are being used.
4.8. CONTRACTS
(a) Seller and AOL have made available to Buyer true and complete
copies of all outstanding contracts (including all contracts with Subscribers as
of the date hereof and OEM Contracts), intellectual property licenses, leases,
agreements and arrangements which are material to Seller and the Business.
Except as otherwise disclosed on SCHEDULE 4.8(a), all of the contracts, leases,
intellectual property licenses, agreements and arrangements to be assigned by
Seller hereunder are valid, binding and enforceable in accordance with their
terms (assuming the other parties thereto are bound, as to which neither Seller
nor AOL has any reasonable basis to believe otherwise) and in full force and
effect, except, insofar as can be reasonably foreseen, where any such invalidity
or failure to be binding, enforceable or in full force and effect would not have
a Material Adverse Effect on Seller. Except as otherwise indicated on SCHEDULE
4.8(a), neither Seller nor, to the Knowledge of Seller or AOL, any other party
to such contracts, leases, licenses, agreements and arrangements is in default
thereunder, and no event has occurred which, with or without the lapse of time
or the giving of notice or both, would
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constitute a default thereunder, except, insofar as can be reasonably foreseen,
in each case for defaults as would not have, individually or in the aggregate, a
Material Adverse Effect on Seller.
(b) Except as set forth on SCHEDULE 4.8(b) and except for contracts
which may be canceled by Seller within 60 days without penalty or the
termination of which, insofar as can be reasonably foreseen, would not have a
Material Adverse Effect on Seller, none of the contracts to be assumed by Buyer
pursuant to this Agreement (i) provide for ongoing obligations with respect to
the Business after December 31, 2000; or (ii) are agreements containing change
of control or anti-assignment provisions granting to another party or other
parties thereto the right to terminate such agreements or take other action
adverse to Seller upon or following the transactions contemplated by this
Agreement; and there are no contracts to which Seller is a party or by which
Seller is bound which purport to limit Seller from providing any service in any
jurisdiction, whether under the "SpryNet" or "Spry" name or otherwise, or grant
any exclusive geographic, segment or other rights to any third-party, except
where the existence of such limitation or grant would not, after the Closing
Date, have a Material Adverse Effect on the Assets.
(c) Except as set forth on SCHEDULE 4.8(c), no notice, consent,
waiver or approval is contemplated or required by the terms of any contracts
(including all contracts with Subscribers as of the date hereof and OEM
Contracts), intellectual property licenses, leases, agreements or other
arrangements of any kind to be assumed by Buyer to which Seller or AOL is party
or subject in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for any such
notice, waiver, consent or approval the failure of which to receive would not
materially delay or impede such consummation or result in a Material Adverse
Effect.
4.9. ACCOUNTS RECEIVABLE
Since July 31, 1998, Seller has not materially changed any principle
or practice with respect to the recordation of accounts receivable or the
calculation of reserves therefor, or any material collection, discount or
write-off policy or procedure except as required by GAAP or statutory accounting
principles.
4.10. TAXES
(a) All federal, state, local and foreign Tax Returns required to be
filed by or on behalf of Seller have been timely filed or requests for extension
have been timely filed and any such extension has been granted and has not
expired, and all such filed Tax Returns are accurate and complete in all
material respects, except for such failures to be complete and accurate as would
not, individually or in the aggregate, have a Material Adverse Effect on Seller;
(b) All Taxes required to be paid (including all required estimated
Tax payments and with respect to Taxes required to be withheld) by Seller have
been paid in full or adequately reserved in accordance with GAAP on the Seller
Financial Statements,
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other than any failure to pay or reserve for as would not have a Material
Adverse Effect on Seller;
(c) Except as set forth on SCHEDULE 4.10, there is no outstanding
Tax audit, inquiry or assessment (and no written notice of any such audit or
inquiry has been received) with respect to Seller that would have a Material
Adverse Effect on Seller;
(d) There are no waivers of the statute of limitations for the
assessment or payment of any Tax by Seller that would be material to Seller;
(e) Seller has not either (i) executed or entered into any closing
agreement under Code Section 7121 (or any similar provision of state, local or
foreign law) or (ii) agreed to make any adjustment to its income or deductions
pursuant to Code Section 481(a) (or similar provision of state, local or foreign
law), in either case that could affect its Tax liability after the Closing Date
to any material extent;
(f) Except as set forth on SCHEDULE 4.10, Seller is not a party to a
tax sharing, tax indemnity or similar agreement (whether or not in writing);
(g) There are no Encumbrances with respect to Taxes upon any of the
Assets, other than with respect to Taxes not yet due and payable;
(h) Seller has not been a member of an affiliated group (within the
meaning of the Code) filing a consolidated federal income Tax Return other than
a group the common parent of which is AOL, and, prior to February 1, 1998, other
than a group the common parent of which was H&R Block, Inc.; and
(i) Seller has no liability for Taxes of any other person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract, or otherwise, other
than with respect to the group, the common parent of which is AOL and, prior to
February 1, 1998, other than with respect to the group, the common parent of
which was H&R Block, Inc.
4.11. EMPLOYMENT MATTERS
(a) All "employee benefit plans" of AOL (as such term is defined in
Section 3(3) of ERISA) in which United States based employees of Seller
participate have been operated and administered in all material respects in
accordance with their terms and all applicable laws, rules and regulations,
including, but not limited to, ERISA and the Code (and any similar statute of a
state or other jurisdiction, domestic or foreign, if applicable) except for
failures to have been so operated and administered that would not have a
Material Adverse Effect. The only employee benefit plans in which United States
based employees of Seller participate as of the date hereof are AOL employee
benefit plans.
(b) Except as set forth on SCHEDULE 4.11(b), Seller is not a party
to any oral or written (i) union, guild or collective bargaining agreement which
covers employees in the United States (nor is Seller aware of any union
organizing activity currently being conducted in respect to any of Seller's
employees), (ii) agreement with any director, officer,
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employee or agent the material benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction of the nature
contemplated by this Agreement or which provides for any payment or payments
(including any severance, unemployment compensation, golden parachute, bonus or
otherwise) of more than an aggregate of $50,000 to such officer or employee upon
such occurrence, or (iii) agreement or plan, including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or with respect to vesting, will
be accelerated, by the occurrence of any of the transactions contemplated by
this Agreement.
(c) None of the companies with which Seller is a member of a
"controlled group" within the meaning of Section 1563(a) of the Code nor any
administrator or fiduciary of any employee benefit plan adopted by a member of
such controlled group (or any agent of any of the foregoing) has engaged in any
transaction or acted or failed to act in a manner which is reasonably likely to
subject Buyer to any material liability (to individuals, the IRS, the Pension
Benefit Guaranty Corporation, or any other party) for breach of fiduciary
duties, accumulated funding deficiencies, termination or other liability under
ERISA, the Code, or any other applicable laws.
4.12. COMPLIANCE WITH LAWS; PERMITS
(a) Except as disclosed on SCHEDULE 4.12, Seller has not violated,
failed to comply with or acted or failed to act in any material respect so as to
incur liability under any federal, state, local or foreign law, regulation or
ordinance, judgment, decree or order relating to its business, operations,
properties or assets including the Occupational Safety and Health Act, the
Americans with Disabilities Act, export control laws, and any Environmental
Laws, except where a violation, action or failure to act would not have a
Material Adverse Effect on the Assets or prevent or materially delay the
consummation of the transaction contemplated hereby, and no notice of any
pending investigation or violation of, non-compliance with or alleged liability
under, any such law, regulation, ordinance, judgment, decree or order has been
received by Seller which, if it were determined that a violation had occurred,
would have a Material Adverse Effect on the Assets, provided, however, that with
respect to AOL, the representations and warranties set forth in this SECTION
4.12(a) shall, insofar as they relate to events occurring, or consequences
existing, with respect to Seller prior to February 1, 1998, be deemed given to
AOL's Knowledge.
(b) Seller possesses all Governmental Authorizations necessary to
enable it to conduct its business as presently conducted, except for those
Governmental Authorizations the failure to possess which would not have a
Material Adverse Effect on the Assets or prevent or materially delay the
consummation of the transaction contemplated hereby. All such Governmental
Authorizations are valid and in full force and effect, except for those
authorizations the failure of which to be valid and in full force and effect
would not have a Material Adverse Effect on the Assets or prevent or materially
delay the consummation of the transaction contemplated hereby. Seller is in
compliance with the terms and requirements of each such Governmental
Authorization, except where the failure to be so in compliance would not have a
Material Adverse Effect on the Assets
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or prevent or materially delay the consummation of the transaction contemplated
hereby, provided, however, that with respect to AOL, the representations and
warranties set forth in this sentence shall, insofar as they relate to events
occurring, or consequences existing, with respect to Seller prior to February 1,
1998, be deemed given to AOL's Knowledge. Seller has not received any notice or
other communication from any Governmental Entity asserting (a) any violation of
or failure to comply with any term or requirement of any Governmental
Authorization, or (b) any revocation, withdrawal, suspension, cancellation,
termination or modification of any Governmental Authorization, except, insofar
as is reasonably foreseen, where any such violation, failure to comply,
revocation, withdrawal, suspension, cancellation, termination or modification
would not have a Material Adverse Effect on the Assets or prevent or materially
delay the consummation of the transaction contemplated hereby.
