SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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): October 5, 1998
LYCOS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-27830 04-3277338
(State or other jurisdiction (Commission File (IRS Employer
ofincorporation or Number) Identification Number)
organization)
400-2 Totten Pond Road
Waltham, MA 02154
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (781) 370-2700
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Item 5. Other Events.
On October 5, 1998, Lycos, Inc., a Delaware corporation (the
"Company"), entered into an Agreement and Plan of Merger and Reorganization (the
"Agreement") by and among the Company, BF Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of the Company ("BFC"), Wired
Ventures, a Delaware corporation ("Wired"), and H. William Jesse, Louis Rossetto
and Paul J. Salem, as representatives of the shareholders of Wired providing for
the merger of BFC with and into Wired (the "Merger"). As a result of the Merger,
Wired will become a wholly-owned subsidiary of the Company.
In the Merger, all outstanding shares of common stock and preferred
stock of Wired will be exchanged for shares of Common Stock, par value $.01 per
share, of the Company (the "Lycos Common Stock") with an approximate value on
the closing of the transaction of $95 million (including approximately $12.5
million which will paid to the holders of options to purchase common stock of
Wired which are exercised prior to the closing of the transaction), subject to
certain adjustments, plus the amount of cash held by Wired on the date of the
closing of the transaction (subject to certain adjustments), which may be paid
to the shareholders of Wired in cash or shares of Lycos Common Stock, or any
combination thereof, at the option of the Company. The purchase price for the
outstanding shares of common stock and preferred stock of Wired may be increased
after the closing of the transaction in the event Wired receives certain tax
refunds or if certain amounts currently being held in escrow by Wired for the
benefit of a third party are returned to Wired, provided that such increase will
not exceed in the aggregate approximately $9.5 million.
The closing of the transaction is subject to a number of customary
conditions, including the Registration Statement on Form S-4 filed for purposes
of registering the shares of Lycos Common Stock issuable in the Merger being
declared effective by the Securities and Exchange Commission, approval of the
shareholders of Wired, approval under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and certain other regulatory filings and
approvals. The transaction is scheduled to close by December 31, 1998.
The acquisition will be accounted for as a purchase and is intended to
be a tax-free reorganization. The purchase price will be allocated to the assets
acquired and liabilities assumed based on their estimated fair values. Results
of operations for Wired will be included with those of the Company for periods
subsequent to the date of acquisition.
Under the terms of the Agreement, shares of Lycos Common Stock with an
approximate value of $9.5 million will be held in escrow for the purpose of
indemnifying the Company against certain liabilities of Wired and its
stockholders. The escrow will expire on the first anniversary of the closing of
the transaction.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a)-(b) Not applicable.
(c) Exhibits
2.1 Agreement and Plan of Merger and Reorganization dated
as of October 5, 1998 by and among Lycos, Inc., BF
Acquisition Corp., Wired Venture, Inc. , and H.
William Jesse, Louis Rossetto and Paul J. Salem, as
representatives of of the shareholders of Wired.
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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.
LYCOS, INC.
Dated: October 20, 1998 By: /s/ Edward M. Philip
--------------------
Edward M. Philip
Chief Operating Officer and
Chief Financial Officer
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and among
LYCOS, INC.,
a Delaware corporation,
BF ACQUISITION CORP.,
a Delaware corporation,
WIRED VENTURES, INC.,
a Delaware corporation,
and
H. WILLIAM JESSE, JR., LOUIS ROSSETTO AND PAUL J. SALEM
As Stockholder Representatives
- 1 -
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ARTICLE 1
DESCRIPTION OF TRANSACTION.......................................- 2 -
1.1 Merger of Acquisition Sub into Ventures.................- 2 -
1.2 Effect of the Merger....................................- 3 -
1.3 Closing; Effective Time.................................- 3 -
1.4 Certificate of Incorporation and Bylaws;
Directors and Officers................................- 3 -
1.5 Merger Consideration....................................- 3 -
1.6 Effect on Capital Stock.................................- 8 -
1.7 Dissenting Shares......................................- 11 -
1.8 Exchange of Certificates...... ........................- 12 -
1.9 Tax Consequences. ....................................- 14 -
1.10 Accounting Consequences................................- 14 -
1.11 Further Action.........................................- 14 -
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF VENTURES......................- 14 -
2.1 Organization, Standing, Etc. of the Wired Companies;
Corporate Authorization; Enforceability..............- 15 -
2.2 Wired Companies; Title to Wired Companies'
Shares, Etc..........................................- 15 -
2.3 Capitalization of Ventures.............................- 16 -
2.4 Certificate of Incorporation and Bylaws................- 16 -
2.5 Compliance with Other Instruments and Laws.............- 16 -
2.6 Governmental Authorizations and Consents...............- 17 -
2.7 No Violations..........................................- 17 -
2.8 Financial Statements...................................- 18 -
2.9 Absence of Certain Changes or Events...................- 18 -
2.10 Title to Assets........................................- 20 -
2.11 Intellectual Property..................................- 20 -
2.12 Benefit Plans..........................................- 21 -
2.13 Litigation.............................................- 24 -
2.14 Taxes..................................................- 25 -
2.15 Contracts..............................................- 27 -
2.16 Insurance..............................................- 28 -
2.17 Environmental Quality..................................- 28 -
2.18 Brokers................................................- 29 -
2.19 Statements; Proxy Statement/Prospectus.................- 29 -
2.20 Governmental Permits...................................- 30 -
2.21 Major Customers........................................- 30 -
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2.22 Traffic................................................- 30 -
2.23 Accounts Receivable....................................- 31 -
2.24 Bank Accounts; Powers of Attorney......................- 31 -
2.25 Minute Books, Etc......................................- 31 -
2.26 Company Action.........................................- 31 -
2.27 Disclosure.............................................- 32 -
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
AND ACQUISITION SUB.............................................- 32 -
3.1 Organization and Standing of Purchaser.................- 32 -
3.2 Charter and Bylaws.....................................- 32 -
3.3 Capitalization of Purchaser............................- 32 -
3.4 Authorization..........................................- 32 -
3.5 Enforceability.........................................- 33 -
3.6 Compliance with Other Instruments and Laws.............- 33 -
3.7 Governmental Authorizations and Consents...............- 34 -
3.8 Litigation.............................................- 34 -
3.9 Brokers................................................- 34 -
3.10 Public Filings.........................................- 34 -
3.11 Statements; Proxy Statement/Prospectus.................- 35 -
3.12 Ownership of Ventures Stock............................- 36 -
3.13 Material Adverse Effect................................- 36 -
ARTICLE 4
COVENANTS OF VENTURES...........................................- 36 -
4.1 Conduct of Business....................................- 36 -
4.2 Access.................................................- 38 -
4.3 No-Shop Provision......................................- 38 -
4.4 Meeting of Stockholders................................- 39 -
4.5 Consent of Ventures' Stockholders to Certain Payments..- 39 -
ARTICLE 5
COVENANTS OF PURCHASER AND ACQUISITION SUB......................- 39 -
5.1 Confidentiality........................................- 39 -
5.2 Investigation..........................................- 40 -
5.3 Employees..............................................- 40 -
5.4 Indemnification........................................- 40 -
5.5 Stock Options and Warrants.............................- 41 -
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5.6 Nasdaq National Market.................................- 42 -
5.7 Advance Agreement......................................- 42 -
5.8 Tax Refund Amount......................................- 43 -
ARTICLE 6
COVENANTS OF ALL PARTIES........................................- 43 -
6.1 Best Efforts; Further Assurances.......................- 43 -
6.2 Certain Filings........................................- 43 -
6.3 Public Announcements...................................- 44 -
6.4 Tax Returns............................................- 44 -
6.5 Proxy Statement and Registration Statements............- 46 -
6.6 Tax-Free Reorganization................................- 47 -
6.7 Tax Representation Letters.............................- 47 -
6.8 Marketing Program Funding..............................- 47 -
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF PURCHASER
AND ACQUISITION SUB TO CLOSE...................................- 47 -
7.1 Accuracy of Representations and Warranties.............- 48 -
7.2 Performance............................................- 48 -
7.3 Certificate............................................- 48 -
7.4 Employment Agreements..................................- 48 -
7.5 No Injunction..........................................- 48 -
7.6 HSR Act................................................- 48 -
7.7 Legal Opinion..........................................- 48 -
7.8 Stockholder Approval...................................- 48 -
7.9 Consents...............................................- 48 -
7.10 Escrow Agreement.......................................- 49 -
7.11 Resignations...........................................- 49 -
7.12 Appraisal Rights.......................................- 49 -
7.13 Termination of Agreements..............................- 49 -
7.14 Form S-4 Registration Statement........................- 49 -
7.15 Tax Opinion............................................- 49 -
7.16 Quotation on Nasdaq National Market....................- 49 -
7.17 Consent of Ventures' Stockholders to Certain Payments..- 49 -
ARTICLE 8
CONDITIONS TO OBLIGATION OF VENTURES TO CLOSE...................- 50 -
8.1 Accuracy of Representations and Warranties.............- 50 -
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8.2 Performance............................................- 50 -
8.3 Certificate............................................- 50 -
8.4 No Injunction..........................................- 50 -
8.5 HSR Act................................................- 50 -
8.6 Consents...............................................- 51 -
8.7 Legal Opinion..........................................- 51 -
8.8 Stockholder Approval...................................- 51 -
8.9 Tax Opinion............................................- 51 -
8.10 Form S-4 Registration Statement........................- 51 -
8.11 Quotation on Nasdaq National Market....................- 51 -
ARTICLE 9
TERMINATION.....................................................- 51 -
9.1 Right to Terminate Agreement...........................- 51 -
9.2 Effect of Termination..................................- 52 -
9.3 Failure to Close.......................................- 52 -
ARTICLE 10
ADJUSTMENT PROCEDURES...........................................- 53 -
10.1 Preparation of Final Closing Balance Sheet.............- 53 -
10.2 Adjustment of Escrow Fund..............................- 55 -
ARTICLE 11
CERTAIN REMEDIES AND LIMITATIONS................................- 56 -
11.1 Expiration of Representations, Warranties and Covenants- 56 -
11.2 Escrow Fund............................................- 56 -
11.3 Indemnification by Purchaser...........................- 57 -
11.4 Defense of Third Party Actions.........................- 57 -
11.5 Subrogation; No Contribution...........................- 59 -
11.6 Exclusivity............................................- 59 -
11.7 Retention of Records...................................- 59 -
11.8 Notice as to Representations...........................- 59 -
11.9 No Rescission..........................................- 60 -
ARTICLE 12
MISCELLANEOUS...................................................- 60 -
12.1 Material Adverse Effect................................- 60 -
12.2 Knowledge of Ventures..................................- 60 -
12.3 Memorandum; Disclaimer of Projections..................- 60 -
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12.4 Expenses...............................................- 60 -
12.5 Notices................................................- 62 -
12.6 Assignment.............................................- 64 -
12.7 Entire Agreement; Amendment; Governing Law; Etc........- 64 -
12.8 Counterparts...........................................- 64 -
12.9 Venue..................................................- 65 -
12.10 Third-Party Rights.....................................- 65 -
12.11 Titles and Headings....................................- 65 -
12.12 Exhibits and Schedules.................................- 65 -
12.13 Pronouns...............................................- 65 -
12.14 Severability...........................................- 65 -
12.15 Time of Essence........................................- 65 -
12.16 Interpretation.........................................- 65 -
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TABLE OF EXHIBITS
Exhibit Description
A Forms of Voting Agreement
B Form of Tax Representation Letter of Ventures
C Form of Tax Representation Letter of Purchaser
D Form of Employment Agreement
E Form of Nondisclosure and Developments Agreement
F Opinion of Cooley Godward LLP
G Form of Escrow Agreement
H Opinion of Hutchins, Wheeler & Dittmar
vi
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AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
This Agreement And Plan Of Merger And Reorganization (this "Agreement")
is entered into as of October 5, 1998 by and among Lycos, Inc., a Delaware
corporation ("Purchaser"), BF Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of Purchaser ("Acquisition Sub"), Wired Ventures, Inc.,
a Delaware corporation ("Ventures"), and H. William Jesse, Jr., Louis Rossetto
and Paul J. Salem, as Stockholder Representatives (as defined below).
RECITALS
A. Purchaser, Acquisition Sub and Ventures intend to effect a merger of
Acquisition Sub into Ventures in accordance with this Agreement and applicable
laws (the "Merger"). Upon consummation of the Merger, Acquisition Sub will cease
to exist, and Ventures will become a wholly-owned subsidiary of Purchaser.
B. The respective boards of directors of Purchaser, Acquisition Sub and
Ventures have adopted this Agreement and approved the Merger.
C. As a condition and inducement to Purchaser's willingness to enter
into this Agreement, certain stockholders of Ventures have, concurrently with
the execution of this Agreement, executed and delivered to Purchaser a Voting
Agreement in one of the forms attached hereto as Exhibit A, pursuant to which
such stockholders have agreed to vote their shares of Ventures' capital stock in
favor of the Merger and to grant Purchaser irrevocable proxies to vote such
shares.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
ARTICLE 1
DESCRIPTION OF TRANSACTION
1.1 Merger of Acquisition Sub into Ventures. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as defined
in Section 1.3), Acquisition Sub shall be merged with and into Ventures, and the
separate existence of
<PAGE>
Acquisition Sub shall cease. Ventures will continue as the surviving corporation
in the Merger (the Surviving Corporation").
1.2 Effect of the Merger. The Merger shall have the effects set forth
in this Agreement and in the applicable provisions of the Delaware General
Corporation Law ("DGCL") and other applicable law.
1.3 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, One Maritime Plaza, 20th Floor, San Francisco,
California, at 10:00 a.m. on a date to be agreed by Purchaser and Ventures (the
"Closing Date"), which shall be no later than the third business day after the
satisfaction or waiver of the conditions set forth in Articles 7 and 8.
Contemporaneously with the Closing, a properly executed agreement of merger or
certificate of merger conforming to the requirements of the DGCL shall be filed
with the Secretary of State of the State of Delaware. The Merger shall take
effect at the time such agreement of merger or certificate of merger is filed
with the Secretary of State of the State of Delaware (the "Effective Time").
1.4 Certificate of Incorporation and Bylaws; Directors and
Officers. Unless otherwise agreed by Purchaser and Ventures prior to the
Effective Time:
(a) the Certificate of Incorporation of Ventures, as amended
by the agreement of merger or the certificate of merger, as the case may be,
shall be the Certificate of Incorporation of the Surviving Corporation;
(b) the Bylaws of Acquisition Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation;
(c) the directors of the Surviving Corporation immediately
after the Effective Time shall be the individuals who are directors of
Acquisition Sub immediately prior to the Effective Time; and
(d) the officers of the Surviving Corporation immediately
after the Effective Time shall be the individuals who are officers of
Acquisition Sub immediately prior to the Effective Time.
1.5 Merger Consideration.
2
<PAGE>
(a) The consideration to be paid by Purchaser in the Merger
(the "Merger Consideration") shall consist of the Merger Shares (as hereinafter
defined), the Cash Portion (as hereinafter defined), the Tax Refund Amount (as
hereinafter defined) and the Advance Escrow Amount (as hereinafter defined).
(b) For purposes of this Agreement:
(1) The term "Merger Shares" shall mean a number
of shares of Common Stock of Purchaser, $.01 par value per share ("Purchaser
Common Stock"), rounded to the nearest full share, equal to the Aggregate Share
Value (as hereinafter defined) divided by the Average Closing Stock Price (as
hereinafter defined).
(2) The term "Aggregate Share Value" shall mean
(i) $95 million, (ii) plus Wired Cash at Closing, (iii) minus Wired Borrowings
at Closing, (iv) minus Wired Adjusted Working Capital Shortfall at Closing, (v)
minus the Closing Expense Adjustment Amount (as such terms are hereinafter
defined); provided, however, that (x) the Aggregate Share Value may be
decreased, and the Cash Portion increased, by such amount, if any (not to exceed
Wired Cash at Closing), as Purchaser may specify no later than the third trading
day preceding the Effective Time (as hereinafter defined), and (y) to the extent
the Merger Shares would otherwise exceed 19.9% of the outstanding capital stock
of Purchaser as of the Closing Date, the Aggregate Share Value shall be
decreased and the Cash Portion shall be correspondingly increased.
Notwithstanding the foregoing, the Aggregate Share Value shall not be decreased
if and to the extent such decrease would result in the Cash Value exceeding
twenty percent (20%) of the Total Value. For purposes hereof, "Cash Value" shall
mean the sum of (i) the Cash Portion plus (ii) $9.8 million plus (iii) the
dollar amount of the cash to be paid with respect to fractional shares pursuant
to Section 1.6(e) plus (iv) two multiplied by the cash amount which would have
been paid to the holders of Dissenting Shares (as defined in Section 1.7) if
such holders had not dissented plus (v) two multiplied by the amount equal to
(A) the number of shares of Purchaser Common Stock which would have been issued
to the holders of Dissenting Shares if such holders had not dissented multiplied
by (B) the closing price of Purchaser Common Stock on the trading date
immediately prior to the Effective Time. For purposes hereof, "Total Value"
shall mean (x) the number of shares of Purchaser Common Stock issued to the
holders of Ventures Common Stock, Ventures Series A Preferred, Ventures Series B
Preferred and Ventures Series C Preferred pursuant to Section 1.6 (other than to
the holders of Dissenting Shares and other than such shares as are placed in the
Escrow Fund pursuant to Section 1.6(d)) multiplied by the closing price of
Purchaser Common Stock on the trading date immediately prior to the Effective
Time plus (y) the Cash Value. Immediately following the close of trading on the
trading date immediately prior to the Effective Time (or the business day
immediately prior to the Effective
3
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Time, if later), Purchaser will calculate the Aggregate Share Value and provide
such calculation to Ventures in writing.
(3) The term "Average Closing Stock Price" shall mean
the average of
the closing prices of one share of Purchaser Common Stock for the 20 consecutive
most recent days that Purchaser Common Stock has traded on the Nasdaq National
Market ("NNM") ending on the third trading day preceding the Effective Time, as
reported on the NNM; provided, however, that the Average Closing Stock Price
shall not be greater than $42.86 (the "Upper Collar Limit") or less than $20.64
(the "Lower Collar Limit").
(4) The term "Advance Escrow Amount" shall mean
any and all amounts that are delivered to or for the benefit of Ventures at any
time, or from time to time, pursuant to the escrow arrangements (the "Advance
Escrow") established under Section 10.2(b) of that certain Asset Purchase
Agreement dated as of May 7, 1998 among Advance Magazine Publishers Inc.,
Ventures, Wired Magazine Group, Inc., Wired Digital, Inc., Wired Books, Inc.,
Wired Television, Inc. and The Chase Manhattan Bank, as Escrow Agent (the
"Advance Agreement"), less any portion of such amounts that is required to be
delivered to Purchaser pursuant to Section 10.2 below.
