<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AT HOME CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7370 770408542
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
AT HOME CORPORATION
450 BROADWAY STREET
REDWOOD CITY, CALIFORNIA 94063
(650) 569-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
THOMAS A. JERMOLUK
CHIEF EXECUTIVE OFFICER
AT HOME CORPORATION
450 BROADWAY STREET
REDWOOD CITY, CALIFORNIA 94063
(650) 569-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
JEFFREY R. VETTER, ESQ. PAUL D. TOSETTI, ESQ.
CRAIG A. MENDEN, ESQ. LATHAM & WATKINS
FENWICK & WEST LLP 633 WEST FIFTH STREET
TWO PALO ALTO SQUARE SUITE 4000
PALO ALTO, CALIFORNIA 94306 LOS ANGELES, CALIFORNIA 90071
(650) 494-0600 (213) 485-1234
</TABLE>
Approximate date of commencement of proposed sale to the public: Upon
consummation of the merger described herein (the "Merger").
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number for the same offering. [ ]
- ---------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
BE REGISTERED REGISTERED(1) PER SHARE PRICE(2) FEE(3)
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Common Stock, $0.01 par value........... 10,021,614 not applicable $354,678,017 $98,601
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</TABLE>
(1) Based upon the maximum number of shares of Series A common stock ("At Home
Series A Common Stock"), par value $0.01 per share, of At Home Corporation
that may be issued pursuant to the Merger.
(2) Estimated solely for the purpose of calculation of the registration fee
pursuant to Rule 457(c) under the Securities Act and based on $16.28, the
average of the high and low per share prices of common stock, par value
$0.008 per share, of iMALL, Inc. on the Nasdaq National Market on September
21, 1999.
(3) Pursuant to Rule 457(b) under the Securities Act, $81,512 of the
registration fee is offset by the filing fee previously paid by At Home
Corporation in connection with the filing of preliminary proxy materials on
Schedule 14A on August 30, 1999. Accordingly, a registration fee of $17,089
is being paid herewith.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
IMALL LOGO
IMALL, INC.
233 Wilshire Boulevard
Suite 820
Santa Monica, California 90401
To iMALL Stockholders:
You are cordially invited to attend the special meeting of stockholders of
iMALL, Inc., to be held at the Miramar Sheraton Hotel, 101 Wilshire Boulevard,
Santa Monica, California on October 27, 1999 at 10:00 a.m. (local time).
At the special meeting, you will be asked to vote on the approval of an
amendment to iMALL's articles of incorporation and the approval of an Agreement
and Plan of Merger, dated as of July 12, 1999 among At Home Corporation, which
is referred to as Excite@Home, Shop Nevada, Inc., a wholly-owned subsidiary of
Excite@Home, and iMALL, under which Shop Nevada will merge with iMALL, with
iMALL continuing as the surviving corporation. In the merger, you will become
entitled to receive 0.46 of a share of Excite@Home Series A common stock for
each share of iMALL common stock you own immediately prior to the merger.
iMALL's board has unanimously approved the amendment to the articles of
incorporation and the merger agreement and the merger and believes it is in the
best interests of iMALL and its stockholders to consummate the transactions
contemplated by the merger agreement. The board of directors unanimously
recommends that stockholders vote FOR the proposals to be considered at the
special meeting.
The attached notice of special meeting and prospectus/proxy statement
explain the proposed amendment to the articles of incorporation and the proposed
merger and provide specific information concerning the special meeting. Please
read these materials carefully. Do not send any certificates representing iMALL
common stock at this time.
iMALL is a Nevada corporation. Under Nevada law, the affirmative vote of
the holders of a majority of the outstanding shares of iMALL common stock
entitled to vote at the special meeting is required to approve the amendment to
the articles of incorporation and to approve the merger agreement. Stockholders
of iMALL owning approximately 41.9% of its common stock have agreed to vote all
of the shares of common stock owned by them in favor of the amendment to the
articles of incorporation and approval of the merger agreement and the merger.
Whether or not you plan to attend the special meeting, iMALL urges you to
complete, sign and promptly return the enclosed proxy card to assure that your
shares will be voted at the special meeting. Failure to return a properly
executed proxy card and/or to vote at the special meeting will have the same
effect as a vote against the proposals. Your vote is important, regardless of
the number of shares that you own.
Sincerely,
/s/ Richard M. Rosenblatt
Richard M. Rosenblatt
Chief Executive Officer
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE EXCITE@HOME COMMON STOCK
TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS PROSPECTUS/PROXY STATEMENT IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus/proxy statement is dated September 28, 1999 and is expected
to be first mailed to stockholders on September 28, 1999.
<PAGE> 3
SOURCES OF ADDITIONAL INFORMATION
This prospectus/proxy statement incorporates important business and
financial information about iMALL and Excite@Home that is not included or
delivered with this document. Such information is available without charge to
iMALL and Excite@Home stockholders upon written or oral request. Contact iMALL
at iMALL, Inc., 233 Wilshire Boulevard, Suite 820, Santa Monica, California
90401, Attn.: Secretary. iMALL's telephone number is (310) 309-4000. Contact
Excite@Home at At Home Corporation, 425 Broadway, Redwood City, California
94063, Attn: Secretary. Excite@Home's telephone number is (650) 569-5000.
To obtain timely delivery of requested documents prior to the special
meeting of iMALL, you must request them no later than October 20, 1999, which is
five business days prior to the date of such meeting.
Also see "Where you can find more information" in this prospectus/proxy
statement.
<PAGE> 4
iMALL, INC.
233 WILSHIRE BOULEVARD
SUITE 820
SANTA MONICA, CALIFORNIA 90401
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 27, 1999
To the Stockholders of iMALL, Inc.:
A special meeting of stockholders of iMALL, Inc., will be held on October
27, 1999, at 10:00 a.m. (local time), at the Miramar Sheraton Hotel, 101
Wilshire Boulevard, Santa Monica, California, for the following purposes:
1. To consider and vote upon a proposal to approve an amendment to iMALL's
articles of incorporation, deleting in its entirety Section C of Article
VI of the articles of incorporation which requires the vote or written
consent of the stockholders entitled to exercise two-thirds of the
voting power of the corporation to approve any sale, conveyance,
transfer, exchange or other disposition of all or substantially all of
the property and assets of the corporation;
2. To consider and vote upon a proposal to approve an Agreement and Plan of
Merger, dated as of July 12, 1999, and a merger among At Home
Corporation, which is referred to as Excite@Home, Shop Nevada, Inc., a
wholly-owned subsidiary of Excite@Home, and iMALL under which:
(a) Shop Nevada will be merged with iMALL, with iMALL continuing as the
surviving corporation; and
(b) each issued and outstanding share of common stock of iMALL will be
canceled and converted into and represent the right to receive 0.46
of a share of Series A common stock of Excite@Home; and
3. To transact such other business as may properly come before the special
meeting or any adjournment or postponement of the special meeting,
including without limitation, potential adjournments or postponements of
the special meeting for the purpose of soliciting additional proxies in
order to approve the amendment to the articles of incorporation and to
approve the merger agreement and the merger.
iMALL's board of directors has unanimously approved the amendment to the
articles of incorporation and the merger agreement and the merger and
unanimously recommends that you vote FOR approval of the amendment to the
articles of incorporation and the approval of the merger agreement and the
merger. The proposals are described in more detail in the accompanying
prospectus/proxy statement, which you should read in its entirety before voting.
A copy of the merger agreement is attached as Annex A to the accompanying
prospectus/proxy statement.
The close of business on September 20, 1999 has been fixed by iMALL's board
of directors as the record date for the determination of stockholders entitled
to notice of and to vote at the special meeting or any adjournment or
postponement thereof. Only holders of record of iMALL common stock at the close
of business on the record date may vote at the special meeting.
All stockholders of iMALL are cordially invited to attend the special
meeting in person. However, to ensure your representation at the special
meeting, you are urged to complete, sign and return the enclosed proxy card as
promptly as possible in the enclosed postage-prepaid envelope. You may revoke
your proxy in the manner described in the accompanying prospectus/proxy
statement at any time before it is voted at the special meeting. If you fail to
return a properly executed proxy card or to vote in person at the special
meeting, the effect will be a vote against the amendment to the articles of
incorporation and the merger agreement and the merger.
<PAGE> 5
By Order of the Board of Directors
/s/ Anthony P. Mazzarella
Anthony P. Mazzarella
Executive Vice President,
Chief Financial Officer and Secretary
Santa Monica, California
September 28, 1999
IMALL'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION AND APPROVAL OF
THE MERGER AGREEMENT AND THE MERGER.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
<PAGE> 6
PROSPECTUS/PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY OF THE PROSPECTUS/PROXY STATEMENT................... 4
The Companies............................................. 4
Summary of the transaction................................ 5
Information about the common stock of Excite@Home and
iMALL.................................................. 9
Excite@Home's selected historical financial data.......... 10
iMALL's selected historical financial data................ 11
Comparative historical and unaudited pro forma per share
data................................................... 12
RISK FACTORS................................................ 13
Risks relating to the proposed merger..................... 13
Risks related to Excite@Home's business................... 15
Risks related to Excite@Home's relationships with its
cable partners......................................... 21
Risks associated with the acquisition of Excite, Inc. and
Excite's business by @Home............................. 24
THE iMALL SPECIAL MEETING................................... 26
Date, time and place...................................... 26
Purpose................................................... 26
Recommendation of iMALL's board of directors.............. 26
Record date, outstanding shares and voting rights......... 26
Vote required; quorum..................................... 26
Voting of proxies......................................... 27
Revocation of proxies..................................... 27
Solicitation of proxies; expenses......................... 28
Appraisal rights.......................................... 28
THE MERGER.................................................. 29
Background of the merger.................................. 29
iMALL's reasons for the merger............................ 31
Recommendation of iMALL's board of directors.............. 33
Opinion of iMALL's financial advisor...................... 33
Interests of certain persons in the merger................ 41
Completion and effectiveness of the merger................ 41
Structure of the merger and conversion of iMALL common
stock.................................................. 42
Exchange of iMALL stock certificates for Excite@Home stock
certificates........................................... 42
Material United States federal income tax consequences of
the merger............................................. 43
Accounting treatment of the merger........................ 45
Regulatory filings and approvals required to complete the
merger................................................. 45
Restrictions on sales of shares by affiliates of iMALL and
Excite@Home............................................ 45
Listing on the Nasdaq National Market of Excite@Home
common stock to be issued in the merger................ 46
Delisting and deregistration of iMALL common stock after
the merger............................................. 46
Operations after the merger............................... 46
THE MERGER AGREEMENT........................................ 47
Representations and warranties............................ 47
iMALL's representations and warranties.................... 47
Excite@Home's representations and warranties.............. 48
iMALL's conduct of business before completion of the
merger................................................. 49
</TABLE>
i
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
No other negotiations involving iMALL..................... 50
Treatment of iMALL stock options and warrants............. 52
iMALL's employee benefit plans............................ 52
Director and officer indemnification...................... 52
Conditions to completion of the merger.................... 53
Termination of the merger agreement....................... 55
Payment of termination fee................................ 56
Extension, waiver and amendment of the merger agreement... 57
RELATED AGREEMENTS.......................................... 58
Voting agreements......................................... 58
Agreements relating to the First Data relationship........ 58
Employment agreements..................................... 61
Option grants............................................. 65
Redemption of iMALL "Series A" Warrants................... 66
Amendment to iMALL "Series B" Warrants.................... 66
COMPARATIVE PER SHARE MARKET PRICE DATA..................... 67
COMPARISON OF RIGHTS OF HOLDERS OF iMALL COMMON STOCK AND
EXCITE@HOME COMMON STOCK.................................. 68
Classification of common stock............................ 68
Voting.................................................... 68
Special meeting of stockholders........................... 68
Record date for determining stockholders.................. 69
Election of directors..................................... 70
Number of directors....................................... 70
Removal of directors...................................... 71
Board of directors vacancies.............................. 71
Special meetings of the board of directors................ 71
Board action -- generally................................. 72
Board action -- transactions with related parties......... 72
Board action -- supermajority requirement................. 73
Board action -- unanimity requirement..................... 74
Action by committees...................................... 74
Approval of third-party content transactions.............. 75
Preferred stock........................................... 76
Conversion rights......................................... 76
Share dividends........................................... 76
Indemnification........................................... 77
Limitation on liability................................... 77
Dividends/Distributions................................... 78
Liquidation............................................... 78
Amendment of certificate or articles of incorporation..... 79
Amendment of bylaws....................................... 79
Stockholder voting with respect to mergers................ 80
Appraisal and dissenters' rights.......................... 80
Stockholder approval of certain business combinations..... 81
Inspection of stockholders' list.......................... 84
ADDITIONAL MATTER BEING SUBMITTED TO A VOTE OF iMALL
STOCKHOLDERS.............................................. 85
STOCKHOLDER PROPOSALS....................................... 86
</TABLE>
ii
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS/PROXY
STATEMENT................................................. 86
WHERE YOU CAN FIND MORE INFORMATION......................... 87
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION............ 88
LEGAL OPINION............................................... 89
EXPERTS..................................................... 89
ANNEX A -- AGREEMENT AND PLAN OF MERGER
ANNEX B -- FORM OF VOTING AGREEMENT
ANNEX C -- OPINION OF BANCBOSTON ROBERTSON STEPHENS INC.
ANNEX D -- AMENDMENT TO ARTICLES OF INCORPORATION OF iMALL,
INC.
</TABLE>
iii
<PAGE> 9
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT IS THE MERGER?
A: In the merger, iMALL will become a wholly-owned subsidiary of
Excite@Home.
Based on the capitalization of Excite@Home as of September 20, the
former stockholders of iMALL will receive in the merger a number of
shares of Excite@Home Series A common stock representing 2.4% of
Excite@Home's outstanding common stock and 1.4% of the voting power of
Excite@Home's outstanding common stock.
For a more complete description of the merger, see the section entitled
"The Merger" on page 29.
Q: WHAT WILL iMALL STOCKHOLDERS RECEIVE IN THE MERGER?
A: iMALL stockholders will receive 0.46 (the "exchange ratio") of a share
of Excite@Home Series A common stock for each share of iMALL common
stock they own. iMALL stockholders will receive cash based on the
market price of Excite@Home Series A common stock instead of any
fractional share.
For example, a holder of 100 shares of iMALL common stock will receive
46 shares of Excite@Home Series A common stock.
Holders of options or warrants to purchase shares of iMALL common stock
will hold options or warrants, as appropriate, to purchase shares of
Excite@Home Series A common stock after completion of the merger.
The number of shares of Excite@Home Series A common stock to be issued
for each share of iMALL common stock is fixed and will not be adjusted
based upon changes in the value of these shares. As a result, the value
of the shares iMALL stockholders will receive in the merger will not be
known prior to the time of the merger and may go up or down as the
market price of Excite@Home Series A common stock goes up or down.
iMALL is not permitted to terminate its obligations to complete the
merger or resolicit the vote of its stockholders based solely on
changes in the market price of Excite@Home Series A common stock.
Excite@Home's stock price is volatile. As an example, the following
table sets forth, as of the end of the month for each of the last 12
calendar months, the closing sale price per share of Excite@Home Series
A common stock on the Nasdaq National Market. This table also reflects
the value to be received in the merger for each share of iMALL common
stock, calculated by multiplying the closing price per share of
Excite@Home common stock by the exchange ratio.
<TABLE>
<CAPTION>
CLOSING
SALE PRICE
PER SHARE
OF EXCITE VALUE PER
@HOME SHARE OF
Series A IMALL
COMMON COMMON
DATE STOCK STOCK
------------------ ---------- ---------
<S> <C> <C>
August 31, 1999 $40.13 $18.46
July 30, 1999 $45.69 $21.02
June 30, 1999 $53.94 $24.81
May 28, 1999 $63.38 $29.15
April 30, 1999 $71.97 $33.11
March 31, 1999 $78.75 $36.23
February 26, 1999 $53.06 $24.41
January 29, 1999 $62.50 $28.75
December 31, 1998 $37.13 $17.08
November 30, 1998 $29.13 $13.40
October 30, 1998 $22.13 $10.18
September 30, 1998 $23.94 $11.01
</TABLE>
1
<PAGE> 10
The share prices of Excite@Home Series A common stock reflect a two for
one stock split effected on June 16, 1999.
Q: DOES THE BOARD OF DIRECTORS OF iMALL RECOMMEND VOTING IN FAVOR OF THE MERGER
AND THE AMENDMENT TO THE ARTICLES OF INCORPORATION?
A: Yes. After careful consideration, iMALL's board of directors
unanimously recommends that its stockholders vote in favor of the
merger agreement and the merger as well as the amendment to the
articles of incorporation.
For a more complete description of the recommendation of iMALL's board
of directors, see the sections entitled "iMALL's reasons for the
merger" on page 31, and "Recommendation of iMALL's board of directors"
on page 33.
Q: WHAT DO I NEED TO DO NOW?
A: You are urged to read this prospectus/proxy statement carefully,
including its annexes, and to consider how the amendment to the
articles of incorporation and the merger affect you as a stockholder.
You may also want to review the documents referenced under "Where you
can find more information" on page 87.
Q: HOW DO I VOTE?
A: You should indicate on your proxy card how you want to vote, and sign
and mail your proxy card in the enclosed return envelope as soon as
possible so that your shares will be represented at the special
meeting. If you fail to return your proxy card or to vote in person at
the special meeting, the effect will be a vote against the amendment to
the articles of incorporation and against the merger agreement and the
merger.
For a more complete description of voting at the special meeting, see
the section entitled "Voting of proxies" on page 27.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: If you want to change your vote, deliver to the secretary of iMALL a
written notice of revocation of your proxy or a later-dated, signed
proxy card before the special meeting.
For a more complete description of how to change your vote, see the
section entitled "Revocation of proxies" on page 27.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on
how to vote by following the information provided to you by your
broker.
Q: SHOULD I SEND IN MY iMALL STOCK CERTIFICATES NOW?
A: No. After the merger is completed, you will receive written
instructions for exchanging your iMALL stock certificates for
Excite@Home stock certificates.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: Excite@Home and iMALL are working toward completing the merger as
quickly as possible and hope to complete the merger during the fourth
quarter of 1999.
2
<PAGE> 11
Q: WILL I RECOGNIZE A GAIN OR LOSS ON THE TRANSACTION?
A: Excite@Home and iMALL expect that if the merger is completed, you will
not recognize gain or loss for United States federal income tax
purposes, except that you will recognize gain or loss with respect to
cash received instead of fractional shares. You are urged to consult
your own tax advisor to determine your particular tax consequences.
For a more complete description of the tax consequences of the merger,
see the section entitled "Material United States federal income tax
consequences of the merger" on page 43.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: You should call iMALL Investor Relations at (310) 309-4000 with any
questions about the merger or the amendment to the articles of
incorporation.
You may also obtain additional information about Excite@Home and iMALL
from documents filed with the Securities and Exchange Commission by
following the instructions in the section entitled "Where you can find
more information" on page 87.
3
<PAGE> 12
SUMMARY OF THE PROSPECTUS/PROXY STATEMENT
THE COMPANIES
EXCITE@HOME
AT HOME CORPORATION
450 Broadway
Redwood City, California 94063
(650) 569-5000
http://www.home.net
Excite@Home is a global media company. Excite@Home's Media services provide
consumers content and interactive services via broadband and narrowband Internet
service platforms. These platforms include the broadband Internet portal of the
@Home service launch screen and the Internet portal Excite (www.excite.com).
Excite@Home's Media services also provide rich media advertising and highly
targeted marketing solutions through Excite@Home's MatchLogic and Enliven
business units. Excite@Home is a provider of broadband Internet services over
the cable television infrastructure to consumers via the @Home service. The
@Home service allows residential subscribers to connect their personal computers
via cable modems and hybrid fiber co-axial cable wires to a high-speed Internet
backbone network developed and managed by Excite@Home. This service enables
subscribers to access all Internet content and services at transmission speeds
up to 100 times faster than typical dial-up connections, provides an "always on"
connection and offers rich multimedia programming through Excite@Home's
broadband Internet portal. For businesses, Excite@Home's @Work services provide
a platform for Internet, intranet and extranet connectivity solutions and
networked business applications over both cable infrastructure and digital
telecommunications lines.
iMALL
iMALL, INC.
233 Wilshire Boulevard, Suite 820
Santa Monica, California 90401
(310) 309-4000
http://www.imallinc.com
iMALL and its subsidiaries provide electronic commerce services and
solutions to small and medium-sized businesses enabling them to cost effectively
and efficiently sell their products through the Internet. iMALL's unique
electronic commerce services and integrated process allow businesses to create
fully commerce enabled Web sites or add transaction capabilities to their
existing ones, establish "Internet ready" merchant accounts online, and process
customer orders securely through iMALL's proprietary payment gateway. To help
increase online business' sales, iMALL's shopping portals and shopper services
are integrated into its electronic commerce services. iMALL's shopping portals
are located at www.stuff.com and www.imall.com.
4
<PAGE> 13
SUMMARY OF THE TRANSACTION
THE TRANSACTION (PAGE 42)
In the merger, iMALL and a wholly-owned subsidiary of Excite@Home will
merge, and as a result iMALL will become a wholly-owned subsidiary of
Excite@Home.
The merger agreement is attached to this prospectus/proxy statement as
Annex A. Excite@Home and iMALL encourage you to read the merger agreement
carefully.
CONDITIONS TO COMPLETION OF THE MERGER (PAGES 53 TO 55)
The completion of the merger depends upon meeting a number of conditions,
including:
- the merger agreement and the merger must be approved by iMALL
stockholders;
- no governmental injunction or order preventing the completion of the
merger may be in effect and the applicable waiting periods under
antitrust laws must expire or be terminated;
- the parties must have received legal opinions to the effect that the
merger will qualify as a tax-free reorganization;
- the shares of Excite@Home Series A common stock to be issued to iMALL
stockholders in the merger must have been approved for listing on the
Nasdaq National Market;
- the representations and warranties of each party in the merger agreement
must be true and correct;
- the parties must have complied in all material respects with their
respective agreements in the merger agreement;
- no material adverse effect shall have occurred with respect to
Excite@Home or iMALL;
- the parties must have received from third parties any required consents
to the merger;
- each employment agreement entered into with iMALL employees described
under "Related Agreements -- Employment Agreements" must be in full force
and effect and Richard Rosenblatt and at least two of Phillip Windley,
Joseph Ruszkiewicz and Stephen Fulling shall be employed by iMALL;
- the agreements with First Data Merchant Services Corporation must be in
full force and effect; and
- the amendment to the articles of incorporation must be approved by iMALL
stockholders.
If either Excite@Home or iMALL waives any conditions, other than the
condition relating to the agreements with First Data which may not be waived
without First Data's consent, iMALL will consider the facts and circumstances at
that time and make a determination as to whether a resolicitation of proxies
from stockholders is appropriate.
VOTES REQUIRED FOR APPROVAL (PAGES 26 TO 27)
The holders of a majority of the outstanding shares of iMALL common stock
must approve the merger agreement and the merger. iMALL stockholders are
entitled to cast one vote per share of iMALL common stock owned as of September
20, 1999, the record date.
iMALL stockholders that beneficially own 41.9% of iMALL common stock as of
the record date have agreed to vote in favor of approval of the merger agreement
and the merger and approval of the amendment to the articles of incorporation.
Directors and executive officers of iMALL collectively beneficially owned
approximately 20.9% of the outstanding iMALL common stock as of the record date.
5
<PAGE> 14
TERMINATION OF THE MERGER AGREEMENT (PAGES 55 TO 56)
The merger agreement may be terminated by the parties' mutual consent.