4.13. PATENTS, TRADEMARKS, ETC.
(a) Except as disclosed on SCHEDULE 4.13 hereto, Seller owns, free
and clear of all Encumbrances, and has the exclusive right to use, sell, license
or dispose of or otherwise has rights to use the Software, except for failures
to own free and clear, license to use or otherwise have sufficient rights to use
which would not have a Material Adverse Effect on the Assets. Except as
disclosed on SCHEDULE 4.13 hereto, Seller has sufficient rights to use, license
and distribute the Intellectual Property other than the Software in the Ordinary
Course of Business, except for failures to have sufficient rights to use which
would not have a Material Adverse Effect on the Assets. SCHEDULE 4.13 sets forth
all registered patents, copyrights, trademarks and service marks of Seller
included in the Intellectual Property, all of which are in full force and effect
and are not subject to any Taxes or maintenance fees except as set forth on
SCHEDULE 4.13 or except where the failure to be in full force or effect or to be
so subject would not have a Material Adverse Effect on the Assets, and all of
which with respect to the Software are transferable to Buyer by the sole act and
deed of Seller, and no consent on the part of any other person is necessary to
validate the transfer to Buyer of such Intellectual Property. Except as set
forth on SCHEDULE 4.13, Seller has not licensed or granted to anyone the right
to use the name "Spry," "SpryNet" or any other name associated with or used by
Seller. Except as set forth on SCHEDULE 4.13, (i) Seller has not licensed or
granted to anyone rights of any nature to use any of the Intellectual Property
that would limit the use of such Intellectual Property by Seller against such
licensee or grantee if such licensee or grantee were to use the Intellectual
Property in direct competition with Seller or that would limit Seller from
using, selling, licensing or disposing of such Intellectual Property in any
market or geographic region, including in direct competition with any licensee
of such Intellectual Property in such geographic region; (ii) Seller is not
obligated and does not pay royalties, fees or other payments to anyone for use
of any item of Intellectual Property in an amount exceeding $2,000,000 annually;
(iii) Seller has not received notice from any third party that any services or
products marketed or sold by Seller violates any intellectual property right of
a third party, except, insofar as is reasonably foreseen, for such violations as
would not have a Material Adverse Effect on the Assets; and (iv) to the
Knowledge of AOL, none of the services or products marketed or sold by Seller
violates any intellectual property rights of any third parties, except for such
violations as would not have a Material Adverse Effect on the Assets. To the
Knowledge of AOL, there exists no infringement by any third party
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of any of Seller's rights in the Intellectual Property that would have a
Material Adverse Effect on the Assets and there is no pending or, to the
Knowledge of AOL, threatened claim or litigation against Seller contesting its
use of any Intellectual Property, asserting the misuse of any Intellectual
Property, or asserting the infringement or other violation of any rights of a
third party, where, in any such case, individually or in the aggregate, such
infringement, claim or litigation would have a Material Adverse Effect on the
Assets.
(b) The Software, and to the Knowledge of AOL, all other
copyrightable works, inventions and know-how conceived by employees or
independent contractors of Seller within the scope of their employment or
retention, as the case may be, and related to the business of Seller, were and
are "works for hire" or if they were or are not, then all right, title, and
interest therein were transferred and assigned to, or vested in, Seller, except,
insofar as can be reasonably foreseen, where the failure to be "works for hire"
or to have been so transferred, assigned or vested would not have a Material
Adverse Effect on the Assets.
4.14. LABOR MATTERS
Seller is not the subject of any proceeding (a) asserting that
Seller has committed an unfair labor practice or (b) seeking to compel Seller to
bargain with a labor union or labor organization, and there are no pending or
threatened, nor, to the Knowledge of AOL (such Knowledge qualifier applying only
to events occurring or circumstances existing prior to February 1, 1998), has
there been for the past two (2) years any, labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving Seller, except in each case as did not
or would not have a Material Adverse Effect on Seller.
4.15. REAL PROPERTY
To the Knowledge of Seller and AOL, Seller owns no real estate
except as shown on SCHEDULE 4.15. The real estate occupied by Seller is held
under leases, each of which is described on such SCHEDULE 4.15 and is in full
force and effect. To the Knowledge of AOL (such Knowledge qualifier applying
only to events occurring or circumstances existing prior to February 1, 1998),
Seller is in compliance in all material respects with Seller's respective
obligations under each such lease.
4.16. EMPLOYEES
SCHEDULE 4.16 sets forth a complete and accurate list of the job
title, exempt status, annual salary, any bonus or other incentive compensation
paid, any retirement pay, any accrued vacation pay and any advances to all
employees and independent contractors of Seller as of August 17, 1998. Except as
set forth on SCHEDULE 4.16, there are no written or oral contracts, agreements
or policies to which Seller is bound that relate to the employment of any
employees of Seller.
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5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller and AOL as follows:
5.1. ORGANIZATION, EXISTENCE AND GOOD STANDING
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Buyer has all necessary
corporate power and authority to own, lease and operate its properties and to
conduct its business as currently conducted. Buyer is duly qualified to do
business as a foreign corporation and, to the extent such concept is applicable
in such jurisdictions, is in good standing in each jurisdiction in which the
properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so duly qualified and in good standing would not have a Material Adverse
Effect on Buyer's ability to consummate the transactions contemplated hereby.
5.2. POWER AND AUTHORITY; NON-CONTRAVENTION; FILINGS AND CONSENTS
(a) Buyer has full corporate power and authority to execute, deliver
and perform its obligations under this Agreement and all other agreements and
documents executed and delivered, or to be executed and delivered, by it
pursuant to this Agreement. Buyer has taken all actions required by Law, its
certificate of incorporation and bylaws, or otherwise to duly and validly
authorize the execution, delivery and performance of this Agreement and all
other agreements and documents executed and delivered, or to be executed and
delivered, by it pursuant to this Agreement and the consummation of the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Buyer of this Agreement and all other agreements and documents
executed and delivered, or to be executed and delivered, by it pursuant to this
Agreement do not, and the consummation of the transactions contemplated by this
Agreement by Buyer will not (except for the consents and waivers listed on
SCHEDULE 5.2(a)), (i) conflict with or violate any provisions of its certificate
of incorporation or bylaws, (ii) constitute a breach of or default under or
result in the creation of any lien, charge or other Encumbrance or Tax on or
against any assets, rights or property of Buyer or give rise, with or without
notice or lapse of time, to any third-party right of termination, cancellation,
material modification or acceleration under any note, bond, mortgage, pledge,
lien, lease, agreement, license, commitment or instrument applicable to Buyer or
to which Buyer is a party or by which Buyer is bound, or conflict with or
violate any restrictions of any kind to which Buyer is subject, which breach,
default, lien, charge, Encumbrance, Tax, termination, cancellation, modification
or acceleration would have a Material Adverse Effect on Buyer or which would
prevent or materially delay the consummation of the transactions contemplated by
this Agreement or otherwise prevent Buyer from performing its obligations
hereunder in any material respect, or (iii) violate or conflict with any Law,
order, writ, judgment, award, statute or rule of any Governmental Entity or
arbitrator, or NASDAQ or NYSE, which, if violated or accelerated, would have a
Material Adverse Effect on Buyer or which would prevent or materially delay the
consummation of the transactions contemplated by this Agreement or otherwise
prevent Buyer from performing its obligations hereunder in any material respect.
The execution and delivery of this Agreement have been approved by the
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Board of Directors of Buyer. This Agreement has been duly executed and delivered
by Buyer and, assuming this Agreement constitutes a valid and binding obligation
of Seller and AOL, enforceable against them in accordance with its terms,
constitutes a valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms.
(b) Except as set forth on SCHEDULE 5.2(b), no consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity or private individual or entity is required to be obtained,
made or filed by Buyer in connection with the execution, delivery and
performance of this Agreement by Buyer or the consummation by Buyer of the
transactions contemplated by this Agreement.