(5) The term "Cash Portion" shall mean the cash
amount equal to (i)
$95 million, (ii) plus Wired Cash at Closing, (iii) minus Wired Borrowings at
Closing, (iv) minus Wired Adjusted Working Capital Shortfall at Closing, (v)
minus the Closing Expense Adjustment Amount, (vi) minus the Aggregate Share
Value.
(6) The term "Common Share Value" shall mean
$12,538,700.
(7) The term "Closing Expense Adjustment Amount"
shall mean any
amounts in excess of $2.5 million paid or payable by Ventures at or prior to the
Closing pursuant to Section 12.4.
(8) The term "Series A Share Value" shall mean
78.8% of the Residual Share Value (as hereinafter defined).
(9) The term "Series B Share Value" shall mean
$20.00 times the number of shares of Ventures Series B Preferred Stock (as
hereinafter defined) outstanding immediately prior to the Effective Time.
(10) The term "Series C Share Value" shall mean the
sum of:
4
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(i) $5.71 times the number of shares of
Ventures Series C Preferred Stock (as hereinafter defined) outstanding
immediately prior to the Effective Time (the "Series C Liquidation Value");
(ii) all Series C Accrued Dividends (as
hereinafter defined);
(iii) 26.903553% of the Series B Share
Value (the "Series C/B Participation Value"); and
(iv) 21.2% of the Residual Share Value (as
hereinafter defined).
(11) The term "Series C Accrued Dividends" shall mean
the sum of (i)
$1,718,829 and (ii) $5,085.85 times the number of calendar days in the period
beginning January 1, 1998 and ending the day prior to the Closing Date.
(12) The term "Residual Share Value" shall mean the
Aggregate Share
Value less the sum of (i) the Common Share Value, (ii) the Series B Share Value,
(iii) the Series C Liquidation Value, (iv) the Series C Accrued Dividends and
(v) the Series C/B Participation Value.
(13) The term "Tax Refund Amount" shall mean the cash
amount equal
to the federal and state tax refunds actually received by Purchaser with respect
to the Wired Companies' pre-Closing tax periods, including without limitation
refunds generated by the carryback of losses of any of the Wired Companies
following the Closing, less any fees and expenses incurred by Purchaser in
connection with the receipt of such refunds by Purchaser; provided, however,
that such net amount shall not exceed $5 million. Notwithstanding the foregoing,
the $5 million amount shall be reduced by the tax effect on Purchaser or the
Wired Companies of the disallowance of any deduction claimed by Ventures or the
Wired Companies with respect to pre-Closing tax periods, but such amount shall
not constitute a Loss for purposes of Article 11 of this Agreement to the extent
of such reduction. The computation of refunds generated by the carryback of
losses of any of the Wired Companies following the Closing shall include all
refunds that would reasonably be available if Purchaser had prepared its
post-Closing tax returns and made its tax elections in a manner so as to
maximize the dollar value of such refunds, determined solely with regard to the
operations of the acquired Wired Companies on a stand-alone basis.
(14) "Wired Cash at Closing" shall mean all cash and
cash equivalents
of the Wired Companies as of the Closing (including any cash held by Ventures
that represents the exercise price of stock options exercised for cash after the
date hereof), as reflected on the
5
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Preliminary Closing Balance Sheet (as hereinafter defined), minus an amount of
cash sufficient to fund Ventures' obligation to pay the amounts identified on
Schedule 1.5 (the "Cash Exclusions"); provided, however, that for purposes of
calculating Wired Cash at Closing, Ventures shall be deemed to hold an
incremental amount of cash equal to the sum of (A) the Marketing Program Funding
Amount described in Section 6.8, (B) any amounts paid by Ventures at or prior to
the Closing pursuant to Section 12.4, and (C) the aggregate exercise price of
all stock options presently held by or hereafter granted to employees of the
Wired Companies (but not non-employees), as described in Schedule 2.3, to the
extent such stock options are either held unexercised at the Closing Date or
net-exercised between the date hereof and the Closing Date.
(15) "Wired Borrowings at Closing" shall mean all
indebtedness for borrowed money of the Wired Companies as of the Closing, as
reflected on the Preliminary Closing Balance Sheet. Obligations under
capitalized leases shall not constitute Wired Borrowings at Closing.
(16) "Wired Adjusted Working Capital Shortfall at
Closing" shall mean
the absolute value of the difference between (i) $432,172 and (ii) the adjusted
working capital (i.e., current assets less current liabilities) of the Wired
Companies as of the Closing, as reflected on the Preliminary Closing Balance
Sheet; provided, however, that, for the purpose of calculating Wired Adjusted
Working Capital Shortfall at Closing only, Wired Cash at Closing (together with
the offsetting Cash Exclusions) and Wired Borrowings at Closing shall be
disregarded, and no amounts payable by Ventures pursuant to Section 12.4 at or
prior to the Closing shall be deemed to be a current liability. Notwithstanding
the foregoing, Wired Adjusted Working Capital Shortfall at Closing shall be zero
if the adjusted working capital described in subparagraph (ii) above is $432,172
or greater.
(17) The final result (but not interim results)
of all calculations of fractions, ratios and percentages shall be rounded to
six (6) decimal places.
(c) Not later than ten (10) business days prior to the
Closing, Ventures shall prepare in good faith and deliver to Purchaser an
estimated consolidated balance sheet of Ventures and the other Wired Companies
as of the Closing Date (the "Preliminary Closing Balance Sheet"). Except for the
fact that it is based on estimates and the absence of footnotes, the Preliminary
Closing Balance Sheet shall be prepared in accordance with U.S. generally
accepted accounting principles ("GAAP") on a basis consistent with that used in
the preparation of the Financial Statements (as hereinafter defined). Based on
the Preliminary Closing Balance Sheet, Ventures shall calculate Wired Cash at
Closing and Wired Adjusted Working Capital Shortfall at Closing, and Ventures
shall deliver such calculations to Purchaser with the
6
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Preliminary Closing Balance Sheet. Within five (5) business days after such
delivery, Purchaser shall concur in such Preliminary Closing Balance Sheet and
calculations or deliver to Ventures its proposed alternatives thereto. If
Ventures and Purchaser cannot agree within two (2) business days on the
appropriate values for Wired Cash at Closing and Wired Adjusted Working Capital
Shortfall at Closing, then Ventures and Purchaser shall submit their respective
proposed values to Arthur Andersen LLP, who shall be asked to select, for each
of such items, either Ventures' or Purchaser's proposed value as the more
correct value in accordance with the standards set forth herein. If both values
proposed by one of the parties are selected, the other party shall pay the fees
and expenses of Arthur Andersen LLP; otherwise such fees and expenses shall be
shared equally between the parties. The conditions to Closing set forth in
Articles 7 and 8 shall be deemed not to have been met until after the
determination of Wired Cash at Closing and Wired Adjusted Working Capital
Shortfall at Closing.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any further action on the part of Purchaser, Acquisition Sub,
Ventures or any stockholder of Ventures or of Acquisition Sub all outstanding
shares of capital stock of Ventures, calculated on a fully-diluted,
fully-converted basis as though all convertible debt and equity securities and
options (whether vested or unvested) and warrants had been converted or
exercised immediately prior to the Effective Time, shall be converted into, or
exchanged for, the Merger Consideration, which shall be allocated as follows:
(a) Conversion of Shares.
(1) Each share of Common Stock, $0.001 par
value per share (the "Ventures Common Stock"), issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares (as
defined in Section 1.8)) will be canceled and extinguished and automatically
converted into that fraction of a share of the Purchaser Common Stock equal to
the Common Share Value divided by the product of (A) the total number of shares
of Ventures Common Stock outstanding on a fully-diluted, fully-converted basis
as though all convertible debt and equity securities (excluding Ventures Series
A Preferred Stock, Ventures Series B Preferred Stock and Ventures Series C
Preferred Stock) and options (whether vested or unvested) and warrants which are
convertible into or exercisable for Ventures Common Stock had been converted
into or exercised for Ventures Common Stock immediately prior to the Effective
Time (the "Fully-diluted Common Shares Outstanding") and (B) the Average Closing
Stock Price.
(2) Each share of Series A Preferred Stock,
$0.001 par value per share (the "Ventures Series A Preferred Stock"), issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares) will be canceled and extinguished and automatically converted into:
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(i) that fraction of a share of
Purchaser Common Stock equal to the Series A Share Value divided by the product
of (A) the total number of shares of Ventures Series A Preferred Stock
outstanding on a fully-diluted, fully-converted basis as though all convertible
debt and warrants which are convertible into or exercisable for Ventures Series
A Preferred Stock had been converted into or exercised for Ventures Series A
Preferred Stock immediately prior to the Effective Time (the "Fully-diluted
Series A Shares Outstanding") and (B) the Average Closing Stock Price;
(ii) the right to receive that fraction
of the Advance Escrow Amount equal to 0.788 divided by the number of
Fully-diluted Series A Shares Outstanding;
(iii) the right to receive that fraction
of the Cash Portion equal to 0.788 divided by the number of Fully-diluted
Series A Shares Outstanding; and
(iv) the right to receive that fraction
of the Tax Refund Amount equal to 0.788 divided by the number of Fully-diluted
Series A Shares Outstanding.
(3) Each share of Series B Preferred Stock,
$0.001 par value per share (the "Ventures Series B Preferred Stock"), issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares) will be canceled and extinguished and automatically converted into that
fraction of a share of Purchaser Common Stock equal to the Series B Share Value
divided by the product of (A) the total number of shares of Ventures Series B
Preferred Stock outstanding on a fully-diluted, fully-converted basis as though
all convertible debt and warrants which are convertible into or exercisable for
Ventures Series B Preferred Stock had been converted into or exercised for
Ventures Series B Preferred Stock immediately prior to the Effective Time and
(B) the Average Closing Stock Price.
(4) Each share of Series C Preferred Stock,
$0.001 par value per share (the "Ventures Series C Preferred Stock"), issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares) will be canceled and extinguished and automatically converted into:
(i) that fraction of a share of
Purchaser Common Stock equal to the Series C Share Value divided by the product
of (A) the total number of shares of Ventures Series C Preferred Stock
outstanding on a fully-diluted, fully-converted basis as though all convertible
debt and warrants which are convertible into or exercisable for Ventures Series
C Preferred Stock had been converted into or exercised for
Ventures Series C Preferred Stock immediately prior to the Effective Time
(the "Fully-diluted Series C Shares Outstanding") and (B) the Average
Closing Stock Price;
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(ii) the right to receive that fraction
of the Advance Escrow Amount equal to 0.212 divided by the number of
Fully-diluted Series C Shares Outstanding;
(iii) the right to receive that fraction
of the Cash Portion equal to 0.212 divided by the number of Fully-diluted
Series C Shares Outstanding; and
(iv) the right to receive that fraction
of the Tax Refund Amount equal to 0.212 divided by the number of Fully-diluted
Series C Shares Outstanding.
(b) Stock Options and Warrants. At the Effective Time, all
Options (as defined in Section 2.3) and all Warrants (as defined in Section 2.3)
will be assumed by Purchaser in accordance with Section 5.6.
(c) Capital Stock of Acquisition Sub. Each share of Common
Stock, $0.01 par value per share, of Acquisition Sub (the "Acquisition Sub
Common Stock") issued and outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and nonassessable share
of Common Stock, $0.01 par value per share, of the Surviving Corporation. At and
after the Effective Time, each certificate evidencing ownership of shares of
Acquisition Sub Common Stock shall evidence ownership of such shares of capital
stock of the Surviving Corporation.
(d) Escrow. At the Closing, on behalf of the holders of the
outstanding Ventures Capital Stock, Options and Warrants and pursuant to Article
11, Purchaser shall deposit with State Street Bank and Trust Company (the
"Escrow Agent"): (1) that number of shares of Purchaser Common Stock
representing 10% of the total number of shares of Purchaser Common Stock
issuable pursuant to Section 1.6(a), less 10% of that number of shares obtained
by dividing the amount of Wired Cash at Closing (less the amount of Cash Portion
increase, if any, specified by Purchaser pursuant to proviso (x) of Section
1.5(b)(2)) by the Average Closing Stock Price; and (2) instruments or other
documentation representing Options and Warrants to purchase 10% of the shares of
Purchaser Common Stock issuable upon the exercise thereof (collectively, the
"Escrow Shares"). The portion of the Escrow Shares deemed to have been
contributed on behalf of each holder of Ventures Capital Stock, Options and
Warrants shall be determined as follows:
(1) Each of the holders of Ventures Common
Stock (including holders of Options and Warrants to purchase Ventures Common
Stock) shall be deemed to have contributed 10% of the aggregate number of shares
of Purchaser Common Stock (including Purchaser Common Stock issuable upon
exercise of such Options and Warrants) to which each such holder is entitled
under Sections 1.6(a) and 5.6.
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(2) Of the balance of the Escrow Shares:
(i) 78.8% shall be deemed to have been
contributed on behalf of the holders of Ventures Series A Preferred Stock
(including holders of Options and Warrants to purchase Ventures Series A
Preferred Stock) in proportion to the aggregate number of shares of Purchaser
Common Stock (including Purchaser Common Stock issuable upon exercise of such
Options and Warrants) to which each such holder is entitled under Sections
1.6(a) and 5.6; and
(ii) 21.2% shall be deemed to have been
contributed on behalf of the holders of Ventures Series C Preferred Stock
(including holders of Options and Warrants to purchase Ventures Series C
Preferred Stock) in proportion to the aggregate number of shares of Purchaser
Common Stock (including Purchaser Common Stock issuable upon exercise of such
Options and Warrants) to which each such holder is entitled under Sections
1.6(a) and 5.6.
(e) Fractional Shares. No fraction of a share of Purchaser
Common Stock will be issued by virtue of the Merger, but in lieu thereof each
holder of shares of Ventures Common Stock, Ventures Series A Preferred Stock,
Ventures Series B Preferred Stock or Ventures Series C Preferred Stock
(collectively, the "Ventures Capital Stock") (after aggregating all fractional
shares of Purchaser Common Stock that otherwise would be received by such
holder) shall receive from Purchaser an amount of cash (rounded to the nearest
whole cent) equal to the product of (1) such fraction and (2) the Average
Closing Stock Price.
(f) Adjustments to Exchange Ratios. If, between the date of
this Agreement and the Effective Time, the outstanding shares of Purchaser
Common Stock or Ventures Capital Stock (or any class or series thereof) are
changed into a different number or class of shares by reason of any stock
dividend, subdivision, reclassification, recapitalization, split-up, combination
or similar transaction, the exchange ratios for the Ventures Capital Stock set
forth in Section 1.6(a)(1) through (4) above and, in the case of changes in the
Purchaser Common Stock, the Upper Collar Limit and the Lower Collar Limit shall
be appropriately adjusted. With respect to the Escrow Shares, if, between the
Effective Time and the date of termination of the Escrow Fund, the outstanding
shares of Purchaser Common Stock are changed into a different number or class of
shares by reason of any stock dividend, subdivision, reclassification,
recapitalization, split-up, combination or similar transaction, the number and
type of Escrow Shares shall be appropriately adjusted.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, the shares of any holder of Ventures Capital Stock who (1) has the
right under applicable law to
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demand dissenter's or appraisal rights for such shares, (2) has demanded and
perfected such rights under applicable law and (3) as of the Effective Time, has
not effectively withdrawn or lost such rights ("Dissenting Shares"), shall not
be converted into Purchaser Common Stock pursuant to Section 1.6(a), but the
holder thereof shall only be entitled to such rights as are granted by
applicable law.
(b) Notwithstanding the foregoing, if any holder of shares of
Ventures Capital Stock who has the right under applicable law to demand and who
does demand appraisal of such shares under applicable law shall effectively
withdraw or lose (through failure to perfect or otherwise) the right to
appraisal, then, as of the later of the Effective Time and the occurrence of
such event, such holder's shares shall automatically be converted into and
represent only Purchaser Common Stock in accordance with Section 1.6(a).
(c) Ventures shall give Purchaser (1) prompt written notice of
any written demands for appraisal, withdrawals of demands for appraisal and any
other instruments served on Ventures pursuant to applicable law and (2) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under applicable law. Ventures will not voluntarily make any
payment with respect to any demands for appraisal and will not, except with the
prior written consent of Purchaser, settle or offer to settle any such demands.
It is understood and agreed that the obligation to make any payment under
applicable law shall be exclusively that of the surviving corporation and that
Purchaser (i) shall be under no obligation to perform and discharge any such
obligation or to reimburse or make any contribution to the capital of the
surviving corporation to enable it to perform or discharge any such obligation,
and (ii) shall have no recourse pursuant to Article 11 of this Agreement or
otherwise against the Wired Companies or their affiliates or stockholders with
respect to any such demands or obligation.
1.8 Exchange of Certificates.
(a) Boston EquiServe, Purchaser's transfer agent, shall serve
as an exchange agent in the Merger (the "Exchange Agent").
(b) At the Effective Time, Purchaser shall (1) authorize the
Exchange Agent to make available in accordance with this Article 1 the shares of
Purchaser Common Stock issuable pursuant to Section 1.6(a) in exchange for
outstanding shares of Ventures Capital Stock and (2) deliver to the Exchange
Agent cash in an amount sufficient for payment in lieu of fractional shares
pursuant to Section 1.6(e).
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(c) No later than three (3) business days prior to the mailing
date of the notice of meeting of stockholders (or written consent of
stockholders in lieu of meeting), Purchaser shall provide Ventures with copies
of the following materials: (1) a letter of transmittal in customary form and
(2) instructions for use in effecting the surrender of Ventures certificates and
(3) any other documents required to be signed by a holder of a certificate or
certificates (the "Ventures Certificates") that immediately prior to the
Effective Time represented outstanding shares of Ventures Capital Stock that
were converted into shares of Purchaser Common Stock pursuant to Section 1.6(a)
and cash in lieu of any fractional shares pursuant to Section 1.6(e) in order to
surrender such Ventures Certificates in exchange for certificates representing
the Purchaser Common Stock pursuant to Section 1.6(a) and cash in lieu of any
fractional shares pursuant to Section 1.6(e). Holders of Ventures Certificates
who complete and validly execute and submit such documents in accordance with
the instructions thereto, together with such Ventures Certificates (or affidavit
of loss and indemnity in accordance with Section 1.8(e) below), to Purchaser at
the Closing shall be deemed to have effected a surrender of such Ventures
Certificates to the Exchange Agent for cancellation in accordance with the
requirements of Section 1.8(d) below. Promptly after the Effective Time, but in
no event later than ten (10) business days thereafter, Purchaser shall cause the
Exchange Agent to mail to each such holder who has surrendered Ventures
Certificates at the Closing (i) certificates evidencing the number of full
shares of Purchaser Common Stock into which the shares of Ventures Capital Stock
represented by the Ventures Certificates so surrendered by such holder were
converted pursuant to Section 1.6(a) and (ii) cash in lieu of any fractional
shares in accordance with Section 1.6(e).