In addition, subject to qualifications, the merger agreement may be
terminated by either of the parties under any of the following circumstances:
- if the merger is not completed by March 1, 2000, so long as the
terminating party did not prevent completion of the merger by breaching
the merger agreement;
- if a final governmental injunction or order prohibiting the merger is
issued and is not appealable;
- if the iMALL stockholders do not approve the merger agreement at the
special meeting, however, iMALL may not terminate the agreement if the
failure to obtain stockholder approval resulted from its breach of the
merger agreement or the breach of any voting agreement; or
- if the conditions to completion of the merger would not be satisfied (1)
because of a breach of an agreement in the merger agreement by the other
which causes the representations and warranties in the merger agreement
to become untrue, or (2) because a representation or warranty of the
other in the merger agreement becomes untrue.
The merger agreement may be terminated by Excite@Home if any of the
following "triggering events" occurs:
- iMALL's board fails to unanimously recommend that iMALL stockholders
approve the merger agreement and the merger;
- iMALL's board fails to reaffirm its unanimous recommendation of the
merger upon the request of Excite@Home after a proposal for an
extraordinary transaction involving iMALL such as a merger or sale of
significant assets has been publicly announced;
- iMALL's board approves or publicly recommends a proposal for an
extraordinary transaction involving iMALL;
- iMALL enters into a letter of intent or other similar document or
agreement relating to an extraordinary transaction involving iMALL; or
- any tender or exchange offer relating to securities of iMALL shall be
commenced and iMALL shall not have recommended the rejection of that
tender offer or exchange offer.
TERMINATION FEE (PAGES 56 TO 57)
If the merger agreement is terminated by Excite@Home because of any of the
triggering events described immediately above, iMALL will be obligated to pay
Excite@Home a termination fee of $2.5 million. If within 15 months following the
termination, an extraordinary transaction, such as a merger or sale of
significant assets, occurs with respect to iMALL, or iMALL enters into an
agreement regarding an extraordinary transaction, iMALL will be obligated to pay
Excite@Home an additional $19.6 million.
If the merger agreement is terminated because iMALL stockholders do not
approve the merger agreement and the merger, iMALL may be obligated to pay
Excite@Home a termination fee of $22.1 million. For iMALL to become obligated to
pay Excite@Home the $22.1 million termination fee, an extraordinary transaction
of the nature specified in the merger agreement involving iMALL and a party
other than Excite@Home must be publicly proposed before the termination of the
merger agreement and iMALL must enter into an agreement for or complete the
extraordinary transaction within 15 months after termination of the merger
agreement.
6
<PAGE> 15
NO OTHER NEGOTIATIONS INVOLVING iMALL (PAGES 50 TO 51)
Until the merger is completed or the merger agreement is terminated, iMALL
has agreed, with limited exceptions, not to directly or indirectly take any
action with respect to an Acquisition Proposal, as defined on page 51 of this
prospectus/proxy statement.
After iMALL receives an Acquisition Proposal that iMALL's board reasonably
concludes may constitute a Superior Offer, as defined on page 51 of this
prospectus/proxy statement, subject to the conditions specified on pages 50 to
51, iMALL may furnish information or enter into discussions with the person or
group that submitted the Acquisition Proposal.
iMALL has agreed to promptly inform Excite@Home as to any Acquisition
Proposal, request for nonpublic information or inquiry which iMALL believes
would lead to an Acquisition Proposal. iMALL has agreed to inform Excite@Home of
the status and details of any Acquisition Proposal.
THE VOTING AGREEMENTS (PAGE 58)
Some iMALL stockholders have entered into voting agreements with
Excite@Home. The voting agreements require these iMALL stockholders to vote all
shares of iMALL common stock beneficially owned by them in favor of the approval
of the merger agreement and the merger and the amendment to the articles of
incorporation. Each of these stockholders, other than First Data, granted
Excite@Home an irrevocable proxy to vote their shares in favor of the amendment
to the articles of incorporation and the merger agreement and the merger.
The stockholders who entered into the voting agreements collectively held
approximately 41.9% of the outstanding iMALL common stock as of the record date.
The form of voting agreement is attached to this prospectus/proxy statement
as Annex B, and you are urged to read it in its entirety.
OPINION OF FINANCIAL ADVISOR (PAGES 33 TO 41)
In deciding to approve the merger agreement and the merger, iMALL's board
considered, among various other factors described below in "iMALL's reasons for
the merger," an opinion from its financial advisor, BancBoston Robertson
Stephens, Inc. On July 11, 1999, BancBoston Robertson Stephens delivered to
iMALL's board its oral opinion, which it subsequently confirmed in writing,
that, as of that date, the exchange ratio in the merger was fair from a
financial point of view to iMALL's stockholders other than Excite@Home or any of
its affiliates.
The full text of the written opinion of BancBoston Robertson Stephens which
sets forth the assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion, is attached to this
prospectus/proxy statement as Annex C. You should read this opinion in its
entirety. The opinion of BancBoston Robertson Stephens does not constitute a
recommendation as to how any iMALL stockholder should vote with respect to the
merger.
ACCOUNTING TREATMENT OF THE MERGER (PAGE 45)
Excite@Home intends to account for the merger as a "purchase" for financial
accounting purposes, under U. S. generally accepted accounting principles.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 41)
In considering the recommendation of iMALL's board, you should be aware
that officers and directors of iMALL have interests in the merger that are
different from, or in addition to, those of stockholders generally. These
interests include:
- some officers of iMALL will become employees of Excite@Home or the
company resulting from the merger and will have employment agreements;
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<PAGE> 16
- iMALL's directors and officers have customary rights to indemnification
against liabilities;
- First Data, which as of the record date owned 10.2% of the outstanding
shares of iMALL common stock, entered into a marketing agreement, an
amended marketing and development agreement, a capacity reservation
agreement, and upon completion of the merger, will enter into a
registration rights agreement with Excite@Home. In addition, if the
merger is completed, Excite@Home will issue First Data a warrant to
purchase 2,300,000 shares of its Series A common stock.
APPRAISAL RIGHTS (PAGE 28)
Under Nevada law, holders of iMALL common stock are not entitled to
appraisal or dissenters' rights in the merger.
ANTITRUST APPROVAL REQUIRED TO COMPLETE THE MERGER (PAGE 45)
The merger is subject to antitrust laws. Excite@Home and iMALL have made
the required filings with the Department of Justice and the Federal Trade
Commission. However, the Department of Justice or the Federal Trade Commission,
or government, state or private person, may challenge the merger at any time
before or after its completion.
ABILITY TO SELL EXCITE@HOME STOCK (PAGE 45)
All shares of Excite@Home Series A common stock received by iMALL
stockholders in connection with the merger will be freely transferable unless
the holder is considered an affiliate of either of the parties under the
Securities Act.
COMPARATIVE MARKET PRICE INFORMATION (PAGE 67)
Shares of Excite@Home Series A common stock and iMALL common stock are
listed on the Nasdaq National Market. On July 12, 1999, the last full trading
day prior to the public announcement of the proposed merger, Excite@Home's
Series A common stock closed at $51.50 per share, and iMALL's common stock
closed at $22.31 per share. On September 20, 1999, Excite@Home's Series A common
stock closed at $37.69 per share, and iMALL's common stock closed at $16.56 per
share. The parties urge you to obtain current market quotations for the
Excite@Home Series A common stock and the iMALL common stock.
This summary may not contain all of the information that is important to
you. You should read carefully this entire document and the other documents
referred to in this prospectus/proxy statement for a more complete understanding
of the merger. In particular, you should read the documents attached to this
prospectus/proxy statement, including the merger agreement, which is attached as
Annex A, the form of the voting agreement, which is attached as Annex B, the
opinion of BancBoston Robertson Stephens, which is attached as Annex C and the
amendment to the articles of incorporation which is attached as Annex D.
8
<PAGE> 17
INFORMATION ABOUT THE COMMON STOCK OF EXCITE@HOME AND iMALL
<TABLE>
<CAPTION>
EXCITE@HOME
Series A iMALL IMALL
COMMON COMMON EQUIVALENT
STOCK STOCK PER SHARE PRICE
----------- ------ ---------------
<S> <C> <C> <C>
July 12, 1999, the business day preceding public
announcement that Excite@Home and iMALL had entered
into the merger agreement.......................... $51.50 $22.31 $23.69
September 27, 1999, the last practicable day for
which closing prices were available at the time of
the printing of this prospectus/proxy statement.... $38.31 $16.81 $17.62
</TABLE>
The iMALL equivalent price per share is equal to the closing price of a
share of Excite@Home Series A common stock on that date multiplied by 0.46, the
number of shares of Excite@Home Series A common stock to be issued in exchange
for each share of iMALL common stock.
Excite@Home and iMALL have never paid cash dividends on their respective
shares of common stock. Under the merger agreement, iMALL has agreed not to pay
cash dividends pending the consummation of the merger, without written consent
of Excite@Home. If the merger is not completed, iMALL's board presently intends
that it would continue its policy of retaining any earnings to finance the
expansion of its business. The Excite@Home board presently intends to retain all
earnings for use in its business and has no present intention to pay cash
dividends before or after the merger.
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<PAGE> 18
EXCITE@HOME'S SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following selected historical financial data of Excite@Home has been
derived from Excite@Home's historical financial statements, and should be read
in conjunction with those financial statements and the related notes which are
incorporated by reference in this prospectus/proxy statement. The selected
historical financial data excludes the financial position and results of
operations of Excite, Inc. for dates and periods prior to its merger into At
Home Corporation in May 1999. Pro forma statement of operations data and balance
sheet data for Excite@Home is included in its Form 10-Q for the three month
period ended June 30, 1999 and Form 8-K/A dated August 13, 1999 incorporated by
reference in this prospectus/proxy statement.
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 28,
1995 SIX MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, (INCEPTION) TO JUNE 30,
--------------------------------- DECEMBER 31, ---------------------
1998 1997 1996 1995 1999 1998
--------- -------- -------- -------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENTS OF
OPERATIONS DATA:
Revenues..................... $ 48,045 $ 7,437 $ 676 $ -- $ 95,640 $ 14,993
Loss from operations......... $(150,592) $(58,750) $(25,027) $(2,886) $(253,175) $(58,001)
Net loss..................... $(144,179) $(55,717) $(24,513) $(2,756) $(236,068) $(55,988)
Net loss per share -- basic
and diluted................ $ (1.26) $ (0.54) $ (0.26) $ (0.03) $ (0.89) $ (0.25)
Number of shares used in per
share calculation -- basic
and diluted................ 114,240 103,543 96,120 95,252 264,060 224,196
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------- JUNE 30,
1998 1997 1996 1995 1999
-------- -------- ------- ------ ----------
<S> <C> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA:
Working capital................................. $390,324 $101,390 $10,573 $6,244 $ 380,028
Total assets.................................... $780,631 $323,928 $33,388 $8,124 $8,055,547
Long-term debt and capital lease obligations.... $255,806 $ 27,442 $10,510 $ -- $ 310,051
Total stockholders' equity...................... $493,866 $282,407 $18,317 $7,212 $7,610,052
</TABLE>
10
<PAGE> 19
iMALL'S SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The following selected historical financial data of iMALL has been derived
from iMALL's historical financial statements, and should be read in conjunction
with those financial statements and the related notes which are incorporated by
reference in this prospectus/proxy statement.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- -------------------------
1998 1997 1996 1999 1998
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
HISTORICAL STATEMENTS OF OPERATIONS
DATA:
Revenues.............................. $ 1,596 $ 974 $ 677 $ 1,580 $ 488
Loss from continuing operations....... $ (11,086) $ (2,586) $ (2,348) $ (8,137) $ (3,528)
(Loss) income from discontinued
operations.......................... $ (2,063) $ (2,117) $ 2,413 $ 79 $ (244)
Net (loss) income..................... $ (13,149) $ (4,703) $ 65 $ (8,058) $ (3,772)
Net (loss) income per share -- basic
and diluted
Loss from continuing operations..... $ (1.61) $ (0.36) $ (0.32) $ (0.53) $ (0.58)
(Loss) income from discontinued
operations........................ $ (0.26) $ (0.28) $ 0.33 $ 0.01 $ (0.03)
Net (loss) income................... $ (1.87) $ (0.64) $ 0.01 $ (0.52) $ (0.61)
Number of shares used in per share
calculation -- basic and diluted.... 8,008,040 7,526,967 7,252,584 15,826,031 7,683,098
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- JUNE 30,
1998 1997 1996 1999
------- ------- ------ -------------
<S> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA:
Working capital (deficit).................................. $ 8,227 $13,474 $ (590) $ 7,108
Total assets............................................... $14,502 $16,017 $2,018 $16,840
Long-term debt and capital lease obligations............... $ -- $ -- $ 40 $ 74
Total stockholders' equity................................. $10,714 $14,354 $ 714 $15,285
</TABLE>
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<PAGE> 20
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA
The following table sets forth (1) the pro forma historical net loss per
share (presented as if the merger between At Home Corporation and Excite, Inc.
had taken place at the beginning of each period presented) and the historical
book value per share data of Excite@Home as disclosed in Excite@Home's Form 10-Q
for the period ended June 30, 1999 and Form 8-K/A dated August 13, 1999
incorporated by reference in this prospectus/proxy statement; (2) historical net
loss per share and historical book value per share data of iMALL; (3) unaudited
pro forma condensed combined net loss per share and unaudited pro forma
condensed combined book value per share data of Excite@Home after giving effect
to the merger; and (4) unaudited equivalent pro forma condensed combined net
loss per share and unaudited equivalent pro forma condensed combined book value
per share data of iMALL based on the exchange ratio of 0.46 of a share of
Excite@Home's Series A common stock for each share of iMALL's common stock. See
"The Merger -- Structure of the merger and conversion of iMALL common stock" on
page 42.
The information in the table should be read in conjunction with the pro
forma financial statements of Excite@Home and the financial statements of iMALL
and the related notes incorporated by reference in this prospectus/proxy
statement. The unaudited pro forma condensed combined financial information is
not necessarily indicative of the net loss per share or book value per share
that would have been achieved had the merger been consummated as of the
beginning of the periods presented and should not be construed as representative
of these amounts for any future dates or periods.
<TABLE>
<CAPTION>
IMALL
EQUIVALENT
PRO FORMA PRO FORMA PRO FORMA
HISTORICAL HISTORICAL CONDENSED CONDENSED
Excite@Home IMALL COMBINED COMBINED
(1) (2)(3) (4) (4)(5)
----------- ---------------- --------- ----------
<S> <C> <C> <C> <C>
Net loss per share -- basic and diluted
For the year ended December 31, 1998............. $(5.61) $(1.87) $(6.08) $(2.80)
For the six months ended June 30, 1999........... $(2.81) $(0.52) $(3.04) $(1.40)
Book value per share at June 30, 1999................ $ 1.88 $ 0.85 $ 1.84 $ 0.85
</TABLE>
- -------------------------
(1) Historical book value per share is computed by dividing pro forma
stockholders' equity less goodwill and other intangible assets by the number
of pro forma shares of common stock outstanding at the end of each period.
Excite@Home's historical net loss per share, which did not include the
results of operations of Excite, Inc. for periods prior to its merger into
At Home Corporation in May 1999, was $(1.26) and $(0.89) for the year ended
December 31, 1998 and for the six months ended June 30, 1999, respectively.
(2) Historical book value per share is computed by dividing stockholders' equity
less goodwill and other intangible assets by the number of shares of common
stock outstanding at the end of each period.
(3) The iMALL historical net loss per share data for the year ended December 31,
1998 and the six months ended June 30, 1999 include a net (loss) and income
per share for discontinued operations of ($0.26) and $0.01, respectively.
(4) The pro forma condensed combined book value per share is computed by
dividing pro forma stockholders' equity less goodwill and other intangible
assets, including the effect of pro forma adjustments for the merger, by the
pro forma number of shares of Excite@Home Series A common stock which would
have been outstanding had the merger been consummated as of June 30, 1999.
(5) The iMALL equivalent pro forma condensed combined per share amounts are
calculated by multiplying the pro forma condensed combined book value per
share amounts by the exchange ratio of 0.46 of a share of Excite@Home Series
A common stock for each share of iMALL common stock.
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<PAGE> 21
RISK FACTORS
The merger involves a high degree of risk. Also, by voting in favor of the
merger agreement and the merger, iMALL stockholders will be choosing to invest
in Excite@Home Series A common stock. Any investment in Excite@Home Series A
common stock involves a high degree of risk. In addition to the other
information contained or incorporated by reference in this prospectus/proxy
statement, iMALL stockholders should carefully consider the following risk
factors in deciding whether to vote for the merger agreement and the merger.
RISKS RELATING TO THE PROPOSED MERGER
IMALL STOCKHOLDERS WILL RECEIVE A FIXED RATIO OF 0.46 OF A SHARE OF EXCITE@HOME
SERIES A COMMON STOCK PER IMALL SHARE EVEN IF THERE ARE CHANGES IN THE MARKET
VALUE OF IMALL COMMON STOCK OR EXCITE@HOME SERIES A COMMON STOCK BEFORE THE
COMPLETION OF THE MERGER
There will be no adjustment to the exchange ratio if the market price of
either iMALL common stock or Excite@Home Series A common stock fluctuates. The
specific dollar value of Excite@Home Series A common stock that iMALL
stockholders will receive upon completion of the merger will depend on the
market price of Excite@Home Series A common stock at the time of the merger. The
share prices of both iMALL common stock and Excite@Home Series A common stock
are subject to price fluctuations in the market for publicly-traded equity
securities and have each experienced significant volatility. Excite@Home and
iMALL cannot predict the market prices for either iMALL common stock or
Excite@Home Series A common stock at any time before the completion of the
merger or the market price for Excite@Home Series A common stock after the
completion of the merger. EXCITE@HOME AND IMALL ENCOURAGE YOU TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE EXCITE@HOME SERIES A COMMON STOCK AND THE IMALL COMMON
STOCK.
EXCITE@HOME'S PRO FORMA ACCOUNTING FOR THE ACQUISITION MAY CHANGE
Excite@Home has allocated the total estimated purchase price for the iMALL
acquisition on a preliminary basis to assets and liabilities based on
Excite@Home's best estimates of the fair value of these assets and liabilities,
with the excess costs over the net tangible assets acquired allocated to
goodwill and other intangible assets. This allocation is subject to change
pending a final analysis of the fair values of the assets acquired and
liabilities assumed. The impact of these changes could be material to
Excite@Home's future results of operations.
THERE ARE TECHNICAL, OPERATIONAL AND STRATEGIC CHALLENGES THAT MAY PREVENT
EXCITE@HOME FROM SUCCESSFULLY INTEGRATING IMALL WITH EXCITE@HOME
The merger involves risks related to the integration and management of
acquired technology, operations and personnel. The integration of Excite@Home
and iMALL will be a complex process and may disrupt the combined company's
business if not completed in a timely and efficient manner. Following the
merger, Excite@Home must operate as a combined organization utilizing common
information and communication systems, operating procedures, financial controls
and human resources practices. Excite@Home may
13
<PAGE> 22
encounter substantial difficulties, costs and delays involved in integrating
iMALL's operations, including:
- potential incompatibility of business cultures;
- perceived adverse changes in business focus;
- potential conflicts in sponsor, advertising or content relationships; and
- the loss of key employees and diversion of the attention of management
from other ongoing business concerns.
THE MERGER COULD HARM KEY THIRD PARTY RELATIONSHIPS
The present and potential relationships of iMALL with sponsors, customers,
advertisers and users may be harmed by the proposed merger. Uncertainties
regarding sponsorship, joint venture overlap and new service development
following the merger may cause these parties to delay decisions regarding these
relationships. Any changes in these relationships could harm the combined
company's business.
IMALL MAY LOSE CONTRACTUAL RIGHTS DUE TO THE MERGER
iMALL has contracts with suppliers, customers and other business partners.
Some of these contracts require iMALL to obtain the consent, waiver or approval
of these other parties in connection with the proposed merger. If consent,
waiver or approval cannot be obtained, iMALL may lose the right to use
intellectual property or other rights that are necessary for operation of
iMALL's services. iMALL has agreed to attempt to secure the necessary consents,
waivers and approvals. However, iMALL may not be able to obtain all of the
necessary consents, waivers and approvals. Failure to do so could harm the
combined company's business.
OFFICERS AND DIRECTORS OF IMALL HAVE DIFFERENT INTERESTS FROM YOURS AS AN IMALL
STOCKHOLDER
The directors and officers of iMALL have interests in the merger that are
different from, or are in addition to, those of stockholders generally. These
include:
- some officers of iMALL will become employees of Excite@Home or the
company resulting from the merger and will have employment agreements;
- iMALL's directors and executive officers have customary rights to
indemnification against liabilities; and
- First Data entered into a marketing agreement, an amended marketing and
development agreement, a capacity reservation agreement, and upon
completion of the merger, will enter into a registration rights agreement
with Excite@Home. In addition, if the merger is completed, Excite@Home
will issue First Data a warrant to purchase 2,300,000 shares of its
Series A common stock.
As a result, officers and directors could be more likely to vote to approve
the merger agreement and the merger than if they did not hold these interests.
For a more complete description of these interests see the section entitled
"The Merger -- Interests of certain persons in the merger" on page 41.
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<PAGE> 23
RISKS RELATED TO EXCITE@HOME'S BUSINESS
EXCITE@HOME HAS INCURRED AND EXPECTS TO INCUR SUBSTANTIAL LOSSES
Excite@Home was incorporated in March 1995, commenced operations in August
1995, and has incurred net losses in each fiscal period since its inception. As
of June 30, 1999, Excite@Home had an accumulated deficit of $463.2 million. In
addition, Excite@Home currently intends to increase capital expenditures and
operating expenses in order to expand its network and to market and provide its
services to potential subscribers. As a result, Excite@Home expects to incur
additional net losses before cost and amortization of distribution agreements
and amortization of goodwill and other intangible assets for at least the next
quarter. As a result of the acquisition of Excite and the proposed acquisition
of iMALL, Excite@Home anticipates that it will incur substantial non-cash
charges relating to the amortization of goodwill and other intangible assets.
EXCITE@HOME'S BUSINESS IS UNPROVEN, AND IT MAY NOT ACHIEVE PROFITABILITY
The profit potential of Excite@Home's business model is unproven. The
Excite@Home service was available only in portions of 89 geographic markets as
of June 30, 1999 and may not achieve broad consumer or commercial acceptance.
Although approximately 3,300 primarily small and medium-sized business
organizations have agreed to utilize @Work services as of June 30, 1999, the
@Work services may not achieve broad commercial acceptance and the current rate
of deployment for @Work services may not be sustained. Excite@Home has
difficulty predicting whether the pricing models for its Internet services will
prove to be viable, whether demand for Excite@Home's Internet services will
materialize at the prices its cable partners charge for the Excite@Home service
or the prices Excite@Home or its cable partners charge for Excite@Home's @Work
services, or whether current or future pricing levels will be sustainable. If
these pricing levels are not achieved or sustained or if Excite@Home's services
do not achieve or sustain broad market acceptance, Excite@Home's business,
operating results and financial condition will be significantly harmed.
Excite@Home may never achieve favorable operating results or profitability.
Excite@Home's Media services rely substantially upon the sale of
advertising, ad serving and targeting marketing solutions on the Internet, which
is a developing market. Risks related to the Media services business include:
- the inability to maintain and increase levels of traffic on Excite@Home's
Internet portal services;
- the failure of the market to adopt the Internet as an advertising and
commercial medium;
- reductions in market prices for Internet advertising as a result of
competition or otherwise;
- the inability to achieve higher cost per thousand impression rates for
targeted advertising or to increase the percentage of advertising
inventory sold;
- the inability to meet minimum guaranteed impressions under sponsorship
agreements;
- the inability to develop or acquire content for the Media services;
15
<PAGE> 24
- the inability to generate commerce-related revenues;
- the inability of the Media services to continue to generate increased
revenues;
- the failure to anticipate and adapt to a developing market; and
- government regulation.