5.3. LEGAL PROCEEDINGS
There is no action, suit, claim, demand, proceeding or investigation
pending or, to the best of Buyer's Knowledge, threatened against Buyer which, if
resolved adversely to Buyer, would have a Material Adverse Effect on Buyer or
which could prevent or materially delay the consummation of the transactions
contemplated by this Agreement. There are no material judgments, decrees,
injunctions or orders of any Governmental Entity or arbitrator against Buyer
that would have a Material Adverse Effect on Buyer or which could prevent or
materially delay the consummation of the transaction contemplated hereby.
5.4. COMPLIANCE WITH LAWS
(a) Buyer has not violated, failed to comply with or acted or failed
to act in any material respect so as to incur liability under any federal,
state, local or foreign law, regulation or ordinance, judgment, decree or order
relating to its business, operations, properties or assets including the
Occupational Safety and Health Act, the Americans with Disabilities Act, export
control laws, and any Environmental Laws, except where a violation, action or
failure to act would not prevent or materially delay the consummation of the
transaction contemplated hereby, and no notice of any pending investigation or
violation of, non-compliance with or alleged liability under, any such law,
regulation, ordinance, judgment, decree or order has been received by Buyer
which, if it were determined that a violation had occurred, could prevent or
materially delay the consummation of the transaction contemplated hereby.
(b) Buyer possesses all Governmental Authorizations necessary to
enable it to conduct its business as presently conducted, except for those
Governmental Authorizations the failure of which to possess would not prevent or
materially delay the consummation of the transaction contemplated hereby. All
such Governmental Authorizations are valid and in full force and effect, except
for those authorizations the failure of which to be valid and in full force and
effect would not prevent or materially delay the consummation of the transaction
contemplated hereby. Buyer is in compliance with the terms and requirements of
each such Governmental Authorization, except where the failure to be so in
compliance would not prevent or materially delay the consummation of the
transaction contemplated hereby. Buyer has not received any notice or other
communication from any Governmental Entity asserting (a) any violation of or
failure to
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comply with any term or requirement of any Governmental Authorization, or (b)
any revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization, except where any such violation,
failure to comply, revocation, withdrawal, suspension, cancellation, termination
or modification would not prevent or materially delay the consummation of the
transaction contemplated hereby
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND AOL
The obligations of Seller and AOL under this Agreement are subject
to the fulfillment, at or prior to the Closing, of each of the following
conditions, and failure to satisfy any such condition shall excuse and discharge
all obligations of Seller and AOL to carry out the provisions of this Agreement,
unless such failure is agreed to in writing by Seller and AOL:
6.1. REPRESENTATIONS AND WARRANTIES
The representations and warranties made by Buyer in this Agreement
shall be true and complete in all material respects when made and on and as of
the Closing Date as though such representations and warranties were made on and
as of such date (except for any changes expressly permitted by this Agreement
and except for any representations and warranties that speak as of a specific
date or time other than the Closing Date, which need only be true and complete
in all material respects as of such date or time).
6.2. PERFORMANCE
Buyer shall have performed and complied in all material respects
with all agreements and conditions required by this Agreement to be performed or
complied with by Buyer prior to the Closing Date.
6.3. LEGAL PROCEEDINGS
No action or proceeding by or before any Governmental Entity shall
have been instituted (and not subsequently dismissed, settled or otherwise
terminated) which is reasonably expected to restrain, prohibit or invalidate the
transactions contemplated by this Agreement, other than an action or proceeding
instituted by Seller or AOL.
6.4. HART-SCOTT-RODINO
All applicable waiting periods under Hart-Scott-Rodino shall have
expired.
6.5. OFFICER'S CERTIFICATE
Buyer shall have delivered to Seller a certificate, dated as of the
Closing Date and executed by a senior officer of Buyer, in his capacity as such,
certifying to the fulfillment of the conditions set forth in SECTIONS 6.1
through 6.3.
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6.6. DOCUMENTS AT CLOSING
Buyer shall have duly executed and/or delivered to Seller all
documents listed on SCHEDULE 6.6.
6.7. AIM DISTRIBUTION AGREEMENT
Buyer shall have duly executed and delivered to AOL the AIM
Distribution Agreement substantially in the form of Exhibit C.
6.8. OPINION OF BUYER'S COUNSEL
Seller shall have received an opinion of Hogan & Hartson L.L.P.,
counsel to Buyer, dated as of the Closing Date, to the effect and substantially
in the form of Exhibit D.
6.9. CONSENT DECREE
All applicable notification periods with respect to the Consent
Decree shall have expired.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement are subject to the
fulfillment, at or prior to the Closing, of each of the following conditions,
and failure to satisfy any such condition shall excuse and discharge all
obligations of Buyer to carry out the provisions of this Agreement, unless such
failure is agreed to in writing by Buyer:
7.1. REPRESENTATIONS AND WARRANTIES
The representations and warranties made (jointly or individually) by
Seller and AOL in this Agreement and the statements contained in the disclosure
schedules hereto shall be true and complete in all material respects when made,
and on and as of the Closing Date as though such representations and warranties
were made on and as of such date (except for any changes expressly permitted by
this Agreement and except for any representations or warranties that speak as of
a specific date or time other than the Closing Date, which need only be true and
complete in all material respects as of such date or time).
7.2. PERFORMANCE
Seller and AOL shall have performed and complied in all material
respects with all agreements and conditions required by this Agreement to be
performed or complied with by Seller and AOL prior to the Closing Date.
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7.3. LEGAL PROCEEDINGS
No action or proceeding by or before any Governmental Entity shall
have been instituted (and not subsequently settled, dismissed or otherwise
terminated) which is reasonably expected to restrain, prohibit or invalidate the
transactions contemplated by this Agreement other than an action or proceeding
instituted by Buyer.
7.4. MATERIAL ADVERSE CHANGE IN NUMBER OF SUBSCRIBERS
Between the date hereof and the Closing Date, the number of
Subscribers shall not have declined to less than 80,000, such change being
deemed a Material Adverse Change.
7.5. SUBSCRIBER CONTRACTS
Seller shall have delivered to Buyer a true and complete list of all
of the Subscriber Contracts (as of a date not more than three business days
prior to the Closing Date) in a form that is mutually acceptable to Buyer and
Seller.
7.6. HART-SCOTT-RODINO
All applicable waiting periods under Hart-Scott-Rodino shall have
expired.
7.7. OFFICERS' CERTIFICATES
Seller and AOL shall have delivered to Buyer certificates, dated as
of the Closing Date and executed by a senior officer of each party, in their
capacity as such, certifying to the fulfillment of the conditions specified in
SECTIONS 7.1 through 7.5.
7.8. DOCUMENTS AT CLOSING
AOL and Seller shall have duly executed and/or delivered to Buyer
all documents listed on SCHEDULE 7.8.
7.9. AIM DISTRIBUTION AGREEMENT
AOL shall have duly executed and delivered to Buyer the AIM
Distribution Agreement substantially in the form of Exhibit C.
7.10. OPINIONS OF SELLER'S COUNSEL
Buyer shall have received (i) an opinion of Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., counsel to Seller and AOL, dated as of the
Closing Date, to the effect and substantially in the form of Exhibit E, and (ii)
an opinion of Preston Gates & Ellis LLP., counsel to Seller and AOL, dated as of
the Closing Date, as to issues of
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Washington law covered in the Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. opinion and in a form reasonably acceptable to Buyer.
7.11. REQUIRED CONSENTS
Seller shall have received and delivered to Buyer (a) all material
consents, authorizations and approvals of all Governmental Entities which are
required to be obtained by Seller in order to consummate the transactions
contemplated hereby, and (b) all material consents, authorizations and approvals
of all private parties which are required to be obtained by Seller in order to
assign the Leases to Buyer, and such authorizations and approvals shall be in
full force and effect on the Closing Date.
7.12. CONSENT DECREE
All applicable notification periods with respect to the Consent
Decree shall have expired.
8. CLOSING
8.1. CLOSING PROCEDURES
The Closing of the transactions contemplated by this Agreement shall
occur three (3) business days following the satisfaction or waiver of the
conditions set forth in SECTIONS 6 and 7 hereof, but in no event later than
October 15, 1998 (the "Closing Date"); provided, however, should circumstances
require a delay, any party may extend the Closing Date upon written notice to
the others if the cause of the delay may be reasonably satisfied by November 30,
1998. Any requirement for consents of a Governmental Entity shall automatically
be deemed circumstances requiring an extension of sixty (60) days. The Closing
shall be held at the offices of Hogan & Hartson L.L.P., 555 Thirteenth Street,
N.W., Washington, D.C., or at such other place as the parties mutually agree.