(d) Promptly after the Effective Time, but in no event later
than ten (10) business days thereafter, Purchaser shall cause the Exchange Agent
to mail to each holder of record (as of the Effective Time) of Ventures
Certificates that did not surrender such Certificate pursuant to Section 1.8(c),
the following materials: (1) a letter of transmittal in customary form and (2)
instructions for use in effecting the surrender of the Ventures Certificates in
exchange for certificates representing the Purchaser Common Stock pursuant to
Section 1.6(a) and cash in lieu of any fractional shares pursuant to Section
1.6(e). Upon surrender of Ventures Certificates for cancellation to the Exchange
Agent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holders of such
Ventures Certificates shall be entitled to receive in exchange therefor
certificates representing the number of whole shares of Purchaser Common Stock
into which their shares of Ventures Capital Stock were converted at the
Effective Time and payment in lieu of fractional shares that such holders have
the right to receive pursuant to Section 1.6(e). Until so surrendered,
outstanding Ventures Certificates will be deemed from and after the Effective
Time, for all corporate purposes, to evidence the ownership of the number of
full shares of Purchaser Common Stock into which the
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shares of Ventures Capital Stock represented thereby were so converted and the
right to receive an amount in cash in lieu of any fractional shares in
accordance with Section 1.6(e).
(e) In the event any Ventures Certificates have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Ventures Certificates, upon the making of an affidavit of
that fact by the holder thereof in a form reasonably acceptable to Purchaser,
certificates representing the shares of Purchaser Common Stock into which the
shares of Ventures Capital Stock represented by such Ventures Certificates were
converted pursuant to Section 1.6(a) and any cash for fractional shares pursuant
to Section 1.6(e). Purchaser may in its discretion and as a condition precedent
to the issuance thereof, require the owner of such lost, stolen or destroyed
Ventures Certificate to provide to Purchaser an indemnity agreement, reasonable
in form and substance, against any claim that may be made against Purchaser with
respect to the Ventures Certificate alleged to have been lost, stolen or
destroyed.
1.9 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a "reorganization" within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"). The parties to this
Agreement hereby adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
1.10 Accounting Consequences. For financial reporting purposes,
the Merger is intended to be accounted for as a purchase.
1.11 Further Action. If, at any time after the Effective Time, any
further action is determined by Purchaser to be necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full right, title and possession of and to all rights and property of
Acquisition Sub and Ventures, the officers and directors of the Surviving
Corporation and Purchaser shall be fully authorized (in the name of Acquisition
Sub, in the name of Ventures and otherwise) to take such action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF VENTURES
Except as set forth in the Disclosure Schedule attached hereto (the
"Disclosure Schedule"), of which the Schedules referred to below are a part, and
in the documents and other materials identified in the Disclosure Schedule, the
section numbers and letters of which
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correspond to the section and subsection numbers and letters of this Agreement,
Ventures represents and warrants to Purchaser as follows:
2.1 Organization, Standing, Etc. of the Wired Companies; Corporate
Authorization; Enforceability.
(a) Each of the Wired Companies (as defined below) is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization and has all requisite corporate power and
authority to carry on its business as currently conducted and to own or lease
and to operate its properties. Each of the Wired Companies is qualified to do
business and is in good standing in each jurisdiction in which the property
owned, leased or operated by it, or the nature of the business conducted by it,
makes such qualification necessary and in which the failure to so qualify would
have a material adverse effect on the business, operations, financial condition
or results of operations of the Wired Companies, taken as a whole (a "Material
Adverse Effect on Wired"). With respect to each of the Wired Companies, the
jurisdiction in which it is organized and qualified to do business is listed in
Schedule 2.1.
(b) Ventures has full corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and all other documents and instruments
executed or to be executed by Ventures pursuant to this Agreement have been duly
authorized by all necessary corporate and other action on the part of Ventures.
This Agreement and all other documents and instruments executed or to be
executed by Ventures pursuant to this Agreement have been, or will have been, at
the time of their respective executions and deliveries, duly executed and
delivered by a duly authorized officer of Ventures.
(c) This Agreement and all other agreements executed or to be
executed by Ventures pursuant to this Agreement constitute, or will constitute,
the valid and legally binding obligations of Ventures, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
equitable principles and by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or similar laws relating to or affecting the rights of
creditors generally.
2.2 Wired Companies; Title to Wired Companies' Shares, Etc. Schedule
2.2 contains a list of each corporation or other entity of which Ventures owns,
directly or indirectly, 50% or more of the outstanding equity interests
(collectively with Ventures, the "Wired Companies") and the capitalization and
ownership thereof. Except as set forth in Schedule 2.2, each of the equity
interests in the Wired Companies owned by Ventures is free and clear of any
lien, pledge, charge, adverse claim, security interest, encumbrance (including
any imposed by
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law in any jurisdiction), title retention agreement, option, equity or right to
purchase of any kind except for restrictions on transfer imposed by applicable
securities laws. Except as set forth in Schedule 2.2, the Wired Companies do not
own any shares of capital stock or other securities of, or have an ownership
interest in, any corporation, partnership, association or other entity.
2.3 Capitalization of Ventures. The authorized capital stock of
Ventures consists of: (a) 30,000,000 shares of Preferred Stock, par value $0.001
per share, of which 15,300,000 shares have been designated Series A Preferred
Stock, 700,000 shares have been designated Series B Preferred Stock, 3,800,000
shares have been designated Series C Preferred Stock and 50,000 shares have been
designated Series D Preferred Stock; and (b) 45,000,000 shares of Common Stock.
As of the date of this Agreement, the shares of Ventures Capital Stock that are
issued and outstanding consist of 15,199,794 shares of Ventures Series A
Preferred Stock, 625,000 shares of Ventures Series B Preferred Stock, 3,762,760
shares of Ventures Series C Preferred Stock, no shares of Ventures Series D
Preferred Stock and 96,223 shares of Ventures Common Stock. All of the issued
and outstanding shares of Ventures Capital Stock are owned of record by the
persons set forth on Schedule 2.3. Each issued and outstanding share of Ventures
Capital Stock has been duly authorized and validly issued and is fully paid and
nonassessable. Except for warrants to purchase an aggregate of 50,000 shares of
Ventures Series A Preferred Stock (the "Warrants") and options to purchase an
aggregate of 2,297,430 shares of Ventures Common Stock (the "Options"), and
except as set forth on Schedule 2.3, no subscriptions, options, warrants, calls
or rights of any kind, directly or indirectly to purchase or otherwise acquire
any shares of capital stock of any of the Wired Companies, and no securities
directly or indirectly convertible into or exchangeable for any shares of
capital stock of any of the Wired Companies are outstanding. The Options are
held by present or former directors, officers and employees of and consultants
to the Wired Companies, in the amounts and with the exercise prices and vesting
schedules set forth on Schedule 2.3.
2.4 Certificate of Incorporation and Bylaws. Copies of the certificate
of incorporation and bylaws or other organizational documents of each of the
Wired Companies have been made available to Purchaser, and each such copy is
true, correct and complete.
2.5 Compliance with Other Instruments and Laws. The execution and
delivery of this Agreement and all other documents and instruments executed or
to be executed by Ventures pursuant to this Agreement, and the consummation of
the transactions contemplated hereby, will not (A) conflict with or result in
any violation of or default under any provision of the charter or bylaws of any
of the Wired Companies, (B) breach, violate or constitute an event of default
(or an event which with the lapse of time or the giving of notice or both would
constitute an event of default) under any note, bond, security agreement,
mortgage, indenture, trust, lease, partnership or other agreement or other
instrument, permit, concession, grant, franchise or license, or give
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rise to any right of termination, cancellation, modification or acceleration
under, or require any consent or the giving of any notice under, any agreement
or other instrument or obligation to which any of the Wired Companies is a
party, or by which any of the Wired Companies or any of their properties or
assets may be bound, or result in the creation of any lien, claim or encumbrance
or other right of any third party of any kind whatsoever upon the properties or
assets of any of the Wired Companies pursuant to the terms of any such
instrument or obligation, the result of which (either individually or in the
aggregate) would have a Material Adverse Effect on Wired, or (C) violate or
conflict with any law, judgment, order, decree, statute, law, ordinance, rule or
regulation, writ injunction, decree or other instrument of any Federal, state,
local or foreign court or governmental or regulatory body, agency or authority
applicable to any of the Wired Companies or by which any of their properties or
assets may be bound, the result of which (either individually or in the
aggregate) would have a Material Adverse Effect on Wired. Ventures has complied
with all of its obligations under Section 1.5 of the Advance Agreement and
Advance Magazine Publishers Inc. ("AMP") has waived any rights under Section 1.5
to purchase Ventures or Wired Digital, Inc.
2.6 Governmental Authorizations and Consents. Except as set forth on
Schedule 2.6, no material consents, licenses, approvals or authorizations of, or
registrations or declarations with, any governmental authority, agency, bureau
or commission, or any third party, are required to be obtained or made by any of
the Wired Companies in connection with the execution, delivery, performance,
validity and enforceability of this Agreement or the Merger, other than (a) a
filing with the Federal Trade Commission and the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (b) the approval of Ventures' stockholders in accordance with applicable
law, (c) filing the Certificate of Merger under the DGCL and (d) other consents,
licenses, approvals, authorizations, registrations or declarations, where the
failure to obtain such would not have a Material Adverse Effect on Wired.
2.7 No Violations. None of the Wired Companies is in violation of any
term of its certificate of incorporation or bylaws or other charter documents or
any note, bond, security agreement, mortgage, indenture, instrument or agreement
relating to indebtedness for borrowed money or of any judgment, decree or order
which names such entity, or of any term of any other instrument, contract or
agreement, which violation either individually or when aggregated with all other
such violations, would have a Material Adverse Effect on Wired. None of the
Wired Companies is in violation of any law, ordinance, rule or governmental
regulation applicable to it or any of its properties or of any judgment, order,
writ, injunction, decree or other instrument of any federal, state, local or
foreign court or governmental or regulatory body, which violation either
individually or when aggregated with all other such violations would have a
Material Adverse Effect on Wired.
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2.8 Financial Statements. Ventures has delivered to Purchaser (a) the
consolidated balance sheets of Ventures as of December 31, 1997, 1996 and 1995
and the related consolidated statements of income, stockholders' equity and cash
flows for the years then ended, accompanied in each case by the opinion thereon
of KPMG Peat Marwick LLP, independent public accountants, and (b) the unaudited
consolidated balance sheet of Ventures (the "Unaudited Balance Sheet") as of
August 31, 1998 (the "Balance Sheet Date") and the related unaudited
consolidated statements of income, stockholders' equity and cash flows for the
eight months then ended (such financial statements, including the notes thereto,
hereinafter being referred to as the "Financial Statements"). The Financial
Statements are attached hereto as Schedule 2.8. All of the Financial Statements
have been prepared from the books and records of Ventures and have been prepared
in accordance with GAAP and present fairly in all material respects the
consolidated financial position of Ventures as of the dates thereof and the
consolidated results of its operations for the periods then ended, except that
the unaudited financial statements were prepared on an interim basis, are
subject to normal year-end adjustments and do not contain all the footnote
disclosures required by GAAP consistently applied. None of the Wired Companies
has any debts, obligations, guaranties of the obligations of others or
liabilities of the type required to be disclosed in a balance sheet prepared in
accordance with GAAP or the notes thereto, except for (a) debts, obligations,
guaranties and liabilities reflected or reserved against in the Unaudited
Balance Sheet, (b) debts, obligations, guaranties and liabilities referred to in
this Agreement or any of the Schedules hereto or in any of the documents or
other materials identified in the Schedules hereto (excluding obligations or
liabilities arising from the breach or violation of the documents or other
materials identified in the Schedules, unless such obligations or liabilities
are specifically identified in the Schedules), (c) debts, obligations,
guaranties and liabilities incurred or entered into in the ordinary course of
business after the Balance Sheet Date, and (d) debts, obligations and
liabilities directly or indirectly relating to this Agreement and the other
agreements and instruments being executed and delivered in connection herewith
and the transactions referred to herein and therein (including obligations to
pay legal, accounting and investment banker fees and other amounts in connection
therewith).
2.9 Absence of Certain Changes or Events. Except as set forth in
Schedule 2.9 and except for (a) any transfers, borrowings, dividends or
guaranties between the Wired Companies that were made, paid or incurred in the
ordinary course of business, (b) transactions and other matters contemplated by
this Agreement and any changes, indebtedness, agreements, encumbrances, damages,
liabilities or obligations arising therefrom or relating thereto, and (c)
matters disclosed in the Financial Statements, since the Balance Sheet Date,
none of the Wired Companies has:
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(a) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock or purchased or redeemed, directly
or indirectly, any shares of its capital stock;
(b) issued or sold any shares of its capital stock of any
class or any subscriptions, options, warrants, calls or other rights to purchase
directly or indirectly any such shares or any securities directly or indirectly
convertible into or exchangeable for such shares (except for sales of Ventures
Capital Stock upon exercise of Warrants and Options or conversion of convertible
securities outstanding on the Balance Sheet Date);
(c) incurred any indebtedness for money borrowed by any of the
Wired Companies or issued or sold any debt securities;
(d) mortgaged, pledged or subjected to any lien, lease,
security interest or other charge or encumbrance any of its properties or
assets, tangible or intangible;
(e) acquired or disposed of any material assets or properties
except in the ordinary course of business and consistent with past practice, or
canceled or compromised any debts or knowingly waived any claims or rights of a
material nature;
(f) granted to any officer, director or employee any increase
in compensation, except in the ordinary course of its current personnel policies
consistent with past practice or any bonus or service award or other like
benefit, or instituted, increased, augmented or improved any Benefit Plan (as
that term is hereinafter defined);
(g) suffered any damage, destruction or loss (whether or not
covered by insurance) that has had or would reasonably be expected to have a
Material Adverse Effect on Wired;
(h) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise) except for fair equivalent value or
in the ordinary course of business and consistent with past practice;
(i) experienced any Material Adverse Effect on Wired;
(j) made any change in any accounting principle or practice or
in its methods of applying any such principle or practice; or
(k) entered into any agreement to do any of the
foregoing.
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2.10 Title to Assets. Except as set forth in Schedule 2.10, each of the
Wired Companies has good title to all personal property, tangible or intangible,
which it purports to own, including the tangible assets reflected on the
Unaudited Balance Sheet, other than (a) assets disposed of after the Balance
Sheet Date in the ordinary course of business, and (b) other assets disposed of
after the Balance Sheet Date and referred to in the Financial Statements. Except
as set forth in Schedule 2.10, all personal property, tangible or intangible,
owned by the Wired Companies is owned free and clear of all liens, mortgages,
pledges, charges, security interests or encumbrances except for (a) liens for
current taxes not yet due and payable, and (b) purchase money security interest
and common law liens, in each case for goods purchased in the ordinary course of
business, and (c) such imperfections of title and encumbrances, if any, that are
not material in character, amount or extent and do not materially detract from
the value, or materially interfere with the use of, the property subject thereto
or affected thereby. None of the Wired Companies owns any real property or any
interest in real property, except for the leasehold interests created under the
leases referred to in Schedule 2.15 hereto.
2.11 Intellectual Property.
(a) Except as set forth on Schedule 2.11(a), the Wired
Companies own, or are licensed or otherwise possess legally enforceable rights
to use, all patents, trademarks, trade names, service marks, copyrights and
Internet domain names, and any applications therefor, technology, know-how,
computer software programs and applications, and tangible and intangible
proprietary information or material that are used in the business of the Wired
Companies as currently conducted in all material respects (the "Intellectual
Property Rights"), free and clear of all liens, claims and encumbrances. The
Intellectual Property Rights are sufficient to carry on the business of the
Wired Companies as presently conducted in all material respects.
(b) Schedule 2.11(b) sets forth a list of patents, registered
copyrights, registered and material unregistered trademarks, trade names and
service marks, Internet domain names, and any pending applications therefor,
included in the Intellectual Property Rights and specifies, where applicable,
the jurisdictions in which each such Intellectual Property Right has been issued
or registered or in which an application for such issuance and registration has
been filed, including the respective registration or application numbers and the
names of all registered owners.
(c) The present business activities or products of the Wired
Companies do not infringe any intellectual property rights of others, except
where such infringement would not have a Material Adverse Effect on Wired.
Except as set forth on Schedule 2.11, no material claims with respect to the
Intellectual Property Rights have been asserted and are pending against
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any of the Wired Companies as of the date of this Agreement (1) to the effect
that the sale, licensing or use of any of the products of any of the Wired
Companies infringes any other party's valid copyright, trademark, service mark,
trade secret or other intellectual property right, (2) against the use by any of
the Wired Companies of any material trademarks, service marks, trade names,
trade secrets, copyrights, patents, technology, know-how or computer software
programs or applications used in the Wired Companies' business as currently
conducted, or (3)<0- 95>challenging the ownership by any of the Wired Companies,
of any of the Intellectual Property Rights owned by the Wired Companies.
(d) The Wired Companies have the right to use all trade
secrets, customer lists, hardware designs, programming processes, software and
other information required for its products or their business as presently
conducted where the absence of such right would have a Material Adverse Effect
on Wired. The Wired Companies have taken commercially reasonable measures to
protect and preserve the security and confidentiality of its trade secrets and
other confidential information. All employees and consultants of the Wired
Companies involved in the design, review, evaluation or development of
proprietary products or Intellectual Property Rights have executed nondisclosure
and assignment of inventions agreements substantially in the form provided to
Purchaser or otherwise sufficient to give the Wired Companies the legal right to
protect the confidentiality of the Wired Companies' trade secrets and other
confidential information and to assign the interests of such employees or
consultants in Intellectual Property Rights to the Wired Companies.
2.12 Benefit Plans.
(a) Except as set forth on Schedule 2.12, none of the Wired
Companies maintains, is a party to, contributes to or is obligated to contribute
to, or has liability or contingent liability for, any of the following (whether
or not set forth in a written document):
(1) Any employee benefit plan, employee pension
benefit plan, employee welfare benefit plan, or multiemployer plan, all as
defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), regardless of whether or not a plan is exempt from some or all of the
otherwise applicable requirements of ERISA; or
(2) Any bonus, deferred compensation, incentive,
restricted stock, stock purchase, stock option, stock appreciation right,
debenture, supplemental pension, profit sharing, royalty pool, severance or
termination pay, loan guarantee, relocation assistance, employee loan or other
extensions of credit, or other similar plan, program, agreement, policy,
commitment, arrangement or benefit currently in effect which is applicable to
any present or former employee or his or her survivors (whether or not published
or generally known).