GROWTH OF THE EXCITE@HOME SERVICE MAY BE INHIBITED BY FACTORS BEYOND
EXCITE@HOME'S CONTROL
As of June 30, 1999, Excite@Home had in excess of 620,000 cable modem
subscribers, including recently acquired Internet subscribers that are being
converted to the Excite@Home service. Excite@Home's ability to increase the
number of subscribers to the Excite@Home service to achieve its business plans
and generate future revenues will depend on many factors which are beyond its
control. For instance, some of Excite@Home's cable partners have not achieved
the subscriber levels that Excite@Home had originally anticipated. Other factors
include:
- the rate at which Excite@Home's current and future cable partners upgrade
their cable infrastructures for two-way data services;
- Excite@Home's ability and the ability of its cable partners to coordinate
timely and effective marketing campaigns with the availability of cable
infrastructure upgrades;
- the success of Excite@Home's cable partners in marketing and installing
the @Home service in their local cable areas;
- the prices that Excite@Home's cable partners set for the @Home service
and for its installation;
- the speed at which Excite@Home's cable partners can complete the
installations required to initiate service for new subscribers;
- the commercial availability of self-installable, two-way modems that
comply with the recently adopted interface standards known as DOCSIS, and
the success of Excite@Home's roll-out of these products with the @Home
service;.
- the quality of customer and technical support provided by Excite@Home and
its cable partners; and
- the quality of content on the @Home service.
EXCITE@HOME NEEDS TO ADD SUBSCRIBERS AT A RAPID RATE FOR ITS BUSINESS TO
SUCCEED, BUT EXCITE@HOME MAY NOT ACHIEVE ITS SUBSCRIBER GROWTH GOALS
Excite@Home's actual revenues or the rate at which it will add new
subscribers may differ from its forecasts. Excite@Home may not be able to
increase its subscriber base enough to meet its internal forecasts or the
forecasts of industry analysts or to a level that meets the expectations of
investors. The rate at which subscribers have increased in the past does not
necessarily indicate the rate at which subscribers may be expected to grow in
the future. In particular, while Excite@Home had forecasted that the number of
its subscribers could grow to up to 1.1 million by December 31, 1999 from more
than 620,000
16
<PAGE> 25
subscribers at June 30, 1999, Excite@Home may not achieve this level of
subscriber growth.
EXCITE@HOME'S SUBSCRIBER GROWTH DEPENDS ON THE ACTIONS OF ITS CABLE PARTNERS,
AND IS LIMITED BY PRICE AND INSTALLATION CONSTRAINTS
Excite@Home believes subscriber growth has been constrained, and will
continue to be constrained, by the cost and time required to install the @Home
service for each residential consumer. In addition, Excite@Home's growth has
been constrained by the rate at which Excite@Home's cable partners have upgraded
their systems and most of Excite@Home's cable partners are not obligated to
upgrade their cable infrastructures or market the @Home service. Moreover, the
@Home service is currently priced at a premium to many other online services,
and large numbers of subscribers may not be willing to pay a premium for the
@Home service.
IF EXCITE@HOME CANNOT MAINTAIN THE SCALABILITY, SPEED AND SECURITY OF ITS
NETWORK, CUSTOMERS WILL NOT ACCEPT ITS SERVICES
Due to the limited deployment of Excite@Home's services, the ability of its
network to connect and manage a substantial number of online subscribers at high
transmission speeds is unknown. Therefore, Excite@Home faces risks related to
its network's ability to be scaled up to its expected subscriber levels while
maintaining superior performance. Excite@Home's network may be unable to achieve
or maintain a high speed of data transmission, especially as its subscribers
increase. In recent periods, the performance of the Excite@Home network has
experienced some deterioration in some markets as a result of subscriber abuse
of the @Home service. While Excite@Home is seeking to eliminate this abuse by
enforcing our acceptable user policy and by limiting users' upstream bandwidth,
Excite@Home's failure to do so may result in slower network performance and
reduced customer demand for Excite@Home's services. In addition, while
Excite@Home has taken steps to prevent users from sharing files via the @Home
service and to protect against bulk unsolicited e-mail, public concerns about
security, privacy and reliability of the cable network, or actual problems with
the security, privacy or reliability of Excite@Home's network, may inhibit the
acceptance of Excite@Home's Internet services.
IF NEW TWO-WAY CABLE MODEMS ARE NOT DEPLOYED TIMELY AND SUCCESSFULLY,
EXCITE@HOME MAY NOT BE ABLE TO GROW ITS SUBSCRIBER BASE QUICKLY
Each Excite@Home subscriber currently must obtain a cable modem from a
cable partner to access the @Home service. The North American cable industry has
recently adopted interface standards known as DOCSIS for hardware and software
to support the delivery of data services over the cable infrastructure utilizing
compatible cable modems. Some of Excite@Home's cable partners have chosen to
delay some deployments of the @Home service until the widespread commercial
availability of DOCSIS-compliant cable modems. Subscriber growth could be
constrained and Excite@Home's business could be significantly harmed if its
cable partners choose to slow the deployment of the @Home service further. If
Excite@Home's cable partners are not able to obtain a sufficient quantity of
DOCSIS-compliant modems, Excite@Home's growth will be limited.
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EXCITE@HOME COULD LOSE SUBSCRIBERS, DISTRIBUTION RELATIONSHIPS AND REVENUES TO
ITS COMPETITORS
The markets for consumer and business Internet services and online content
are extremely competitive, and Excite@Home expects that competition will
intensify in the future. Excite@Home's most direct competitors in these markets
include the following:
- Providers of cable-based Internet services. Time Warner Inc. and Media
One Group have deployed high-speed Internet access services over their
local cable networks through their own cable-based Internet service, Road
Runner. Excite@Home currently competes with Road Runner to establish
distribution arrangements with cable system operators and Excite@Home may
compete for subscribers in the future if and when Excite@Home's cable
partners cease to be subject to their exclusivity obligations. In
addition, Excite@Home competes with other providers of cable-based
Internet services, such as ISP Channel, Inc. and High Speed Access
Corporation.
- Telecommunications providers. Excite@Home competes with national long-
distance and local exchange carriers that offer high-speed, Internet
access services such as asymmetric digital subscriber line. If the
advanced services offered by these companies are deregulated, this would
further enhance the ability of these companies to compete against
Excite@Home's services;
- Internet and online service providers. Excite@Home competes with Internet
service providers that provide basic Internet access services and with
online service providers such as America Online; and
- Internet content aggregators. Excite@Home competes with content
aggregators and Internet portals including America Online, Yahoo! Inc.
and Lycos, Inc. that seek to capture audience flow by providing
ease-of-use and offering content that appeals to a broad audience.
Many of Excite@Home's competitors and potential competitors have
substantially greater financial, technical and marketing resources, larger
subscriber bases, longer operating histories, greater name recognition and more
established relationships with advertisers and content and application providers
than Excite@Home does. These competitors may be able to undertake more extensive
marketing campaigns, adopt more aggressive pricing policies and devote more
resources to developing Internet services or online content than Excite@Home.
Excite@Home may not be able to compete successfully against current or future
competitors, and competitive pressures could significantly harm Excite@Home's
subscriber base, Excite@Home's ability to renew and enter into new distribution
agreements and Excite@Home's revenues.
EXCITE@HOME'S DEPENDENCE ON ITS NETWORK EXPOSES IT TO A SIGNIFICANT RISK OF
SYSTEM FAILURE
Excite@Home's operations are dependent upon its ability to support its
highly complex network infrastructure and avoid damage from fires, earthquakes,
floods, power losses, telecommunications failures and similar events. The
occurrence of a natural disaster or other unanticipated problem at Excite@Home's
network operations center or at a number of Excite@Home's regional data centers
could cause interruptions in Excite@Home's services. Additionally, failure of
Excite@Home's cable partners or companies from which Excite@Home obtains data
transport services to provide the data
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communications capacity that Excite@Home requires, for example as a result of
natural disaster, or operational disruption, could cause interruptions in the
services Excite@Home provide. Any damage or failure that causes interruptions in
Excite@Home's operations could harm Excite@Home's business.
YEAR 2000 ISSUES COULD AFFECT THE PERFORMANCE OF EXCITE@HOME'S SYSTEMS
If Excite@Home's internal and network information systems do not correctly
recognize and process date information beyond the year 1999, Excite@Home may not
be able to conduct operations. Excite@Home may also experience supplier-related
Year 2000 problems. To address these Year 2000 issues, Excite@Home has initiated
a comprehensive program to address Year 2000 readiness in Excite@Home's systems
and its customers' and suppliers' systems. Delays in the implementation of new
information systems or a failure to fully identify all Year 2000 dependencies in
Excite@Home's existing systems and in the systems of Excite@Home's suppliers
could harm Excite@Home's business. Therefore, Excite@Home is developing, but
does not yet have, contingency plans for continuing operations in the event
these problems arise.
EXCITE@HOME'S LIMITED EXPERIENCE WITH INTERNATIONAL EXPANSION MAY PREVENT IT
FROM GROWING ITS BUSINESS OUTSIDE THE UNITED STATES
A key component of Excite@Home's strategy is expansion into international
markets. Excite@Home has limited experience in developing localized versions of
its products and services and in developing relationships with international
cable system operators. Excite@Home may not be successful in expanding its
product and service offerings into foreign markets. In addition to the
uncertainty regarding Excite@Home's ability to generate revenues from foreign
operations and expand Excite@Home's international presence, Excite@Home faces
specific risks related to providing Internet services in foreign jurisdictions,
including:
- regulatory requirements, including the regulation of Internet access;
- legal uncertainty regarding liability for information retrieved and
replicated in foreign jurisdictions; and
- potential inability to use European customer information due to new
European governmental regulations.
EXCITE@HOME'S BUSINESS MAY BE IMPACTED BY CABLE UNBUNDLING PROPOSALS AND OTHER
GOVERNMENT REGULATION
Currently, Excite@Home's services are not directly subject to regulations
of the Federal Communication Commission or any other federal, state or local
communications regulatory agency. However, changes in the regulatory environment
relating to the Internet, cable television or telecommunications markets which
could require regulatory compliance by Excite@Home or which could impact its
exclusivity arrangements, subscribers and revenues include:
- Federal regulation. Regulatory changes that affect telecommunications
costs, limit usage of subscriber-related information or increase
competition from telecommunications companies could affect Excite@Home's
pricing or ability to market its services successfully. For example,
reregulation of cable television rates may affect
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the speed at which Excite@Home's cable partners upgrade their cable
systems to carry Excite@Home's services;
- Regulation by local franchise authorities. Many of Excite@Home's United
States cable partners' local cable affiliates have elected to classify
the provision of the @Home service as additional cable services under
their local franchise agreements, and to pay franchise fees under those
agreements. Local franchise authorities may attempt to subject cable
systems to higher or different franchise fees, taxes or requirements in
connection with their distribution of the @Home service. There are
thousands of franchise authorities, and thus it would be difficult or
impossible for Excite@Home or its cable partners to operate under a
unified set of franchise requirements; and
- The FCC or local agencies could require Excite@Home's cable partners to
grant competitors access to their cable systems. America Online,
MindSpring Enterprises, Inc., Consumers Union and other parties have
requested Congress, the Federal Communications Commission and state and
local authorities to require cable operators to provide Internet and
online service providers with unbundled access to their cable systems. If
Excite@Home or its cable partners are classified as common carriers, or
if government authorities require third-party access to cable networks or
unaffiliated Internet service providers, Excite@Home's competitors may be
able to provide service over its cable partner systems. The rates that
Excite@Home's cable partners charge for this third-party access, or for
the @Home Services, could also be subject to rate regulation or tariffing
requirements.
- Local Governmental Proceedings. Portland and Multnomah County, Oregon and
Broward County, Florida, have imposed third-party access requirements on
AT&T and other cable companies operating in those communities. The
imposition of these requirements has been challenged in Federal Courts.
In June 1999, a U.S. District Court upheld the third-party access
requirement imposed on AT&T by Portland and Multnomah County. This
decision has been appealed to the U.S. Court of Appeals for the Ninth
Circuit. Denver, Colorado, King County, Washington, San Francisco and Los
Angeles, California have considered imposing similar requirements and
other municipalities may consider imposing similar requirements in the
future.
EXCITE@HOME COULD FACE LIABILITY FOR DEFAMATORY OR INDECENT CONTENT
Claims could be made against Internet and online service providers under
both United States and foreign law for defamation, negligence, copyright or
trademark infringement, or other theories based on the nature and content of the
materials disseminated through their networks. Several private lawsuits seeking
to impose this liability are currently pending against Internet and online
services providers. In addition, legislation has been proposed that imposes
liability for or prohibits the transmission over the Internet of indecent
content. The imposition upon Internet and online service providers of potential
liability for information carried on or disseminated through their systems could
require Excite@Home to implement measures to reduce its exposure to this
liability. This may require that Excite@Home expend substantial resources or
discontinue service or product offerings. The increased focus on liability
issues as a result of these lawsuits and legislative proposals could impact the
growth of Internet use. Furthermore, some foreign governments, such as Germany,
have enacted laws and regulations governing content distributed over the
Internet that are more strict than those currently in place in the United
States. One or more of these factors could significantly harm Excite@Home's
business.
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RISKS RELATED TO EXCITE@HOME'S RELATIONSHIPS WITH ITS CABLE PARTNERS
The success of Excite@Home's business depends on Excite@Home's
relationships with its cable partners, most of which have agreed to provide
Excite@Home's high-speed residential Internet access services on an exclusive
basis. In return, Excite@Home has agreed not to provide a variety of Internet
services in the areas covered by its cable partners. Excite@Home's agreements
with its cable partners are complex. Some of the risks associated with these
relationships are set forth below. For a summary of some of the key aspects of
these agreements, you should refer to Excite@Home's annual report on Form 10-K/A
for the year ended December 31, 1998.
EXCITE@HOME DEPENDS ON ITS CABLE PARTNERS TO UPGRADE TO THE TWO-WAY CABLE
INFRASTRUCTURE NECESSARY TO SUPPORT THE @HOME SERVICE; THE AVAILABILITY AND
TIMING OF THESE UPGRADES ARE UNCERTAIN
Transmission of the @Home service and cable-based @Work services depends on
the availability of high-speed two-way hybrid fiber coaxial cable
infrastructure. However, only a portion of existing cable plant in the United
States and in some international markets has been upgraded to two-way hybrid
fiber coaxial cable, and even less is capable of high-speed two-way
transmission. As of June 30, 1999, approximately 29% of Excite@Home's North
American cable partners' cable infrastructure was capable of delivering the
@Home service. Excite@Home's cable partners have announced and begun to
implement major infrastructure investments in order to deploy two-way hybrid
fiber coaxial cable. However, these investments have placed a significant strain
on the financial, managerial, operating and other resources of Excite@Home's
cable partners, most of which are already highly leveraged. Therefore, these
infrastructure investments have been, and Excite@Home expects will continue to
be, subject to change, delay or cancellation. Although Excite@Home's commercial
success depends on the successful and timely completion of these infrastructure
upgrades, most of Excite@Home's cable partners are under no obligation to
upgrade systems or to introduce, market or promote Excite@Home's services. The
failure of Excite@Home's cable partners to complete these upgrades in a timely
and satisfactory manner, or at all, would prevent Excite@Home from delivering
high-performance Internet services and would significantly harm Excite@Home's
business.
EXCITE@HOME'S CABLE PARTNERS ARE NOT GENERALLY OBLIGATED TO CARRY EXCITE@HOME'S
SERVICES, AND THE EXCLUSIVITY OBLIGATIONS THAT PREVENT THEM FROM CARRYING
COMPETING SERVICES MAY BE TERMINATED
Excite@Home's cable partners are subject to exclusivity obligations that
prohibit them from obtaining high-speed, greater than 128 kilobits per second,
residential consumer Internet services from any source other than Excite@Home.
However, most of Excite@Home's cable partners are under no affirmative
obligation to carry any of Excite@Home's services. Also, the exclusivity
obligations of Excite@Home's principal cable partners, TCI, Comcast Corporation,
Cox Communications, Inc. and Cablevision Systems Corp., expire on June 4, 2002,
and may be terminated sooner under some circumstances, including:
- Excite@Home's principal cable partners may terminate all their
exclusivity obligations upon a change in law that materially impairs some
of their rights;
- Comcast or Cox may terminate all exclusivity obligations of Excite@Home's
principal cable partners at any time if there is a change of control of
TCI that
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results within 12 months in the incumbent TCI directors no longer constituting a
majority of TCI's board. AT&T, TCI, Comcast and Cox have agreed, however, that
AT&T's acquisition of TCI did not constitute a change of control under the terms
of the original agreement;
- Cox or Comcast may terminate the exclusivity provisions of Excite@Home's
principal cable partners if AT&T and its affiliates did not meet
specified subscriber penetration levels for the @Home service. On June 4,
1999, Cox had this right, but Cox has agreed to waive it for 1999; and
- Comcast may terminate its own exclusivity obligations after June 4, 1999
if it allows Excite@Home to repurchase a portion of Comcast's equity
interest in Excite@Home. Comcast has informed Excite@Home that it has
entered into an agreement with Microsoft Corporation under which
Microsoft can require Comcast to terminate its exclusivity obligations.
In consideration for Cox's agreement to waive its right to terminate
exclusivity as of June 4, 1999, Excite@Home's board approved changes to
Excite@Home's corporate governance on April 16, 1999. Excite@Home's stockholders
approved these changes on May 28, 1999. These governance changes generally
require board action to be approved by a majority of Excite@Home's board,
including the board representatives of AT&T and either Cox or Comcast. In
addition, as further consideration for Cox's waiver, AT&T agreed to increase its
subscriber acquisition goals for the next twelve months above its current goal
for that period.
If the exclusivity obligations of Excite@Home's cable partners are
terminated, this could significantly harm Excite@Home's business and cause an
immediate drop in Excite@Home's stock price.
EXCITE@HOME IS CONTROLLED BY TCI AND AT&T
TCI controls approximately 57% of Excite@Home's voting power. AT&T owns TCI
and therefore controls Excite@Home. Currently, four of Excite@Home's eleven
directors are directors, officers or employees of TCI, AT&T or their affiliates.
TCI currently owns all 30,800,000 outstanding shares of Excite@Home's Series B
common stock, each of which carries ten votes per share. This Series B common
stock ownership gives TCI the right to elect five Series B directors, one of
which is designated by Comcast and one of which is designated by Cox. So long as
TCI owns at least 15,400,000 shares of Excite@Home's Series B common stock and
holds a majority of Excite@Home's voting power, Excite@Home's board may take
action only if approved by the board and by at least 75%, or four of the five,
of Excite@Home's Series B directors. As a result, corporate actions generally
require the approval of TCI's three Series B directors and one, or in some cases
both, of the directors designated by Comcast and Cox. Therefore, Comcast and
Cox, acting together, may veto any board action.
EXCITE@HOME DEPENDS ON TELEPORT COMMUNICATIONS GROUP FOR LOCAL
TELECOMMUNICATIONS SERVICES FOR THE @WORK SERVICES
Excite@Home depends on Teleport Communications Group, which is owned by
AT&T, to provide local telecommunications services and co-location within TCG's
facilities on favorable economic terms. This relationship enables Excite@Home to
provide @Work services to an entire metropolitan area in which TCG has
facilities. If
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Excite@Home were required to obtain comparable telecommunications services from
local exchange carriers, Excite@Home would effectively be limited to providing
@Work services to commercial customers within a ten-mile radius of one of
Excite@Home's points of presence. As a result, Excite@Home would be required to
build multiple points of presence to service an entire metropolitan area, which
would substantially increase Excite@Home's capital costs to enter new markets
and which could make market entry uneconomical. If Excite@Home were required to
pay standard local exchange carrier rates, the ongoing operating costs for @Work
services would be substantially higher. The loss of Excite@Home's strategic
relationship with TCG would significantly harm Excite@Home's ability to deploy
@Work services. In addition, TCG has acquired a provider of Internet-related
services to businesses and corporate customers and will compete directly with
the @Work Internet service. To the extent TCG acquires or enters into strategic
relationships with other Internet service providers, TCG may reduce its support
of the @Work services. Although there are alternative suppliers for TCG's
services, it could take a significant period of time for Excite@Home to
establish similar relationships, and equivalent terms might not be available.
EXCITE@HOME MAY FACE ADDITIONAL COMPETITION FROM AT&T
AT&T operates businesses that could compete with Excite@Home's services,
notwithstanding any exclusivity obligations that may apply to it due to its
ownership of TCI. First, AT&T operates a consumer Internet service known as AT&T
WorldNet. Although AT&T WorldNet is currently a telephone dial-up service that
does not utilize broadband technologies, AT&T may be able to use non-cable-based
data transport mechanisms to offer high-speed residential Internet services that
compete with the @Home service. Second, AT&T owns TCG, which operates an
Internet service for business customers that competes with the @Work service.
The @Work business depends to a significant extent on Excite@Home's agreement
with TCG for local access telecommunications services. If TCG ceases to
cooperate with Excite@Home, the @Work business would be harmed. Because
Excite@Home's @Work business is not subject to the cable partners' exclusivity
obligations, AT&T or TCG are not limited in their ability to compete with the
@Work business. In addition, AT&T and Time Warner recently announced the
formation of a significant strategic relationship that will include a joint
venture to offer AT&T-branded cable telephony service to residential and small
business customers over Time Warner's existing cable television systems in 33
states. The relationship between AT&T and Time Warner could ultimately extend to
other broadband services, including cable Internet services, that compete with
the @Home service. AT&T may take actions that benefit TCG, WorldNet or other
services of AT&T or other parties to Excite@Home's detriment.
WARRANTS ISSUED TO EXCITE@HOME'S CABLE PARTNERS MAY RESULT IN ADDITIONAL
DILUTION TO EXCITE@HOME'S STOCKHOLDERS
Excite@Home has entered into agreements with Cablevision, Rogers
Cablesystems Limited, Shaw Cablesystems Ltd. and other cable partners under
which Excite@Home issued warrants to purchase shares of Excite@Home Series A
common stock. Under these agreements, warrants to purchase 20,955,563 shares of
Excite@Home Series A common stock at an average price of $1.09 per share were
exercisable as of June 30, 1999. To the extent that Cablevision, Rogers, Shaw or
other cable partners become eligible to and exercise their warrants,
Excite@Home's stockholders would experience substantial dilution.
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Excite@Home also may issue additional stock, or warrants to purchase stock, at
prices less than fair market value in connection with efforts to expand
distribution of the @Home service.
RISKS ASSOCIATED WITH THE ACQUISITION OF EXCITE, INC. AND EXCITE'S BUSINESS BY
@HOME
EXCITE@HOME FACES SEVERAL TRANSITORY RISKS ASSOCIATED WITH THE ACQUISITION OF
EXCITE
In May 1999, Excite, Inc. was acquired by At Home Corporation, which we
refer to as @Home for the period before the merger. This acquisition presents
the following risks:
- Excite@Home may encounter substantial difficulties, costs and delays
associated with integrating the operations of an acquired company. This
process may disrupt Excite@Home's business if not completed in a timely
and efficient manner;
- The present and potential relationships of @Home and Excite with
sponsors, content providers, advertisers, users and subscribers may be
harmed by the merger of @Home and Excite; and
- The merger of @Home and Excite may result in conflicts associated with
exclusive rights that both @Home and Excite have granted to third parties
with regard to content, relationships, sponsorships or other strategic
relationships, and failure to resolve these conflicts could harm
Excite@Home's business.
THE EXCITE SERVICE COULD LOSE USERS, ADVERTISERS AND REVENUES TO ITS COMPETITORS
The Excite service competes with a number of companies both for users and
advertisers, and therefore for revenues. Excite@Home expects this competition
will intensify, particularly because there are few barriers to entry in this
market. Excite's competitors include:
- Web portal companies such as Infoseek's Go Network, Lycos, Netscape's
Netcenter and Yahoo!;
- online service providers such as America Online and Microsoft's MSN
service;
- large media companies such as CBS, NBC, Time Warner and USA Networks,
Inc., who have announced initiatives to develop Web services or partner
with Web companies; and
- providers of Web-based advertising solutions, including AdForce,
advertising management software, including NetGravity, Inc., advertising
supported content and traditional advertising media.