8.2. DELIVERIES BY SELLER AND AOL AT THE CLOSING
At the Closing, Seller and AOL shall deliver to Buyer the following:
(a) a certified copy of the resolutions adopted by the Boards of
Directors of Seller and AOL authorizing the transactions contemplated by this
Agreement;
(b) a list of all of the Subscriber Contracts as required by SECTION
7.5;
(c) the opinions of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. and Preston Gates & Ellis LLP, as required by SECTION 7.10;
(d) certificates of incumbency and specimen signatures of the
signatory officers of Seller and AOL;
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(e) the Officers' Certificates required by SECTION 7.7;
(f) a bill of sale and assignment of assets, an assignment and
assumption of contracts and leases, and an assumption agreement substantially in
the form attached as Exhibit F, and such other instruments of transfer as Buyer
shall reasonably require to transfer to Buyer title to the Assets (the "Transfer
Instruments"); and
(g) such other documents as Buyer may reasonably request.
8.3. DELIVERIES BY BUYER AT THE CLOSING
At the Closing, Buyer shall deliver the following:
(a) a wire transfer of the First Payment payable in accordance with
SECTION 2.3;
(b) a certified copy of the resolutions adopted by the Board of
Directors of Buyer authorizing the transactions contemplated by this Agreement;
(c) the opinion of Hogan & Hartson L.L.P. as required by SECTION
6.8;
(d) a certificate of incumbency and specimen signatures of the
signatory officers of Buyer;
(e) the Officer's Certificate required by SECTION 6.5;
(f) the Transfer Instruments (to the extent required to be executed
by Buyer); and
(g) such other documents as Seller and AOL may reasonably request.
9. SURVIVAL; INDEMNIFICATION; REMEDIES
9.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in this Agreement and
the indemnification obligations set forth in this SECTION 9 related thereto
shall survive for a period of one year following the Closing Date and shall be
unaffected by (and shall not be deemed waived by) any investigation, audit,
appraisal, or inspection at any time made by or on behalf of Buyer, provided,
however, that the representations and warranties set forth in SECTIONS 4.7, 4.10
and 4.11 shall each survive until the expiration of any applicable statute of
limitations period. The covenants, agreements and undertakings contained in this
Agreement and the indemnification obligations set forth in this SECTION 9
(except to the extent related to the representations and warranties contained in
this Agreement) shall survive until fully performed in accordance with the terms
of this Agreement.
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Notwithstanding the foregoing, if written notice of a claim for
indemnification has been given to the Indemnifying Party by the Indemnified
Party pursuant to SECTION 9.4.1 prior to the expiration of the applicable
representations, warranties and covenants, all relevant representations,
warranties and covenants and the obligation to indemnify therefor shall survive
for the purposes of such claim until such claim has been finally resolved in
accordance with the terms of this SECTION 9.
9.2. INDEMNIFICATION BY SELLER AND AOL.
Subject to the conditions and provisions of this SECTION 9, Seller
and AOL, jointly and severally, agree to indemnify, defend and hold harmless,
Buyer from, against and with respect to any and all Losses (whether absolute,
accrued, contingent or otherwise and whether a contractual, Tax or any other
type of liability or obligation or claim) asserted against, imposed upon or
incurred by Buyer, directly or indirectly, relating to, arising out of or
resulting from (a) any liability or obligation of or claim against Buyer not
expressly assumed by Buyer pursuant to SECTION 2.4, arising out of, relating to
or resulting from the Assets or the operation of the Business accruing during
the period prior to the Closing Date; (b) any misrepresentation or breach of the
representations and warranties of Seller or AOL contained in this Agreement or
in any Transfer Instrument or in either officer's certificate delivered pursuant
to SECTION 7.7 hereof; (c) any noncompliance by Seller or AOL with any
covenants, agreements or undertakings of Seller or AOL contained in or made
pursuant to this Agreement or any Transfer Instrument; or (d) any liability or
obligation of or claim against Buyer or any of the Assets by virtue of the
application of bulk sales or other similar laws relating to the sale and
transfer of the Assets to Buyer.
9.3. INDEMNIFICATION BY BUYER.
Subject to the conditions and provisions of this SECTION 9, Buyer
hereby agrees to indemnify, defend and hold harmless AOL and Seller, jointly and
severally, from, against and with respect to any and all Losses (whether
absolute, accrued, contingent or otherwise and whether contractual, Tax or any
other type of liability or obligation or claim) asserted against, imposed upon
or incurred by AOL or Seller, directly or indirectly, relating to, arising out
of or resulting from (a) the Assumed Liabilities; (b) any misrepresentation or
breach of the representations and warranties of Buyer contained in or made
pursuant to this Agreement or any Transfer Instrument or in the officer's
certificate delivered pursuant to SECTION 6.5 or (c) any noncompliance by Buyer
with any covenants, agreements or undertakings of Buyer contained in or made
pursuant to this Agreement or any Transfer Instrument. Notwithstanding the
foregoing (except for SECTION 9.3(b), which shall be deemed excluded from, and
unaffected by, this provision), in no event shall Buyer have any indemnification
obligation to Seller or AOL pursuant to this SECTION 9 for any Losses otherwise
indemnifiable hereunder to the extent that such Losses directly relate to a
liability, obligation or claim with regard to the failure to obtain any waiver,
consent or approval from any party to any contract or lease that is required in
order to assign any such contract or lease to Buyer; provided, however, that
Buyer shall remain liable for any other Losses indemnifiable pursuant to this
SECTION 9 and SECTION 3.1(b) not directly relating to such a liability,
obligation or claim.
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9.4. CONDITIONS OF INDEMNIFICATION.
The obligations and liabilities of Seller and AOL, on the one hand,
and of Buyer, on the other hand, hereunder with respect to their respective
indemnities pursuant to this SECTION 9.4, resulting from any Losses, shall be
subject to the following terms and conditions:
9.4.1. NOTICE.
The party seeking indemnification (the "Indemnified Party") must
give the other party or parties, as the case may be (the "Indemnifying Party"),
written notice of any such Losses, specifically identifying the matters which
have given rise to such Losses, promptly after the Indemnified Party receives
notice thereof; provided that the failure to give such notice shall not affect
the rights of the Indemnified Party hereunder except to the extent that the
Indemnifying Party shall have suffered actual damage by reason of such failure
or such failure prejudices the Indemnifying Party's ability to settle or defend
such claim.
9.4.2. COUNSEL.
The Indemnifying Party shall have the right to undertake, by counsel
or other representatives of its own choosing and reasonably acceptable to the
Indemnified Party, the defense of all such Losses at the Indemnifying Party's
risk and expense. In the event the Indemnifying Party elects to undertake such
defense, the Indemnified Party shall cooperate with and furnish reasonable
assistance to the Indemnifying Party in defense of such Losses.
9.4.3. RIGHT TO DEFEND.
In the event that the Indemnifying Party shall elect not to
undertake such defense, or, within a reasonable period of time after notice from
the Indemnified Party of any such Losses, shall fail to undertake such defense,
the Indemnified Party (upon further written notice to the Indemnifying Party)
shall have the right to undertake the defense, compromise or settlement of such
Losses, by counsel or other representatives of its own choosing and reasonably
acceptable to the Indemnifying Party, on behalf of and for the account and risk
of the Indemnifying Party (subject to the right of the Indemnifying Party to
assume the defense of such Losses at any time prior to settlement, compromise or
final determination thereof); provided, however, that the Indemnified Party who
undertakes such defense shall not settle or compromise any such Losses without
the Indemnifying Party's written consent (which consent shall not be
unreasonably withheld). In such event (i) the Indemnifying Party shall pay to
the Indemnified Party, in addition to the other sums required to be paid
hereunder, the reasonable costs and expenses of third parties incurred by the
Indemnified Party in connection with such defense, compromise or settlement as
and when such costs and expenses are so incurred, and (ii) the Indemnifying
Party shall cooperate with and furnish reasonable assistance to the Indemnified
Party in defense of such Losses.
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9.4.4. NON-MONETARY HARM.