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(b) As to each plan, program, agreement, policy, commitment,
arrangement or benefit listed on Schedule 2.12 (each, a "Benefit Plan"),
Ventures has furnished to Purchaser complete, accurate and current copies of the
text (including amendments) of the Benefit Plan if previously reduced to writing
or has provided in Schedule 2.12 a description of all material elements of the
Benefit Plan if not previously reduced to writing. With respect to each employee
benefit plan (as defined in section 3(3) of ERISA) listed on Schedule 2.12,
Ventures has made available to Purchaser the following:
(1) Where applicable, the most recent summary
plan description, as described in section 102 of ERISA;
(2) Any summary of material modifications which
has been distributed to participants or filed with the U.S. Department of Labor
but which has not been incorporated in an updated summary plan description
furnished under paragraph (1) above;
(3) The annual reports, as described in section
103 of ERISA, for the most recent three plan years for which an annual report
has been prepared (including any schedules), and any financial s tatements and
opinions required by Section 103(a)(3) of ERISA;
(4) Where applicable, the actuarial reports for
the most recent three reporting periods for which such a report has been
prepared;
(5) Any trust agreement, investment management
agreement, contract with an insurance company or service provider,
administration agreement or other contract,agreement or insurance policy; and
(6) Where applicable, the most recent
determination letter issued by the Internal Revenue Service ("IRS").
(c) With respect to each Benefit Plan:
(1) All of the currently applicable requirements
of ERISA and regulations thereunder have been fully and timely complied with in
all material respects and each Benefit Plan has been administered in material
respects in accordance with its terms;
(2) There is no act or omission of any of the
Wired Companies, or any other person or entity, which would constitute a
material violation of or material prohibited act (for which an exemption is not
available) under any applicable section of ERISA or the Code, or
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regulations under either, and no amendment to such Benefit Plan is precluded by
any waiver, extension or prior amendment described in Section 412(f)(1) of the
Code;
(3) All contributions, premiums or other
payments due from any of the Wired Companies to (or under) a Benefit Plan for
all periods prior to the date of this Agreement have been fully paid or
adequately provided for on the books of the Wired Companies and all accruals
have been made in accordance with generally accepted accounting principles;
(4) The provisions of each Benefit Plan intended
to meet the requirements of Section 401(a) of the Code meet such requirements; a
favorable determination letter covering the provisions of the Tax Reform Act of
1986 has been issued by the Internal Revenue Service (the "IRS") with respect to
each plan and trust; and nothing has occurred since the date of such
determination letter that would adversely affect the qualification of such plan;
(5) None of the Benefit Plans nor any fiduciary
thereof has been the subject of an order or investigation or examination by a
governmental agency and there are no matters pending before the IRS, the
Department of Labor, or any other governmental agency pertaining to these
Benefit Plans.
(d) The Wired Companies have not maintained or contributed to
or in any way directly or indirectly have any liability (whether contingent or
otherwise) with respect to any Benefit Plan subject to Title IV of ERISA; except
as indicated on Schedule 2.12, the Wired Companies have no obligation to provide
medical or other benefits to employees or former employees of the Wired
Companies or their survivors, dependents and beneficiaries, except as may be
required by the Consolidated Omnibus Budget Reconciliation Act of 1986 or
applicable state medical benefits continuation statutes.
(e) Schedule 2.12(e) sets forth the names of all current
employees of the Wired Companies (the "Employees") and such Employee's job
title, such Employee's current salary, the amount of any bonuses or other
compensation paid since January 1, 1998 to such Employee, the date of employment
of such Employee and the accrued vacation time of such Employee. Except as set
forth in Schedule 2.12(e), there are no outstanding loans from any Wired Company
to any officer, director, employee or consultant of any Wired Company.
(f) None of the Benefit Plans is a "multiple employer welfare
plan" (as defined in Section 3(40) of ERISA), or an employee benefit pension
plan maintained by more than one employer (as described in Section 413(c) of the
Code).
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(g) With respect to any Benefit Plan that is an employee
welfare benefit plan, there are no understandings, agreements or undertakings,
written or oral, that would prevent any such plan (including any such plan
covering retirees or other former employees) from being amended or terminated
without material liability to Ventures or the Surviving Corporation on or at any
time after the Closing Date Time.
(h) Except as set forth in Schedule 2.12(h), no employee of
Ventures will be entitled to any additional compensation or benefits or any
acceleration of the time of payment or vesting of any compensation or benefits
under any Benefit Plan as a result of the transactions contemplated by this
Agreement, except to the extent required by operation of law in the event of a
termination or partial termination of the Benefit Plan.
(i) Except as set forth in Schedule 2.12(i), no amount that
could be received (whether in cash or property or the vesting of property) as a
result of any of the transactions contemplated by this Agreement by any
employee, officer, or director of Ventures or any of its subsidiaries who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Benefit Plan currently in effect
would be an "excess parachute payment" (as such term is defined in Section
280G(b)(1) of the Code). Except as set forth in Schedule 2.12(i), no such person
is entitled to receive any additional payment from Ventures, the Surviving
Corporation or any other person in the event that the excise tax of Section
4999(a) of the Code is imposed on such person.
(j) No person is entitled to receive a bonus or other
compensation pursuant to the Wired Ventures, Inc. Employee Transaction Bonus
Plan as a result of the consummation of the transactions contemplated by this
Agreement.
2.13 Litigation. Schedule 2.13 sets forth, as of the date hereof, each
action, suit, proceeding or governmental investigation pending against any of
the Wired Companies or their respective properties, at law or in equity or
before any court, governmental department, commission, board, agency, authority
or instrumentality, domestic or foreign, or that have been settled, dismissed or
resolved on or since the Balance Sheet Date and each action, suit, proceeding or
governmental investigation known to Ventures as of the date hereof that is
overtly threatened against any of the Wired Companies or their respective
properties. Except as disclosed in Schedule 2.13, there are no actions, suits,
proceedings or governmental investigations pending against any of the Wired
Companies or their respective properties, at law or in equity or before any
court, governmental department, commission, board, agency, authority or
instrumentality, domestic or foreign, or that have been settled, dismissed or
resolved on or since the Balance Sheet Date, that have had or would reasonably
be expected to have a Material
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Adverse Effect on Wired and, to Ventures' knowledge, no action, suit, proceeding
or governmental investigation that would reasonably be expected to have a
Material Adverse Effect on Wired is overtly threatened against any of the Wired
Companies or their respective properties. None of the Wired Companies is subject
to any judgment, stipulation, order or decree arising from any action, suit,
proceeding or investigation that individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect on Wired. There are no
threatened strikes or work stoppages by the employees of any of the Wired
Companies and, to Ventures' knowledge, there are no pending union organizing
efforts with respect to such employees. No action, suit, proceeding or
governmental investigation is pending or, to Ventures' knowledge, overtly
threatened against any of the Wired Companies that seeks to question, delay or
prevent the consummation of the transactions contemplated hereby. Ventures has
not received any Officer's Certificate (as such term is defined in Section
10.2(d) of the Advance Agreement).
2.14 Taxes. Except as set forth in Schedule 2.14, with respect to Taxes
(as defined below):
(a) Each of the Wired Companies has filed or will file or
cause to be filed (or extensions of the time for filing have been or will be
duly filed), within the time prescribed by law, all returns, reports and other
filings ("Returns") required to be filed under federal, state, local or any
foreign laws by such company for all taxable periods ending on or prior to the
Closing Date and such Returns have been, or will be when filed prior to the
Closing Date, accurately and completely prepared in all material respects in
compliance with all laws, rules and regulations;
(b) Each of the Wired Companies has, within the time and in
the manner prescribed by law, paid (and until the Closing will, within the time
and in the manner prescribed by law, pay) all Taxes (as defined below) that are
shown on Returns filed prior to the Closing to be due on or before the Closing
Date;
(c) Since the Balance Sheet Date, Ventures has established
(and until the Closing Ventures will continue to maintain) on its books and
records reserves that are adequate under GAAP for the payment of all Taxes not
yet due and payable; at the Closing, such reserves as adjusted in accordance
with past practice will be sufficient for the then unpaid Taxes of the Wired
Companies attributable to periods prior to or ending on the Closing Date;
(d) Ventures has not filed (and will not file prior to the
Closing Date) any consent agreement under Section 341(f) of the Code (or any
corresponding provision of state, local or foreign law) or agreed to have
Section 341(f)(2) of the Code (or any corresponding
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provision of state, local or foreign law) apply to any disposition of the
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by any of the Wired Companies;
(e) No deficiency or adjustment for any Taxes has been
proposed or asserted in writing, or assessed against any of the Wired Companies
and no federal, state or local audits or other administrative proceedings or
court proceedings are presently pending with regard to any Taxes, there are no
matters under discussion with any governmental authority regarding claims for
the assessment or collection of Taxes, and no waiver or consent extending any
statute of limitations for the assessment or collection of any Taxes, which
waiver or consent remains in effect, has been executed by (or on behalf of) any
of the Wired Companies nor are any requests for such waiver or consent pending;
(f) Ventures has not elected to be treated as an S Corporation
pursuant to Section 1362(a) of the Code;
(g) None of the Wired Companies is, or has at any time been a
"United States Real Property Holding Corporation" within the meaning of Section
897(c)(2) of the Code;
(h) There is no agreement, plan or arrangement covering any
employee or independent contractor or former employee or independent contractor
of the Wired Companies that, considered individually or considered collectively
with any other such agreement, plan or arrangement, will, or could reasonably be
expected to, give rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 280G of the Code or that would be
subject to an excise tax under Section 4999 of the Code;
(i) None of the Wired Companies is or has ever been a party to
or bound by any tax indemnity agreement, tax sharing agreement, tax allocation
agreement or similar agreement or arrangement and none of them has any liability
for Taxes of any person (other than such Wired Company) under Treasury
Regulation 1.1502-6 (or any similar provision of state, local or foreign law);
(j) Each of the Wired Companies has withheld amounts from its
employees and other persons required to be withheld under the tax, social
security, unemployment and other withholding provisions of all federal, state,
local and foreign laws; and
(k) For purposes of this Agreement, "Taxes" in the plural and
"Tax" in the singular shall refer to all or any taxes, charges, fees, levies or
other assessments of whatever kind or nature, including, without limitation, all
net income, gross income, gross receipts, value added, unitary, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, social
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security, payroll, employment, excise, estimated, severance, stamp, occupancy or
property taxes, customs duties, fees, assessments or charges of any kind
whatsoever, including the recapture of any tax items, (together with any
interest and any penalties, additions to tax or additional amounts) imposed by
any taxing authority (domestic or foreign) upon or payable by any of the Wired
Companies.
2.15 Contracts. Ventures has made available to Purchaser a copy or
description of any outstanding written or oral (a) contract or arrangement for
the employment of any person by any of the Wired Companies providing for cash
compensation equal to or greater than $100,000 per annum, (b) collective
bargaining agreement to which any of the Wired Companies is a party, (c)
mortgage, indenture, credit facility, note or installment obligation or other
instrument or contract for or relating to any borrowing of an amount in excess
of $50,000 by any of the Wired Companies (other than intercompany borrowings
between the Wired Companies), (d) guaranty of any loan obligation in excess of
$50,000 by any of the Wired Companies (excluding any endorsement made in the
ordinary course of business for collection), (e) agreement between any of the
Wired Companies and any holder of 5% or more of the outstanding Ventures Capital
Stock or any officer or director of any Wired Company, (f) lease of real or
personal property under which any of the Wired Companies is lessor, except
equipment leases entered into in the ordinary course of business, (g) lease of
real property under which any of the Wired Companies is lessee involving annual
rentals in excess of $50,000, (h) lease of personal property under which any of
the Wired Companies is lessee and under which any such entity is obligated to
make annual aggregate payments of more than $50,000, (i) agreement for the
purchase by any of the Wired Companies of equipment involving outstanding
commitments in excess of $50,000, (j) agreement materially limiting the freedom
of any of the Wired Companies to compete in any line of business, with any
person or other entity or in any geographical area, (k) other agreement,
contract or obligation of any of the Wired Companies calling for or involving
the payment by or to any Wired Company, potential payment by or to any Wired
Company or accrued obligation by such company, from the date hereof through the
earliest date such agreement, contract or obligation can be terminated
unilaterally without material penalty by such company, of an amount in excess of
$100,000, (l) any contract, arrangement or understanding not otherwise
identified on the Disclosure Schedule and relating to the acquisition, issuance
or transfer of any securities, (m) any material contract, arrangement or
understanding having more than one year remaining on its term and relating to
the acquisition, transfer, distribution, use, development, sharing or license of
any Intellectual Property Rights, and (n) any outstanding offer, commitment or
obligation to enter into any contract or arrangement of the nature described in
subsections (a) through (m) of this subsection 2.15. A list or description of
each of the items described in the previous sentence ("Material Contracts") is
set forth on Schedule 2.15. Except as disclosed in Schedule 2.15, all of the
Material Contracts are in full force and effect and, as to each Material
Contract, there does not exist thereunder any material breach on the part of any
of the Wired
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Companies, nor (to the best knowledge of the Wired Companies) is any other party
in material breach of any Material Contract, and there does not exist any event,
occurrence or condition, including the consummation of the transactions
contemplated hereunder, which (after notice, passage of time, or both) would
constitute a material breach thereunder on the part of any of the Wired
Companies.
2.16 Insurance. Schedule 2.16 contains a list of all material insurance
policies maintained by or on behalf of or covering any of the Wired Companies
(the "Policies"), together with, in respect of each such policy, the name of the
insurer, the number of the policy, the annual policy premium payable therefor,
the limits of coverage, the deductible amount (if any), the expiration date
thereof and each pending claim thereunder. Ventures has made available to
Purchaser copies of all current declaration sheets relating to the Policies.
Except as noted on Schedule 2.16, as of the date hereof, the Policies are in
full force and effect, no notices of cancellation or nonrenewal have been
received by any of the Wired Companies with respect thereto, and all premiums
due thereon have been paid.
2.17 Environmental Quality.
(a) To Ventures' knowledge, during the period of time that the
Wired Companies have leased or owned their respective properties, none of the
Wired Companies used, generated, manufactured, installed, released, discharged,
stored or disposed of any "Hazardous Materials," as defined below, on, under, in
or about the site of such properties. The term "Hazardous Materials" shall mean
any substance, material or waste which is regulated by any local government
authority, the State of California, or the United States Government, including,
without limitation, any material or substance that is (1) defined as a
"hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste" or "restricted hazardous waste" under any provision of
California or any other applicable law, (2) petroleum, (3) asbestos, (4)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. ss.1251 et seq. (33 U.S.C. ss.1321) or listed pursuant to Section
307 of the Clean Water Act (33 U.S.C. ss.1317), (5) defined as a "hazardous
waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act,
42 U.S.C. ss.6901 et seq. (42 U.S.C. ss.6903), or (6) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss.9601 et seq. (42 U.S.C.
ss.9601).
(b) The conduct of the Wired Companies' business complies in
all material respects with all applicable Federal, state and local laws,
ordinances and regulations pertaining to air and water quality, Hazardous
Materials, waste, disposal or other environmental matters, including the Clean
Water Act, the Clean Air Act, the Federal Water Pollution Control Act, the
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Solid Waste Disposal Act, the Resource Conservation Recovery Act, the
Comprehensive Environmental Response, Compensation, and Liability Act, and the
rules, regulations and ordinances of the city and county in which their business
is located, the Environmental Protection Agency and all other applicable
Federal, state, regional and local agencies and bureaus.
(c) To Ventures' knowledge, none of the Wired Companies (1)
has ever sent a Hazardous Material to a site that, pursuant to any applicable
Federal, state or local law, ordinance and regulation pertaining to
environmental matters, (A) has been placed on the "National Priorities List" of
hazardous waste sites, the "CERCLIS" list, or any similar state list, or (B) is
subject to a claim, an administrative order or other request to take "removal"
or "remedial" action, as defined in any applicable Federal, state or local law,
ordinance and regulation pertaining to environmental matters, or to pay for the
costs of cleaning up the site, (2) is not in compliance in all material respects
with all applicable Federal, state or local laws, ordinances and regulations
pertaining to environmental matters in all of its activities and operations, (3)
is involved in any suit or proceeding or has received any notice or request for
information from any governmental agency or authority or other third party with
respect to a release or threatened release of any Hazardous Material or a
violation or alleged violation of any applicable Federal, state or local law,
ordinance and regulation pertaining to environmental matters, or has received
notice of any claims from any person or entity relating to property damage or to
personal injuries from exposure to any Hazardous Material, or (4) has failed to
timely file any report required to be filed, failed to acquire all necessary
certificates, approvals and permits or failed to generate and maintain all
required data, documentation and records under all applicable Federal, state or
local laws, ordinances and regulations pertaining to environmental matter.
2.18 Brokers. No agent, broker, person or firm acting on behalf of
Ventures or its stockholders is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from and person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein, except
for Lazard Freres, whose fees and expenses will be paid as provided in Section
12.4. A copy of the Lazard Freres engagement letter setting forth such fees and
expenses has been made available to Purchaser.
2.19 Statements; Proxy Statement/Prospectus. The information supplied
by Ventures for inclusion in the Form S-4 Registration Statement (as defined in
Section 6.5) shall not, at the time the Form S-4 Registration Statement becomes
effective under the Securities Act of 1933, as amended (the "Securities Act"),
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
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The information supplied by Ventures for inclusion in the proxy
statement/prospectus or information statement/prospectus to be sent to
stockholders of Ventures in connection with a meeting of Ventures' stockholders
(or, alternatively, the solicitation of written consents in lieu of a meeting)
to approve and adopt this Agreement and approve the Merger (such proxy
statement/prospectus or information statement/prospectus as amended or
supplemented being referred to herein as the "Proxy Statement") shall not, on
the date the Proxy Statement is first mailed to Ventures stockholders or at the
time of the meeting of stockholders (or, alternatively, on the date the
necessary written consent under applicable law has been obtained) contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. Notwithstanding
the foregoing, Ventures makes no representation or warranty with respect to any
information provided by Purchaser or Acquisition Sub that is contained in any of
the foregoing documents.
2.20 Governmental Permits. The Wired Companies have in force, and are
in compliance with, in all material respects, all material governmental permits,
licenses, exemptions, consents, authorizations and approvals used in or required
for the conduct of their business as presently conducted and where the absence
of such compliance would have a Material Adverse Effect on Wired, all of which
shall continue in full force and effect, without requirement of any filing or
the giving of any notice and without modification thereof, following the
consummation of the transactions contemplated hereby.
2.21 Major Customers. Schedule 2.21 sets forth a complete and correct
list of the ten largest customers of the Wired Companies, in terms of revenue
recognized in respect of such customers during the fiscal year ended December
31, 1997 and the six months ended June 30, 1998, showing the amount of revenue
recognized for each such customer during such period. Except as set forth on
Schedule 2.21, as of the date hereof, to the knowledge of the Wired Companies,
none of the Wired Companies has received any written notice or other written
communication from any of the customers listed as customers for the six (6)
months ended June 30, 1998 in Schedule 2.21 hereto terminating or reducing in
any material respect, or setting forth an intention to terminate or reduce in
the future, or otherwise reflecting a material adverse change in, the business
relationship between such customer and the Wired Companies.