EXCITE@HOME DEPENDS ON SEVERAL THIRD PARTY RELATIONSHIPS FOR USERS, ADVERTISERS
AND REVENUES
Excite@Home depends on a number of third party relationships to provide
users and content for its Excite services, including agreements for links to
Excite services to be placed on high-traffic Web sites and agreements for third
parties to provide content, games and e-mail for Excite Web sites. If these
relationships terminate and Excite@Home is not able to replace them, it could
lose users or advertisers, and this could harm the revenues of the Excite
business.
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PRIVACY CONCERNS REGARDING THE USAGE OF DEMOGRAPHIC INFORMATION COULD PREVENT
EXCITE@HOME FROM BENEFITING FROM SELLING TARGETED ADVERTISING
Due to privacy concerns regarding the usage of demographic information in
online advertising, some commentators and governmental bodies have suggested
limitations on technology that Excite@Home uses to deliver targeted advertising
and compile demographic information about users. Any reduction or limitation in
the use of this technology could result in lower advertising rates.
POTENTIAL LITIGATION WITH RESPECT TO INTELLECTUAL PROPERTY RIGHTS COULD HARM THE
EXCITE BUSINESS
Many parties, including competitors of the Excite service, are actively
developing search, indexing and related Internet technologies. Some of these
parties have taken steps to protect these technologies, and Excite@Home believes
that others will follow. Therefore, Excite@Home believes that disputes regarding
the ownership of these technologies are likely to arise in the future.
Excite@Home may not be able to defend any litigation successfully. Even if
successful, defending litigation may be costly and may divert management
resources.
EXCITE@HOME'S BUSINESS DEPENDS ON THE CONTINUED GROWTH IN INTERNET USE GENERALLY
AND PORTAL WEB SITES IN PARTICULAR
Excite@Home's business may be adversely affected if usage of the Internet
or other online services does not continue to grow. This growth could be
hindered by a number of factors including: the adequacy of the Internet's
infrastructure to meet increased usage demands; privacy and security concerns;
and availability of cost-effective services. Any of these issues could cause the
Internet's performance or level of usage to decline.
The success of Excite@Home's Internet portals is also dependent on Internet
users continuing to use "portal" web sites for their information needs. If
Internet users begin to become less dependent on portal sites, but rather go
directly to particular web sites, Excite@Home's traffic levels could decrease,
which could make Excite@Home's web sites less attractive to advertisers.
This prospectus/proxy statement contains and incorporates by reference
forward-looking statements within the safe harbor provisions of the Private
Securities Litigation Reform Act. Forward-looking statements are based on
current expectations that involve a number of uncertainties, including those
disclosed in the risk factors above. Actual results could differ materially from
those projected in the forward-looking statements.
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THE IMALL SPECIAL MEETING
DATE, TIME AND PLACE
The special meeting of iMALL stockholders will be held on October 27, 1999,
at 10:00 a.m. local time, at the Miramar Sheraton Hotel, 101 Wilshire Boulevard,
Santa Monica, California. This prospectus/proxy statement is being furnished in
connection with the solicitation by iMALL's board of proxies to be used at the
special meeting and at any and all adjournments and postponements of the special
meeting.
PURPOSE
The purpose of the special meeting is to approve an amendment to the
articles of incorporation, as more fully described in this prospectus/proxy
statement, and to approve the merger agreement and the merger under which Shop
Nevada, a wholly-owned subsidiary of Excite@Home, would be merged with iMALL,
with iMALL continuing as the surviving corporation. iMALL stockholders may also
be asked to transact other business that may properly come before the special
meeting or any adjournment or postponement of the special meeting.
RECOMMENDATION OF IMALL'S BOARD OF DIRECTORS
AFTER CAREFUL CONSIDERATION, IMALL'S BOARD HAS DETERMINED THE MERGER
AGREEMENT AND THE MERGER TO BE FAIR AND IN THE BEST INTERESTS OF THE IMALL
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT IMALL STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION, THE MERGER AGREEMENT
AND THE MERGER. THE UNANIMOUS RECOMMENDATION OF IMALL'S BOARD DID NOT INCLUDE
THE DIRECTOR DESIGNATED TO IMALL'S BOARD BY FIRST DATA, WHO APPROPRIATELY
ABSTAINED FROM VOTING ON THE AMENDMENT TO THE ARTICLES OF INCORPORATION, THE
MERGER AND THE MERGER AGREEMENT BECAUSE OF AN ACTUAL OR POTENTIAL CONFLICT OF
INTEREST.
RECORD DATE, OUTSTANDING SHARES AND VOTING RIGHTS
iMALL's board has fixed September 20, 1999 as the record date for the
special meeting. Only holders of record of shares of iMALL common stock on the
record date are entitled to notice of and to vote at the special meeting. As of
the record date, there were 19,638,080 outstanding shares of iMALL common stock
held by approximately 676 holders of record. At the special meeting, each share
of iMALL common stock will be entitled to one vote. Accordingly, an aggregate of
19,638,080 votes may be cast at the special meeting by holders of iMALL common
stock.
VOTE REQUIRED; QUORUM
The approval of the amendment to the articles of incorporation and the
approval of the merger agreement and the merger will require the affirmative
vote of the holders of a majority of the voting power of the shares of iMALL
common stock outstanding on the record date.
The representation, in person or by properly executed proxy, of the holders
of a majority of the voting power of the shares of stock entitled to vote at the
special meeting is necessary to constitute a quorum at the special meeting.
Shares of iMALL common
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stock represented in person or by proxy will be counted for the purposes of
determining whether a quorum is present at the special meeting. Shares that
abstain from voting on the proposals will be treated as shares that are present
and entitled to vote at the special meeting for purposes of determining whether
a quorum exists, but abstentions will have the same effect as votes against the
proposals. Broker non-votes will be treated as present and entitled to vote at
the special meeting for purposes of determining whether a quorum exists. Brokers
or nominees holding shares of record for customers will not be entitled to vote
on the proposals unless they receive voting instructions from their customers.
Accordingly, broker non-votes will not be voted in favor of the proposals
meaning that such shares will have the same effect as shares voted against
proposals.
As of the record date, iMALL's directors and executive officers and their
affiliates beneficially owned approximately 20.9% of the votes represented by
the outstanding shares of iMALL common stock. Stockholders of iMALL who, as of
the record date, control 41.9% of the votes entitled to be cast at the special
meeting, have agreed to vote all of their shares in favor of the proposal to
approve the amendment to the articles of incorporation and the proposal to
approve the merger agreement and the merger at the special meeting under voting
agreements entered into with Excite@Home. See "Related Agreements -- Voting
agreements."
VOTING OF PROXIES
All shares of iMALL common stock that are entitled to vote and are
represented at the special meeting by properly executed proxies received prior
to or at the special meeting, and not revoked, will be voted at such meeting in
accordance with the instructions indicated on such proxies. If no instructions
are indicated, those proxies will be voted against the proposals. iMALL's board
does not know of any matters other than those described in the notice of the
special meeting that are to come before such meeting. If any other matters are
properly presented at the special meeting for consideration, including, among
other things, consideration of a motion to adjourn or postpone such meeting to
another time and/or place for the purposes of soliciting additional proxies or
allowing additional time for the satisfaction of conditions to the merger, the
persons named in the enclosed form of proxy and acting under the proxy generally
will have discretion to vote on those matters in accordance with their best
judgment.
REVOCATION OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by:
- filing with the Secretary of iMALL, at or before the taking of the vote
at the special meeting, a written notice of revocation bearing a later
date than the proxy; or
- duly executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of iMALL before the taking of the vote at
the special meeting.
Any written notice of revocation or subsequent proxy should be sent to
iMALL, Inc., 233 Wilshire Boulevard, Suite 820, Santa Monica, California 90401,
Attention: Secretary, or hand delivered to the Secretary of iMALL at or before
the taking of the vote at the special meeting. Stockholders that have instructed
a broker to vote their shares must follow
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directions received from such broker in order to change their vote or to vote at
the special meeting.
SOLICITATION OF PROXIES; EXPENSES
All expenses of iMALL's solicitation of proxies will be borne by iMALL. The
cost of preparing and mailing this prospectus/proxy statement to iMALL
stockholders, will be shared equally by iMALL and Excite@Home. In addition to
solicitation by use of the mails, proxies may be solicited from iMALL
stockholders by directors, officers and employees of iMALL in person or by
telephone, facsimile or other means of communication. Such directors, officers
and employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation. iMALL
has retained MacKenzie Partners, Inc., a proxy solicitation firm, for assistance
in connection with the solicitation of proxies for the iMALL special meeting at
an estimated cost of $3,500 plus expenses. Arrangements will also be made with
brokerage houses, custodians, nominees and fiduciaries for forwarding of proxy
solicitation materials to beneficial owners of shares held of record by such
brokerage houses, custodians, nominees and fiduciaries, and iMALL will reimburse
such brokerage houses, custodians, nominees and fiduciaries for their reasonable
expenses incurred in forwarding such materials.
APPRAISAL RIGHTS
Under the Nevada Revised Statutes, the holders of iMALL common stock are
not entitled to any appraisal or dissenters' rights with respect to the merger
because shares of iMALL common stock are included in the National Market System
of the National Association of Securities Dealers, Inc.
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<PAGE> 37
THE MERGER
This section of the prospectus/proxy statement describes the proposed
merger. While Excite@Home and iMALL believe that the description covers the
material terms of the merger and the related transactions, this summary may not
contain all of the information that is important to you. You should read this
entire document and the other documents referred to in this prospectus/proxy
statement carefully for a more complete understanding of the merger. In
addition, important business and financial information about each of Excite@Home
and iMALL is incorporated by reference into this prospectus/proxy statement. See
"Documents incorporated by reference in this prospectus/proxy statement" on page
86. You may obtain the information incorporated by reference into this
prospectus/proxy statement without charge by following the instructions in the
section entitled "Where you can find more information" on page 87.
BACKGROUND OF THE MERGER
During the first quarter of 1999, Richard Rosenblatt, Chairman of the Board
and Chief Executive Officer of iMALL, together with other members of the senior
management of iMALL, conducted a strategic review of iMALL's plans to achieve
increased scale in its business. The review included scenarios in which iMALL
would pursue an independent growth strategy as well as options to pursue a
business combination and/or strategic partnership with a range of companies.
During February, March and April of 1999, Mr. Rosenblatt and other iMALL
executives held numerous discussions and telephonic meetings with executives of
Excite@Home to discuss a possible commercial transaction between Excite@Home and
iMALL under which Excite@Home would resell iMALL's products and services on a
non-exclusive basis. These telephone calls led to additional telephonic
discussions in April 1999 in which Mr. Rosenblatt and Don Hutchison, Senior Vice
President and General Manager of the @Work division of Excite@Home, and other
executives of Excite@Home discussed the merits of a possible strategic business
combination of the companies.
During an informational conference call with iMALL's board on April 6,
1999, Mr. Rosenblatt discussed with the board the trend toward consolidation in
the Internet industry and general market conditions, and reported to the board
on the relative benefits and detriments of the strategic alternatives that
senior management had been analyzing.
On April 13, 1999, Mr. Rosenblatt, Anthony Mazzarella, the Executive Vice
President, Chief Financial Officer and Secretary of iMALL, and Joseph
Ruszkiewicz, the Executive Vice President and Chief Operating Officer of iMALL
met with Deana Bergquist, the @Work Product Line Manager and Eric Van
Miltenberg, the @Work Director of Business Development, in Santa Monica,
California to discuss strategic combination issues. Prior to the meeting,
Excite@Home and iMALL entered into a confidentiality agreement providing for the
exchange of confidential information.
On April 14, 1999, iMALL's executives held an informational conference call
with iMALL's board to discuss the status of discussions with Excite@Home and
other pending business. Mr. Rosenblatt reported to the board his discussions
with representatives of Excite@Home.
During April and May of 1999, Mr. Rosenblatt had numerous telephone
conversations with John Duncan, the Executive Vice President of Business
Development of First Data
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<PAGE> 38
and a director of iMALL, regarding the strategic benefits that could result from
a possible business combination of Excite@Home and iMALL, including the benefits
of promoting the iMALL and First Data joint e-commerce solution through the
Excite portal web site and the @Home and @Work services.
From April 13 through May 25, 1999, Mr. Rosenblatt held several telephonic
meetings with Mr. Hutchison, Mr. Van Miltenberg and Ms. Bergquist concerning a
possible business combination of the two companies.
On May 25, 1999, Mr. Rosenblatt and Ms. Bergquist met in the Palo Alto,
California area to continue discussing a possible strategic combination.
Discussions resumed between Mr. Rosenblatt, Ms. Bergquist and Mr. Van Miltenberg
during a conference call on June 4, 1999.
iMALL entered into an engagement letter with BancBoston Robertson Stephens
on June 14, 1999 under which BancBoston Robertson Stephens agreed to act as
iMALL's exclusive financial advisor for a business combination. On June 23, 1999
representatives of Excite@Home, iMALL, BancBoston Robertson Stephens, First Data
and Morgan Stanley & Co. Incorporated, Excite@Home's financial advisor, met in
Redwood City, California to discuss a strategic combination of Excite@Home and
iMALL and a long-term marketing relationship with First Data.
On June 25, 1999, iMALL's board held a special meeting, together with
senior management of iMALL and representatives of BancBoston Robertson Stephens,
to discuss the status of discussions with Excite@Home. Mr. Rosenblatt reported
to the board his discussions with representatives of Excite@Home. iMALL's board
discussed the merits of iMALL remaining independent versus pursuing a business
combination with another company. iMALL's board authorized the continuation of
discussions with Excite@Home.
Representatives of Excite@Home, iMALL, First Data, Morgan Stanley and
BancBoston Robertson Stephens next met in Englewood, Colorado on June 30, 1999.
During this meeting, representatives of Excite@Home and First Data explored what
form the relationship between Excite@Home and First Data would take if
Excite@Home were to acquire iMALL.
On July 6, 1999, iMALL's board held a special meeting, together with senior
management of iMALL, iMALL's outside legal advisors and BancBoston Robertson
Stephens, to discuss the status of discussions with Excite@Home. Mr. Rosenblatt
reported to the board regarding his discussions with representatives of
Excite@Home, and the board authorized the continuation of discussions with
Excite@Home. Also on July 6, 1999, iMALL's board authorized iMALL's execution of
a non-solicitation agreement with Excite@Home, to expire on July 12, 1999,
during which period iMALL would not be permitted to negotiate with, or provide
information to, any other party regarding a business combination transaction.
The non-solicitation agreement was entered into on July 7, 1999.
On July 7, 1999, Excite@Home's outside legal counsel sent to iMALL's
outside legal counsel a draft merger agreement and ancillary agreements. From
July 7 through July 11, iMALL and its financial advisors conducted a due
diligence review of Excite@Home, and Excite@Home and its outside legal and
financial advisors conducted a due diligence review of iMALL.
On July 10, 1999, for the purpose of ensuring that the prohibitions imposed
by Nevada's "Combinations with Interested Stockholders" statutes would not apply
to the
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<PAGE> 39
transactions with Excite@Home, iMALL's board authorized the officers and agents
of iMALL to continue to negotiate with Excite@Home with a view to reaching an
agreement relating to, and finalizing, a definitive merger agreement with
Excite@Home, and to enter into such agreement, subject to the approval and
adoption by the board of directors and stockholders of iMALL of the terms
thereof.
From July 10 to July 12, 1999, iMALL, Excite@Home and their respective
outside legal and financial advisors negotiated the terms of the merger
agreement and other agreements relating to the merger. The principal issues
discussed during these negotiations were the exchange ratio, the termination
rights under the merger agreement, the conditions upon which any breakup fee
would be payable, the representations, warranties and covenants contained in the
merger agreement, and the effect of the merger on iMALL's existing warrants and
outstanding stock options. In addition, during this period, Excite@Home and
iMALL held a series of negotiations with First Data regarding amendments to the
First Data Marketing and Development Agreement and the First Data Investment
Agreement and the execution of a Marketing Agreement and a Capacity Reservation
Agreement to be entered into between First Data and Excite@Home. Also during
this period, Excite@Home and iMALL held discussions with certain iMALL
stockholders concerning the voting agreements, with certain holders of iMALL's
warrants concerning an amendment to such holders' warrants to be effective upon
the closing of the merger and with certain officers of iMALL regarding their
employment agreements.
On July 11, 1999, iMALL's board held a special meeting at which iMALL's
outside legal counsel reviewed the principal terms of the merger agreement, the
voting agreements, the amendment to iMALL's articles of incorporation, the
amendment to some of iMALL's warrants and the amendments to iMALL's existing
agreements with First Data. Additionally, iMALL's outside legal counsel reviewed
the iMALL board's fiduciary duties in considering a strategic business
combination. BancBoston Robertson Stephens then made a presentation to the board
regarding the financial analyses it had performed in connection with its opinion
and stated orally that it was prepared to render, and subsequently did provide,
its written opinion as of July 11, 1999 that, as of that date, the exchange
ratio in the merger was fair from a financial point of view to iMALL's
stockholders other than Excite@Home or any of its affiliates. See the section
entitled "Opinion of iMALL's financial advisor" below. Following a discussion,
iMALL's board unanimously approved the final terms of the merger agreement, the
merger and related agreements and the amendment to the articles of incorporation
and determined to recommend to the stockholders of iMALL that the merger
agreement and the merger be approved.
On the evening of July 12, 1999, the merger agreement, the voting
agreements, the amendment to some of iMALL's warrants, the employment agreements
and the agreements with First Data were finalized and executed. The terms of the
merger were announced in a joint press release that was issued before the
opening of the stock markets on July 13, 1999.
IMALL'S REASONS FOR THE MERGER
iMALL's board has determined that the terms of the merger and the merger
agreement are fair to, and in the best interests of, iMALL and its stockholders.
Accordingly, iMALL's board has unanimously approved the amendment to the
articles of incorporation, the merger agreement and the merger and unanimously
recommends that
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<PAGE> 40
you vote for approval of the amendment to the articles of incorporation, the
merger agreement and the merger.
In reaching its decision, iMALL's board identified several potential
benefits of the merger, including:
- The exchange ratio in the merger represented a premium of approximately
39% over the average closing price for iMALL common stock over the 30 day
trading period ending on July 9, 1999, the last trading day prior to the
iMALL board meeting;
- iMALL's board assessed the benefits of being part of a combined company
and the risks of continuing to be an independent company, in view of the
increased consolidation and increased competitive trends in the
electronic commerce industry. iMALL's board believed that the combined
company might be able to realize synergies in its combined operations as
well as be able to possibly leverage Excite@Home's existing cable
partners. iMALL's board considered favorably that the former iMALL
stockholders, as stockholders of Excite@Home, would share the benefits of
these synergies;
- iMALL's board reviewed the principal terms and conditions of the merger
agreement, including the representations, warranties and covenants and
the conditions to each party's obligation to complete the merger. iMALL's
board considered favorably that the terms of the merger agreement are
reasonable;
- iMALL's board considered the potential benefits of the merger to iMALL's
customers and employees and the interests of the community and of
society;
- iMALL's board considered favorably the opinion of BancBoston Robertson
Stephens, dated July 11, 1999, including the related financial analyses,
to the effect that, as of that date and based upon and subject to the
factors and assumptions set forth in the opinion, the exchange ratio was
fair from a financial point of view to the holders of iMALL common stock,
other than Excite@Home or any of its affiliates;
- iMALL's board considered the larger market capitalization of Excite@Home,
and the higher corresponding trading liquidity for former iMALL
shareholders. Based on the closing prices of Excite@Home common stock and
iMALL common stock on July 9, 1999, the last trading day prior to the
iMALL board meeting, Excite@Home had a market capitalization of $19.752
billion, compared to iMALL's market capitalization of $358 million.
Accordingly, by combining with Excite@Home, iMALL's stockholders will be
afforded substantially increased trading liquidity for their investment;
and
- iMALL's board considered the ability of Excite@Home and iMALL to complete
the merger, including their ability to obtain necessary regulatory
approvals and their obligations to attempt to obtain those approvals and
the likelihood that the merger would be completed.
iMALL's board also considered a number of potentially negative factors in
its deliberations concerning the merger, including:
- iMALL's board considered the risk that because the exchange ratio will
not be adjusted for changes in the market price of either Excite@Home
Series A common
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stock or iMALL common stock, the per share value of the consideration to
be received by iMALL stockholders might be less than the price per share
implied by the exchange ratio immediately prior to the announcement of
the merger;
- iMALL's board considered the risk that the synergies and benefits sought
in the merger would not be fully achieved, which might have the effect of
adversely affecting the market value of the Excite@Home common stock
received in the merger;
- iMALL's board considered the risk that the merger would not be completed.
In evaluating this risk, iMALL's board considered the circumstances under
which Excite@Home could terminate the merger agreement;
- iMALL's board considered the interests of its officers and directors in
the merger; and
- iMALL's board considered the risk that the negative features of the
termination fee may prevent others from proposing an alternative
transaction that may be more advantageous to iMALL stockholders. In
determining the fairness of the merger to the stockholders of iMALL,
iMALL's board took into account the size of the termination fee in
relation to the size of the transaction and the circumstances in which it
would be paid.
The foregoing discussions of the information and factors considered by
iMALL's board are not intended to be exhaustive but are believed to include all
material factors considered by iMALL's board.
RECOMMENDATION OF IMALL'S BOARD OF DIRECTORS
AFTER CAREFUL CONSIDERATION, IMALL'S BOARD HAS DETERMINED THE MERGER
AGREEMENT AND THE MERGER TO BE FAIR TO AND IN THE BEST INTERESTS OF THE IMALL
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT IMALL STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION, THE MERGER AGREEMENT
AND THE MERGER. THE UNANIMOUS RECOMMENDATION OF IMALL'S BOARD DID NOT INCLUDE
THE DIRECTOR DESIGNATED TO IMALL'S BOARD BY FIRST DATA, WHO APPROPRIATELY
ABSTAINED FROM VOTING ON THE AMENDMENT TO THE ARTICLES OF INCORPORATION, THE
MERGER AND THE MERGER AGREEMENT BECAUSE OF AN ACTUAL OR POTENTIAL CONFLICT OF
INTEREST.
OPINION OF IMALL'S FINANCIAL ADVISOR
Under an engagement letter dated June 14, 1999, and amended on June 18,
1999, iMALL engaged BancBoston Robertson Stephens to render an opinion as to the
fairness of the exchange ratio, from a financial point of view, to holders of
shares of iMALL common stock, other than Excite@Home or any of its affiliates.
On July 11, 1999 at a meeting of iMALL's board held to evaluate the
proposed merger, BancBoston Robertson Stephens delivered to iMALL's board its
written opinion that, as of July 11, 1999 and based on the assumptions made, the
matters considered and the limitations on the review undertaken described in the
opinion, the exchange ratio was fair, from a financial point of view, to the
holders of shares of iMALL common stock, other than Excite@Home or any of its
affiliates. The exchange ratio was determined through negotiations between the
respective managements of iMALL and Excite@Home. Although BancBoston Robertson
Stephens did assist the management of iMALL in these
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negotiations, it was not asked to, and did not, recommend to iMALL that any
specific exchange ratio constituted the appropriate exchange ratio for the
merger. BancBoston Robertson Stephens assisted iMALL's management in the
negotiations leading to an agreement on principal structural terms of the
merger.
The full text of the BancBoston Robertson Stephens opinion, which sets
forth, among other things, assumptions made, matters considered and limitations
on the review undertaken, is attached as Annex C and is incorporated in this
prospectus/proxy statement by reference. iMALL urges its stockholders to read
the BancBoston Robertson Stephens opinion in its entirety. The BancBoston
Robertson Stephens opinion was prepared for the benefit and use of iMALL's board
in connection with its evaluation of the merger and does not constitute a
recommendation to stockholders of iMALL as to how they should vote, or take any
other action, with respect to the merger.