Anything in this SECTION 9 to the contrary notwithstanding, (i) if
there is a reasonable probability that Losses may materially and adversely
affect the Indemnified Party other than as a result of money damages or other
money payments, the Indemnified Party shall have the right, at its own cost and
expense, to participate with the Indemnifying Party in the defense, compromise
or settlement of the Losses, (ii) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Losses or consent
to entry of any judgment which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party of a
release from all liability in respect of such Losses in form and substance
reasonably satisfactory to the Indemnified Party, (iii) in the event that the
Indemnifying Party undertakes the defense of any Losses, the Indemnified Party,
by counsel or other representative of its own choosing and at its sole cost and
expense, shall have the right to consult with the Indemnifying Party and its
counsel or other representatives concerning such Losses, and the Indemnifying
Party and the Indemnified Party and their respective counsel or other
representatives shall cooperate with respect to the defense of such Losses and
use their reasonable efforts in light of the prevailing circumstances to
incorporate suggested modifications if such modifications would not adversely
affect the Indemnifying Party, and (iv) in the event that the Indemnifying Party
undertakes the defense of any Losses, the Indemnifying Party shall have an
obligation to keep the Indemnified Party informed of the status of the defense
of such Losses and furnish the Indemnified Party with all documents, instruments
and information that the Indemnified Party shall reasonably request in
connection therewith.
9.5. LIMITATIONS ON INDEMNIFICATION.
9.5.1. BASKET AMOUNT.
Neither Seller and AOL, on the one hand as an Indemnifying Party,
nor Buyer, on the other hand as an Indemnifying Party, shall be liable to the
other in respect of any indemnification hereunder until the aggregate Losses of
the other party, as an Indemnified Party, exceed Six Hundred Thousand Dollars
($600,000.00) (the "Basket Amount"), whereupon the Indemnified Party shall be
entitled to indemnification from the Indemnifying Party for all Losses suffered
or incurred by the Indemnified Party in excess of Four Hundred Thousand Dollars
($400,000.00); provided, however, that the Basket Amount shall not apply to any
Losses (A) of Buyer arising out of, related to or resulting from (i) any Taxes
or Tax Returns of Seller, (ii) any ERISA claims asserted as a result of a breach
of a representation or warranty under SECTION 4.11, (iii) any liability or
obligation of or claim against Buyer arising out of, relating to or resulting
from the Assets or the operations of the Business (except for Assumed
Liabilities) or (iv) any noncompliance by Seller or AOL with any covenants,
agreements or undertakings of Seller or AOL under SECTION 3.17 or (B) of Seller
or AOL arising out of, related to or resulting from (i) the Assumed Liabilities,
(ii) any WARN Act claim against which Buyer has agreed to indemnify Seller under
SECTION 3.14 or (iii) any noncompliance by Buyer with any covenants, agreements
or undertakings of Buyer under SECTION 3.17.
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9.5.2. CAP.
Neither Seller and AOL, on the one hand, nor Buyer, on the other
hand, shall be required to indemnify the other for an amount in excess of the
Purchase Price; provided, however, that with respect to Losses suffered by
Buyer, the cap amount set forth in this SECTION 9.5.2 shall not apply to any
Losses of Buyer related to (i) any Taxes or Tax Returns of Seller or (ii) any
ERISA claims asserted as a result of a breach of a representation or warranty
under SECTION 4.11.
9.5.3. DE MINIMIS.
In calculating whether the Basket Amount has been reached, no
particular claim shall be included in the amount of aggregate Losses of the
Indemnified Party unless such claim is greater than Twenty-five Thousand Dollars
($25,000.00).
9.5.4. RECOVERIES.
The determination of the amount of any Loss shall take into account:
(i) the net Tax benefit with respect to such Loss actually received by the
Indemnified Party; and (ii) any other recovery or benefit with respect to such
Loss actually received by the Indemnified Party from any other party, person or
entity, including any insurance company, net of expenses incurred in obtaining
such recovery or benefit (which expenses shall include, but not be limited to,
any increase in insurance premiums arising as result of such Loss). If an
Indemnified Party later receives such a recovery or benefit after receipt of
payment from an Indemnifying Party of a Loss, then the amount of such recovery
or benefit, after taking into account the effect of the preceding sentence,
shall be paid to the Indemnifying Party. With respect to clause (i) of this
SECTION 9.5.4, if requested by the Indemnifying Party in writing, determinations
of the Loss, net of any Tax benefit, made by the Indemnified Party shall be
verified in writing by a nationally recognized accounting firm experienced in
the Indemnified Party's type of business selected by the Indemnified Party and
reasonably satisfactory to the Indemnifying Party. Such verification shall
relate only to the computations underlying the determinations of the effect of
Taxes made by the Indemnified Party and shall not involve an interpretation of
this Agreement or any other agreements subject to the indemnifications set forth
in this SECTION 9. If such verification is requested, the Indemnified Party
shall, upon request, provide to the accountants all information necessary to
permit the confirmation of the accuracy of the Indemnified Party's calculations
of the effect of Taxes. The costs of such verification shall be borne by the
Indemnifying Party unless it is the determination of such verification that the
Loss, net of any Tax benefit, to the Indemnified Party is lower by more than ten
percent (10%) than the amount of the Loss, net of any Tax benefit, originally
determined by the Indemnified Party, in which case such costs shall be borne by
the Indemnified Party. The Indemnifying Party agrees that it shall not have the
right to inspect the tax returns or other books or records of the Indemnified
Party in order to verify the basis or the accuracy of the Indemnified Party's
calculations of any Loss and the effect of Taxes thereon and that the
determination made with respect thereto in accordance with this SECTION 9.5.4
shall be conclusive and binding.
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9.6. EXCLUSIVE REMEDY.
Except as otherwise provided in SECTION 11, the indemnification
rights and obligations of the parties under this SECTION 9 shall be the sole and
exclusive remedy of the parties hereto with respect to any breach of any
representation, warranty, covenant or agreement under this Agreement, any
Transfer Instrument or any officer's certificate delivered pursuant to SECTION
6.5 or SECTION 7.7 hereof by any party hereto or thereto. Notwithstanding the
foregoing, nothing herein shall be construed or interpreted as limiting or
impairing the rights or remedies that any party hereto may have at equity,
including, but not limited to, specific performance and injunctive relief, where
available.
10. TERMINATION
10.1. TERMINATION PRIOR TO OCTOBER 15, 1998
This Agreement may be terminated at any time before the Closing Date
under any one or more of the following circumstances:
(a) by the mutual consent of the parties hereto;
(b) by Buyer or Seller, by written notice of termination to the
other parties hereto, if (i) the Closing has not occurred on or before the date
set forth in SECTION 8.1, and (ii) the failure to close on or before such date
did not result from the failure by the party seeking termination of this
Agreement to fulfill any undertaking or commitments provided for herein that
such party is required to fulfill prior to the Closing; or
(c) by Buyer pursuant to SECTION 3.3(b).
10.2. TERMINATION AFTER EXTENSION OF CLOSING DATE
If the Closing Date has been extended beyond October 15, 1998
pursuant to the terms of SECTION 8.1, then this Agreement may be terminated:
(a) by Seller (if it is not in breach of any of its material
obligations hereunder), by written notice of termination, after learning of a
breach of a representation or warranty by Buyer which would cause the condition
set forth in SECTION 6.1 not to be satisfied or any other breach of this
Agreement; provided, that Seller shall not have the right to terminate this
Agreement pursuant to this SECTION 10.2(a) so long as Buyer cures such breach
within 10 days of receipt of such notice; or
(b) by Buyer (if it is not in breach of any of its material
obligations hereunder), by written notice of termination, after learning of a
breach of a representation or warranty by Seller or AOL which would cause the
condition set forth in SECTION 7.1 not to be satisfied or any other breach of
this Agreement; provided, that Buyer shall not have
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the right to terminate this Agreement pursuant to this SECTION 10.2(b) so long
as Seller or AOL, as the case may be, cures such breach within 10 days of
receipt of such notice.
10.3. EFFECT OF TERMINATION
In the event this Agreement is terminated as provided in this
SECTION 10 or SECTION 11, this Agreement shall forthwith become wholly void and
of no effect, and the parties shall be released from all future obligations
hereunder; provided, however, that the provisions of SECTIONS 3.8, 12.2 AND 12.3
shall not be extinguished but shall survive such termination and, except for a
termination pursuant to SECTION 3.3(b), that termination shall not relieve any
party hereto of liability for any breach of this Agreement.