2.22 Traffic. Schedule 2.22 attached hereto sets forth certain
statistics regarding Ventures' business which are true and correct in all
material respects as of the dates stated in such Schedule. Without limiting the
materiality of any other representations, warranties and covenants of Ventures
contained herein, Ventures specifically acknowledges that the accuracy in all
material respects of this representation is material to the Purchaser's decision
to enter into the transactions contemplated by this Agreement and to pay the
Merger Consideration.
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2.23 Accounts Receivable. All accounts receivable of the Wired
Companies (a) arose from bona fide transactions in the ordinary course of
business and consistent with past practice, (b) except as set forth on Schedule
2.23, are owned by the Wired Companies free and clear of any claim, security
interest, lien or other encumbrance and (c) with respect to accounts receivable
owned by the Wired Companies as of the Balance Sheet Date, are accurately and
fairly reflected on the Balance Sheet, or, with respect to accounts receivable
of the Wired Companies created after the Balance Sheet Date, are accurately and
fairly reflected in the books and records of the Wired Companies. The reserves
for bad debts reflected on the Balance Sheet and in the balance sheet included
in the Financial Statements are reasonable and were calculated in accordance
with generally accepted accounting principles consistent with past practice.
2.24 Bank Accounts; Powers of Attorney. Schedule 2.24 sets forth
a complete and correct list showing:
(i) all bank accounts of the Wired Companies, together with,
with respect to each such account, the account number, the names of all
signatories thereof, the authorized powers of each such signatory and the
approximate balance thereof on the date of this Agreement; and
(ii) the names of all persons holding powers of attorney from
the Wired Companies and a summary statement of the terms thereof.
2.25 Minute Books, Etc. The minute books, stock certificate book and
stock ledger of the Wired Companies are complete and correct in all material
respects. The minute books of the Wired Companies contain accurate and complete
records of all formal actions taken at meetings or by written consent of the
Board of Directors and stockholders of the Wired Companies and accurately
reflect all formal corporate actions of the Wired Companies which are required
by law to be passed upon by the Board of Directors or stockholders of the Wired
Companies.
2.26 Company Action. The Board of Directors of Ventures, by unanimous
written consent or at a meeting duly called and held, has (a) determined that
the Merger is fair and in the best interests of Ventures and its stockholders,
(b) approved the Merger and this Agreement in accordance with the provisions of
the DGCL and any applicable California law, and (c) directed that this Agreement
and the Merger be submitted to Ventures' stockholders for their approval and
resolved to recommend that Ventures' stockholders vote favor of the approval of
this Agreement and the Merger.
2.27 Disclosure. No representation or warranty by any of the Wired
Companies contained in this Agreement, when considered together with the
statements contained in the Disclosure Schedule and any certificates or other
documents or instruments delivered or to be delivered by the Wired Companies
pursuant to this Agreement, contains or will contain any
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untrue statement of a material fact or omits or will omit to state any material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
AND ACQUISITION SUB
Purchaser and Acquisition Sub jointly and severally represent and
warrant to Ventures as follows:
3.1 Organization and Standing of Purchaser. Each of Purchaser and
Acquisition Sub is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and has all requisite
corporate power and authority to enter into this Agreement, to carry out the
transactions contemplated hereby and to perform its obligations hereunder.
3.2 Charter and Bylaws. Purchaser has delivered or made available to
Ventures a true and correct copy of the charter and Bylaws of Purchaser and
Acquisition Sub, each as amended to date, and each such instrument is in full
force and effect. Neither Purchaser nor Acquisition Sub is in violation of any
of the provisions of its charter or Bylaws.
3.3 Capitalization of Purchaser. The authorized capital stock of
Purchaser consists of: (a) 5,000,000 shares of Preferred Stock, par value .01
per share; and (b) 100,000,000 shares of Purchaser Common Stock. As of August
31, 1998, the shares of Purchaser's capital stock that are issued and
outstanding consist of 42,847,741 shares of Purchaser Common Stock. Each issued
and outstanding share of Purchaser Common Stock has been duly authorized and
validly issued and is fully paid and nonassessable. The Purchaser Common Stock
to be issued in the Merger, when issued by Purchaser pursuant to the terms of
this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable.
3.4 Authorization. Each of Purchaser and Acquisition Sub has full
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and all other documents and instruments executed or to be executed by Purchaser
or Acquisition Sub pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate and other action on the part of Purchaser and Acquisition
Sub. This Agreement and all other documents and instruments executed or to be
executed by Purchaser or
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Acquisition Sub pursuant to this Agreement have been, or will have been, at the
time of their respective executions and deliveries, duly executed and delivered
by a duly authorized officer of Purchaser or Acquisition Sub.
3.5 Enforceability. This Agreement and all other agreements executed or
to be executed by Purchaser or Acquisition Sub pursuant to this Agreement
constitute, or will constitute, the valid and legally binding obligations of
Purchaser and Acquisition Sub, enforceable in accordance with their respective
terms, except as such enforceability may be limited by equitable principles and
by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
similar laws relating to or affecting the rights of creditors generally.
3.6 Compliance with Other Instruments and Laws. The execution and
delivery of this Agreement and all other documents and instruments executed or
to be executed by Purchaser or Acquisition Sub pursuant to this Agreement, and
the consummation of the transactions contemplated hereby, will not (A) conflict
with or result in any violation of or default under any provision of the charter
or bylaws of Purchaser or Acquisition Sub, (B) breach, violate or constitute an
event of default (or an event which with the lapse of time or the giving of
notice or both would constitute an event of default) under any note, bond,
security agreement, mortgage, indenture, trust, lease, partnership or other
agreement or other instrument, permit, concession, grant, franchise or license,
or give rise to any right of termination, cancellation, modification or
acceleration under, or require any consent or the giving of any notice under,
any agreement or other instrument or obligation to which Purchaser or
Acquisition Sub is a party, or by which Purchaser or Acquisition Sub or any of
their properties or assets may be bound, or result in the creation of any lien,
claim or encumbrance or other right of any third party of any kind whatsoever
upon the properties or assets of Purchaser or Acquisition Sub pursuant to the
terms of any such instrument or obligation, the result of which (either
individually or in the aggregate) would have a material adverse effect on the
business, operations, financial condition or results of operations of Purchaser
and its subsidiaries, taken as a whole (a "Material Adverse Effect on
Purchaser"), or (C) violate or conflict with any law, judgment, order, decree,
statute, law, ordinance, rule or regulation, writ injunction, decree or other
instrument of any Federal, state, local or foreign court or governmental or
regulatory body, agency or authority applicable to Purchaser or Acquisition Sub
or by which any of their properties or assets may be bound the result of which
(either individually or in the aggregate) would have a Material Adverse Effect
on Purchaser.
3.7 Governmental Authorizations and Consents. No material consents,
licenses, approvals or authorizations of, or registrations or declarations with,
any governmental authority, bureau, agency or commission, or any third party,
are required to be obtained or made by Purchaser or Acquisition Sub in
connection with the execution, delivery, performance, validity
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and enforceability of this Agreement or the Merger, other than (a) a filing with
the Federal Trade Commission and the Department of Justice under the HSR Act,
(b) the filing of a Form S-4 Registration Statement covering the issuance of the
Purchaser Common Stock issuable pursuant to Section 5.1(a) or issuable upon
exercise of the Warrants (the "Form S-4 Registration Statement") with, and the
declaration of the effectiveness of the Form S-4 Registration Statement by, the
Securities and Exchange Commission (the "SEC") in accordance with the Securities
Act, the filing of the Certificate of Merger in accordance with the DGCL (d)
other consents, licenses, approvals, authorizations, registrations or
declarations, where the failure to obtain such would not have a Material Adverse
Effect on Purchaser.
3.8 Litigation. There are no actions, suits, proceedings or
governmental investigations pending against Purchaser or Acquisition Sub or
their respective properties, at law or in equity or before any court,
governmental department, commission, board, agency, authority or
instrumentality, domestic or foreign, or that have been settled, dismissed or
resolved on or since the Balance Sheet Date, that have had or would reasonably
be expected to have a Material Adverse Effect on Purchaser and, to Purchaser's
knowledge, no action, suit, proceeding or governmental investigation that would
reasonably be expected to have a Material Adverse Effect on Purchaser has been
overtly threatened against Purchaser or Acquisition Sub or their respective
properties. Neither Purchaser nor Acquisition Sub is subject to any judgment,
stipulation, order or decree arising from any action, suit, proceeding or
investigation that individually or in the aggregate would reasonably be expected
to have a Material Adverse Effect on Purchaser. There are no threatened strikes
or work stoppages by the employees of Purchaser or Acquisition Sub and, to
Purchaser's knowledge, there are no pending union organizing efforts with
respect to such employees. No action, suit, proceeding or governmental
investigation is pending or, to Purchaser's knowledge, overtly threatened
against Purchaser or Acquisition Sub that seeks to question, delay or prevent
the consummation of the transactions contemplated hereby.
3.9 Brokers. No agent, broker, person or firm acting on behalf of
Purchaser, Acquisition Sub or their respective stockholders is, or will be,
entitled to any commission or broker's or finder's fees from any of the parties
hereto, or from and person controlling, controlled by or under common control
with any of the parties hereto, in connection with any of the transactions
contemplated herein, except for Hambrecht & Quist LLC, whose fees and expenses
will be paid by the Purchaser.
3.10 Public Filings.
(a) Purchaser has filed all forms, reports and documents
required to be filed by Purchaser with the SEC since July 31, 1997 and has made
available to Purchaser such forms, reports and documents in the form filed with
the SEC. All such required forms, reports and
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documents (including those that Purchaser may file subsequent to the date of
this Agreement) are referred to herein as the "SEC Reports." As of their
respective dates, the SEC Reports (1) were prepared in accordance with, and in
compliance with, the requirements of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and
the rules and regulations of the SEC thereunder applicable to such SEC Reports
and (2) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of Purchaser's subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in the SEC Reports (the
"Purchaser Financials"), including any SEC Reports filed after the date hereof
until the Closing, (1) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, (2) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved and (3) present fairly in all material respects the
consolidated financial position of Purchaser as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended, except that the unaudited financial statements were prepared on an
interim basis, are subject to normal year-end adjustments and do not contain all
the footnote disclosures required by GAAP.
3.11 Statements; Proxy Statement/Prospectus.
The information supplied by Purchaser for inclusion in or incorporation
by reference the Form S-4 Registration Statement shall not at the time the Form
S-4 Registration Statement at the time it becomes effective under the Securities
Act contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The information supplied by Purchaser for inclusion or
incorporation by reference in the Proxy Statement shall not, on the date the
Proxy Statement is first mailed to Ventures stockholders or at the time of the
meeting of stockholders (or, alternatively, on the date the necessary written
consent under applicable law has been obtained) contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. Notwithstanding the
foregoing, neither Purchaser nor Acquisition Sub makes any representation or
warranty with respect to any information provided by Ventures that is contained
in any of the foregoing documents.
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3.12 Ownership of Ventures Stock. Purchaser does not own,
beneficially or of record, any shares of Ventures Capital Stock.
3.13 Material Adverse Effect. Since July 31, 1998, Purchaser has
not experienced any Material Adverse Effect on Purchaser.
ARTICLE 4
COVENANTS OF VENTURES
4.1 Conduct of Business. Between the date of this Agreement and the
Closing Date, except as contemplated by this Agreement or referred to in the
Disclosure Schedule, and except as may be necessary to carry out the
transactions contemplated by this Agreement or to comply with the terms of the
contracts referred to in this Agreement or the Disclosure Schedule, Ventures
will carry on its business in the usual, regular and ordinary course in
substantially the same manner as previously conducted, pay its debts and taxes
when due, subject to good faith disputes over such debts or taxes, and perform
all other obligations when due and, to the extent consistent with such business,
use commercially reasonable efforts to preserve intact its present business
organization, maintain its existing insurance policies, keep available the
services of its officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it to the end that its goodwill and ongoing business
shall not be materially impaired at the Effective Time. Purchaser acknowledges
that the transactions contemplated by this Agreement and attendant publicity may
adversely affect Ventures' ability to preserve intact its business and
relationships and to keep available the services of employees. Except as
expressly contemplated by this Agreement, none of the Wired Companies shall,
without Purchaser's prior written consent:
(a) amend its charter documents or by-laws;
(b) enter into any agreement to dissolve, merge, consolidate
or, except in the ordinary course of business, sell any material assets of the
Wired Companies, or acquire or agree to acquire by merging or consolidating
with, or by purchasing an equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership
or other business organization or division, or otherwise acquire or agree to
acquire any assets in excess of $50,000 in the aggregate;
(c) enter into any material transaction;
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(d) declare or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any Ventures Capital Stock or split, combine or reclassify any Ventures
Capital Stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for any Ventures Capital Stock;
(e) repurchase, redeem or otherwise acquire, directly or
indirectly, any shares of Ventures Capital Stock, except repurchases of unvested
shares at cost in connection with the termination of the employment or
consulting relationship with any employee or consultant pursuant to agreements
in effect as of the date hereof;
(f) issue or sell, or authorize the issuance or sale of, any
shares of Ventures Capital Stock or any securities convertible into or
exercisable for Ventures Capital Stock other than (1) shares of Ventures Common
Stock pursuant to the exercise of Options outstanding on the date hereof, (2)
shares of Ventures Series A Preferred Stock pursuant to the exercise of Warrants
outstanding on the date hereof and (3) certain options to be granted prior to
the Closing Date as described on Schedule 2.3;
(g) conduct its business in a manner that departs materially
from the manner in which such business was being conducted prior to the date of
this Agreement;
(h) make any capital expenditures in excess of $25,000
per month in the aggregate;
(i) adopt or amend any Benefit Plan for the benefit of
employees or increase the salary or other compensation (including, without
limitation, bonuses or severance compensation) payable or to become payable to
its employees (except for salary increases consistent with past practice in
connection with annual performance evaluations and increases pursuant to
existing contractual obligations which have been disclosed to Purchaser on
Schedule 2.12), hire any employee or consultant, or accelerate, amend or change
the period of exercisability, the exercise price, or the vesting schedule of
options or restricted stock granted under any stock option plan or agreements
except as specifically required by the terms of such plans or agreements, or
enter into any agreement to do any of the foregoing;
(j) amend or terminate any material contract, agreement or
license to which it is a party, except in the ordinary course of business;
(k) enter into any inbound content licensing agreement
providing exclusivity to the licensor or any outbound content license or
distribution agreement providing exclusivity to the licensee or any other
agreement in which the obligation of Ventures or any Wired Company
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exceeds $50,000 or any other agreement which shall not terminate or be subject
to termination for convenience (without penalty or premium) within 180 days
following execution;
(l) enter into or terminate any lease of, or purchase or sell,
any real property, or enter into any leases of personal property involving
individually in excess of $25,000 annually or in the aggregate in excess of
$100,000 annually;
(m) accelerate receivables or delay payables inconsistent with
practices followed in the operation of the business of Wired Digital, Inc.
during the three months ended August 31, 1998 (after giving effect to the
working capital adjustments upon which Purchaser and Ventures agreed in arriving
at the working capital amount set forth in Section 1.5(b)(16) above); or
(n) agree or commit to do any of the foregoing.
In addition, Ventures will promptly advise Purchaser of the
commencement of, or overt threat of (to the extent that such threat comes to the
knowledge of the Wired Companies), any claim, action, suit, proceeding or
investigation against, relating to or involving the Wired Companies or any of
their directors, officers or employees, in connection with their businesses or
the transactions contemplated hereby that would reasonably be expected to have a
Material Adverse Effect.
4.2 Access. Between the date of this Agreement and the Closing Date,
and subject to the provisions of the Non-Disclosure Agreement between Ventures
and Purchaser dated June 24, 1998 (the "Non-Disclosure Agreement"), Ventures
shall, after receiving reasonable advance notice from Purchaser, give Purchaser
reasonable access (during normal business hours) to the books, records,
contracts and officers of Ventures for the purpose of enabling Purchaser to
further familiarize itself, at Purchaser's sole expense, with the business,
operations and legal affairs of Ventures.
4.3 No-Shop Provision. From and after the date of this Agreement until
the earlier of the Effective Time or termination of this Agreement pursuant to
its terms, the Wired Companies will not, and will instruct their respective
officers, directors, employees, agents, representatives and affiliates not to,
directly or indirectly (a) solicit or knowingly encourage submission of any
Acquisition Proposal (as defined below) by any person, entity or group (other
than Purchaser) or (b) participate in any discussions or negotiations with, or
disclose any non-public information concerning Ventures or any of its
subsidiaries to, any person, entity or group (other than Purchaser) in
connection with any Acquisition Proposal with respect to Ventures or any
material subsidiary. For the purposes of this Agreement, "Acquisition Proposal"
means any proposal or
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offer for any merger, consolidation, sale of substantial assets, equity or debt
financing, disposition of all or any substantial portion of the Intellectual
Property Rights or similar transactions involving Ventures or any of its
material subsidiaries (other than sales of assets in the ordinary course of
business or as permitted by the terms of this Agreement). Upon execution of this
Agreement, Ventures will immediately cease any and all existing activities,
discussion or negotiations with any parties conducted heretofore with respect to
any Acquisition Proposal. In the event Ventures receives any Acquisition
Proposal after the date of this Agreement, it will as promptly as practicable
thereafter notify Purchaser of the existence and all material terms of such
Acquisition Proposal.
4.4 Meeting of Stockholders. Promptly after the date hereof, Ventures
will take all action necessary in accordance with the DGCL, other applicable
law, Ventures' Certificate of Incorporation and Ventures' Bylaws to convene and
hold a meeting of stockholders (or, alternatively, solicit the written consent
of the requisite number of stockholders in lieu of a meeting) as promptly as
practicable, and in any event within 30 days after the date on which Purchaser
makes available sufficient quantities of the final Prospectus/Proxy Statement
included in the Form S-4 Registration Statement, for the purpose of approving
and adopting this Agreement and approving the Merger. In soliciting such proxies
or written consents, the Board of Directors of Ventures will recommend to the
stockholders of Ventures that they approve this Agreement and the Merger and
shall use best efforts to obtain the approval of the stockholders of Ventures
entitled to vote on or consent to this Agreement and the Merger in accordance
with the DGCL, other applicable law, and Ventures' Certificate of Incorporation
and By-laws.
4.5 Consent of Ventures' Stockholders to Certain Payments. Ventures
will use commercially reasonable efforts to obtain, as promptly as practicable
after the date of this Agreement, the requisite approval of its stockholders
with respect to any payments identified on Schedule 2.12(i) made or to be made
to persons who are to be employed by any of the Wired Companies as of the
Effective Time.