The BancBoston Robertson Stephens opinion does not address:
- the relative merits of the merger and the other business strategies that
iMALL's board has considered or may be considering; or
- the underlying business decision of iMALL's board to proceed with the
merger.
The summary of the BancBoston Robertson Stephens opinion set forth in this
prospectus/proxy statement is qualified in its entirety by reference to the full
text of the BancBoston Robertson Stephens opinion.
In connection with the preparation of the BancBoston Robertson Stephens
opinion, BancBoston Robertson Stephens, among other things:
- reviewed certain publicly available financial statements and other
business and financial information of iMALL and Excite@Home,
respectively;
- reviewed certain internal financial statements and other financial and
operating data concerning iMALL prepared by the management of iMALL;
- reviewed certain financial forecasts and other forward looking financial
information prepared by the management of iMALL;
- reviewed with Excite@Home certain publicly available estimates of
research analysts relating to Excite@Home;
- held discussions with the respective managements of Excite@Home and iMALL
concerning the businesses, past and current operations, financial
condition and future prospects of both iMALL and Excite@Home,
independently and combined, including discussions with the managements of
iMALL and Excite@Home concerning cost savings and other synergies that
are expected to result from the merger, as well as their views regarding
the strategic rationale for the merger;
- reviewed the financial terms and conditions set forth in the merger
agreement and the agreements ancillary thereto;
- reviewed the stock price and trading history of iMALL and Excite@Home;
- compared the financial performance of iMALL and Excite@Home and the
prices and trading activity of iMALL common stock and Excite@Home Series
A
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common stock with that of certain other publicly traded companies it
deemed comparable with iMALL and Excite@Home, respectively;
- compared the financial terms of the merger with the financial terms, to
the extent publicly available, of other transactions that it deemed
relevant;
- reviewed the pro forma impact of the merger on Excite@Home's cash
earnings per share and revenue per share;
- participated in discussions and negotiations among representatives of
iMALL and Excite@Home and their financial and legal advisors; and
- made such other studies and inquiries, and reviewed such other data, as
it deemed relevant.
In its review and analysis, and in arriving at its opinion, BancBoston
Robertson Stephens assumed and relied upon the accuracy and completeness of all
of the financial and other information provided to it (including information
furnished to it orally or otherwise discussed with it by the managements of
iMALL and Excite@Home) or publicly available and neither attempted to verify,
nor assumed responsibility for verifying, any of such information. BancBoston
Robertson Stephens relied upon the assurances of managements of iMALL and
Excite@Home that they were not aware of any facts that would make such
information inaccurate or misleading. Furthermore, BancBoston Robertson Stephens
did not obtain or make, or assume any responsibility for obtaining or making,
any independent evaluation or appraisal of the properties, assets or liabilities
(contingent or otherwise) of iMALL or Excite@Home, nor was BancBoston Robertson
Stephens furnished with any such evaluation or appraisal.
With respect to the financial forecasts and projections (and the
assumptions and bases therefor) for each of iMALL and Excite@Home that
BancBoston Robertson Stephens reviewed, upon the advice of the managements of
iMALL and Excite@Home, BancBoston Robertson Stephens assumed that such forecasts
and projections:
- had been reasonably prepared in good faith on the basis of reasonable
assumptions;
- reflected the best available estimates and judgments as to the future
financial condition and performance of iMALL and Excite@Home,
respectively; and
- will be realized in the amounts and in the time periods estimated.
In this regard, BancBoston Robertson Stephens noted that each of iMALL and
Excite@Home face exposure to the Year 2000 problem. BancBoston Robertson
Stephens did not undertake any independent analysis to evaluate the reliability
or accuracy of the assumptions made by the managements of iMALL and Excite@Home
with respect to the potential effect that the Year 2000 problem might have on
their respective forecasts.
In addition, BancBoston Robertson Stephens assumed that:
- the merger will be consummated upon the terms set forth in the merger
agreement without material alteration thereof, including, among other
things, that the merger will be accounted for as a "purchase method"
business combination in accordance with generally accepted accounting
principles;
- the merger will be treated as a tax-free reorganization pursuant to the
Internal Revenue Code of 1986, as amended;
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- the agreements with First Data described in the merger agreement will be
executed and in full force and effect; and
- the historical financial statements of each of iMALL and Excite@Home
reviewed by it had been prepared and fairly presented in accordance with
generally accepted accounting principles consistently applied.
BancBoston Robertson Stephens relied as to all legal matters relevant to
rendering its opinion on the advice of counsel.
Although developments following the date of the BancBoston Robertson
Stephens opinion may affect the opinion, BancBoston Robertson Stephens assumed
no obligation to update, revise or reaffirm its opinion. The BancBoston
Robertson Stephens opinion is necessarily based upon market, economic and other
conditions as in effect on, and information made available to BancBoston
Robertson Stephens as of, the date of the BancBoston Robertson Stephens opinion.
It should be understood that subsequent developments may affect the conclusion
expressed in the BancBoston Robertson Stephens opinion and that BancBoston
Robertson Stephens disclaims any undertaking or obligation to advise any person
of any change in any matter affecting the opinion which may come or be brought
to its attention after the date of the opinion. The BancBoston Robertson
Stephens opinion is limited to the fairness, from a financial point of view and
as of the date thereof, of the exchange ratio to holders of shares of iMALL
common stock, other than Excite@Home or any of its affiliates. BancBoston
Robertson Stephens does not express any opinion as to:
- the value of any employee agreement or other arrangement entered into in
connection with the merger;
- any tax or other consequences that might result from the merger; or
- what the value of Excite@Home common stock will be when issued to iMALL's
stockholders pursuant to the merger or the price at which the shares of
Excite@Home common stock that are issued pursuant to the merger may be
traded in the future.
The following is a summary of the material financial analyses performed by
BancBoston Robertson Stephens in connection with rendering the BancBoston
Robertson Stephens opinion. The summary of the financial analyses is not a
complete description of all of the analyses performed by BancBoston Robertson
Stephens. Certain of the information in this section is presented in a tabular
form. IN ORDER TO BETTER UNDERSTAND THE FINANCIAL ANALYSES PERFORMED BY
BANCBOSTON ROBERTSON STEPHENS, THESE TABLES MUST BE READ TOGETHER WITH THE TEXT
OF EACH SUMMARY. THE BANCBOSTON ROBERTSON STEPHENS OPINION IS BASED UPON THE
TOTALITY OF THE VARIOUS ANALYSES PERFORMED BY BANCBOSTON ROBERTSON STEPHENS AND
NO PARTICULAR PORTION OF THE ANALYSES HAS ANY MERIT STANDING ALONE. BancBoston
Robertson Stephens noted that based on the closing price of Excite@Home common
stock on July 9, 1999 of $53.81, the exchange ratio in the merger of 0.460x
implied an iMALL equity value of approximately $588 million and an iMALL equity
value per share of $24.75.
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EXCHANGE RATIO ANALYSES. BancBoston Robertson Stephens compared the
historical ratios of the average closing price of iMALL common stock to the
average closing price of Excite@Home common stock over various periods ending
July 9, 1999. The following table sets forth the ratios of the average closing
prices of iMALL common stock compared to Excite@Home common stock for the
various periods ending July 9, 1999:
<TABLE>
<CAPTION>
RATIO OF AVERAGE CLOSING PRICES OF
PERIOD ENDING IMALL COMMON STOCK COMPARED TO
JULY 9, 1999 EXCITE@HOME COMMON STOCK
- --------------- ----------------------------------
<S> <C>
1 trading day 0.376x
10 trading days 0.359x
20 trading days 0.345x
30 trading days 0.326x
60 trading days 0.279x
90 trading days 0.262x
12 months 0.341x
</TABLE>
BancBoston Robertson Stephens also applied a typical control premium of
25.0% - 50.0% to the results of the foregoing analysis, which implied the
following iMALL equity values, iMALL equity values per share and exchange
ratios:
<TABLE>
<CAPTION>
HISTORICAL
PERIOD ENDING AVERAGE IMPLIED IMALL IMPLIED IMALL IMPLIED
JULY 9, 1999 EXCHANGE RATIO EQUITY VALUE EQUITY VALUE PER SHARE EXCHANGE RATIO
- --------------- -------------- ------------------- ---------------------- ---------------
<S> <C> <C> <C> <C>
1 trading day 0.376x $607 - $752 million $25.31 - $30.38 0.470x - 0.564x
30 trading days 0.326x $509 - $635 million $21.90 - $26.29 0.407x - 0.488x
60 trading days 0.279x $421 - $528 million $18.83 - $22.60 0.348x - 0.418x
90 trading days 0.262x $373 - $470 million $16.98 - $20.38 0.328x - 0.394x
12 months 0.341x $538 - $669 million $22.91 - $27.49 0.426x - 0.511x
</TABLE>
BancBoston Robertson Stephens also compared the historical ratios of the
weighted trading volume price of iMALL common stock to the weighted trading
volume price of Excite@Home common stock over various periods ending July 9,
1999. The following table sets forth the ratios of the weighted trading volume
price of iMALL common stock compared to the weighted trading volume price of
Excite@Home common stock for various periods ending July 9, 1999:
<TABLE>
<CAPTION>
RATIO OF WEIGHTED TRADING VOLUME PRICES
OF IMALL COMMON STOCK COMPARED TO
PERIOD ENDING THE WEIGHTED TRADING VOLUME PRICE
JULY 9, 1999 OF EXCITE@HOME COMMON STOCK
- --------------- ---------------------------------------
<S> <C>
1 trading day 0.376x
10 trading days 0.356x
20 trading days 0.376x
30 trading days 0.348x
60 trading days 0.287x
90 trading days 0.271x
12 months 0.383x
</TABLE>
COMPARABLE COMPANIES ANALYSIS. Using publicly available information,
BancBoston Robertson Stephens analyzed, among other things, the total
capitalization and trading
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multiples of iMALL and selected publicly traded companies that have similar
business and operating profiles, including:
- QRS Corp.
- Open Market, Inc.
- Cybercash, Inc.
- Intershop Communications
Multiples compared by BancBoston Robertson Stephens included total
capitalization to estimated revenues for calendar years 2000 and 2001. All
multiples were based on closing stock prices as of July 9, 1999.
Using the ranges of multiples set forth in the table below that BancBoston
Robertson Stephens derived from multiples for the comparable companies, the
following iMALL equity values, iMALL equity values per share and exchange ratios
are implied:
<TABLE>
<CAPTION>
IMPLIED IMALL
IMPLIED IMALL EQUITY VALUE IMPLIED
MULTIPLE RANGE EQUITY VALUE PER SHARE EXCHANGE RATIO
-------------- ------------------- --------------- ----------------
<S> <C> <C> <C> <C>
2000 Revenues 7.0x - 9.0x $388 - $495 million $17.66 - $21.53 0.328x - 0.400x
2001 Revenues 4.0x - 5.0x $548 - $682 million $23.40 - $28.00 0.435x - 0.520x
</TABLE>
BancBoston Robertson Stephens also applied a typical control premium of
25.0% - 50.0% to the mean values implied in the foregoing analysis, which
implied the following iMALL equity values, iMALL equity values per share and
exchange ratios:
<TABLE>
<CAPTION>
IMPLIED IMALL
IMPLIED IMALL EQUITY VALUE IMPLIED
PREMIUM RANGE EQUITY VALUE PER SHARE EXCHANGE RATIO
------------- ------------------- --------------- ----------------
<S> <C> <C> <C> <C>
2000 Revenues 25.0% - 50.0% $552 - $662 million $23.48 - $27.37 0.436x - 0.509x
2001 Revenues 25.0% - 50.0% $768 - $922 million $31.02 - $36.42 0.577x - 0.677x
</TABLE>
PRECEDENT TRANSACTION ANALYSIS. Using publicly available information,
BancBoston Robertson Stephens analyzed the consideration offered, the premiums
paid and the implied transaction value multiples paid or proposed to be paid in
selected acquisition transactions in the Internet content and service industry,
including:
- AboveNet Communications Inc./Metromedia Fiber Network, Inc. (June 24,
1999)
- TeleBank Financial Corporation/E*TRADE Group, Inc. (June 1, 1999)
- broadcast.com inc./Yahoo! Inc.(April 1, 1999)
- GeoCities/Yahoo! Inc. (January 28, 1999)
- Excite, Inc./At Home Corporation (January 19, 1999)
- Netscape Communications Corporation/America Online, Inc. (November 24,
1998)
- N2K Inc./CDNow, Inc. (October 23, 1998)
- CKS Group, Inc./USWeb Corporation (September 2, 1998)
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<PAGE> 47
In analyzing these "precedent transactions", BancBoston Robertson Stephens
compared, among other things, the total consideration in such transactions as a
multiple of the next twelve months ("NTM") estimated revenues and estimated
fiscal year 2000 revenues. All multiples for the precedent transactions were
based on public information available at the time of the announcement. Based on
this information and other publicly available information, the following table
illustrates the implied iMALL equity valuations, iMALL equity valuations per
share and exchange ratios derived from applying a range of multiples that
BancBoston Robertson Stephens derived from the precedent transactions:
<TABLE>
<CAPTION>
IMPLIED IMALL
MULTIPLE IMPLIED IMALL EQUITY VALUE IMPLIED
RANGE EQUITY VALUE PER SHARE EXCHANGE RATIO
------------- ------------------- --------------- ---------------
<S> <C> <C> <C> <C>
NTM revenues 20.0x - 25.0x $554 - $690 million $22.79 - $28.29 0.424x - 0.526x
FY2000 revenues 8.0x - 12.0x $442 - $656 million $19.61 - $27.13 0.364x - 0.504x
</TABLE>
BancBoston Robertson Stephens also considered the premiums paid in the
precedent transactions over the target's closing share price the day before the
transaction was announced, the target's closing share price one month prior to
the announcement, the average closing share price 10 days prior to the
announcement, the average closing share price 20 days prior to the announcement
and the average closing share price 30 days prior to the announcement. Based on
this information and other publicly available information, the following table
illustrates the implied iMALL equity valuation, iMALL equity valuations per
share and exchange ratios derived from applying a range of premiums that
BancBoston Robertson Stephens derived from the precedent transaction:
<TABLE>
<CAPTION>
IMALL
CLOSING IMPLIED IMALL
TRADING PREMIUM IMPLIED IMALL EQUITY VALUE IMPLIED
PRICE RANGE EQUITY VALUE PER SHARE EXCHANGE RATIO
------- ------------ ------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
One day prior $20.25 30.0% - 40.0% $630 - $688 million $26.33 - $28.35 0.489x - 0.527x
One month prior $16.00 45.0% - 55.0% $536 - $582 million $23.20 - $24.80 0.431x - 0.461x
10 day average $19.39 35.0% - 40.0% $629 - $657 million $26.18 - $27.15 0.487x - 0.505x
20 day average $17.82 37.5% - 45.0% $581 - $620 million $24.51 - $25.84 0.455x - 0.480x
30 day average $17.03 40.0% - 45.0% $567 - $587 million $23.84 - $24.70 0.443x - 0.459x
</TABLE>
No company, business or transaction compared in the comparable companies
analysis or precedent transaction analysis is identical to iMALL or Excite@Home.
Accordingly, an analysis of the results of the foregoing is not entirely
mathematical; rather it involves complex considerations and judgments concerning
differences in financial and operating characteristics and other factors that
could affect the acquisition, public trading and other values of the comparable
companies, precedent transactions or the business segment, company or
transactions to which they are being compared.
PRO FORMA ANALYSIS. BancBoston Robertson Stephens analyzed certain pro
forma effects resulting from the merger, including, among other things, the
impact of the merger on the projected cash earnings per share and revenues per
share of the combined company for fiscal years 1999 and 2000. The following
table summarizes the results of such analysis:
<TABLE>
<S> <C>
Fiscal Year 2000 estimated cash earnings per share
accretion................................................. 31.5%
Fiscal Year 2001 estimated cash earnings per share
accretion................................................. 21.9%
Fiscal Year 2000 estimated revenue per share accretion...... 4.7%
Fiscal Year 2001 estimated revenue per share accretion...... 7.9%
</TABLE>
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<PAGE> 48
The actual results achieved by the combined company may vary from projected
results and the variations may be material.
OTHER FACTORS AND COMPARATIVE ANALYSES. In rendering its opinion,
BancBoston Robertson Stephens considered certain other factors and conducted
certain other comparative analyses, including, among other things a review of:
- the history of trading prices and volume for iMALL common stock and
Excite@Home common stock for the period from July 9, 1998 to July 9,
1999; and
- selected published analysts' reports on iMALL and Excite@Home, including
analysts' estimates as to the earnings growth potential of iMALL and
Excite@Home.
While the foregoing summary describes certain analyses and factors that
BancBoston Robertson Stephens deemed material in its presentation to iMALL's
board, it is not a comprehensive description of all analyses and factors
considered by BancBoston Robertson Stephens. The preparation of a fairness
opinion is a complex process that involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. BancBoston Robertson Stephens
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all analyses and factors, would create an incomplete view of the
evaluation process underlying the BancBoston Robertson Stephens opinion. Several
analytical methodologies were employed and no one method of analysis should be
regarded as critical to the overall conclusion reached by BancBoston Robertson
Stephens. Each analytical technique has inherent strengths and weaknesses, and
the nature of the available information may further affect the value of
particular techniques. The conclusions reached by BancBoston Robertson Stephens
are based on all analyses and factors taken as a whole and also on application
of BancBoston Robertson Stephens' own experience and judgment. Such conclusions
may involve significant elements of subjective judgment and qualitative
analysis. BancBoston Robertson Stephens therefore gives no opinion as to the
value or merit standing alone of any one or more parts of the analysis it
performed. In performing its analyses, BancBoston Robertson Stephens considered
general economic, market and financial conditions and other matters, many of
which are beyond the control of iMALL and Excite@Home. The analyses performed by
BancBoston Robertson Stephens are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than those
suggested by such analyses. Accordingly, analyses relating to the value of a
business do not purport to be appraisals or to reflect the prices at which the
business actually may be purchased. Furthermore, no opinion is being expressed
as to the prices at which shares of iMALL common stock or Excite@Home common
stock may be traded at any future time.
The engagement letter between BancBoston Robertson Stephens and iMALL
provides that, for its services, BancBoston Robertson Stephens is entitled to
receive a transaction fee equal to $1.0 million plus two percent (2%) of the
aggregate transaction value, if any, exceeding a purchase price of $20.00 per
share of iMALL common stock. iMALL has also agreed to reimburse BancBoston
Robertson Stephens for certain of its out-of-pocket expenses, including legal
fees, and to indemnify and hold harmless BancBoston Robertson Stephens and its
affiliates and any director, employee or agent of BancBoston Robertson Stephens
or any of its affiliates, or any person controlling BancBoston Robertson
Stephens or its affiliates for certain losses, claims, damages, expenses and
liabilities relating to or
40
<PAGE> 49
arising out of services provided by BancBoston Robertson Stephens as financial
advisor to iMALL. The terms of the fee arrangement with BancBoston Robertson
Stephens, which iMALL and BancBoston Robertson Stephens believe are customary in
transactions of this nature, were negotiated at arm's length between iMALL and
BancBoston Robertson Stephens, and iMALL's board was aware of such fee
arrangements, including the fact that a significant portion of the fees payable
to BancBoston Robertson Stephens is contingent upon completion of the merger. In
the past, BancBoston Robertson Stephens has provided certain investment banking
services to iMALL for which it has been paid fees. In the ordinary course of its
business, BancBoston Robertson Stephens may trade in iMALL's securities and
Excite@Home's securities for its own account and the account of its customers
and, accordingly, may at any time hold a long or short position in iMALL's
securities or Excite@Home's securities.
BancBoston Robertson Stephens was retained based on BancBoston Robertson
Stephens' experience as a financial advisor in connection with mergers and
acquisitions and in securities valuations generally, as well as BancBoston
Robertson Stephens' investment banking relationship and familiarity with iMALL.
BancBoston Robertson Stephens is an internationally recognized investment
banking firm. As part of its investment banking business, BancBoston Robertson
Stephens is frequently engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of securities, private placements and
other purposes.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of iMALL's board, you should be aware of
the interests that directors and officers of iMALL have in the merger. These
interests are different from and in addition to your interests as stockholders.
These include:
- Richard Rosenblatt, Joseph Ruszkiewicz, Anthony Mazzarella, Stephen
Fulling, Daniel Odette and Phillip Windley have entered into employment
agreements and will be employed by Excite@Home or the company resulting
from the merger after completion of the merger.
- First Data, which as of the record date owned 10.2% of the outstanding
shares of iMALL common stock, entered into a marketing agreement, an
amended marketing and development agreement and a capacity reservation
agreement and, upon completion of the merger, will enter into a
registration rights agreement with Excite@Home. In addition, if the
merger is completed, Excite@Home will issue First Data a warrant to
purchase 2,300,000 shares of its Series A common stock at an exercise
price of $36.96 per share.
- iMALL's directors and officers have customary rights to indemnification
against liabilities.
As a result, these directors and officers could be more likely to vote to
approve the merger agreement and the merger than if they did not hold these
interests.
COMPLETION AND EFFECTIVENESS OF THE MERGER
The merger will be completed when all of the conditions to completion of
the merger are satisfied or waived, including the approval of the amendment to
the articles of
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<PAGE> 50
incorporation, the merger agreement and the merger by the stockholders of iMALL.
The merger will become effective upon the filing of articles of merger in the
office of the Secretary of State of the State of Nevada.
STRUCTURE OF THE MERGER AND CONVERSION OF IMALL COMMON STOCK
Shop Nevada, a newly-formed and wholly-owned subsidiary of Excite@Home,
will be merged with iMALL. As a result of the merger, the separate corporate
existence of Shop Nevada will cease and iMALL will survive the merger as a
wholly-owned subsidiary of Excite@Home.
Upon completion of the merger, each outstanding share of iMALL common stock
will be converted into the right to receive 0.46 of a share of Excite@Home
Series A common stock.
No certificate or scrip representing fractional shares of Excite@Home
Series A common stock will be issued in connection with the merger. Instead,
iMALL's stockholders will receive cash, without interest, in lieu of any
fractional shares of Excite@Home Series A common stock.
EXCHANGE OF IMALL STOCK CERTIFICATES FOR EXCITE@HOME STOCK CERTIFICATES
When the merger is completed, Excite@Home's exchange agent will mail to
iMALL stockholders a letter of transmittal and instructions for use in
surrendering iMALL stock certificates in exchange for Excite@Home stock
certificates. When you deliver your iMALL stock certificates to the exchange
agent along with an executed letter of transmittal and any other required
documents, your iMALL stock certificates will be canceled and you will receive
Excite@Home stock certificates representing the number of whole shares of
Excite@Home Series A common stock to which you are entitled under the merger
agreement. iMALL stockholders will receive payment in cash, without interest, in
lieu of any fractional shares of Excite@Home Series A common stock which would
have been otherwise issuable to iMALL stockholders in the merger.
YOU SHOULD NOT SUBMIT YOUR IMALL STOCK CERTIFICATES FOR EXCHANGE UNLESS AND
UNTIL YOU RECEIVE THE TRANSMITTAL INSTRUCTIONS AND A LETTER OF TRANSMITTAL FROM
THE EXCHANGE AGENT.
iMALL stockholders are not entitled to receive any dividends or other
distributions on Excite@Home Series A common stock until the merger is completed
and they have surrendered their iMALL stock certificates in exchange for
Excite@Home stock certificates.
Subject to the effect of applicable laws, promptly following surrender of
iMALL stock certificates and the issuance of the corresponding Excite@Home
certificates, iMALL stockholders will be paid the amount of dividends or other
distributions, without interest, with a record date after the completion of the
merger which were previously paid with respect to their whole shares of
Excite@Home Series A common stock. At the appropriate payment date, iMALL
stockholders will also receive the amount of dividends or other distributions,
without interest, with a record date after the completion of the merger and a
payment date after they exchange their iMALL stock certificates for Excite@Home
stock certificates.