11. DEFAULTS AND REMEDIES
11.1. SELLER OR AOL DEFAULT
In the event that the Seller or AOL fails or refuses to perform any
of its covenants, obligations or agreements hereunder in any material respect
(such failure or refusal, a "Seller Default") and no Buyer Default (as defined
in SECTION 11.2) exists, in addition to any right to terminate pursuant to
SECTION 10, Buyer shall be entitled to: (a) terminate its obligations under this
Agreement by giving Seller written notice thereof, (b) except for a termination
pursuant to SECTION 3.3(b), specifically enforce the terms and conditions of
this Agreement, (c) except for a termination pursuant to SECTION 3.3(b), sue for
damages, which shall be limited to actual damages (including reasonable legal
fees and expenses) unless the Seller Default includes the willful refusal or
failure to deliver the documents required to be delivered at the Closing by the
Seller or AOL hereunder, (d) except for a termination pursuant to SECTION
3.3(b), avail itself of any other rights and remedies available at law or in
equity as a result of such default by the Seller or AOL, including specific
performance but excluding damages other than actual damages, or (e) avail itself
of any combination of the foregoing (except as otherwise provided herein). In
the event the Seller or AOL fails or refuses to perform any of its covenants,
obligations or agreements hereunder and no Buyer Default exists, Buyer shall
have available to it as against the Seller and AOL all of the remedies described
in clauses (a) through (e) above (except as otherwise provided herein).
11.2. BUYER DEFAULT
In the event that the Buyer fails or refuses to perform any of its
covenants, obligations or agreements hereunder in any material respect (such
failure or refusal, a "Buyer Default") and no Seller Default (as defined in
SECTION 11.1) exists, in addition to any right to terminate pursuant to SECTION
10, Seller shall be entitled to: (a) terminate its obligations under this
Agreement by giving Buyer written notice thereof, (b) specifically enforce the
terms and conditions of this Agreement, (c) except as provided in SECTION
3.3(b), sue for damages, which shall be limited to actual damages (including
reasonable legal fees and expenses) unless the Buyer Default includes the
willful refusal or
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failure to deliver the documents required to be delivered at Closing by the
Buyer hereunder, (d) except as provided in SECTION 3.3(b), avail itself of any
other rights and remedies available at law or in equity as a result of such
default by the Buyer, including specific performance but excluding damages other
than actual damages, or (e) avail itself of any combination of the foregoing
(except as otherwise provided herein). In the event the Buyer fails or refuses
to perform any of its covenants, obligations or agreements hereunder and no
Seller Default exists, Seller shall have available to it as against the Buyer
all of the remedies described in clauses (a) through (e) above (except as
otherwise provided herein).
12. MISCELLANEOUS
12.1. ADDITIONAL ACTIONS AND DOCUMENTS
Each party hereto hereby agrees that, from time to time, whether
before, at or after the Closing, such party will take or cause to be taken such
further actions, to execute, deliver and file or cause to be executed, delivered
and filed such further documents, and will obtain such consents, as may be
necessary or as may be reasonably requested in order to effectuate fully the
purposes, intents, terms and conditions of this Agreement.
12.2. NO BROKERS
Except as set forth on SCHEDULE 12.2, each party hereto represents
and warrants to the other parties (and to each of them) that such party has not
engaged any broker, finder or agent in connection with the transactions
contemplated by this Agreement that will give rise to any unpaid liability to
any broker, finder or agent for any brokerage fees, finders' fees or
commissions, with respect to the transactions contemplated by this Agreement for
which Seller, AOL or Buyer will be responsible after the Closing. Each party
hereto agrees to indemnify, defend and hold harmless each of the other parties
from and against any and all claims asserted against such parties for any such
fees or commissions by any persons purporting to act or to have acted for or on
behalf of the indemnifying party.
12.3. EXPENSES
Subject to the indemnity provisions of SECTION 9, each party hereto
shall pay its own expenses incident (including the fees, commissions and
expenses of all investment bankers, financial advisors, legal advisors,
consultants and accountants) to this Agreement and the transactions contemplated
hereunder, including all legal and accounting fees and disbursements. Seller and
Buyer shall each pay half of all Hart-Scott-Rodino filing fees and other filing
fees.
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12.4. ASSIGNMENT
Buyer shall have the right to assign its rights and obligations
under this Agreement, in whole or in part, to an Affiliate or to designate any
of its Affiliates (to the extent permitted by Law) to perform any of its
obligations; provided, however, that Buyer shall remain liable to Seller for the
satisfaction of its obligations hereunder. Except as set forth in the preceding
sentence, Seller, AOL and Buyer shall not assign their rights and obligations
under this Agreement, in whole or in part, whether by operation of law or
otherwise, without the prior written consent of the other parties hereto, and
any such assignment contrary to the terms hereof shall be null and void and of
no force and effect. In no event shall the assignment by Seller, AOL or Buyer of
such party's respective rights or obligations under this Agreement, whether
before, at or after the Closing, release such party from such party's respective
liabilities and obligations hereunder.
12.5. ENTIRE AGREEMENT; AMENDMENT
This Agreement, the Confidentiality Agreement, the Exhibits and
other documents referred to herein or furnished pursuant hereto, constitute the
entire Agreement among the parties hereto with respect to the transactions
contemplated herein, and they supersede all prior oral or written agreements,
commitments or understandings with respect to the matters provided for herein.
No amendment, modification or discharge of this Agreement shall be valid or
binding unless set forth in writing and duly executed and delivered by the party
against whom enforcement of the amendment, modification, or discharge is sought.
12.6. WAIVER
No delay or failure on the part of any party hereto in exercising
any right, power or privilege under this Agreement or under any other documents
furnished in connection with or pursuant to this Agreement shall impair any such
right, power or privilege or be construed as a waiver of any default or any
acquiescence therein. No single or partial exercise of any such right, power or
privilege shall preclude the further exercise of such right, power or privilege,
or the exercise of any other right, power or privilege. No waiver shall be valid
against any party hereto unless made in writing and signed by the party against
whom enforcement of such waiver is sought and then only to the extent expressly
specified therein.
12.7. SEVERABILITY
If any part of any provision of this Agreement or any other
agreement or document given pursuant to or in connection with this Agreement
shall be invalid or unenforceable in any respect, such part shall be ineffective
to the extent of such invalidity or unenforceability only, without in any way
affecting the remaining parts of such provision or the remaining provisions of
this Agreement.
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12.8. GOVERNING LAW
This Agreement, the rights and obligations of the parties hereto,
and any claims or disputes relating thereto, shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia (excluding the
choice of law rules thereof).
12.9. NOTICES
All notices, demands, requests, or other communications which may be
or are required to be given, served, or sent by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered, sent
by overnight courier or mailed by first-class, registered or certified mail,
return receipt requested, postage prepaid, or transmitted by telegram, telecopy
or telex, addressed as follows:
(i) If to Buyer:
MindSpring Enterprises, Inc.
1430 West Peachtree Street, N.W.
Suite 400
Atlanta, Georgia 30309
Attn: Michael S. McQuary
Telecopy No.: (404) 892-7616
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
8300 Greensboro Drive, Suite 1100
McLean, Virginia 22102
Attn: Richard K. A. Becker, Esq.
Telecopy No.: (703) 610-6200
(ii) If to Seller and AOL:
America Online, Inc.
22000 AOL Way
Dulles, VA 20166
Attn:
Telecopy No.: (703) 265-3995
with a copy (which shall not constitute notice) to:
America Online, Inc.
22000 AOL Way
Dulles, VA 20166
Attn: George Vradenburg III
Telecopy No.: (703) 265-3995
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Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed, telecopied, telexed or telegraphed in the manner described above,
shall be deemed sufficiently given, served, sent, received or delivered for all
purposes at such time as it is delivered to the addressee (with the return
receipt, the delivery receipt, or (with respect to a telecopy or telex) the
answer back being deemed conclusive, but not exclusive, evidence of such
delivery) or at such time as delivery is refused by the addressee upon
presentation.
12.10. HEADINGS
Section headings contained in this Agreement are inserted for
convenience of reference only, shall not be deemed to be a part of this
Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
12.11. INTERPRETATION; ABSENCE OF PRESUMPTION
(a) For the purposes hereof, (i) words in the singular shall be
held to include the plural and vice versa and words of one gender shall be held
to include the other gender as the context requires, (ii) the terms "hereof",
"herein", and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole (including all of
the Exhibits hereto) and not to any particular provision of this Agreement, and
Section, paragraph, Exhibit and Schedule references are to the Sections,
paragraphs, Exhibits and Schedules to this Agreement unless otherwise
specified, (iii) the word "including" and words of similar import when used in
this Agreement shall mean "including, without limitation," unless the context
otherwise requires or unless otherwise specified, (iv) the word "or" shall not
be exclusive, and (v) provisions shall apply, when appropriate, to successive
events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
12.12. EXECUTION IN COUNTERPARTS
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required. It shall not be necessary that the signatures
of, or on behalf of, each party, or that the signatures of all persons required
to bind any party, appear on each counterpart; but it shall be sufficient that
the signature of, or on behalf of, each party, or that the signatures of the
persons required to bind any party, appear on one or more of the counterparts.