ARTICLE 5
COVENANTS OF PURCHASER AND ACQUISITION SUB
5.1 Confidentiality. Purchaser and Acquisition Sub shall hold in strict
confidence, and shall cause each of their respective stockholders, affiliates,
directors, officers, employees, agents, attorneys, accountants and
representatives and those of their respective affiliates ("Associates") to hold
in strict confidence, all documents and information obtained with respect to the
Wired Companies. Purchaser shall not permit any of such documents or information
to be improperly utilized or to be disclosed or conveyed to any other person or
entity, and Purchaser
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shall comply in all respects with the provisions of the Non-Disclosure
Agreement. Without limiting the generality of the foregoing, and except as
required by law or pursuant to valid legal process, (a) neither Purchaser nor
Acquisition Sub shall disclose to any person, or permit any of its Associates to
disclose to any person or entity, the existence of this Agreement or any of the
terms or provisions hereof and (b) neither Purchaser nor Acquisition Sub shall
contact any customers or employees of any of the Wired Companies without the
prior consent of an officer of Ventures.
5.2 Investigation. In conducting its review of the business, operations
and legal affairs of Ventures, neither Purchaser nor Acquisition Sub shall
interfere in any manner with the business or operations of the Wired Companies
or with the performance of any of their employees.
5.3 Employees. With respect to any individual employed by any of the
Wired Companies on the Closing Date (an "Employee"), Purchaser will offer such
individual employment after the Closing Date as an employee at will and will
provide such Employee with benefit plans which in the aggregate are no less
favorable to such Employee than those provided from time to time by Purchaser to
similarly situated employees. Purchaser's offer of employment to each of the
persons named on Schedule 5.3 will include the grant of a standard Purchaser
stock option covering a number of shares of Purchaser Common Stock no less than
the number of shares of Ventures Common Stock set forth opposite such employee's
name on Schedule 5.3, appropriately adjusted to reflect the exchange ratio of
shares of Purchaser Common Stock for shares of Ventures Common Stock pursuant to
this Agreement.
5.4 Indemnification. Purchaser will cause each of the Wired Companies
to ensure the following:
(a) The respective certificates of incorporation, by-laws and
other governing documents of each of the Wired Companies shall contain the
provisions with respect to indemnification set forth in the respective
certificates of incorporation, by-laws and other governing documents of the
Wired Companies on the date of this Agreement, which provisions shall not, for a
period of six years from the Closing Date, be amended, repealed or otherwise
modified in any manner that would adversely affect the rights thereunder of
individuals who at or prior to the Closing Date were directors, officers,
employees or agents of the Wired Companies, unless such modification is required
by law.
(b) From and after the Closing Date, each of the Wired
Companies shall honor all of the indemnity agreements entered into prior to the
date of this Agreement by the Wired Companies with their respective directors
and officers, all of which are listed on Schedule 2.15,
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whether or not such persons continue in their positions with the Wired Companies
following the Closing Date.
(c) The provisions of Sections 5.3 and 5.4 shall survive the
Closing and are intended to be for the benefit of, and shall be enforceable by,
each Employee and by each director and officer of the Wired Companies described
in this Section 5.4 and his or her heirs, representatives and assigns.
5.5 Stock Options and Warrants.
(a) At the Effective Time, each outstanding Option, whether or
not exercisable, will be assumed by Purchaser. Each Option so assumed by
Purchaser under this Agreement will continue to have, and be subject to, the
same terms and conditions set forth in Ventures' 1996 Equity Incentive Plan
immediately prior to the Effective Time and the stock option agreement by which
it is evidenced, except that (1) each Option will be exercisable (or will become
exercisable in accordance with its terms) for that number of whole shares of
Purchaser Common Stock (including Escrow Shares, if applicable) into which the
shares of Ventures Common Stock subject to such option would have been converted
pursuant to Section 1.6(a) if such option had been exercised in its entirety
immediately prior to the Effective Time, rounded down to the nearest whole share
of Purchaser Common Stock, and (2) the per share exercise price for the shares
of Purchaser Common Stock issuable upon exercise of such Option will be equal to
the quotient determined by dividing (A) the aggregate exercise price of such
option, less any cash in lieu of a fractional share to which the holder of the
Option would have been entitled had such Option been exercised immediately prior
to the Effective Time, by (B) the number of shares of Purchaser Common Stock
issuable upon exercise of such Option pursuant to clause (1) above, and rounding
the resulting exercise price up to the nearest whole cent. As soon as
practicable following the Effective Time, Purchaser will issue to each holder of
an Option a notice describing the foregoing assumption of such Option by
Purchaser.
(b) At the Effective Time, each outstanding Warrant will be
assumed by Purchaser. Each Warrant so assumed by Purchaser under this Agreement
will continue to have, and be subject to, the same terms and conditions set
forth in the warrant agreement by which it is evidenced, except that (1) each
Warrant will be exercisable (or will become exercisable in accordance with its
terms) for that number of whole shares of Purchaser Common Stock (including
Escrow Shares, if applicable) into which the shares of Ventures Series A
Preferred Stock subject to such warrant would have been converted pursuant to
Section 1.6(a) if such warrant had been exercised in its entirety immediately
prior to the Effective Time, rounded down to the nearest whole share of
Purchaser Common Stock, and (2) the per share exercise price for the shares of
Purchaser Common Stock issuable upon exercise of such Warrant will be equal to
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the quotient determined by dividing (A) the aggregate exercise price of such
warrant, less any cash in lieu of a fractional share to which the holder of the
Warrant would have been entitled had such Warrant been exercised immediately
prior to the Effective Time, by (B) the number of shares of Purchaser Common
Stock issuable upon exercise of such Warrant pursuant to clause (1) above, and
rounding the resulting exercise price up to the nearest whole cent. As soon as
practicable following the Effective Time, Purchaser will issue to each holder of
a Warrant a notice describing the foregoing assumption of such Warrant by
Purchaser.
(c) Purchaser will, within fifteen (15) business days after
the Closing, file a registration statement on Form S-8 covering the shares of
Purchaser Common Stock issuable upon exercise of the assumed Options and deliver
prospectuses relating thereto to the holders thereof in accordance with the
rules and regulations of the SEC.
5.6 Nasdaq National Market. Purchaser shall cause appropriate notice to
be filed with Nasdaq National Market with respect to the issuance of the
Purchaser Common Stock in the Merger.
5.7 Advance Agreement. Following the Closing Date, Purchaser shall take
all such action as may be reasonably necessary (including, without limitation,
using commercially reasonable efforts to amend the Advance Agreement), to
irrevocably designate the Stockholder Representatives (as hereinafter defined)
to act as agents and attorneys-in-fact on behalf of Ventures in connection with
the Escrow Fund (as defined in the Advance Agreement) established pursuant to
the Advance Agreement, with sole power and full authority to do all acts and
things with respect to such Escrow Fund that Ventures could otherwise do,
including, without limitation, to give and receive notices and communications,
to authorize delivery to Advance of cash from such Escrow Fund in satisfaction
of claims by Advance, to object to such deliveries, to agree to, negotiate,
enter into settlements and compromises of, to demand arbitration, to comply with
orders of courts and awards of arbitrators with respect to such claims, to
appoint substitute Stockholder Representatives, and to take all such actions
necessary or appropriate in the judgment of the Stockholder Representatives for
the accomplishment of the foregoing; provided, however, that the assets subject
to the authority of the Stockholder Representatives to enter into any such
settlement or compromise shall be limited to the assets held in the Advance
Escrow. All costs and expenses reasonably incurred by Purchaser in complying
with its obligations under this Section 5.7 will be paid out of the Escrow Fund.
Upon release of any funds from such Escrow Fund from time to time, Ventures and
the Stockholder Representatives shall promptly (but in no event later than two
business days after receipt thereof) deliver all such funds to the Escrow Agent
(as hereinafter defined). Ventures and the Stockholder Representatives shall
take all such action as may be necessary to ensure the delivery of such funds to
the former holders of
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Ventures Series A Preferred Stock and Ventures Series C Preferred Stock
identified in Schedule 5.7 hereto and in such proportions as is set forth
thereon.
5.8 Tax Refund Amount. Within 15 days following the receipt of any tax
refund (including any offset to tax payments that would otherwise be required)
applicable to any tax year of Purchaser or the Wired Companies following the
Closing Date, Purchaser shall calculate the Tax Refund Amount with respect to
such recently-ended tax year and shall pay such amount to the Escrow Agent for
distribution to the former holders of Ventures Series A Preferred Stock and
Ventures Series C Preferred Stock in such manner and proportions as are set
forth in the Escrow Agreement. Purchaser shall prepare and file its post-Closing
period tax returns and shall make its tax elections in a manner so as to
maximize the dollar amount of any Tax Refund Amount and shall use its best
efforts to take such other actions, including with respect to the manner in
which Purchaser shall operate the Wired Companies and Purchaser following the
Closing, as shall maximize the dollar amount of any Tax Refund Amount. Purchaser
shall provide the Stockholder Representatives with copies of all tax returns
filed on behalf of, or including the taxable results of, any of the Wired
Companies with respect to the first three tax years of the Wired Companies
following the Closing. Without limiting the materiality of any other
representations, warranties and covenants of Purchaser contained herein,
Purchaser specifically acknowledges that Purchaser's performance in all material
respects of its obligations under this Section 5.8 is material to Ventures'
decision to enter into the transactions contemplated by this Agreement.
ARTICLE 6
COVENANTS OF ALL PARTIES
6.1 Best Efforts; Further Assurances. Subject to the terms and
conditions of this Agreement, each party will use all its best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement. Ventures, Purchaser and Acquisition
Sub each will execute and deliver such other documents, certificates, agreements
and other writings and to take such other actions as may be necessary or
desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
6.2 Certain Filings. Ventures, Purchaser and Acquisition Sub shall
cooperate with one another (a) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (b) in
taking such
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actions or making any such filings, in furnishing such information as may be
required in connection therewith, including without limitation filings under the
HSR Act, and in seeking timely to obtain any such actions, consents, approvals
or waivers.
6.3 Public Announcements. The parties will not issue any press release
or make any public statement with respect to this Agreement or the transactions
contemplated hereby prior to or within three (3) business days after the Closing
except as mutually agreed by Purchaser and Ventures, or except as may be
required by law or applicable regulatory authority (including, without
limitation, the rules applicable to Nasdaq National Market companies). Prior to
the issuance of any such press release or public statement determined by
Purchaser or Ventures to be required by law or applicable regulatory authority,
the party making such determination shall use commercially reasonable efforts to
consult with the other party regarding the appropriate contents of such press
release or public statement.
6.4 Tax Returns.
(a) Ventures shall prepare and submit to Purchaser all returns
or reports of each of the Wired Companies for Taxes for any taxable period that,
under applicable law, ends with or prior to the Closing Date, and shall prepare
and submit to Purchaser for its review and approval (which review and approval
shall not be unreasonably withheld or delayed) not later than 30 days before the
due date of such return or report (or any extension thereof) all returns or
reports of each of the Wired Companies for Taxes for any taxable period that,
under applicable law, does not end on or prior to the Closing Date but that
includes any portion of the Pre-Closing Tax Period (as defined below).
(1) Any such return or report referred to in
this Section 6.4 shall be prepared on a basis consistent with returns or reports
prepared for prior taxable periods. If Purchaser reasonably determines that
changes or supplements are required on any return or report described in
this Section 6.4, the parties shall meet in an effort to agree on any such
changes.
(2) Purchaser and Ventures shall deliver to the
Stockholder Representatives such information and data concerning the operations
of each of the Wired Companies as they relate to any Taxes for the Pre-Closing
Tax Period and make available such knowledgeable employees of each of the Wired
Companies as the Stockholder Representatives may reasonably request, including
providing the information and the data required by Ventures' customary tax and
accounting questionnaires, in order to enable each of the Wired Companies to
complete and file all forms and reports which it may be required to file with
respect to its Pre-Closing Tax Period operations and business with respect to
such operations, and otherwise to enable it to satisfy accounting, tax and other
legitimate requirements.
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(b) Purchaser, Ventures and the Stockholder Representatives
will furnish or cause to be furnished to each other as promptly as practicable
such information (including access to books and records) and assistance relating
to each of the Wired Companies as is reasonably requested for the filing of any
return, determining a Tax liability or right to refund, the preparation for any
audit or other proceeding, the prosecution or defense of any claim, suit or
proceeding relating to any proposed adjustment, and the enforcement of this
Agreement, and shall cooperate with each other in the conduct of any Tax audit
or other Tax proceedings involving any of the Wired Companies. Such parties
shall execute and deliver such powers of attorney and other documents as are
reasonably requested to carry out the provisions and purposes of this Agreement.
(c) Purchaser, Ventures and their respective successors and
assigns will use commercially reasonable efforts to preserve and retain all
books, records, returns, schedules, work papers, and other documents (including,
without limitation, appraisals and other background information) relating to any
returns, claims, audits or other proceedings that relate to Pre-Closing Tax
Periods of the Wired Companies until the expiration of the statutory period of
limitations (including extensions) of the taxable periods to which such
documents relate or until the Final Determination (as defined below) of any
payments which may be required with respect to such taxable periods, whichever
period is longer. Purchaser, Ventures and The Stockholder Representatives and
their successors shall make such documents available to each other's
representatives upon reasonable notice for purposes specified in such notice and
at reasonable times, it being understood that such representatives shall be
entitled to make copies of any such materials as they shall deem necessary.
(d) Each of the parties hereto agrees to permit
representatives of the other parties to meet with their employees (and the
employees of their successors) on a mutually convenient basis in order to enable
such representatives to obtain additional information and explanations of any
document described in this Section 6.4. The parties shall make available, or
cause to be made available, to the representatives of the other parties
sufficient work space and facilities to perform the activities described in this
Section 6.4. Any information obtained pursuant to this Section 6.4 shall be kept
confidential, except as may be otherwise necessary in connection with the filing
of returns or claims or refund or in conducting any audit or other proceeding.
(e) The following terms, as used herein, have the following
meaning:
(1) "Final Determination" means the later to
occur of: (a) a decision of the United States Tax Court, or a judgment,
decree or other order by another court of competent jurisdiction, which has
become final and unappealable; (b) a closing agreement under
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Code Section 7121; and (c) any other final disposition by reason of an agreement
between the affected party or parties and the appropriate tax authority, the
expiration of the applicable statute of limitations, or otherwise.
(2) "Pre-Closing Tax Period" means any period
ending with, on or prior to the Closing Date with respect to which any of the
Wired Companies is required to report and/or pay any Tax.
6.5 Proxy Statement and Registration Statements.
(a) As promptly as practicable following the execution of this
Agreement, Purchaser and Ventures will prepare the Proxy Statement and will
prepare and file with the SEC the Form S-4 Registration Statement. Each of
Ventures and Purchaser will respond to any comments of the SEC and will use its
respective reasonable best efforts to have the Form S-4 Registration Statement
declared effective under the Securities Act as promptly as practicable following
such filing. Ventures will use its reasonable best efforts to cause the Proxy
Statement to be mailed to the Ventures stockholders at the earliest practicable
time following the time the Form S-4 Registration Statement is declared
effective by the SEC.
(b) As promptly as practicable after the date of this
Agreement, each of Purchaser and Ventures will prepare and file any other
filings required to be filed by it under the Exchange Act, the Securities Act or
any other Federal, state or foreign laws relating to the Merger and the
transactions contemplated by this Agreement (the "Other Filings"). Purchaser and
Ventures will notify each other promptly upon the receipt of any comments from
the SEC or its staff or any other government officials for amendments or
supplements to the Form S-4 Registration Statement, the Proxy Statement or any
Other Filings. Each of Ventures and Purchaser will cause all documents that it
is responsible for filing with the SEC or other regulatory authorities under
this Section 6.5 to comply in all material respects with all applicable
requirements of law the rules and regulations promulgated thereunder.
(c) Purchaser will cause each of the shares of Purchaser
Common Stock issuable pursuant to Section 1.6 or upon exercise of the Warrants
to be listed for trading on the NNM at the Effective Time. Purchaser will cause
each of the shares of Purchaser Common Stock issuable upon exercise of the
Options to be listed for trading on the NNM on or prior to the effective date of
the Form S-8 registration statement filed pursuant to Section 5.6(c).
6.6 Tax-Free Reorganization. No party shall take any action either
prior to or after the Effective Time that could reasonably be expected to cause
the Merger to fail to qualify as a "reorganization" under Section 368 of the
Code.
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6.7 Tax Representation Letters. At or prior to the filing of the Form
S-4 Registration Statement with the SEC and, to the extent necessary, at the
Closing, Purchaser and Ventures shall each execute and deliver to Hutchins,
Wheeler & Dittmar and Cooley Godward LLP management tax representation letters
in the form attached hereto as Exhibit B and Exhibit C, respectively. Each of
Purchaser and Ventures shall use its reasonable efforts to cause Hutchins,
Wheeler & Dittmar and Cooley Godward LLP, respectively, to deliver promptly to
it a legal opinion satisfying the requirements of Item 601 of Regulation S-K
promulgated under the Securities Act. In rendering such opinion, each of such
counsel shall be entitled to rely on the management tax representation letters.
6.8 Marketing Program Funding. Purchaser and Ventures have agreed that,
between the date of this Agreement and the Closing Date, Wired Digital, Inc.
will carry out certain intensive marketing activities, including a television
advertising campaign previously described to Purchaser, that are beyond the
scope of its ordinary ongoing marketing programs. Ventures will obtain
Purchaser's written approval for all expenditures in connection with such
activities, and the aggregate amount of such approved expenditures (the
"Marketing Program Funding Amount") shall be deemed to be Wired Cash at Closing
as described in Section 1.5(b)(14). Production costs incurred prior to the date
hereof are not included in the Marketing Program Funding Amount, and the cost
(approximately $700,000) of television advertising during the week beginning
Sunday, October 18, 1998 is included in the Marketing Program Funding Amount.
Except with Purchaser's written approval, the cost of television advertising
scheduled to air after the Closing Date will not be included in the Marketing
Program Funding Amount.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF PURCHASER
AND ACQUISITION SUB TO CLOSE
The obligations of Purchaser and Acquisition Sub to effect the Merger
and otherwise consummate the transactions that are to be consummated at the
Closing are subject to the satisfaction, as of the Closing Date, of the
following conditions (any of which may be waived by Purchaser in whole or in
part):
7.1 Accuracy of Representations and Warranties. The representations and
warranties of Ventures set forth in Article 2 shall be accurate in all material
respects as of the Closing, as though made on and as of the Closing Date, except
to the extent that (a) any of such representations and warranties refers
specifically to another date, in which such case such representation or warranty
shall have been accurate as of such other date or (b) the accuracy of
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any of such representations and warranties is affected by any of the
transactions contemplated by this Agreement.