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<PAGE> 51
Excite@Home will only issue iMALL stockholders an Excite@Home stock
certificate or a check in lieu of a fractional share in a name in which the
surrendered iMALL stock certificate is registered. If you wish to have your
certificate issued in another name you must present the exchange agent with all
documents required to show and effect the unrecorded transfer of ownership and
show that you paid any applicable stock transfer taxes.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following general discussion summarizes certain material United States
federal income tax consequences of the merger. This discussion is based on the
Internal Revenue Code, the related regulations promulgated, existing
administrative interpretations and court decisions, all of which are subject to
change, possibly with retroactive effect. This discussion assumes that iMALL
stockholders hold their shares of iMALL common stock as capital assets within
the meaning of section 1221 of the Internal Revenue Code. This discussion does
not address all aspects of United States federal income taxation that may be
important to you in light of your particular circumstances or if you are subject
to special rules. These special rules include rules relating to:
- stockholders who are not citizens or residents of the United States;
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- dealers in securities;
- stockholders who acquired their shares of iMALL common stock through the
exercise of options or similar derivative securities or otherwise as
compensation; and
- stockholders who hold their shares of iMALL common stock as part of a
hedge, appreciated financial position, straddle or conversion
transaction.
In addition, the discussion below does not consider the effect of any
applicable state, local or foreign tax laws.
Our obligations to complete the merger are conditioned on (1) the delivery
of an opinion to Excite@Home from Fenwick & West LLP and (2) the delivery of an
opinion to iMALL from Latham & Watkins, in each case regarding material United
States federal income tax consequences of the merger. Alternatively, this
condition will be satisfied upon (a) the delivery of such a tax opinion to
Excite@Home and iMALL from Latham & Watkins or (b) the delivery of such a tax
opinion to Excite@Home and iMALL from Fenwick & West LLP.
Excite@Home and iMALL believe, based on the advice of their respective
counsel, that the merger will have the United States federal income tax
consequences discussed below. The opinions of counsel referred to above (1) will
assume the absence of changes in existing facts and (2) will rely on
assumptions, representations and covenants including those contained in
certificates executed by officers of Excite@Home, iMALL and others. The opinions
referred to above neither bind the Internal Revenue Service, or the IRS, nor
preclude the IRS from adopting a position contrary to that expressed in the
opinions, and no assurance can be given that contrary positions will not be
successfully asserted by the
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<PAGE> 52
IRS or adopted by a court if the issues are litigated. Neither of Excite@Home
and iMALL intends to obtain a ruling from the IRS with respect to the tax
consequences of the merger.
EACH HOLDER OF IMALL COMMON STOCK IS URGED TO CONSULT HIS, HER OR ITS TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM, HER OR IT OF THE
TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.
Tax consequences to iMALL and iMALL stockholders. The merger will
constitute a "reorganization" within the meaning of section 368(a) of the
Internal Revenue Code. Accordingly, subject to the limitations and
qualifications referred to herein, the following tax consequences will result:
- No gain or loss will be recognized by iMALL solely as a result of the
merger;
- No gain or loss will be recognized by the holders of iMALL common stock
upon the receipt of Excite@Home Series A common stock solely in exchange
for the iMALL common stock in the merger, except to the extent of cash
received in lieu of fractional shares;
- Cash payments received by holders of iMALL common stock in lieu of a
fractional share of Excite@Home Series A common stock will be treated as
capital gain (or loss) measured by the difference between the cash
payment received and the portion of the tax basis in the shares of iMALL
common stock surrendered that is allocable to the fractional share. Such
gain (or loss) will be long-term capital gain or loss if the fractional
share of iMALL common stock is considered to have been held for more than
one year at the effective time of the merger;
- The aggregate tax basis of the Excite@Home Series A common stock received
by iMALL stockholders in the merger, including any fractional share of
Excite@Home Series A common stock not actually surrendered in exchange
therefor, will be the same as the aggregate tax basis of the iMALL common
stock surrendered in exchange therefor; and
- The holding period of the Excite@Home Series A common stock received by
each iMALL common stockholder in the merger will include the holding
period of the iMALL common stock surrendered in exchange therefor.
A successful IRS challenge to the "reorganization" status of the merger
would result in an iMALL stockholder recognizing gain or loss with respect to
each share of iMALL common stock surrendered in the merger equal to the
difference between the iMALL stockholder's basis in the share and the fair
market value, as of the effective time of the merger, of the Excite@Home Series
A common stock received in exchange therefor. In that event, an iMALL
stockholder's aggregate tax basis in the Excite@Home Series A common stock so
received would equal its fair market value as of the effective time of the
merger, and the iMALL stockholder's holding period for the Excite@Home Series A
common stock would begin the day after the merger.
Tax Consequences to Excite@Home and Excite@Home's common stockholders. No
gain or loss will be recognized by Excite@Home solely as a result of the merger.
There will be no United States federal income tax consequences as a result of
the consummation of the merger to Excite@Home common stockholders.
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<PAGE> 53
ACCOUNTING TREATMENT OF THE MERGER
Excite@Home intends to account for the merger as a purchase for financial
reporting and accounting purposes, under generally accepted accounting
principles. After completion of the merger, the results of operations of iMALL
will be included in the consolidated financial statements of Excite@Home. The
purchase price, i.e., the aggregate merger consideration, will be allocated
based on the fair values of the assets acquired and the liabilities assumed. Any
excess of cost over fair value of the net tangible assets of iMALL acquired will
be recorded as goodwill and other intangible assets and will be amortized by
charges to operations under generally accepted accounting principles. These
allocations will be made based upon valuations and other studies that have not
yet been finalized.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER
The merger is subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act, which prohibits the completion of certain
transactions until required information and materials are furnished to the
Antitrust Division of the Department of Justice and the Federal Trade
Commission, and the applicable waiting period has expired or been terminated by
the Antitrust Division of the Department of Justice and the Federal Trade
Commission. On August 16, 1999, Excite@Home and iMALL filed the required
information and materials with the Department of Justice and the Federal Trade
Commission.
The Antitrust Division of the Department of Justice or the Federal Trade
Commission may challenge the merger on antitrust grounds either before or after
expiration of the waiting period. Accordingly, at any time before or after the
completion of the merger, either the Antitrust Division of the Department of
Justice or the Federal Trade Commission could take action under the antitrust
laws. Additionally, at any time before or after the completion of the merger,
notwithstanding that the applicable waiting period may have expired or been
terminated, any state or other person could take action under the antitrust laws
to enjoin the merger. A challenge to the merger could be made and if a challenge
is made, there can be no guarantee that Excite@Home would prevail.
Neither Excite@Home nor iMALL is aware of any other material governmental
or regulatory approval required for completion of the merger, other than the
effectiveness of the registration statement of which this prospectus/proxy
statement is a part, and compliance with applicable corporate law of Nevada.
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES OF IMALL AND EXCITE@HOME
The shares of Excite@Home Series A common stock to be issued in the merger
will be registered under the Securities Act. These shares will be freely
transferable under the Securities Act, except for shares of Excite@Home Series A
common stock issued to any person who is an affiliate of either Excite@Home or
iMALL. Persons who may be deemed to be affiliates include individuals or
entities that control, are controlled by, or are under common control of either
company and may include some of their officers and directors, as well as their
principal stockholders. Affiliates may not sell their shares of Excite@Home
Series A common stock acquired in the merger except under (1) an effective
registration statement under the Securities Act covering the resale of those
shares, (2) an exemption under paragraph (d) of Rule 145 under the Securities
Act or (3) any other applicable exemption under the Securities Act.
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<PAGE> 54
LISTING ON THE NASDAQ NATIONAL MARKET OF EXCITE@HOME COMMON STOCK TO BE ISSUED
IN THE MERGER
It is a condition to the closing of the merger that the shares of
Excite@Home Series A common stock to be issued in the merger be approved for
listing on the Nasdaq National Market.
DELISTING AND DEREGISTRATION OF IMALL COMMON STOCK AFTER THE MERGER
After completion of the merger, iMALL common stock will be delisted from
the Nasdaq National Market and will be deregistered under the Securities
Exchange Act.
OPERATIONS AFTER THE MERGER
After completion of the merger, iMALL will continue its operations as a
wholly-owned subsidiary of Excite@Home. The stockholders of iMALL will become
stockholders of Excite@Home, and their rights as stockholders will be governed
by the Excite@Home amended and restated certificate of incorporation, the
Excite@Home bylaws and the laws of the State of Delaware. See "Comparison of
rights of holders of iMALL common stock and Excite@Home common stock" on page
68.
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<PAGE> 55
THE MERGER AGREEMENT
This section of the prospectus/proxy statement describes the merger
agreement. While Excite@Home and iMALL believe that the description covers the
material terms of the merger agreement, this summary may not contain all of the
information that is important to you. The merger agreement is attached to this
prospectus/proxy statement as Annex A and Excite@Home and iMALL urge you to read
it carefully.
REPRESENTATIONS AND WARRANTIES
Excite@Home and iMALL each made a number of representations and warranties
in the merger agreement regarding aspects of their businesses, financial
condition, structure and other facts pertinent to the merger.
IMALL'S REPRESENTATIONS AND WARRANTIES
iMALL's representations and warranties include representations as to:
- iMALL's corporate organization and its authority and qualification to do
business;
- iMALL's articles of incorporation and bylaws;
- iMALL's capitalization;
- authorization, execution and delivery of the merger agreement and related
matters by iMALL;
- regulatory approvals required to complete the merger;
- the effect of the merger on contractual and other obligations of iMALL as
well as under applicable laws;
- iMALL's filings and reports with the Securities and Exchange Commission;
- iMALL's financial statements;
- iMALL's liabilities;
- changes in iMALL's business since December 31, 1998;
- iMALL's taxes and tax returns;
- iMALL's title to the properties it owns and leases;
- intellectual property used by iMALL;
- iMALL's compliance with applicable laws;
- permits required to conduct iMALL's business and iMALL's compliance with
those permits;
- litigation involving iMALL;
- iMALL's employee benefit plans;
- environmental matters;
- iMALL's material contracts;
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<PAGE> 56
- payments, if any, required to be made by iMALL to its current or former
officers and directors as a result of the merger;
- matters with respect to iMALL's insurance policies;
- accuracy of information supplied by iMALL in this prospectus/proxy
statement;
- approval of the merger by iMALL's board;
- brokers' and finders' fees;
- the fairness opinion received by iMALL from its financial advisor;
- iMALL's lack of a stockholders rights plan or "poison pill" and
applicability of Nevada's laws regarding business combinations to the
merger;
- absence of related party transactions; and
- the business of iMALL's wholly-owned subsidiary, "Internet Yellow Pages,
Inc."
EXCITE@HOME'S REPRESENTATIONS AND WARRANTIES
Excite@Home's representations and warranties include representations as to:
- Excite@Home's and Shop Nevada's corporate organization and their
authority and qualification to do business;
- Excite@Home's and Shop Nevada's certificate of incorporation or articles
of incorporation and bylaws;
- Excite@Home's and Shop Nevada's capitalization;
- authorization, execution and delivery of the merger agreement by
Excite@Home and Shop Nevada;
- regulatory approvals required to complete the merger;
- Excite@Home's filings and reports with the Securities and Exchange
Commission;
- Excite@Home's financial statements;
- changes in Excite@Home's business since December 31, 1998;
- litigation involving Excite@Home;
- information supplied by Excite@Home in this prospectus/proxy statement;
and
- approval of the merger agreement and related agreements by the
Excite@Home board.
The representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to carefully read the articles of the
merger agreement entitled "Representations and Warranties of Company" and
"Representations and Warranties of Parent and Merger Sub."
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<PAGE> 57
IMALL'S CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER
iMALL agreed that until the earlier of the termination of the merger
agreement or the completion of the merger, iMALL and each of its subsidiaries
will, unless Excite@Home consents in writing, use commercially reasonable
efforts consistent with past practices and policies to:
- preserve intact its present business organization;
- keep available the services of its present officers and employees; and
- preserve its relationships with customers, suppliers, licensors,
licensees, and others with which it has business dealings.
iMALL also agreed that until the earlier of the termination of the merger
agreement or the completion of the merger, or unless Excite@Home consents in
writing, each of iMALL and its subsidiaries will not:
- waive any stock repurchase rights or accelerate, amend or change the
period of exercisability of options;
- grant any severance or termination payments;
- modify its rights to intellectual property;
- declare or pay any dividends or other distributions;
- purchase, redeem or acquire any of its capital stock, other than in
connection with termination of an employee;
- issue, or authorize the issuance of, additional shares of its capital
stock or securities convertible into capital stock, other than grants of
options to new employees or the issuance of stock upon exercise of such
options;
- amend the articles of incorporation or bylaws of iMALL and its
subsidiaries;
- acquire or agree to acquire interests in other entities or assets which
are material to its business;
- sell, lease or dispose of property or assets which are material to its
business;
- incur or guarantee any indebtedness, sell debt securities or enter into
any "keep well" agreement;
- adopt or amend any employee benefit plan, employment agreement or
collective bargaining agreement;
- make any payments outside the ordinary course of business in excess of
$50,000 or any capital expenditures in excess of $100,000;
- other than in the ordinary course of business, terminate, amend or modify
any contracts;
- other than in the ordinary course of business, enter into any licensing,
distribution, marketing or similar agreement;
- enter into any contracts or agreements granting any exclusive
distribution or other exclusive rights;
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<PAGE> 58
- materially revalue any of its assets or make changes in accounting
methods or practices;
- other than in the ordinary course of business, pay or discharge any
liabilities or claims other than liabilities reflected on its financial
statements;
- enter into any stockholders rights agreement; or
- agree to take any of the above actions.
The agreements related to the conduct of iMALL's business in the merger
agreement are complicated and not easily summarized. You are urged to carefully
read the sections of the merger agreement entitled "Conduct of Business by the
Company."
NO OTHER NEGOTIATIONS INVOLVING IMALL
Until the merger is completed or the merger agreement is terminated, iMALL
has agreed that it will not:
- solicit, initiate, encourage or induce any Acquisition Proposal (as
defined below);
- participate in any discussions regarding or furnish any person any
nonpublic information with respect to any Acquisition Proposal or take
any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to any
Acquisition Proposal;
- engage in discussions with any person with respect to any Acquisition
Proposal;
- approve, endorse or recommend any Acquisition Proposal; or
- enter into any letter of intent or similar document or any contract,
agreement or commitment relating to any Acquisition Transaction (as
defined below).
However, iMALL may furnish information or enter into discussions with any
person or group submitting an unsolicited, written, bona fide Acquisition
Proposal that iMALL's board reasonably concludes may constitute a Superior Offer
(as defined below) if:
- neither iMALL nor any of its representatives have violated its
non-solicitation obligations described above;
- iMALL's board concludes, after consultation with outside legal counsel,
that the action is required in order for it to comply with its fiduciary
obligations to its stockholders under applicable law;
- prior to furnishing nonpublic information to or entering into discussions
with a person or group iMALL notifies Excite@Home of the identity of the
person or group as well as the material terms of the Acquisition
Proposal;
- iMALL gives Excite@Home at least three business days advance notice of
its intent to furnish nonpublic information or enter into discussions
with the person or group;
- the person or group enters into an agreement with iMALL requiring any
nonpublic information to be treated confidentially, the terms of which
are at least as restrictive as the agreement regarding nondisclosure
entered into by iMALL and Excite@Home; and
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- iMALL furnishes to Excite@Home any nonpublic information that it
furnishes to the person or group to the extent it had not previously
provided the information to Excite@Home.
iMALL has agreed to promptly inform Excite@Home of any Acquisition Proposal
or any request for nonpublic information or inquiry which iMALL reasonably
believes could lead to an Acquisition Proposal,including the identity of the
person or group making the Acquisition Proposal, request or inquiry and the
material terms of the Acquisition Proposal, request or inquiry. iMALL has agreed
to keep Excite@Home informed of the status and details of any Acquisition
Proposal.
An ACQUISITION PROPOSAL is any offer or proposal relating to any
Acquisition Transaction, other than an offer or proposal from Excite@Home.
An ACQUISITION TRANSACTION is any transaction involving any of the
following:
- any acquisition or purchase of more than a 5% interest in the total
outstanding voting securities of iMALL or any of its subsidiaries;
- any tender offer or exchange offer, that, if consummated, would result in
any person or group beneficially owning 5% or more of the total
outstanding voting securities of iMALL or any of its subsidiaries;
- any merger, consolidation, business combination or similar transaction
involving iMALL;
- any sale, lease outside the ordinary course of business, acquisition or
disposition of more than 5% of the assets of iMALL; or
- any liquidation or dissolution of iMALL.
A SUPERIOR OFFER is an unsolicited, bona fide written offer made by a third
party to consummate any of the following transactions: (1) a merger or
consolidation involving iMALL under which the stockholders of iMALL immediately
preceding the transaction hold less than 50% of the equity interest in the
surviving or resulting entity of the transaction or (2) the acquisition by any
person or group, including by way of a tender offer or an exchange offer or a
two step transaction involving a tender offer followed with reasonable
promptness by a cash-out merger involving iMALL, directly or indirectly, of
ownership of 100% of the then outstanding shares of capital stock of iMALL, on
terms that iMALL's board determines, in its reasonable judgment, after
consultation with its financial adviser, to be more favorable to iMALL
stockholders than the terms of the merger.
However, an offer shall not be deemed to be a Superior Offer if any
financing required to consummate the transaction contemplated by the offer is
not committed and is not likely in the reasonable judgment of iMALL's board to
be obtained by the third party on a timely basis.
iMALL's board may, without breaching the merger agreement, change its
recommendation regarding the merger if a Superior Offer is made and iMALL
complies with other conditions in the merger agreement.
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TREATMENT OF IMALL STOCK OPTIONS AND WARRANTS
Upon completion of the merger, each outstanding option or warrant to
purchase iMALL common stock will be converted, in accordance with its terms,
into an option or warrant, as the case may be, to purchase the number of shares
of Excite@Home Series A common stock equal to 0.46 times the number of shares of
iMALL common stock which could have been obtained before the merger upon the
exercise of each option or warrant, rounded down to the nearest whole share. The
exercise price for the shares of Excite@Home Series A common stock will be equal
to the exercise price per share of iMALL common stock subject to the option or
warrant before conversion divided by 0.46, rounded up to the nearest whole cent.
In addition, as described under "Related Agreements -- First Data Warrant" on
page 61, a warrant to purchase 2,300,000 shares of Excite@Home Series A common
stock will be issued to First Data and a warrant to purchase shares of iMALL
common stock held by First Data will be amended upon the completion of the
merger.
The other terms of each option and the iMALL option plans referred to above
under which the options were issued will continue to apply in accordance with
their terms, including any vesting provisions.
Excite@Home will file a registration statement on Form S-8 for the shares
of Excite@Home Series A common stock issuable upon exercise of options under the
iMALL stock option plans and will maintain the effectiveness of this
registration statement for as long as any of the options remain outstanding.
Excite@Home will also file, at its expense, a registration statement on
Form S-3 for the shares of Excite@Home Series A common stock issuable upon
exercise of warrants held by First Data as well as other holders of warrants to
purchase iMALL common stock to be assumed in the merger and will maintain the
effectiveness of this registration statement for a period of one year from the
date of the merger.
IMALL'S EMPLOYEE BENEFIT PLANS
Excite@Home and iMALL will work together to agree upon mutually acceptable
employee benefit and compensation arrangements so as to provide benefits to
iMALL employees who become Excite@Home employees generally equivalent in the
aggregate to those provided to similarly situated employees of Excite@Home.
iMALL will terminate its severance, separation, retention and salary
continuation plans, programs or arrangements prior to the completion of the
merger.
DIRECTOR AND OFFICER INDEMNIFICATION
Excite@Home will enforce the indemnification agreements between iMALL and
its directors and officers and for six years after the merger will maintain
provisions on indemnification in the surviving corporation's articles and bylaws
at least as favorable to the officers and directors as those in effect on the
date of the merger agreement. For six years after the merger, Excite@Home will
maintain directors' and officers' liability insurance covering those individuals
covered by iMALL's policy on the date of the merger agreement.
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CONDITIONS TO COMPLETION OF THE MERGER
The obligations of Excite@Home and iMALL to complete the merger and the
other transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of each of the following conditions before completion of
the merger:
- the merger agreement and the merger must be approved by the holders of a
majority of the outstanding shares of iMALL stock;
- Excite@Home's registration statement must be effective, no stop order
suspending its effectiveness may be in effect and no proceedings for
suspension of its effectiveness may be pending before or threatened by
the Securities and Exchange Commission;
- no law, regulation or order shall have been enacted or issued which has
the effect of making the merger illegal or otherwise prohibiting
completion of the merger substantially on the terms contemplated by the
merger agreement and all applicable waiting periods under applicable
antitrust laws must have expired or been terminated;
- Excite@Home and iMALL must each have received from their respective tax
counsel, an opinion to the effect that the merger will constitute a
tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. However, if counsel to either Excite@Home or iMALL
does not render this opinion, this condition will be satisfied if counsel
to the other party renders the opinion to such party; and
- the shares of Excite@Home common stock to be issued in the merger must be
authorized for listing on the Nasdaq National Market.
iMALL's obligations to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions before completion of the merger:
- Excite@Home's representations and warranties must be true and correct as
of July 12, 1999 and as of the date the merger is to be completed as if
made at and as of such time except:
- Excite@Home's representations and warranties which address matters only
as of a particular date, must be true and correct as of that date; and
- where the failure to be true and correct would not have a material
adverse effect on Excite@Home.
- Excite@Home must have performed or complied in all material respects with
all of its agreements and covenants required by the merger agreement to
be performed or complied with by Excite@Home at or before completion of
the merger; and
- No material adverse effect with respect to Excite@Home shall have
occurred since July 12, 1999 and be continuing.
Excite@Home's obligations to complete the merger and the other transactions
contemplated by the merger agreement are, except with respect to the condition
regarding the effectiveness of the agreements with First Data which cannot be
waived without First
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Data's consent, subject to the satisfaction or waiver of each of the following
additional conditions before completion of the merger:
- iMALL's representations and warranties must be true and correct as of
July 12, 1999 and as of the date the merger is to be completed as if made
at and as of that time except:
- iMALL's representations and warranties which address matters only as of a
particular date, must be true and correct as of that date; and
- where the failure to be true and correct would not have a material
adverse effect on iMALL, provided that the representations concerning
iMALL's capital structure, obligations with respect to capital stock,
approval of the merger by the iMALL board, receipt of the fairness
opinion and the applicability of Nevada's laws relating to business
combinations to the merger and lack of a stockholder rights plan must be
true in all material respects.
- iMALL must have performed or complied in all material respects with all
of its agreements and covenants required by the merger agreement to be
performed or complied with by iMALL at or before completion of the
merger, however:
- iMALL's failure to comply with the agreements and covenants relating to
the conduct of iMALL's business in the usual and ordinary course, the
transfer of iMALL intellectual property rights, disposition of assets,
payments outside the ordinary course, amendment of material contracts,
entering into licensing, distribution, marketing or similar agreements,
or exclusive agreements, revaluation of its assets, changes in accounting
methods, any payment of indebtedness or discharge of obligations outside
of the ordinary course, or agreement to do any of the above will not
prevent the completion of the merger unless the noncompliance would have
a material adverse effect on iMALL; and
- iMALL's failure to perform its agreements and covenants relating to
filings to complete the merger, complying with the confidentiality
agreement between iMALL and Excite@Home and providing Excite@Home access
to information, public disclosure regarding the merger, taking reasonable
efforts to complete the merger, obtaining third party consents and other
agreements, will not prevent the completion of the merger unless the
nonperformance would have a material adverse effect on the ability or
likelihood of Excite@Home and iMALL to complete the merger.