All counterparts shall collectively constitute a single Agreement. It shall not
be necessary in making proof of this Agreement to produce or account for more
than a number of counterparts containing the respective signatures of, or on
behalf of, all of the parties hereto.
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12.13. LIMITATION ON BENEFITS
The covenants, undertakings and agreements set forth in this
Agreement shall be solely for the benefit of, and shall be enforceable only by,
the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
12.14. BINDING EFFECT
Subject to any provisions hereof restricting assignment, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, heirs, executors, administrators, legal
representatives and assigns.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or have caused this Agreement to be duly executed on their behalf, as
of the day and year first above written.
BUYER:
MINDSPRING ENTERPRISES, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
SELLER:
SPRY, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
AMERICA ONLINE, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
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<TABLE>
<CAPTION>
Exhibit Reference
- ------- ---------
<S> <C>
A Definitions
B Transition Plan
C Form of AIM Distribution Agreement
D Form of Opinion of Hogan & Hartson L.L.P.
E Form of Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
F Forms of Bill of Sale and Assignment of Assets, Assignment and Assumption
of Contracts and Leases, and Assumption Agreement
G Employee Retention Plan
H OEM Contracts
</TABLE>
<PAGE> 45
EXHIBIT A
TO ASSET PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 10, 1998
DEFINITIONS
"AFFILIATE" means: (a) with respect to a person, any member of such
person's family; (b) with respect to an entity, any officer, director,
stockholder, partner, member or investor of or in such entity or of or in any
Affiliate of such entity; and (c) with respect to a person or entity, any person
or entity which directly or indirectly, through one or more intermediaries,
Controls, is Controlled by, or is under common Control with such person or
entity.
"AGREEMENT" means this Asset Purchase Agreement entered into as of
the date hereof by and among Buyer, Seller and AOL.
"AIM DISTRIBUTION AGREEMENT' means that certain
promotion/distribution agreement between Buyer and AOL substantially in the form
attached hereto as Exhibit C.
"AOL" means America Online, Inc., a Delaware corporation.
"ASSETS" mean, collectively, all right, title, benefit and interest
of Seller in and to the following assets, rights, benefits and privileges, both
tangible and intangible (including without limitation, customer relationships
and reputation of Seller ("Goodwill")), wherever situated or located, owned,
leased, used, held for use or otherwise held by Seller in connection with the
Business, and shall include all such assets existing on the date of this
Agreement and all such assets acquired between that date and the Closing Date
included in the following list:
(a) all Subscriber Contracts;
(b) all OEM Contracts;
(c) the Lease of Seller's Network Operations Center at 2001 Sixth
Avenue, Seattle, Washington as more particularly described on
SCHEDULE 4.15;
(d) the Lease of Seller's Network Operations Center at 3535-128th
Avenue, S.E., Bellevue, Washington, as more particularly
described on SCHEDULE 4.15;
(e) the names "Spry" and "SpryNet";
(f) all Intellectual Property;
(g) all of the ownership rights to the Software (including auto
registration software), including, but not limited to, all
work currently being undertaken to upgrade and/or improve such
software;
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(h) all engineering, business and other books, papers, files and
records directly relating to the Business, including, but not
limited to, customer lists;
(i) all manufacturer's warranties with respect to the Assets, if
any, to the extent assignable; and
(j) all assets, rights, benefits and privileges set forth on
SCHEDULE 13.1 and any contract or agreement relating thereto.
"ASSUMED LIABILITIES" means the liabilities and obligations of
Seller set forth below:
(a) All liabilities and obligations of Seller relating to, arising
out of or under all contracts, agreements, permits and other instruments
transferred to Buyer pursuant to this Agreement, including, without limitation,
all Subscriber Contracts, OEM Contracts and the Leases, which liabilities or
obligations accrue on or after the Closing Date, or which liabilities or
obligations accrue prior to the Closing Date to the extent that they relate to
products, services or other benefits received by Buyer after the Closing Date;
(b) All liabilities and obligations relating to or arising out of or
under the Assets (including, without limitation, the ownership, use, operation
or control thereof) accruing on or after the Closing Date;
(c) All liabilities and obligations of Seller under the Employee
Retention Plan described on Exhibit G; and
(d) All liabilities and obligations relating to or arising out of
the transfer and transition (except for Seller's obligations under the
Transition Plan) of Closing Subscribers to Buyer and Buyer's other relations
with the Closing Subscribers as of and after the Closing Date.
"BASKET AMOUNT" has the meaning specified in SECTION 9.5.1.
"BUSINESS" has the meaning specified in the recitals.
"BUYER" means MindSpring Enterprises, Inc., a Delaware
corporation.
"BUYER DEFAULT" has the meaning specified in SECTION 11.2.
"CLOSING" means the closing of the purchase, assignment and sale
of the Assets contemplated hereunder.
"CLOSING DATE" means the time and date on which the Closing takes
place, as established by SECTION 8.1.
"CLOSING SUBSCRIBER" means a Subscriber as of the Closing Date who
is current in his or her payments to Seller as of the Closing Date and, with
respect to Subscribers other than SBS Subscribers and Subscribers to Seller's
Web-hosting services,
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has valid credit card information on file with Seller as of Seller's last
billing attempt (or credit card information believed to be valid with respect to
Trial Subscribers).
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT" has the meaning specified in SECTION 3.8.
"CONSENT DECREE" has the meaning specified in SECTION 3.17.
"CONTINUING SUBSCRIBER" means those Closing Subscribers who have
made two payments to Buyer as of the First Measurement Date (or in the case of
Trial Subscribers, as of the Second Measurement Date) and who have not, on or
before the First Measurement Date (or in the case of Trial Subscribers, on or
before the Second Measurement Date), notified either Buyer or Seller of their
intent to cancel service.
"CONTROL" means possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether through
ownership of voting securities, by Agreement or otherwise).
"DUE DILIGENCE" has the meaning specified in SECTION 3.3.
"EMPLOYEE RETENTION PLAN" means the plan for payment of bonuses to
Seller's employees as set forth on Exhibit G.
"ENCUMBRANCE" means any mortgage, lien, pledge, encumbrance,
security interest, deed of trust, option, encroachment, reservation, easement,
servitude, transfer restriction, order, decree, judgment, condition,
restriction, charge, claim or equity of any kind.
"ENVIRONMENTAL LAWS" means any Laws (including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act),
including any plans, other criteria, or guidelines promulgated pursuant to such
Laws, now or hereafter in effect relating to the generation, production,
installation, use, storage, treatment, transportation, release, threatened
release, or disposal of Hazardous Materials, or noise control, or the protection
of human health, safety, natural resources, animal health or welfare, or the
environment.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and all regulations promulgated pursuant thereto.
"FINAL PURCHASE PRICE CALCULATION" has the meaning specified in
SECTION 2.3(e).
"FIRST MEASUREMENT DATE" means a date to be agreed upon by Buyer and
Seller at the Closing that is not less than 15 and not more than 30 days after
the date on which Buyer issues its last invoice to the Closing Subscribers
(other than the Trial Subscribers) pursuant to the Transition Plan for the
second full billing cycle following the Closing Date, provided, however, if the
parties cannot agree to a date, the First Measurement Date shall be 30 days
after the date on which Buyer issues its last invoice to
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<PAGE> 48
the Closing Subscribers (other than the Trial Subscribers) pursuant to the
Transition Plan for the second full billing cycle following the Closing Date.
"FIRST PAYMENT" has the meaning specified in SECTION 2.3.
"GAAP" means United States generally accepted accounting
principles.
"GOVERNMENTAL AUTHORIZATION" means any (a) permit, license,
certificate, franchise, permission, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Entity or pursuant to any legal requirement; or
(b) right under any contract with any Governmental Entity.
"GOVERNMENTAL ENTITY" means any federal, state or local government
or any court, administrative or regulatory agency or commission or other
government authority or agency, domestic or foreign.
"HART-SCOTT-RODINO" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and all Laws promulgated pursuant thereto
or in connection therewith.
"HAZARDOUS MATERIALS" means any wastes, substances, radiation, or
materials (whether solids, liquids or gases): (i) which are hazardous, toxic,
infectious, explosive, radioactive, carcinogenic, or mutagenic; (ii) which are
or become defined as "pollutants," "contaminants," "hazardous materials,"
"hazardous wastes," "hazardous substances," "toxic substances," "radioactive
materials," "solid wastes," or other similar designations in, or otherwise
subject to regulation under, any Environmental Laws; (iii) the presence of which
on the real property cause or threaten to cause a nuisance pursuant to
applicable statutory or common law upon the real property or to adjacent
properties; (iv) which contain without limitation polychlorinated biphenyls
(PCBs), asbestos or asbestos-containing materials, lead-based paints,
urea-formaldehyde foam insulation, or petroleum or petroleum products
(including, without limitation, crude oil or any fraction thereof); or (v) which
pose a hazard to human health, safety, natural resources, industrial hygiene, or
the environment, or an impediment to working conditions.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" have the respective
meanings specified in SECTION 9.4.1.