7.2 Performance. Ventures shall have performed, in all material
respects, all obligations required by this Agreement to be performed by Ventures
on or before the Closing Date.
7.3 Certificate. Purchaser shall have received from a duly authorized
officer of Ventures a certificate dated the Closing Date confirming, to such
person's knowledge, that the conditions in Sections 7.1 and 7.2 have been met.
7.4 Employment Agreements. Elizabeth Vanderslice, Richard D. Boyce,
Joel Truher, June Cohen, Mary M. Moore and Barbara Kuhr shall have entered into
employment agreements in the form attached hereto as Exhibit D, and Purchaser's
Nondisclosure and Developments Agreement in the form attached hereto as Exhibit
E.
7.5 No Injunction. There shall not be in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Purchaser or Acquisition Sub that prohibits the Merger or that
limits or restricts the conduct or operation of the business of the Wired
Companies after the Merger.
7.6 HSR Act. Any applicable waiting period under the HSR Act relating
to the transactions contemplated hereby shall have expired or been terminated.
7.7 Legal Opinion. Purchaser shall have received from Cooley Godward
LLP, counsel to Ventures, an opinion in substantially the form of ExhibitF
attached hereto.
7.8 Stockholder Approval. The Merger shall have been approved by
the stockholders of Ventures in accordance with applicable law.
7.9 Consents. All approvals, consents, waivers and authorizations
required to be obtained by Ventures in connection with the Merger and the other
transactions contemplated by this Agreement set forth on Schedule 7.9 shall have
been obtained and shall be in full force and effect.
7.10 Escrow Agreement. Purchaser shall have entered into the Escrow
Agreement annexed as Exhibit G hereto (the "Escrow Agreement"), duly executed by
the Stockholder Representatives, together with counterparts signed by the escrow
agent named therein and blank
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stock powers executed by each of the holders with respect to such holder's
portion of the Escrow Shares.
7.11 Resignations. Purchaser shall have received resignations of all
directors and officers of all subsidiaries of Ventures, effective as of the
Effective Time.
7.12 Appraisal Rights. The holders of those outstanding shares of
Ventures Capital Stock representing the right to receive no more than 5% of the
Merger Consideration shall have affirmatively demanded appraisal rights in
respect of the Merger.
7.13 Termination of Agreements. The agreements identified on Schedule
7.13 between Ventures and certain of its stockholders shall have been
terminated, effective no later than the Effective Time.
7.14 Form S-4 Registration Statement. The Form S-4 Registration
Statement shall have been declared effective under the Securities Act and shall
not be subject to a stop order or any threatened stop order. All necessary state
securities and blue sky permits, approvals and exemption orders required in
connection with the transactions contemplated by this Agreement shall have been
obtained.
7.15 Tax Opinion. Purchaser shall have received a written opinion from
Hutchins, Wheeler & Dittmar in form and substance reasonably satisfactory to
them, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368 of the Code and such opinion shall not have been
withdrawn; provided, however, that if Hutchins, Wheeler & Dittmar does not
render such opinion or withdraws or modifies such opinion to Purchaser, this
condition shall nonetheless be deemed to be satisfied if counsel to Ventures
renders such opinion to Purchaser. In rendering such tax opinion, counsel shall
be entitled to rely on the management tax representation letters referred to in
Section 6.7.
7.16 Quotation on Nasdaq National Market. The Purchaser Common Stock
issuable in the Merger shall have been approved for quotation on the Nasdaq
National Market upon official notice of issuance thereof.
7.17 Consent of Ventures' Stockholders to Certain Payments. Ventures
shall have either (a) obtained the requisite approval of its stockholders with
respect to any payments identified on Schedule 2.12(i) made or to be made to
persons who are to be employed by any of the Wired Companies as of the Effective
Time (the "Recipients") or (b) made available to Purchaser and the Recipients,
by amendment of this Agreement or otherwise, such arrangements (including the
establishment of an additional cash escrow fund in an appropriate amount) as may
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be necessary to indemnify Purchaser and the Recipients fully against any
after-tax cost to them (including the after-tax cost of any tax "gross-up"
obligation of Ventures) of Ventures' failure to obtain such approval.
ARTICLE 8
CONDITIONS TO OBLIGATION OF VENTURES TO CLOSE
The obligation of Ventures to effect the Merger and otherwise
consummate the transactions that are to be consummated at the Closing is subject
to the satisfaction, as of the Closing Date, of the following conditions (any of
which may be waived by Ventures):
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Purchaser and Acquisition Sub set forth in Article 3 shall be
accurate in all material respects as of the Closing, as though made on and as of
the Closing Date, except to the extent that (a) any of such representations and
warranties refers specifically to a date other than the Closing Date, in which
such case such representation or warranty shall have been accurate in all
material respects of such other date or (b) the accuracy of any of such
representations and warranties is affected by any of the transactions
contemplated by this Agreement.
8.2 Performance. Purchaser and Acquisition Sub shall have performed, in
all material respects, all obligations required by this Agreement to be
performed by Purchaser and Acquisition Sub on or before the Closing Date.
8.3 Certificate. Ventures shall have received from a duly authorized
officer of Purchaser a certificate dated the Closing Date confirming, to such
person's knowledge, that the conditions in Sections 8.1 and 8.2 have been met.
8.4 No Injunction. There shall not be in effect, at the Closing, any
injunction or other binding order of any court or other tribunal having
jurisdiction over Ventures that prohibits the Merger or that limits or restricts
the conduct or operation of Purchaser after the Merger.
8.5 HSR Act. Any applicable waiting period under the HSR Act relating
to the transactions contemplated hereby shall have expired or been terminated.
8.6 Consents. The consents, licenses, approvals, releases and
authorizations specified on Schedule 2.6 shall have been obtained, except where
the failure to obtain such consents did not and would not reasonably be expected
to result in a Material Adverse Effect on Purchaser or a material adverse effect
on the transactions contemplated by this Agreement.
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8.7 Legal Opinion. Ventures shall have received from Hutchins, Wheeler
& Dittmar, counsel to Purchaser, an opinion in substantially the form of Exhibit
H attached hereto.
8.8 Stockholder Approval. The Merger shall have been approved by
the stockholders of Ventures in accordance with applicable law.
8.9 Tax Opinion. Ventures shall have received a written opinion from
Cooley Godward LLP in form and substance reasonably satisfactory to them, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368 of the Code and such opinion shall not have been withdrawn;
provided, however, that if Cooley Godward LLP does not render such opinion or
withdraws or modifies such opinion to Ventures, this condition shall nonetheless
be deemed to be satisfied if counsel to Purchaser renders such opinion to
Ventures. In rendering such tax opinion, counsel shall be entitled to rely on
the management tax representation letters referred to in Section 6.6.
8.10 Form S-4 Registration Statement. The Form S-4 Registration
Statement shall have been declared effective under the Securities Act and shall
not be subject to a stop order or any threatened stop order. All necessary state
securities and blue sky permits, approvals and exemption orders required in
connection with the transactions contemplated by this Agreement shall have been
obtained.
8.11 Quotation on Nasdaq National Market. The Purchaser Common Stock
issuable in the Merger shall have been approved for quotation on the Nasdaq
National Market upon official notice of issuance thereof.
ARTICLE 9
TERMINATION
9.1 Right to Terminate Agreement. This Agreement may be terminated
prior to the Closing:
(a) by the mutual agreement of Ventures and Purchaser;
(b) by Purchaser at any time after 150 days after signing
(excluding the number of days, if any, elapsed during the dispute resolution
proceedings relating to the Preliminary Balance Sheet pursuant to Section
1.5(c)), if the Closing shall not have occurred on or prior to such date;
provided, however, that the right to terminate this Agreement under this Section
9.1(b) shall not be available to Purchaser if the action of Purchaser or
Acquisition Sub or
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any of their Associates has been a principal cause of or resulted in the failure
of the Merger to occur on or before such date and such action or failure to act
constitutes a breach of this Agreement; or
(c) by Ventures at any time after150 days after signing
(excluding the number of days, if any, elapsed during the dispute resolution
proceedings relating to the Preliminary Balance Sheet pursuant to Section
1.5(c)), if the Closing shall not have occurred on or prior to such date;
provided, however, that the right to terminate this Agreement under this Section
9.1(c) shall not be available to Ventures if the action of Ventures or any of
its Associates (including those persons who have signed the Voting Agreement)
has been a principal cause of or resulted in the failure of the Merger to occur
on or before such date and such action or failure to act constitutes a breach of
this Agreement.
9.2 Effect of Termination. Upon the termination of this Agreement
pursuant to Section 9.1:
(a) Purchaser and Acquisition Sub shall promptly cause to be
returned to Ventures all documents and information obtained in connection with
this Agreement and the transactions contemplated by this Agreement and all
documents and information obtained in connection with Purchaser's investigation
of Ventures' business, operations and legal affairs, including any copies made
by or supplied to Purchaser or any of Purchaser's agents of any such documents
or information; and
(b) No party hereto shall have any obligation or liability to
the other parties hereto, except that the parties hereto shall remain bound by
the provisions of this Section 9.2 and Sections 5.1, 6.3 and 9.3 and Article 12
and by the provisions of the Non-Disclosure Agreement, and except that nothing
herein shall relieve any party from liability for a breach of this Agreement
prior to the termination hereof.
9.3 Failure to Close.
(a) If Purchaser fails to consummate the transactions
contemplated on its part to occur on the Closing Date, in circumstances whereby
this Agreement has not been terminated and all conditions of the Closing set
forth in Article 7 have been satisfied in all material respects or waived,
Purchaser shall be liable to Ventures for damages to the extent provided by law
and Ventures shall be entitled to be reimbursed by Purchaser for its expenses as
provided in Section 12.4.
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(b) If Ventures fails to consummate the transactions
contemplated on its part to occur on the Closing Date, in circumstances whereby
this Agreement has not been terminated and all conditions of the Closing set
forth in Article 8 have been satisfied in all material respects or waived,
Ventures shall be liable to Purchaser for damages to the extent provided by law
and Purchaser shall be entitled to be reimbursed by Ventures for its expenses as
provided in Section 12.4.
ARTICLE 10
ADJUSTMENT PROCEDURES
10.1 Preparation of Final Closing Balance Sheet.
(a) For purposes of this Article 10:
(1) "Final Cash at Closing" shall mean all cash
and cash equivalents held by the Wired Companies as of the Closing (including
any cash held by Ventures that represents the exercise price of stock options
exercised for cash after the date hereof), as shown on the Final Closing Balance
Sheet (as hereinafter defined), minus the Cash Exclusions; provided, however,
that, for purposes of calculating Final Cash at Closing, Ventures shall be
deemed to hold an incremental amount of cash equal to the sum of (A) the
Marketing Program Funding Amount described in Section 6.8, (B) any amounts paid
by Ventures at or prior to the Closing pursuant to Section 12.4, and (C) the
aggregate exercise price of all stock options presently held by or hereafter
granted to employees of the Wired Companies (but not non-employees), as
described in Schedule 2.3, to the extent such stock options are either held
unexercised at the Closing Date or net-exercised between the date hereof and the
Closing Date.
(2) "Final Borrowings at Closing" shall mean
all indebtedness for borrowed money of the Wired Companies as of the Closing, as
shown on the Final Closing Balance Sheet.
(3) "Final Adjusted Working Capital Shortfall at
Closing" shall mean
the absolute value of the difference between (i) $432,172 and (ii) the adjusted
working capital (i.e., current assets less current liabilities) of the Wired
Companies as of the Closing, as reflected on the Final Closing Balance Sheet;
provided, however, that, for the purpose of calculating Final Adjusted Working
Capital Shortfall at Closing only, Final Cash at Closing (together with the
offsetting Cash Exclusions) and Final Borrowings at Closing shall be
disregarded, and amounts payable by Ventures as contemplated by Section 6.8 or
Section 12.4 at or prior to Closing shall not be deemed to be a current
liability. Notwithstanding the foregoing, Final Adjusted Working
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Capital Shortfall at Closing shall be zero if the adjusted working capital
described in subparagraph (ii) above is $432,172 or greater.
(b) As soon as practicable following the Closing, Purchaser
shall prepare in good faith, and shall cause Purchaser's independent auditors to
review, the consolidated balance sheet of Ventures and the other Wired Companies
as of the Closing Date (the "Final Closing Balance Sheet"). Except for the
absence of footnotes, the Final Closing Balance Sheet shall be prepared in
accordance with GAAP on a basis consistent with that used in the preparation of
the Financial Statements. Based on the Final Closing Balance Sheet, Purchaser
shall calculate, and shall cause Purchaser's independent auditors to review,
Final Cash at Closing, Final Borrowings at Closing and Final Adjusted Working
Capital Shortfall at Closing, and Purchaser shall deliver such calculations to
the Stockholder Representatives with the Final Closing Balance Sheet. If the
Stockholder Representatives have not given Purchaser notice of their objection
to the Final Closing Balance Sheet (which notice must contain a statement of the
basis of the Stockholder Representatives' objection) within fifteen (15) days
after delivery of such Final Closing Balance Sheet, then Final Cash at Closing
and Final Adjusted Working Capital Shortfall at Closing based on the Final
Closing Balance Sheet as delivered by Purchaser shall be used in computing the
Escrow Adjustment Shares (as hereinafter defined).
(c) In the event the Stockholder Representatives have provided
notice of their objection in accordance with Section 10.1(b) within such 15-day
period, then the issues in dispute shall be resolved in accordance with this
Section 10.1(c). First, Purchaser and the Stockholder Representatives shall
attempt to resolve the issues outstanding with respect to the Final Closing
Balance Sheet and the calculation of Final Cash at Closing, Final Borrowings at
Closing and Final Adjusted Working Capital Shortfall at Closing. If Purchaser
and the Stockholder Representatives are unable to resolve those issues within
thirty (30) days of Purchaser's receipt of the Stockholder Representatives'
objections, then Purchaser and the Stockholder Representatives shall submit the
remaining issues in dispute to Arthur Andersen LLP, independent auditors (the
"Independent Auditors"), for resolution. If issues in dispute are submitted to
the Independent Auditors for resolution, (1) each party shall furnish to the
Independent Auditors such workpapers and other documents and information
relating to the disputed issues as the Independent Auditors may request and as
are available to that party and shall be afforded the opportunity to present to
the Independent Auditors any material relating to the determination and to
discuss the determination with the Independent Auditors; (2) the determination
by the Independent Auditors, as set forth in a notice delivered to both
Purchaser and the Stockholder Representatives by the Independent Auditors within
thirty (30) days of the submission to them of the issues in dispute, shall be
binding and conclusive on the parties and any determination of Final Cash at
Closing, Final Borrowings at Closing and Final Adjusted Working Capital
Shortfall at Closing made by the Independent Auditors in their determination of
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the issues in dispute shall be used in computing the Escrow Adjustment Shares;
and (3)>Purchaser shall bear the fees and costs of the Independent Auditors in
making such determination and shall be entitled to recover 50% of such fees and
costs from the Escrow Fund.
(d) Within one (1) business day after Final Cash at Closing,
Final Borrowings at Closing and Final Adjusted Working Capital Shortfall at
Closing have been determined pursuant to Section 10.1(b), Section 10.1(c) or any
combination thereof, the Escrow Adjustment Shares shall be calculated as
follows: the number of shares of Purchaser Common Stock, rounded to the nearest
full share, equal to the absolute value of the Adjustment Amount (as hereinafter
defined) shall be divided by the Average Closing Stock Price. The term
"Adjustment Amount" shall mean the aggregate of: (1) Final Cash at Closing minus
Wired Cash at Closing minus Excess Expenses, (2) Wired Borrowings at Closing
minus Final Borrowings at Closing and (3) Wired Adjusted Working Capital
Shortfall at Closing minus Final Adjusted Working Capital Shortfall at Closing.
The term "Excess Expenses" shall mean (i) the amount paid or payable by Ventures
pursuant to Section 12.4 (except to the extent such amount was included as a
Closing Expense Adjustment Amount thereby reducing the Aggregate Share Value as
determined pursuant to Section 1.5(b)(2) or to the extent Purchaser has made a
claim against the Escrow Fund with respect to such amount under Section 12.4),
minus (ii) $2.5 million; provided that the amount in clause (i) above exceeds
the amount in clause (ii) above.
10.2 Adjustment of Escrow Fund. If the Adjustment Amount is greater
than zero, Purchaser shall issue the Escrow Adjustment Shares and deposit such
shares in the Escrow Fund within five (5) business days following the
determination of the Escrow Adjustment Shares. If the Adjustment Amount is less
than zero, then, within five (5) business days following the determination of
the Escrow Adjustment Shares, Purchaser and the Stockholder Representatives
shall deliver to the Escrow Agent a notice authorizing the release to Purchaser
from the Escrow Fund of the number of shares of Purchaser Common Stock equal to
the Escrow Adjustment Shares. If the Adjustment Amount is negative and the
amount exceeds $2 million, then, within five (5) business days following the
determination of the Escrow Adjustment Shares, Purchaser and the Stockholder
Representatives shall deliver to the Escrow Agent a notice instructing the
Escrow Agent that: (a) it is promptly to release to Purchaser from the Escrow
Fund a number of shares of Purchaser Common Stock having a value, determined as
provided in the Escrow Agreement, of $2 million; and (b) if it subsequently (but
before the end of the Escrow Period) receives any funds released from the
Advance Escrow as contemplated by Section 5.7, an amount of such funds equal to
the Adjustment Amount in excess of $2 million shall be added to the Escrow Fund
and promptly released to Purchaser before any distribution of the balance, if
any, of such funds to the former holders of Ventures capital stock. In the event
that the cash received from the Advance Escrow is not sufficient to reimburse
Purchaser for the entire Adjustment Amount, an additional number of shares of
Purchaser Common Stock shall be
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released from the Escrow Fund such that Purchaser is reimbursed for the entire
Adjustment Amount. In the event of any increase or decrease in the number of
shares of Purchaser Common Stock or cash held in the Escrow Fund pursuant to
this Section 10.2, the term "Escrow Fund" shall thereafter mean the Escrow Fund
as adjusted.
ARTICLE 11
CERTAIN REMEDIES AND LIMITATIONS
11.1 Expiration of Representations, Warranties and Covenants. All of
the representations and warranties of Ventures set forth in this Agreement and
all of the covenants set forth in Article 4 shall terminate and expire, and
shall cease to be of any force or effect, at 5:00 p.m., Massachusetts time, on
the first anniversary of the Closing Date, and all liability with respect to
such representations, warranties and covenants shall thereupon be extinguished.
Notwithstanding the foregoing, if, prior to such date, Purchaser shall have in
good faith delivered a Claim Notice (as defined below) to the Stockholder
Representatives and the Escrow Agent in conformity with all of the applicable
procedures set forth in the Escrow Agreement, then the specific indemnification
claim set forth in such Claim Notice shall survive such date and shall not be
extinguished thereby.