- No material adverse effect with respect to iMALL shall have occurred
since July 12, 1999 and be continuing;
- iMALL must have obtained all consents, waivers and approvals required to
complete the merger and related transactions, except for those which if
not obtained, would not have a material adverse effect on iMALL;
- the employment agreements and noncompetition agreements between
Excite@Home and officers of iMALL must be in effect, and Richard
Rosenblatt and of at least two of Phillip Windley, Joseph Ruszkiewicz and
Stephen Fulling shall be employed by iMALL;
- each of the agreements with First Data shall be in effect; and
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- the amendment to iMALL's articles of incorporation shall have been
approved by iMALL's stockholders.
A material adverse effect is any change, event, violation, inaccuracy,
circumstance or effect that is or is reasonably likely to be materially adverse
to the business, assets (including intangible assets), capitalization, financial
condition or results of operations of an entity taken as a whole with its
subsidiaries, except to the extent that any such change, event, violation,
inaccuracy, circumstance or effect directly and primarily results from:
- changes in general economic conditions or changes affecting the industry
generally in which the entity operates, provided that the changes do not
affect the entity in a disproportionate manner;
- changes in trading prices for the entity's capital stock; and
- announcement or pendency of the merger.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to completion of
the merger, whether before or after approval of the merger agreement by iMALL's
stockholders:
- by mutual consent of Excite@Home and iMALL;
- by Excite@Home or iMALL, if the merger is not completed before March 1,
2000 except that the right to terminate the merger agreement is not
available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the merger to occur on
or before March 1, 2000 and such action or failure to act constitutes a
breach of the merger agreement;
- by Excite@Home or iMALL, if there is any order of a court or governmental
authority having jurisdiction over either of Excite@Home or iMALL
permanently enjoining, restraining or prohibiting the completion of the
merger which is final and nonappealable;
- by Excite@Home or iMALL, if the merger agreement fails to receive the
requisite vote for approval by the stockholders of iMALL at the meeting,
except that the right to terminate the merger agreement under this
provision by iMALL is not available to iMALL where the failure to obtain
stockholder approval was caused by (1) the action or failure to act by
iMALL and the action or failure to act constitutes a breach of the merger
agreement, or (2) a breach by any iMALL stockholder of its voting
agreement;
- by Excite@Home, at any time prior to the approval of the merger agreement
by the required vote of iMALL stockholders if any of the following events
occur:
- iMALL's board withdraws or amends or modifies in a manner adverse to
Excite@Home its unanimous recommendation in favor of the approval of
the merger agreement and the merger;
- iMALL fails to include in this prospectus/proxy statement the
unanimous recommendation of its board of directors in favor of the
approval of the merger agreement and the merger;
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- iMALL's board fails to reaffirm its unanimous recommendation in favor
of the approval of the merger agreement and the merger within 10
business days after Excite@Home requests in writing that the
recommendation be reaffirmed following the public announcement of an
Acquisition Proposal;
- iMALL's board approves or publicly recommends any Acquisition
Proposal;
- iMALL shall have entered into any agreement, contract, letter of
intent or similar document, accepting any Acquisition Proposal; or
- a tender or exchange offer relating to the securities of iMALL is
commenced by a person unaffiliated with Excite@Home, and iMALL does
not send to its stockholders within 10 business days after the tender
or exchange offer is first commenced a statement disclosing that iMALL
recommends rejection of the tender or exchange offer.
- by iMALL, upon a breach of any representation, warranty, covenant or
agreement on the part of Excite@Home in the merger agreement, or if any
of Excite@Home's representations or warranties are or become untrue so
that the corresponding condition to completion of the merger would not be
met. However, if the breach or inaccuracy is curable by Excite@Home
through the exercise of its commercially reasonable efforts, and
Excite@Home continues to exercise its commercially reasonable efforts to
cure the breach or inaccuracy, iMALL may not terminate the merger
agreement if the breach or inaccuracy is cured within 30 days of iMALL's
notifying Excite@Home of the breach or inaccuracy; or
- by Excite@Home, upon a breach of any representation, warranty, covenant
or agreement on the part of iMALL in the merger agreement, or if any of
iMALL's representations or warranties are or become untrue so that the
corresponding condition to completion of the merger would not be met.
However, if the breach or inaccuracy is curable by iMALL through the
exercise of its commercially reasonable efforts, and iMALL continues to
exercise its commercially reasonable efforts Excite@Home may not
terminate the merger agreement if the breach or inaccuracy is cured
within 30 days of Excite@Home's notifying iMALL of the breach or
inaccuracy.
PAYMENT OF TERMINATION FEE
iMALL has agreed to pay Excite@Home a termination fee of $2.5 million
promptly, but not later than two days after the merger agreement is terminated
by Excite@Home if:
- iMALL's board withdraws or amends or modifies in a manner adverse to
Excite@Home its unanimous recommendation in favor of the approval of the
merger agreement and the merger;
- iMALL fails to include in this prospectus/proxy statement the unanimous
recommendation of iMALL's board in favor of the approval of the merger
agreement and the merger;
- iMALL's board fails to reaffirm its unanimous recommendation in favor of
approval of the merger agreement and the merger within 10 business days
after Excite@Home requests in writing that the recommendation be
reaffirmed following the public announcement of an Acquisition Proposal;
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- iMALL's board approves or publicly recommends any Acquisition Proposal;
- iMALL shall have entered into any agreement, contract, letter of intent
or similar document accepting any Acquisition Proposal; or
- a tender or exchange offer relating to the securities of iMALL is
commenced by a person unaffiliated with Excite@Home and iMALL does not
send to its stockholders within 10 business days after the tender or
exchange offer is first published, sent or given, a statement disclosing
that iMALL recommends rejection of the tender or exchange offer.
In addition, if Excite@Home terminates the merger agreement under
circumstances which cause iMALL to pay the $2.5 million termination fee and
within 15 months following the termination of the merger agreement a Company
Acquisition is consummated or iMALL enters into an agreement with respect to a
Company Acquisition, then iMALL shall pay Excite@Home $19.6 million promptly,
but not later than two days, after the consummation of a Company Acquisition or
entry into an agreement by iMALL with respect to a Company Acquisition.
iMALL has agreed to pay to Excite@Home a termination fee of $22.1 million
promptly, but not later than two days after the consummation of a Company
Acquisition or the entry by iMALL into an agreement for a Company Acquisition in
the event that (1) the merger agreement is terminated by either Excite@Home or
iMALL because the required approval of iMALL stockholders has not been obtained,
(2) prior to that termination a third party has publicly announced an
Acquisition Proposal, and (3) within 15 months following that termination, iMALL
consummates a Company Acquisition, or enters into an agreement providing for a
Company Acquisition.
A Company Acquisition is any of the following:
- a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving iMALL under
which the stockholders of iMALL immediately preceding the transaction
hold less than 50% of the aggregate equity interests in the surviving or
resulting entity of the transaction;
- a sale or other disposition by iMALL of assets representing in excess of
50% of the aggregate fair market value of iMALL's business immediately
prior to the sale; or
- the acquisition by any person or group, including by way of a tender
offer or an exchange offer or issuance by iMALL, directly or indirectly,
of beneficial ownership or a right to acquire beneficial ownership of
shares representing in excess of 50% of the voting power of the then
outstanding shares of capital stock of iMALL.
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Excite@Home and iMALL may agree to amend the merger agreement at any time,
subject to applicable laws.
Either of Excite@Home or iMALL may extend the other's time for the
performance of any of the obligations or other acts under the merger agreement,
waive any inaccuracies in the other's representations and warranties and waive
compliance by the other with any of the agreements or conditions contained in
the merger agreement other than the condition to the completion of the merger
regarding the effectiveness of the agreements with First Data, which cannot be
waived without First Data's consent.
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RELATED AGREEMENTS
This section of the prospectus/proxy statement describes agreements related
to the merger agreement. While Excite@Home and iMALL believe that these
descriptions cover the material terms of these agreements, these summaries may
not contain all of the information that is important to you.
VOTING AGREEMENTS
Excite@Home required First Data, Mark Comer, Cramer Rosenthal McGlynn Inc.,
Cramer Rosenthal McGlynn LLC, Marshall Geller, Anthony Mazzarella, Craig
Pickering, Richard Rogel, Richard Rosenblatt and Phillip Windley to enter into
voting agreements. These voting agreements require these persons to vote all of
the shares of iMALL common stock beneficially owned by them in favor of the
merger agreement, the merger and the amendment to the articles of incorporation
and against any proposal in opposition to or competition with the merger. Each
of these stockholders other than First Data also granted Excite@Home an
irrevocable proxy to vote his shares of iMALL common stock at the special
meeting.
As of the record date, the iMALL stockholders who entered into voting
agreements collectively beneficially owned 8,231,934 shares of iMALL common
stock which represented approximately 41.9% of the outstanding iMALL common
stock.
Each iMALL stockholder who is a party to a voting agreement, other than the
Cramer Rosenthal McGlynn entities, agreed not to sell or transfer the iMALL
stock and options beneficially owned by that person until the termination of the
voting agreement. In addition, Richard Rosenblatt and Phillip Windley also
agreed not to transfer or pledge 50% of their shares for nine months after the
completion of the merger and Anthony Mazzarella agreed to the same restriction
for six months.
The voting agreements subject to the additional six and nine month transfer
restriction will terminate when the transfer restriction ends. All other voting
agreements will terminate upon the earlier of the termination of the merger
agreement or the completion of the merger.
AGREEMENTS RELATING TO THE FIRST DATA RELATIONSHIP
iMALL Development and Marketing Agreements
When the merger agreement was signed, iMALL and First Data signed the First
Amended and Restated Development and Marketing Agreement, which is referred to
as the First Agreement, and the Second Amended and Restated Development and
Marketing Agreement, which is referred to as the Second Agreement. The First
Agreement went into effect when it was signed and will continue for at least ten
years unless it is terminated or replaced by the Second Agreement.
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Under the First Agreement, iMALL granted to First Data and its affiliates
(1) a perpetual, exclusive license to use the "FDMS gateway" (as described in
the agreement), and (2) a non-exclusive license during the term of the agreement
to use iMALL's electronic commerce tools and to license and market those tools
to third parties. In addition, iMALL must:
- operate the FDMS gateway;
- perform certain development activities;
- operate and host applicable iMALL Internet sites;
- promote First Data and its affiliates as a preferred provider of their
respective services, and subject to existing contractual commitments, as
the exclusive provider of on-line Internet accessible applications for
such services;
- not promote, nor permit its affiliates to promote, the services of any
third party constituting a merchant acquiring business;
- provide advertising opportunities to First Data, including advertising
space and links on iMALL's web sites and the opportunity to solicit
iMALL's merchants;
- grant First Data the exclusive right to develop, broker and process
private label or co-branded site-related transaction cards and share
equally in the revenues from the development and brokerage of such cards;
- provide its services so that the technology used is considered leading
technology relative to other shopping portals and Internet mall hosting
providers; and
- deploy a redundant system within the time period specified in the
agreement.
Under the First Agreement, First Data will:
- market iMALL's electronic commerce tools and the iMALL site, including
promoting iMALL as a preferred e-commerce provider in these marketing
efforts; and
- allow iMALL to use the gateway for purposes of meeting its obligations
set forth in the agreement and for such other purposes as the parties may
agree.
First Data will pay to iMALL (1) a monthly fee for each merchant that uses
iMALL's electronic commerce tools and the FDMS gateway, (2) a one time fee for
the development of each merchant site, and (3) a monthly hosting fee for
maintaining each merchant site. First Data and iMALL shall share certain
advertising revenues after threshold revenue amounts are met. First Data is
entitled to a preferred pricing relationship under the agreement.
The Second Agreement will replace the First Agreement when the merger is
completed. It is similar to the First Agreement except that it takes into
account Excite@Home's ownership of iMALL. The Second Agreement permits the
rebranding of certain iMALL products for Excite@Home and provides for specified
joint advertising and promotional activities. The Second Agreement also:
- specifies that First Data's exclusive rights relating to transaction
cards are subject to existing obligations of iMALL and its affiliates as
of the effective date of the
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Second Agreement and specifies that such exclusivity will cease to the
extent that First Data fails or elects not to exercise its exclusive
rights;
- modifies iMALL's redundant system obligations by extending the date by
which such obligation must be met;
- provides that First Data will not license iMALL's electronic commerce
tools to any third party reseller that is in the business of cable
distribution, and iMALL will not sell or license its electronic commerce
tools to any third party reseller that is a financial institution; and
- provides for certain Year 2000-related representations and warranties by
First Data.
Excite@Home Marketing Agreement
Excite@Home signed a Marketing Agreement with First Data that will go into
effect when the merger is completed and continue for at least ten years unless
it is terminated. Under the Marketing Agreement, Excite@Home will:
- promote through preferred placement on its store-building pages and @Work
portal, www.work.com, First Data and its affiliates as a preferred
provider of payment solution processing on behalf of merchants;
- give preferred placement to the First Data merchant virtual application
linking image in its store building pages and @Work portal;
- use commercially reasonable efforts to promote iMALL.com until its
retirement in accordance with the Second Agreement, the successor to
iMALL.com and the Excite Shopping Service;
- cooperate with First Data to approach merchants to promote First Data's
services;
- to the extent that First Data develops, licenses or acquires wallet,
authentication or future technologies, Excite@Home will in good faith
consider the terms and conditions under which it would promote such
technologies as a preferred solution;
- provide First Data with most favored pricing for advertising;
- promote and maintain the Excite@Home successor to the iMALL sites and
other related Excite@Home sites and products;
- subject to existing contractual prohibitions, promote an online bill
payment product called Transpoint within nine months following the
effective date of the agreement through a linking image at such locations
as the parties may agree; and
- guarantee iMALL's performance with respect to its obligations set forth
in the Second Agreement.
Under the Marketing Agreement, First Data will:
- use commercially reasonable efforts to market iMALL's electronic commerce
tools;
- cooperate with Excite@Home to provide appropriate customer support for
the iMALL's electronic commerce tools; and
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- use commercially reasonable efforts to encourage affiliates of First Data
to promote the successor to iMALL.com and the Excite Shopping Service.
Capacity Reservation Agreement
Excite@Home also entered into a Capacity Reservation Agreement with First
Data. This agreement will go into effect when the merger is completed and
requires Excite@Home to reserve sufficient resources to build and host
e-commerce enabled web sites. In each of the first three months after the
merger, if Excite@Home reserves resources for 33,333 web sites, First Data must
pay Excite@Home $1 million per month. In each of the following six months, if
Excite@Home reserves resources for 25,000 web sites, First Data will pay
$750,000 per month. In each of the following three months, if Excite@Home
reserves resources for 16,667 web sites, First Data will pay $500,000 per month.
In each case, these dollar amounts will be reduced by amounts paid by First Data
to iMALL during the same periods.
First Data Warrant
When the merger is completed, Excite@Home will issue to First Data a
warrant to purchase 2,300,000 shares of Series A common stock for $36.96 per
share. The warrant will be exercisable when issued and will expire on October
30, 2003. When the merger agreement was signed, iMALL and First Data entered
into an amendment to the Investment Agreement, dated as of October 30, 1998,
between iMALL and First Data. The amendment provides that as long as the merger
agreement is in effect, iMALL will not issue to First Data the warrant to
purchase 5,000,000 shares of iMALL common stock issuable under the Investment
Agreement.
Registration Rights Agreement
When the merger is completed, Excite@Home will sign a registration rights
agreement with First Data. This agreement will require Excite@Home to use its
commercially reasonable efforts to have the Securities and Exchange Commission
declare effective a registration statement registering the shares issuable under
the First Data warrant. This agreement will also require Excite@Home to keep the
registration statement effective for one year after the completion of merger.
EMPLOYMENT AGREEMENTS
Some iMALL employees entered into amended and restated employment
agreements in connection with the merger. These agreements will go into effect
at the completion of the merger and are described below.
Richard Rosenblatt
Richard Rosenblatt, the Chief Executive Officer of iMALL, has entered into
an amended and restated employment agreement under which he will serve in an
executive position or in a position equivalent to a senior executive of iMALL
with Excite@Home to be determined.
Term. Mr. Rosenblatt's employment agreement will expire on February 2,
2003.
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Compensation. Mr. Rosenblatt will receive a base salary of $195,000 per
year and will be entitled to receive a target bonus of up to 20% of his annual
base salary to be determined at the sole discretion of Excite@Home. Mr.
Rosenblatt will also receive a one-time payment of $9,000 after the completion
of the merger. Richard Rosenblatt holds options to purchase an aggregate of
520,000 shares of iMALL common stock. These options will be assumed in the
merger and will represent options to purchase 239,200 shares of Excite@Home
Series A common stock.
Severance compensation. If Mr. Rosenblatt's employment is terminated by
Excite@Home after the merger for reasons other than his death or disability or
other than for "good cause," or if he resigns for "good reason," the unvested
portion of the assumed stock options will vest immediately. In addition, Mr.
Rosenblatt would be entitled to receive a severance payment equal to one year's
base salary if the termination occurred within one year after the completion of
the merger, or six month's base salary if his employment was terminated more
than one year after the completion of the merger but prior to the expiration of
the term of his employment agreement.
Restrictions on sale of Excite@Home stock. Mr. Rosenblatt has agreed not to
sell or dispose of 50% or more of the shares of Excite@Home stock he receives in
the merger during the nine-month period following the completion of the merger.
Noncompetition. Mr. Rosenblatt has agreed for a period of three years after
the completion of the merger or six months following the termination of his
employment, whichever is longer, not to compete with Excite@Home or solicit any
employees or customers or suppliers of Excite@Home.
Joseph Ruszkiewicz
Joseph Ruszkiewicz, the Executive Vice President and Chief Operating
Officer of iMALL, has entered into an amended and restated employment agreement
under which he will serve in an executive position or in a position equivalent
to a senior executive of iMALL with Excite@Home to be determined.
Term. Mr. Ruszkiewicz's employment agreement will expire on February 10,
2001.
Compensation. Mr. Ruszkiewicz will receive a base salary of $210,000 per
year. He will be entitled to receive a bonus of $40,000 for 1999 and will have a
target bonus of 20% of his base salary for 2000, with a guaranteed minimum bonus
equal to 10% of his base salary. Mr. Ruszkiewicz was also granted an option to
purchase 65,100 shares of iMALL common stock, which will represent options to
purchase 29,946 shares of Excite@Home Series A common stock. These options will
be exercisable over a four-year period with 25% of the shares subject to the
option becoming exercisable one year after the date of grant and the remainder
becoming exercisable ratably on a monthly basis over the next three years. Mr.
Ruszkiewicz also holds an option to purchase 500,000 shares of iMALL common
stock. These options will be assumed in the merger and will represent options to
purchase 230,000 shares of Excite@Home Series A common stock.
Severance compensation. If Mr. Ruszkiewicz's employment is terminated by
Excite@Home after the merger for reasons other than his death or disability or
other than for "good cause," or if he resigns for "good reason," the unvested
portion of the assumed stock options will vest immediately. In addition, Mr.
Ruszkiewicz would be entitled to receive a severance payment equal to one year's
base salary if the termination occurred within one year of the merger, or six
month's base salary if his employment was
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terminated more than one year after the merger but prior to the expiration of
the term of his employment agreement.
Restrictions on sale of Excite@Home stock. Mr. Ruszkiewicz has agreed not
to sell or dispose of 50% or more of the shares of Excite@Home stock he receives
in the merger during the nine month period following the completion of the
merger.
Noncompetition. Mr. Ruszkiewicz has agreed for a period of six months
following the termination of his employment not to compete with Excite@Home or
solicit any employees or customers or suppliers of Excite@Home.
Anthony Mazzarella
Anthony Mazzarella, the Executive Vice President, Chief Financial Officer,
Treasurer and Secretary of iMALL, has entered into an amended and restated
employment agreement under which he will serve in an executive position
reasonably commensurate with his skills, experience and abilities.
Term. Mr. Mazzarella's employment agreement will expire on October 1, 2000.
Compensation. Mr. Mazzarella will receive a base salary at a rate of
$208,800 per year through February 1, 2000, and after that time through August
1, 2000, $5,000 per month while he is providing services to Excite@Home on a
part-time basis. He will also receive a monthly cash payment of $750 through
February 1, 2000. Mr. Mazzarella will receive a guaranteed bonus of $41,760 for
calendar year 1999, but no bonus in calendar year 2000. Mr. Mazzarella held
options to purchase an aggregate of 385,000 shares of iMALL common stock. These
options will be assumed in the merger and will represent options to purchase
177,100 shares of Excite@Home Series A common stock.
Severance compensation. If Mr. Mazzarella's employment is terminated by
Excite@Home after the merger for reasons other than for "good cause," or if he
resigns for "good reason," the unvested portion of the assumed stock options
will accelerate and become immediately exercisable.
Restrictions on sale of Excite@Home stock. Mr. Mazzarella has agreed not to
sell or dispose of 50% or more of the shares of Excite@Home stock he receives in
the merger during the six month period following the completion of the merger.
Noncompetition. Mr. Mazzarella has agreed for a period of six months
following the termination of his employment not to compete with Excite@Home or
solicit any employees or customers or suppliers of Excite@Home.
Stephen Fulling
Stephen Fulling, the Vice President of Information-Technology Services of
iMALL, has entered into an amended and restated employment agreement under which
he will serve in an executive position or in a position equivalent to an
executive of iMALL with Excite@Home to be determined.
Term. Mr. Fulling's employment agreement will expire on January 1, 2001.
Compensation. Mr. Fulling will receive a base salary of $150,000 per year
and will be entitled to receive a bonus in an amount to be determined at the
sole discretion of Excite@Home. Mr. Fulling was also granted an option to
purchase 43,400 shares of
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iMALL common stock, which will represent options to purchase 19,964 shares of
Excite@Home Series A common stock. These options will be exercisable over a four
year period with 25% of the shares subject to the option becoming exercisable
one year after the date of grant and the remainder becoming exercisable ratably
on a monthly basis over the next three years. In addition, Mr. Fulling holds
options to purchase an aggregate of 106,338 shares of iMALL common stock. These
options will be assumed in the merger and will represent options to purchase
48,915 shares of Excite@Home Series A common stock.
Severance compensation. If Mr. Fulling's employment is terminated by
Excite@Home after the merger for reasons other than his death or disability or
other than for "good cause," or if he resigns for "good reason," the unvested
portion of the assumed stock options will vest immediately. In addition Mr.
Fulling would be entitled to receive a severance payment equal to one year's
base salary if the termination occurred within one year of the merger, or six
month's base salary if his employment was terminated more than one year after
the merger but prior to the expiration of the term of his employment agreement.
Restrictions on sale of Excite@Home stock. Mr. Fulling has agreed not to
sell or dispose of 50% or more of the shares of Excite@Home stock he receives in
the merger during the nine month period following the completion of the merger.
Noncompetition. Mr. Fulling has agreed for a period of six months following
the termination of his employment not to compete with Excite@Home or solicit any
employees or customers or suppliers of Excite@Home.
Daniel Odette
Daniel Odette, the Vice President of Marketing of iMALL, has entered into
an amended and restated employment agreement under which he will serve in an
executive position or in a position equivalent to an executive of iMALL with
Excite@Home to be determined.
Term. Mr. Odette's employment agreement will expire on March 22, 2001.
Compensation. Mr. Odette will receive a base salary of $140,000 per year
and will be entitled to receive a bonus in an amount to be determined at the
sole discretion of Excite@Home. Mr. Odette was also granted an option to
purchase 43,400 shares of iMALL common stock, which will represent options to
purchase 19,964 shares of Excite@Home Series A common stock. These options will
be exercisable over a four year period with 25% of the shares subject to the
option becoming exercisable one year after the date of grant and the remainder
becoming exercisable ratably on a monthly basis over the next three years. In
addition, Mr. Odette holds options to purchase an aggregate of 100,000 shares of
iMALL common stock. These options will be assumed in the merger and will
represent options to purchase 46,000 shares of Excite@Home Series A common
stock.