"INITIAL PURCHASE PRICE CALCULATION" has the meaning specified
in SECTION 2.3(d).
"INTELLECTUAL PROPERTY" shall mean the following intellectual
property of Seller: (i) all inventions (whether patentable or unpatentable and
whether or not reduced to practice) and all patents, patent applications and
patent disclosures, (ii) all trademarks, service marks, trade dress, logos,
trade names, and corporate names (including without limitation domain names) and
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (iii) all copyrightable works, all copyrights
and maskworks and all applications, registrations and renewals in connection
therewith,(iv) all trade secrets and confidential information (including,
without limitation,
-iv-
<PAGE> 49
all ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, business and marketing plans and proposals and other information or
material within the definition of a "trade secret" as set forth in Section 1(4)
of the Uniform Trade Secrets Act (1995), (v) all computer programs (including,
without limitation, data and related documentation), (vi) all rights as a
licensee or authorized user of the intellectual property of any third party and
(vii) all copies and tangible embodiments of the foregoing in whatever form or
medium.
"IRS" means the Internal Revenue Service of the United States of
America.
"KNOWLEDGE" means, with respect to Buyer, the actual knowledge of
(i) Michael S. McQuary, President of Buyer and (ii) Michael G. Misikoff,
Chief Financial Officer of Buyer. "Knowledge" means, with respect to Seller
and AOL, the actual knowledge of (i) Mayo S. Stuntz, Jr., President of
CompuServe Interactive Services, (ii) Stuart White, President of Spry, Inc.
and (iii) Jay Rappaport, Vice President, Business Affairs of AOL.
"LAWS" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, rules, resolutions and orders, applicable to the
specified persons or entities and to the businesses and assets thereof
(including, without limitation, Laws relating to securities registration and
regulation; the sale, leasing, ownership or management of real property;
employment practices, terms and conditions, and wages and hours; building
standards, land use and zoning; safety, health and fire prevention; and
environmental protection, including Environmental Laws).
"LEASES" mean (i) the lease for Seller's main office location,
consisting of approximately 84,000 square feet of space at 3535-128th Avenue,
S.E., Bellevue, Washington as evidenced by a certain Lease Agreement dated
August 24, 1995, as amended, by and between Factoria Partnership and Seller, and
(ii) the lease for Seller's network operations center, consisting of
approximately 3,762 square feet of space at 2001 Sixth Avenue, Seattle,
Washington as evidenced by a certain Agreement of Lease dated September 30,
1994, as amended, by and between Sixth & Virginia Properties Corporation and
Seller.
"LOSSES" mean any and all demands, actions or causes of action,
suits, proceedings, investigations, arbitrations, assessments, losses, damages
(including diminution in value), liabilities, payments, obligations (including
those arising out of any action, such as any settlement or compromise thereof or
judgment or award therein) and the reasonable costs and expenses of an
Indemnified Party associated therewith, including, without limitation, interest,
penalties and reasonable attorneys' fees and disbursements.
"MATERIAL ADVERSE EFFECT" means any effect that has a material
adverse impact on the business, operations, properties, assets, liabilities,
condition (financial or otherwise) or prospects of such party or on the Assets,
as the case may be.
"NYSE" means the New York Stock Exchange.
"NASDAQ" means the Nasdaq Stock Market.
-v-
<PAGE> 50
"OEM CONTRACTS mean those contracts with original equipment
manufacturers set forth on Exhibit H.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past practices and prudent business operations.
"PURCHASE PRICE" has the meaning specified in SECTION 2.2.
"SECOND MEASUREMENT DATE" means a date to be agreed upon by Buyer
and Seller at the Closing that is not less than 15 and not more than 30 days
after the date on which Buyer issues its last invoice to the Trial Subscribers
pursuant to the Transition Plan for the second full billing cycle of such
Subscribers following the Closing Date, provided, however, if the parties cannot
agree to a date, the Second Measurement Date shall be 30 days after the date on
which Buyer issues its last invoice to the Trial Subscribers pursuant to the
Transition Plan for the second full billing cycle of such Subscribers following
the Closing Date.
"SBS SUBSCRIBER" means a Subscriber to one of Seller's Small
Business Services plans.
"SELLER" means Spry, Inc., a Washington corporation and a
wholly-owned subsidiary of AOL.
"SELLER BALANCE SHEET" has the meaning specified in SECTION 4.4.
"SELLER DEFAULT" has the meaning specified in SECTION 11.1.
"SELLER FINANCIAL STATEMENTS" has the meaning specified in
SECTION 4.4.
"SELLER TRANSACTION" has the meaning specified in SECTION 3.7.
"SOFTWARE" means that Intellectual Property set forth on SCHEDULE
13.2.
"SUBSCRIBER" means a subscriber to Seller's Internet access,
Web-hosting and/or domain services.
"SUBSCRIBER CONTRACTS" means all contracts for the provision of
Internet access services between Seller and all Closing Subscribers.
"TAXES" means all federal, state, local and foreign taxes
(including, without limitation, income, profit, franchise, sales, use, real
property, personal property, ad valorem, excise, employment, social security and
wage withholding taxes) and installments of estimated taxes, assessments,
deficiencies, levies, imposts, duties, withholdings, or other similar charges of
every kind, character or description imposed by any governmental authorities,
and any interest, penalties or additions to tax imposed thereon or in connection
therewith.
-vi-
<PAGE> 51
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"TRANSFER INSTRUMENTS" has the meaning specified in SECTION 8.2.
"TRANSITION PLAN" means that transition plan attached hereto as
Exhibit B.
"TRANSITION PAYMENT" has the meaning specified in the Transition
Plan.
"TRIAL SUBSCRIBERS" means those Closing Subscribers who receive
Seller's Internet access service for free on a trial basis as of the Closing
Date.
"UMPIRE" has the meaning specified in SECTION 2.3(g).
-vii-
<PAGE> 1
MindSpring Enterprises, Inc.
Ed Hansen
(404) 287-0893
[email protected]
MINDSPRING PURCHASES SPRYNET SUBSCRIBERS AND OTHER ASSETS
FROM AMERICA ONLINE, INC.
ATLANTA, GEORGIA, SEPTEMBER 10, 1998 - MindSpring Enterprises, Inc. (NASDAQ:
MSPG) today announced a definitive agreement with America Online, Inc. (NYSE:
AOL) to purchase the SPRYNET subscriber base of approximately 180,000 individual
Internet access customers in the United States and Canada and various assets
used in serving those customers, including customer support and network
operations facilities in Seattle, WA. MindSpring also acquires all rights held
by AOL to the " SPRYNET " name, as well as select software and equipment.
Charles Brewer, MindSpring's founder and chief executive officer, said,
"Acquiring SPRYNET's customers helps MindSpring continue on our quest to become
a major player in the telecommunications industry of the future. Serving the
consumer Internet segment with a high level of service, while maintaining
profitability, is one of our greatest strengths. We think that the SPRYNET
subscribers will be very impressed with MindSpring's dedication to making their
Internet experience the best possible, and our ability to make this transition
as seamless as possible for them."
America Online, Inc. acquired SPRYNET in February 1998, when it acquired
CompuServe Interactive Services, Inc.
Mayo Stuntz, President, CompuServe Interactive Services, Inc., added, "This
transaction allows us to realize our objective of finding a strategic
alternative for SPRYNET and represents a good value for America Online. It
enables us to focus exclusively on our core CompuServe Internet online brand. We
are confident that MindSpring will give SPRYNET customers a good home."
MindSpring expects to pay America Online between $35 million and $45 million in
cash in this transaction, with the final amount to be determined by the number
of subscribers who make the transition to MindSpring's service. The company
expects the transaction to be completed later this fall, subject to certain
customary closing conditions.
MindSpring is a leading Internet service provider focused on delivering
outstanding service and support to its customers. By following its core values
and beliefs, MindSpring is committed to doing an exceptional job of serving its
customers, its employees, its owners and its community. MindSpring's dial-up
subscribers can browse the World Wide Web, send electronic mail, participate in
informative online chats and access over 20,000 newsgroups. MindSpring offers
local Internet service in more than 375 locations throughout the United States.
MindSpring is also a leading provider of Web Hosting services and domain
registrations.
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