11.2 Escrow Fund. At the Effective Time, Ventures' stockholders will be
deemed to have received and deposited the Escrow Shares with the Escrow Agent
without any act of any stockholder. At the Closing, the Escrow Shares, without
any act of any stockholder, will be deposited with State Street Bank and Trust
Company (or other institution acceptable to Purchaser and the Stockholder
Representatives), as Escrow Agent (the "Escrow Agent"), such deposit for a
period of one year from the Closing Date to constitute an escrow fund (the
"Escrow Fund") to be governed by the terms set forth herein and in the Escrow
Agreement at Purchaser's cost and expense. The Escrow Fund shall be available to
compensate Purchaser and its affiliates for any and all losses, damages,
deficiencies, liabilities, obligations, actions, claims, suits, proceedings,
demands, assessments, judgments, recoveries, fees, costs and expenses
(including, without limitation, all out-of-pocket expenses, reasonable
investigation expenses and reasonable fees and disbursements of accountants and
counsel) of any nature whatsoever, net of insurance proceeds actually realized
or to be realized by Purchaser (collectively, "Losses"), arising out of, based
upon or resulting from (1) any inaccuracy in or breach of any representation and
warranty of Ventures which is contained in this Agreement or any Schedule or
certificate delivered pursuant hereto or thereto; (2) any breach or
non-fulfillment of, or any failure to perform, any of the covenants, agreements
or undertakings of Ventures (which covenants, agreements or undertakings were to
be performed or complied with on or prior to the consummation of the Merger)
which are contained in or made pursuant to the terms and conditions of this
Agreement;
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(3) any Losses of Purchaser or any Wired Company (whether or not disclosed on a
Schedule hereto) to the extent arising out of the Wired Companies' obligations
to provide indemnification in excess of the amount of the Advance Escrow
pursuant to Section 10.3(b) of the Advance Agreement or otherwise resulting from
or relating to the operation or sale of the Business (as such term is defined in
the Advance Agreement); or (4) any Losses resulting from the delayed form
filings described in paragraph (c) of Schedule 2.12. Purchaser may not receive
any payment from the Escrow Fund unless and until Officer's Certificates (as
defined in paragraph (d) below) identifying Losses, the aggregate amount of
which exceed $500,000, have been delivered to the Escrow Agent as provided in
paragraph (e); in such case, Purchaser may recover from the Escrow Fund its
Losses in excess of the first $500,000 (the "Deductible"); provided, however,
that in no event shall the Deductible apply to Losses resulting from any
inaccuracy or breach of any representation and warranty contained in Sections
2.1(b), 2.2, 2.14 or 2.18, any Losses arising under clause (3) or (4) above, any
fees and costs that Purchaser is entitled to recover pursuant to Section
10.1(c), or any negative Adjustment Amount determined pursuant to Section
10.1(d), and provided, further, that any such Losses or fees and costs or
Adjustment Amount shall not be taken into account in determining whether
aggregate Losses exceed the threshold of the Deductible or whether the
Deductible has been satisfied for purposes of calculating Purchaser's recovery
from the Escrow Fund.
11.3 Indemnification by Purchaser. Subject to the limitations and the
provisions set forth herein, Purchaser and the Surviving Corporation, jointly
and severally, will indemnify and hold harmless the stockholders of Ventures
from, against and in respect of the net amount (after deduction of the amount of
any insurance proceeds recoverable and net of any tax benefit) of any and all
Losses actually suffered by them as a direct result of the failure of any
representation or warranty made by Purchaser or Acquisition Sub in Article 3 to
have been true in all material respects when made.
11.4 Defense of Third Party Actions. If either Purchaser, on the one
hand, or the Stockholder Representatives, on the other hand (the "Indemnitee"),
receives notice or otherwise obtains knowledge of any matter or any threatened
matter that may give rise to an indemnification claim against the Escrow Fund,
on the one hand, or Purchaser, on the other hand (the "Indemnifying Party"),
then the Indemnitee shall promptly deliver to the Indemnifying Party a written
notice describing such matter in reasonable detail. The timely delivery of such
written notice by the Indemnitee to the Indemnifying Party shall be a condition
precedent to any liability on the part of the Indemnifying Party under this
Article 11 with respect to such matter. The Indemnifying Party shall have the
right, at its option (acting through the Stockholder Representatives, if the
"Indemnifying Party" is the Escrow Fund), to assume the defense of any such
matter with its own counsel, but only if the Indemnifying Party simultaneously
agrees to
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indemnify the Indemnitee for such matter. If the Indemnifying Party elects to
assume the defense of and indemnification for any such matter, then:
(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnitee against any attorneys' fees or other expenses incurred
on behalf of the Indemnitee in connection with such matter following the
Indemnifying Party's election to assume the defense of such matter;
(b) the Indemnitee shall make available to the Indemnifying
Party all books, records and other documents and materials that are under the
direct or indirect control of the Indemnitee or any of the Indemnitee's agents
and that the Indemnifying Party considers necessary or desirable for the defense
of such matter;
(c) the Indemnitee shall execute such documents and take such
other actions as the Indemnifying Party may reasonably request for the purpose
of facilitating the defense of, or any settlement, compromise or adjustment
relating to, such matter;
(d) the Indemnitee shall otherwise fully cooperate as
reasonably requested by the Indemnifying Party in the defense of such matter;
and
(e) the Indemnitee shall not admit any liability with respect
to such matter.
Notwithstanding the foregoing, the Indemnifying Party shall not, without the
prior written consent of the Indemnitee, agree to a settlement of any third
party claim, unless the settlement provides an unconditional release and
discharge of the Indemnitee. If the Indemnifying Party elects not to assume the
defense of and indemnification for such matter, then the Indemnitee shall
proceed diligently to defend such matter with the assistance of counsel
reasonably satisfactory to the Indemnifying Party; provided, however, that the
Indemnitee shall not settle, adjust or compromise such matter, or admit any
liability with respect to such matter, without the prior written consent of the
Indemnifying Party, such consent not to be unreasonably withheld or delayed. In
the event the Escrow Fund is the "Indemnifying Party" in connection with a
matter, the Stockholder Representatives shall have the right to pay any
attorneys' fees and other expenses of any defense of a matter assumed pursuant
to this Section 11.4 out of the amount then available thereunder.
11.5 Subrogation; No Contribution. To the extent that the Indemnifying
Party makes or is required to make any indemnification payment to the
Indemnitee, the Indemnifying Party shall be entitled to exercise, and shall be
subrogated to, any rights and remedies (including rights of indemnity, rights of
contribution and other rights of recovery) that the Indemnitee or
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any of the Indemnitee's affiliates may have against any other person with
respect to any Losses, circumstances or matter to which such indemnification
payment is directly or indirectly related. The Indemnitee shall permit the
Indemnifying Party to use the name of the Indemnitee and the names of the
Indemnitee's affiliates in any transaction or in any proceeding or other matter
involving any of such rights or remedies; and the Indemnitee shall take such
actions as the Indemnifying Party may reasonably request for the purpose of
enabling the Indemnitee to perfect or exercise the Indemnifying Party's right of
subrogation hereunder. Notwithstanding the foregoing, the Stockholder
Representative, on behalf of all holders of Ventures Capital Stock, hereby
waives, and acknowledges and agrees that no holder of Ventures Capital Stock
shall have and shall not exercise or assert (or attempt to exercise or assert),
any right of contribution, right of indemnity or other right or remedy against
Purchaser or Ventures in connection with any indemnification obligation to which
such stockholder may become subject under this Agreement or the Escrow
Agreement.
11.6 Exclusivity. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article<0- 95>11 shall be the sole and exclusive right and remedy exercisable by
such party with respect to any breach by the other party hereto of any
representation, warranty or covenant, except for claims based on fraud.
11.7 Retention of Records. From and after the date of this Agreement,
Purchaser shall preserve, and shall cause the Surviving Corporation and the
Wired Companies to preserve, all books, records and other documents, materials
and information relevant to the representations, warranties and covenants set
forth in this Agreement for a period of six years following the date of this
Agreement or for such longer period as the rights of the parties hereunder may
exist.
11.8 Notice as to Representations. Without limiting any of the other
obligations of the respective parties hereunder, if at any time after the date
of this Agreement, Purchaser shall have any reason to believe that any
representation or warranty made by Ventures hereunder may have been untrue,
Purchaser shall promptly provide the Stockholder Representatives written notice
to that effect, indicating the basis for Purchaser's belief that such
representation or warranty may have been untrue. For purposes of this Article
11, Ventures shall not be deemed to have breached any representation or warranty
if Purchaser, prior to the Closing Date, had knowledge of the breach, or facts
and circumstances constituting or resulting in a breach, of such representation
or warranty, and consummated the Merger notwithstanding such knowledge.
11.9 No Rescission. Neither Purchaser, Acquisition Sub nor Ventures
shall be entitled to rescind the Merger by virtue of any failure of any party's
representations and warranties herein to have been true or any breach of any
party's obligations hereunder.
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ARTICLE 12
MISCELLANEOUS
12.1 Material Adverse Effect. Any adverse change, event or effect that
is proximately caused by conditions affecting the United States economy
generally shall not be taken into account in determining whether there has been
or would be a Material Adverse Effect on Wired or a Material Adverse Effect on
Purchaser (unless such conditions adversely affect Ventures or Purchaser, as the
case may be, in a materially disproportionate manner). Any adverse change, event
or effect that is proximately caused by any industry in which Purchaser or
Ventures competes shall not be taken into account in determining whether there
has been or would be a Material Adverse Effect on Purchaser or Material Adverse
Effect on Ventures (unless such conditions adversely affect Ventures or
Purchaser, as the case may be, in a materially disproportionate manner). Any
adverse change, event or effect that is proximately caused by the announcement
or pendency of the Merger shall not be taken into account in determining whether
there has been or would be a Material Adverse Effect on Purchaser or a Material
Adverse Effect on Wired. Any adverse change, event or effect that is proximately
caused by any breach by Purchaser or Ventures of any covenant or obligation set
forth in this Agreement shall not be taken into account in determining whether
there has been or would be a Material Adverse Effect on Wired or Material
Adverse Effect on Purchaser, respectively.
12.2 Knowledge of Ventures. As used in this Agreement, a corporate
party's "knowledge" means the actual knowledge of any director or executive
officer of such party.
12.3 Memorandum; Disclaimer of Projections. Ventures makes no
representation or warranty to Purchaser or Acquisition Sub except as
specifically made in this Agreement. In particular, Ventures makes no
representation or warranty to Purchaser or Acquisition Sub with respect to any
financial projection or forecast delivered by or on behalf of Ventures to
Purchaser. Purchaser and Acquisition Sub acknowledge that (a) there are
uncertainties inherent in attempting to make such projections and forecasts, (b)
they are familiar with such uncertainties, (c) they are taking full
responsibility for making their own evaluation of the adequacy and accuracy of
all such projections and forecasts so furnished to them and (d) they shall have
no claim against Ventures or its stockholders with respect thereto.
12.4 Expenses.
(a) If the Merger is consummated or if this Agreement is
terminated under circumstances other than those specified in Section 9.3(a) or
(b), Ventures and Purchaser shall pay their own respective expenses and costs
incidental to the preparation of this Agreement, the
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performance and compliance with all agreements contained in this Agreement to be
performed or complied with by them and the consummation of the transactions
contemplated hereby. Ventures shall pay all such legal, accounting, investment
banking and other fees and expenses that are payable by it in full at or prior
to the Closing against appropriate invoices therefor. So that Purchaser may
calculate the Aggregate Share Value pursuant to Section 1.5(b)(2), Ventures
shall provide Purchaser with an estimate of amounts to be paid by Ventures at or
prior to the Closing at least two days prior to the Effective Time.
Notwithstanding anything to the contrary contained herein, if the Merger is
consummated, and if the aggregate legal, accounting, investment banking and
other fees and expenses paid or payable by Ventures and determined by Ventures
to be substantially related to the preparation for, negotiation of or
consummation of this Agreement or the transactions contemplated hereby exceed
$2.5 million and have not otherwise been included as a Closing Expense
Adjustment Amount thereby reducing the Aggregate Share Value pursuant to Section
1.5(b)(2) or included in the definition of Excess Expenses as defined in Section
10.1(d), Purchaser shall be entitled to seek indemnification, by making a claim
against the Escrow Fund pursuant to Article 11, with respect to the amount by
which such fees and expenses exceed $2.5 million. The Deductible shall not apply
to any such claim, and any such claim shall not be taken into account in
determining whether aggregate Losses exceed the threshold of the Deductible or
whether the Deductible has been satisfied for purposes of calculating
Purchaser's recovery from the Escrow Fund.
(b) If the Merger is not consummated under the circumstances
described in Section 9.3(a), Purchaser shall pay (1) all of its own expenses and
costs and (2) the reasonable expenses and costs of Ventures incidental to the
preparation of this Agreement, the performance and compliance with all
agreements contained in this Agreement and the consummation of the transactions
contemplated hereby including, without limitation, the reasonable fees and
expenses of their respective counsel and investment bankers, in an aggregate
amount not to exceed $200,000.
(c) If the Merger is not consummated under the circumstances
described in Section 9.3(b), Ventures shall pay (1) all of its own expenses and
costs and (2) the reasonable expenses and costs of Purchaser incidental to the
preparation of this Agreement, the performance and compliance with all
agreements contained in this Agreement and the consummation of the transactions
contemplated hereby including, without limitation, the reasonable fees and
expenses of their respective counsel and investment bankers, in an aggregate
amount not to exceed $200,000.
12.5 Notices. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (a) by registered or certified
mail, return receipt requested, postage prepaid, or (b)
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via a reputable nationwide overnight courier service, in each case to the
address set forth below. Any such notice, instruction or communication shall be
deemed to have been delivered three business days after it is sent prepaid, or
one business day after it is sent via a reputable nationwide overnight courier
service.
If to Purchaser, Acquisition Sub or the Surviving Corporation to:
Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02451
Attention: General Counsel
Tel: (781) 370-2700
Fax: (781) 370-2600
with a copy to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: Michael J. Riccio, Jr., Esquire
If to Ventures, to:
Wired Ventures, Inc.
660 Third Street, 4th Floor
San Francisco, CA 94107
Attention: President
Tel: (415) 276-8400
Fax: (415) 276-8699
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with a copy to:
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Attention: Kenneth L. Guernsey
Tel: (415) 693-2000
Fax: (415) 951-3699
If to the Stockholder Representatives, to:
H. William Jesse, Jr.
222 Sutter Street, 8th Floor
San Francisco, CA 94108
Tel: (415) 274-4550
Fax: (415)274-4567
and to:
Louis Rossetto
1732 La Vereda
Berkeley, CA 94702
Tel: (510) 841-7567
Fax: (510) 841-7568
and to:
Paul J. Salem
901 Fleet Center
50 Kennedy Plaza
Providence, RI 02903
Tel: (401) 751-6763
Fax: (401) 751-1790
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with a copy to:
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Attention: Kenneth L. Guernsey
Tel: (415) 693-2000
Fax: (415) 951-3699
or, in each case, to such other address as may be specified in writing to the
other parties.
Any party may give any notice, instruction or communication in
connection with this Agreement using any other means (including personal
delivery, telecopy or ordinary mail), but no such notice, instruction or
communication shall be deemed to have been delivered unless and until it is
actually received by the party to whom it was sent. Any party may change the
address to which notices, instructions or communications are to be delivered by
giving the other parties to this Agreement notice thereof in the manner set
forth in this Section 12.5.
12.6 Assignment. No party may assign or otherwise transfer this
Agreement or any of his rights hereunder to any person or entity, without the
prior written consent of Purchaser, Ventures and the Stockholder
Representatives, which consent shall not be unreasonably withheld or delayed.
Subject to the foregoing, this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their successors and assigns.
12.7 Entire Agreement; Amendment; Governing Law; Etc. This Agreement
(together with the Exhibits and Schedules hereto) and the Non-Disclosure
Agreement embody the entire agreement and understanding among the parties hereto
with respect to the subject matter hereof. This Agreement may be amended,
modified, waived, discharged or terminated only by (and any consent hereunder
shall be effective only if contained in) an instrument in writing signed by the
party against which enforcement of such amendment, modification, waiver,
discharge, termination or consent is sought. This Agreement shall be construed
in accordance with and governed by the laws of the State of Delaware as it
applies to contracts to be performed entirely within the State of California.
12.8 Counterparts. This Agreement may be executed in several
counterparts, each of which is an original, but all of which shall constitute
one instrument.
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12.9 Venue. If any legal proceeding or other action relating to this
Agreement or any of the other agreements being executed and delivered in
connection herewith, or any of the transactions contemplated hereby or thereby,
is brought or otherwise initiated, the venue therefor shall be in the city and
state in which the principal executive offices of the party who is not
initiating the legal proceeding, which shall be deemed to be a convenient forum.
Each of the parties hereto hereby expressly and irrevocably consents and submits
to the jurisdiction of the Federal and State courts sitting in such city and
state in connection with any such legal proceeding or other action.
12.10 Third-Party Rights. The stockholders of Ventures and holders of
Options and Warrants, acting solely through the Stockholder Representatives, are
intended third-party beneficiaries of the obligations of Purchaser and
Acquisition Sub set forth in Articles 1, 5, 6, 10, 11 and 12 of this Agreement.
Except as otherwise set forth herein, the parties do not intend to confer any
benefit hereunder on any person or entity other than the parties hereto and
their respective successors in interest.
12.11 Titles and Headings. Titles and headings of sections of this
Agreement and the "Table of Contents" and the "Table of Exhibits" included
herewith are for convenience of reference only and shall not affect the
construction of any provision of this Agreement.
12.12 Exhibits and Schedules. Each of the Exhibits and Schedules
referred to herein and attached hereto is an integral part of this Agreement and
is incorporated herein by this reference.
12.13 Pronouns. All pronouns and any variations thereof used in this
Agreement shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as appropriate.
12.14 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction, as to such jurisdiction, shall be
ineffective to the extent of such invalidity or unenforceability, without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
12.15 Time of Essence. Time is of the essence of this Agreement.
12.16 Interpretation. Each party acknowledges that such party, either
directly or through such party's representatives, has participated in the
drafting of this Agreement and any applicable rule of constructions that
ambiguities are to be resolved against the drafting party should not be applied
in connection with the construction or interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed as of the date first above written.
Lycos, Inc.,
a Delaware corporation
By:____________________
Its:
BF Acquisition Corp.,
a Delaware corporation
By:_____________________
Its:
Wired Ventures, Inc.,
a Delaware corporation
By:____________________
Its:
STOCKHOLDER REPRESENTATIVE:
--------------------------
STOCKHOLDER REPRESENTATIVE:
--------------------------
STOCKHOLDER REPRESENTATIVE:
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