Severance compensation. If Mr. Odette's employment is terminated by
Excite@Home after the merger for reasons other than his death or disability or
other than for "good cause," or if he resigns for "good reason," the unvested
portion of the assumed stock options will vest immediately. In addition, Mr.
Odette would be entitled to receive a severance payment equal to one year's base
salary if the termination occurred within one year of the merger, or six month's
base salary if his employment was terminated more than
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one year after the merger but prior to the expiration of the term of his
employment agreement.
Restrictions on sale of Excite@Home stock. Mr. Odette has agreed not to
sell or dispose of 50% or more of the shares of Excite@Home stock he receives in
the merger during the nine month period following the completion of the merger.
Noncompetition. Mr. Odette has agreed for a period of six months following
the termination of his employment not to compete with Excite@Home or solicit any
employees or customers or suppliers of Excite@Home.
Phillip J. Windley
Phillip J. Windley, the Chief Technology Officer of iMALL, has entered into
an amended and restated employment agreement under which he will serve in an
executive position or in a position equivalent to an executive of iMALL with
Excite@Home to be determined.
Term. Mr. Windley's employment agreement will expire on January 1, 2000.
Compensation. Mr. Windley will receive a base salary of $175,000 per year
and will be entitled to receive a bonus in an amount to be determined at the
sole discretion of Excite@Home. Mr. Windley will also be granted an option to
purchase 65,100 shares of iMALL common stock, which will represent options to
purchase 29,946 shares of Excite@Home Series A common stock. These options will
be exercisable over a four year period with 25% of the shares subject to the
options becoming exercisable one year after the date of grant and the remainder
becoming exercisable ratably on a monthly basis over the next three years. In
addition, Mr. Windley holds options to purchase an aggregate of 187,500 shares
of iMALL common stock. These options will be assumed in the merger and will
represent options to purchase 86,250 shares of Excite@Home Series A common
stock.
Severance compensation. If Mr. Windley's employment is terminated by
Excite@Home after the merger for reasons other than his death or disability or
other than for "good cause," or if he resigns for "good reason," the unvested
portion of the assumed stock options will vest immediately. In addition, Mr.
Windley would be entitled to receive a severance payment equal to one year's
base salary if the termination occurred prior to the expiration of the term of
his employment agreement.
Restrictions on sale of Excite@Home stock. Mr. Windley has agreed not to
sell or dispose of 50% or more of the shares of Excite@Home stock he receives in
the merger during the nine month period following the completion of the merger.
Noncompetition. Mr. Windley has agreed for a period of six months following
the termination of his employment not to compete with Excite@Home or solicit any
employees or customers or suppliers of Excite@Home.
OPTION GRANTS
On July 11, 1999 iMALL granted options to purchase 564,600 shares of iMALL
common stock, which will represent options to purchase 259,716 shares of
Excite@Home Series A common stock, to its employees at an exercise price of
$20.00 per share. These options will be exercisable over a four year period with
25% of the shares subject to the
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options becoming exercisable one year after the date of grant and the remainder
becoming exercisable ratably on a monthly basis over the next three years.
REDEMPTION OF IMALL "SERIES A" WARRANTS
iMALL currently has outstanding a series of warrants to purchase shares of
iMALL common stock at an exercise price of $3.20 per common share. These "Series
A" warrants are redeemable by iMALL at a redemption price of $0.40 per warrant.
On August 18, 1999, iMALL sent to holders of these warrants a notice of
redemption, which will result in the redemption and termination of these
warrants 30 days following the date of such notice. As a result, it is expected
that most of these warrants will be exercised prior to their redemption.
AMENDMENT TO IMALL "SERIES B" WARRANTS
iMALL currently has outstanding warrants to purchase shares of iMALL common
stock at an exercise price of $3.20 per common share. These "Series B" warrants
contained extensive antidilution protection and registration rights provisions
for the holders. On July 12, 1999, holders of a majority of these warrants
agreed to amend their warrants to remove all registration rights provisions and
all antidilution protections except in the case of a stock split or stock
dividend or similar event. In return, Excite@Home agreed to file a registration
statement within 30 days of the completion of the merger to register the
Excite@Home Series A common stock issuable upon exercise of the warrants. iMALL
is seeking to have the remaining holders amend their "Series B" warrants before
completion of the merger and, as a result, it is expected that all or nearly all
of the "Series B" warrants will be amended prior to the completion of the
merger.
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COMPARATIVE PER SHARE MARKET PRICE DATA
Excite@Home Series A common stock has been traded on the Nasdaq National
Market under the symbol ATHM since July 11, 1997, the date of Excite@Home's
initial public offering. iMALL common stock was traded on the Nasdaq SmallCap
Market under the symbol "IMAL" from July 13, 1998 to May 19, 1999, and has been
traded on the Nasdaq National Market under the same symbol since May 20, 1999.
From July 16, 1996 to July 13, 1998, iMALL common stock traded on the OTC
Electronic Bulletin Board. Prior to trading on Nasdaq, the trading market was
limited and sporadic and did not constitute an "established trading market."
The following table sets forth, for the calendar quarters indicated, the
high and low sale prices per share of Excite@Home Series A common stock as
reported on the Nasdaq National Market and iMALL common stock as reported on the
OTC Bulletin Board and Nasdaq SmallCap Market prior to May 20, 1999 and on the
Nasdaq National Market from May 20, 1999. The prices in the table have been
adjusted to reflect Excite@Home's two-for-one stock split which was effected in
June 1999.
<TABLE>
<CAPTION>
EXCITE@HOME
SERIES A IMALL
COMMON STOCK COMMON STOCK
--------------- ---------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1997:
First Quarter.......................................... -- -- $36.00 $13.00
Second Quarter......................................... -- -- 24.00 8.50
Third Quarter (commencing July 11, 1997)............... $12.75 $ 8.31 12.50 4.00
Fourth Quarter......................................... 14.69 9.00 8.00 3.25
Fiscal Year Ended December 31, 1998:
First Quarter.......................................... 19.06 10.25 12.25 4.00
Second Quarter......................................... 28.63 14.88 10.13 7.69
Third Quarter.......................................... 27.38 11.75 15.56 5.50
Fourth Quarter......................................... 42.38 17.25 32.75 5.69
Fiscal Year Ending December 31, 1999:
First Quarter.......................................... 81.75 37.25 25.25 12.38
Second Quarter......................................... 99.00 39.00 24.00 13.50
Third Quarter (through September 27, 1999)............. 59.63 33.13 22.81 13.94
</TABLE>
Excite@Home and iMALL believe that iMALL common stock presently trades on
the basis of the value of the Excite@Home Series A common stock expected to be
issued in exchange for the iMALL common stock in the merger, discounted
primarily for the uncertainties associated with the merger. Apart from the
publicly disclosed information concerning Excite@Home which is included and
incorporated by reference in this prospectus/proxy statement, Excite@Home cannot
state with certainty what factors account for changes in the market price of the
Excite@Home Series A common stock.
iMALL stockholders are advised to obtain current market quotations for
Excite@Home Series A common stock and iMALL common stock. No assurance can be
given as to the market prices of Excite@Home Series A common stock or iMALL
common stock at any time before the completion of the merger or as to the market
price of Excite@Home Series A common stock at any time after the merger. Because
the exchange ratio is fixed, the exchange ratio will not be adjusted to
compensate iMALL stockholders for decreases in the market price of Excite@Home
Series A common stock which could occur before the merger is completed. In the
event the market price of Excite@Home Series A common stock decreases or
increases prior to the consummation of the merger, the value of the Excite@Home
Series A common stock to be received in the merger in exchange for iMALL common
stock would correspondingly decrease or increase.
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COMPARISON OF RIGHTS OF HOLDERS OF
IMALL COMMON STOCK AND
EXCITE@HOME COMMON STOCK
This section of the prospectus/proxy statement describes certain
differences between iMALL common stock and Excite@Home Series A common stock.
While Excite@Home believes that the description covers the material differences
between the two, this summary may not contain all of the information that is
important to you. You should carefully read this entire document and the other
documents Excite@Home and iMALL refer to, including the certificates or articles
of incorporation, as applicable, and bylaws of each company for a more complete
understanding of the differences between iMALL common stock and Excite@Home
Series A common stock. You may obtain the information incorporated by reference
into this prospectus/proxy statement without charge by following the
instructions in the section entitled "Where you can find more information" on
page 87.
After the merger, the former stockholders of iMALL, a Nevada corporation,
will become stockholders of Excite@Home, a Delaware corporation. The rights of
Excite@Home stockholders are governed by its certificate of incorporation, its
bylaws and the Delaware General Corporation Law, or the DGCL. The rights of
iMALL's stockholders are currently governed by its articles of incorporation,
its bylaws and the Nevada Revised Statutes, or the NRS. Upon completion of the
merger, the rights of iMALL stockholders who become Excite@Home stockholders
will be governed by the certificate of incorporation and bylaws of Excite@Home
and the DGCL. The following paragraphs summarize differences between the rights
of Excite@Home stockholders and iMALL stockholders under the certificate or
articles of incorporation and bylaws of Excite@Home and iMALL, as applicable, as
well as differences between the DGCL and the NRS.
CLASSIFICATION OF COMMON STOCK
The Excite@Home certificate of incorporation provides for three series of
common stock, the Series A common stock, the Series B common stock and the
Series K common stock.
The common stock of iMALL is not divided into separate classes or series.
VOTING
Holders of Excite@Home Series A common stock and Series K common stock have
the right to one vote for each share of Series A or Series K stock held, and
holders of Excite@Home Series B common stock have the right to 10 votes for each
share of Series B stock held, on all matters presented to the Excite@Home
stockholders.
Each iMALL stockholder has the right to one vote for each share of common
stock held by the stockholder.
SPECIAL MEETING OF STOCKHOLDERS
Under the DGCL, a special meeting of stockholders may be called by the
board of directors or by any other person authorized to do so in the certificate
of incorporation or the bylaws. The Excite@Home bylaws provide that special
meetings of the stockholders may be called by a majority of the members of the
board of directors or upon written
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request of the holders of not less than 10% of the total voting power of the
outstanding capital stock of Excite@Home entitled to vote at the meeting.
The NRS is silent as to who may call a special meeting of stockholders. The
iMALL bylaws provide that special meetings of the stockholders may be called by
the president or by the board of directors, and shall be called by the president
at the request of the holders of not less than one-fourth of all outstanding
votes of the corporation entitled to be cast on any issue at the meeting.
RECORD DATE FOR DETERMINING STOCKHOLDERS
The Excite@Home bylaws provide that the board of directors may fix a record
date which:
- in the case of determination of stockholders entitled to vote at any
meeting of stockholders or adjournment of any meeting, shall not be more
than 60 nor less than 10 days before the date of the meeting;
- in the case of determination of stockholders entitled to express consent
to corporate action in writing without a meeting, shall not be more than
10 days from the date upon which the resolution fixing the record date is
adopted by the board of directors; and
- in the case of any other action, shall not be more than 60 days prior to
the action.
The NRS provides that the board of directors may prescribe a period not
exceeding 60 days or fix a record date which shall not be more than 60 or less
than 10 days prior to the date of any meeting of the stockholders, during which
period no transfer of stocks on the books of the corporation may be made as the
date as of which stockholders entitled to notice of and to vote at that meeting
must be determined.
The Excite@Home bylaws provide that if the board of directors do not fix a
record date in the manner described above, then:
- the record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on
which the meeting is held;
- the record date for determining stockholders entitled to express consent
to corporate action in writing and without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which
the first written consent is made; and
- the record date for determining stockholders for any other purpose shall
be at the close of business on the same day on which the board of
directors adopts the related resolution.
The NRS provides that if the board of directors does not fix a record date
in the manner described above, then the record date for determining stockholders
entitled to notice of and to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given to the
stockholders.
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ELECTION OF DIRECTORS
The Excite@Home certificate of incorporation provides that:
(1) so long as there are at least 10,000,000 shares of Series B common
stock outstanding, the holders of Series B common stock, voting
separately as a single series, shall be entitled to elect five
directors to the board of directors; and
(2) in the event that holders of Series B common stock are entitled to
elect any directors, then so long as there are any shares of Series A
common stock outstanding, the holders of Series A common stock, voting
separately as a single series, shall be entitled to elect two directors
to the board of directors. The directors elected by the holders of
Series A common stock must not be (1) an officer, other than a Vice
Chairman, of, or employed by, Excite@Home or its subsidiaries or (2) an
affiliate or associate of Cox Enterprises, Inc., Comcast Corporation or
TCI Internet Holdings, or any of their affiliates, other than
Excite@Home and its subsidiaries. If the total number of directors
constituting the board of directors exceeds the number of directors
that the Series A common stock and Series B common stock are entitled
to elect, then any additional directors shall be elected by the holders
of all series of common stock, and any preferred stock entitled to
vote, voting together as a single class.
The holders of iMALL common stock elect all members of iMALL's board of
directors; there is no series vote.
NUMBER OF DIRECTORS
Both the DGCL and the NRS provide that the board of directors must consist
of at least 1 director, with the corporation having the option of specifying a
fixed or a variable number of directors within a fixed range. The Excite@Home
certificate of incorporation provides that the board of directors shall consist
of not fewer than three and not more than seventeen directors, with the exact
number to be specified by the board of directors. The total number of directors
may not be less than (1) the total number of directors that the holders of
Series A and Series B common stock are entitled to elect and (2) any directors
that the holders of any series of preferred stock, voting as a separate series
and not with the common stock, are entitled to elect.
The iMALL bylaws provide that the board of directors shall consist of
between one and ten directors; provided, however, that if iMALL has less than
seven stockholders entitled to vote for the election of directors, the board of
directors may consist of a number of individuals equal to or greater than the
number of those stockholders. The bylaws further provide that until First Data
no longer has the right to designate members of iMALL's board of directors under
the terms of the Stockholders Agreement among iMALL, First Data and certain
stockholders of iMALL, the total number of authorized directors will not be less
than seven nor more than ten. The number of directors within these limits will
be determined by the board of directors without the participation of the
directors appointed to the board by First Data. However, the board of directors
may not authorize or approve any recommendation to the stockholders to change
the number of directors constituting the entire board without the approval of a
majority of the FDMS Committee, which is comprised exclusively of each of the
directors appointed by First Data.
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REMOVAL OF DIRECTORS
The DGCL provides that for corporations such as Excite@Home which neither
have cumulative voting nor a classified board of directors, any director or the
entire board may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors. The Excite@Home
certificate of incorporation, however, provides that any director elected by the
holders of Series A common stock or Series B common stock may be removed from
office without cause solely by the vote of the holders of a majority of the
outstanding shares of the applicable series of common stock that elected the
director.
The NRS provides that any director or one or more of the incumbent
directors may be removed from office by the vote of stockholders representing
not less than two-thirds of the voting power of the issued and outstanding stock
entitled to vote. The iMALL bylaws further provide that the stockholders may
remove one or more directors, with or without cause, at a meeting called for
that purpose if notice has been given that a purpose of the meeting is the
removal of the director(s). If the director is elected by a voting group of
stockholders, only the stockholders of that voting group may participate in the
vote to remove the director(s). Furthermore, the board of directors may not call
a special meeting to vote on the removal of a director appointed by First Data
unless the board of directors has first determined, by the affirmative vote of
at least a majority of the members of the entire board of directors and with the
concurrence of the FDMS Committee that there exists cause to remove the First
Data director from the board.
BOARD OF DIRECTORS VACANCIES
Under the DGCL, vacancies and newly created directorships may be filled by
a majority of the directors then in office, even though less than a quorum,
unless (1) otherwise provided in the certificate of incorporation or bylaws of
the corporation or (2) the certificate of incorporation directs that a
particular class is to elect the director, in which case any other directors
elected by the class, or a sole remaining director, may fill the vacancy. The
Excite@Home certificate of incorporation further that any vacancy in the office
of a director elected by the holders of Series A common stock or Series B common
stock common stock shall be filled by the vote of the holders of a majority of
the shares of the applicable series of common stock that originally elected the
director; provided, however, that if there is a vacancy in the office of one of
the two directors elected by the holders of Series A common stock, the remaining
director elected by the holders of Series A common stock shall have the power to
fill the vacancy.
The NRS provides that all vacancies, including those caused by an increase
in the number of directors, may be filled by a majority of the remaining
directors, though less than a quorum, unless it is otherwise provided in the
articles of incorporation. The iMALL bylaws further provide that vacancies on
the board of directors may be filled by the stockholders. During any time that
the stockholders fail or are unable to fill a vacancy, then and until the
stockholders act, the board of directors may fill the vacancy. In the event of
any vacancy in a directorship originally appointed by First Data, the FDMS
Committee shall have the exclusive authority to fill that vacancy.
SPECIAL MEETINGS OF THE BOARD OF DIRECTORS
The Excite@Home bylaws provide that the chairman of the board or a majority
of the members of the board of Excite@Home may call a special meeting of the
board of
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directors. The bylaws require that written notice of the time and place of the
meeting be given at least ten days before the meeting if the notice is mailed,
or at least three days before the meeting if notice is given by facsimile,
telegram, cable or personal service, unless the notice requirement is waived in
writing by each member of the board of directors. Any and all business may be
transacted at a special meeting of the board of directors without specification
of the business in the notice. However, notice of a special meeting to discuss
(1) certain actions requiring a supermajority or unanimous vote of the directors
elected by the holders of the Series B common stock or (2) transactions between
Excite@Home and any holder of more than 5% of the voting power of Excite@Home,
or any affiliate of the 5% holder, shall include a reasonably detailed
description of the matter(s).
The iMALL bylaws provide that the president or any director may call a
special meeting of the board of directors.
BOARD ACTION -- GENERALLY
The Excite@Home certificate of incorporation provides that except for
certain actions involving related parties or actions that have supermajority or
unanimous voting requirements, as explained below, board action requires the
vote of (1) a majority of the directors present at a meeting at which a quorum
is present or a written consent to the action executed by all members of the
board of directors and (2) so long as TCI beneficially owns at least 15,400,000
shares of Series B common stock and securities representing a majority of the
voting power of Excite@Home, 75% of the directors elected by the holders of
Series B common stock (66 2/3% if there are only three Series B directors and
100% if there are only two).
The NRS provides that the act of directors holding a majority of the voting
power of the directors, present at a meeting at which a quorum is present, is
the act of the board of directors. Any action required or permitted to be taken
at a meeting of the board of directors may be taken without a meeting if, before
or after the action, a written consent to that action is signed by all the
members of the board.
BOARD ACTION -- TRANSACTIONS WITH RELATED PARTIES
The Excite@Home certificate of incorporation provides that, with respect to
certain transactions between Excite@Home and any holder of more than 5% of the
voting power of Excite@Home, or any affiliate of the 5% holder, board approval
requires the vote of each of the following:
- a majority of the directors present at a meeting at which a quorum is
present or a written consent to the action executed by all members of the
board of directors; and
- so long as the holders of Series B common stock are entitled to elect at
least one Series B director, the vote of either:
- 75% of the total number of number of directors who were elected by the
holders of Series B common stock, regardless of whether the directors
are disinterested in the transaction, and a majority of all directors
elected by the holders of the Series B common stock who are
disinterested in the transaction unless the transaction is of a type
that requires a supermajority or unanimous vote of the Series B
directors; or
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- all of the directors who were elected by the holders of Series B common
stock, regardless of whether the directors are disinterested in the
transaction.
The iMALL articles of incorporation and bylaws do not contain any similar
provisions regarding transactions with related parties.
BOARD ACTION -- SUPERMAJORITY REQUIREMENT
So long as the holders of Series B common stock are entitled to elect at
least one Series B director, the vote or written consent of a supermajority of
75%, rounded up to the nearest whole number of directors of the total number of
the directors elected by the holders of Series B common stock, voting separately
from the other directors of Excite@Home, are required to approve certain
actions, including the following:
- mergers of Excite@Home or a controlled affiliate of Excite@Home;
- acquisitions of stock or assets for a price in excess of 20% of the fair
market value of Excite@Home's assets;
- dispositions of Excite@Home's assets having an aggregate value in excess
of 50% of the fair market value of Excite@Home's assets;
- acquisitions of stock or assets in exchange for more than 16 2/3% of
Excite@Home's capital stock;
- the approval or removal of the Chief Executive Officer of Excite@Home;
- the voluntary dissolution or liquidation of Excite@Home or the initiation
of voluntary bankruptcy proceedings;
- certain amendments to the bylaws or certificate of incorporation of
Excite@Home;
- the creation of classes of stock of Excite@Home entitled to special
voting rights;
- an increase in the shares of Series A common stock issued or reserved for
issuance to management in excess of a specified amount; and
- the declaration or payment of certain dividends or distributions to
controlled affiliates of Excite@Home.
If the action requiring supermajority approval is a transaction with a
related party, the transaction must be approved by either 75%, rounded up to the
nearest whole number of directors, of the Series B directors who are
disinterested in the transaction, or a majority of the entire board of directors
and all Series B directors regardless of whether they are disinterested
directors.
The iMALL articles of incorporation and bylaws do not contain any similar
provisions regarding transactions requiring the approval of a supermajority of
the board of directors.
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BOARD ACTION -- UNANIMITY REQUIREMENT
The vote or written consent of 100% of the total number of Excite@Home
directors elected by the holders of Series B common stock, regardless of whether
the directors are disinterested directors, voting separately from the other
directors of Excite@Home are required to approve certain actions, including the
following:
- any amendments to the Excite@Home certificate of incorporation regarding
the items which require supermajority or unanimous approval;
- any increase in the number of directors to be elected by the holders of
Series B common stock common stock;
- any modification of the rights of the holders of Series B common stock or
Series K common stock to designate and elect directors; and
- the appointment of any directors to the .Com committee, whose function is
explained in the following subheading.
The iMALL articles of incorporation and bylaws do not contain any similar
provisions regarding transactions requiring the approval of the entire board of
directors.
ACTION BY COMMITTEES
Both the Excite@Home bylaws and the iMALL bylaws authorize their respective
board of directors to establish committees by resolution setting forth the
powers and duties of these committees. The DGCL and NRS both state that these
committees have and may exercise the power of the board of directors in the
management of the business and affairs of the corporation. The DGCL states,
however, that no committee may (1) approve, adopt or recommend to the
stockholders any action or matter that is expressly required by the DGCL to be
submitted to the stockholders for approval or (2) adopt, amend or repeal any
bylaw of the corporation. The iMALL bylaws provide that, in addition to the two
items prohibited by the DGCL, committees may not:
- authorize distributions;
- fill vacancies on the board of directors or on any committee;
- amend the articles of incorporation;
- approve a plan of merger not requiring stockholder approval;
- authorize or approve reacquisition of shares, except according to a
formula or method prescribed by the board; or
- authorize or approve the issuance or sale of shares or determine the
designation and relative rights, preferences and limitations of a class
or series of shares, unless the board has authorized the committee to do
so within certain prescribed limits.
The Excite@Home certificate of incorporation establishes a special
committee: the .Com committee. The .Com committee has the power to approve the
execution, delivery and performance of certain agreements between Excite@Home
and third parties which provide or promote content for Excite@Home's network
where these third parties are holders of more than 5% of the voting power of
Excite@Home, or are an affiliate of a 5%
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or greater stockholder. Except by vote of a majority of the board of directors,
including all of the Series B directors, the board of directors may not:
- rescind or modify any action or determination made by the .Com committee
- remove any member of the .Com committee;
- amend any provisions of Excite@Home's bylaws or certificate of
incorporation regarding the .Com committee; or
- dissolve or terminate the .Com committee.
Any action taken by the .Com committee must be approved by either a
majority of the members of the committee or a written consent to the action
executed by all members of the committee.
In the case of action by any committee of the Excite@Home board of
directors other than the .Com committee, the approval of that action must be by
both of the following:
- either a majority of the members of the committee present at a meeting at
which a quorum is present or a written consent to that action executed by
all members of the committee; and
- so long as the holders of Series B common stock are entitled to elect at
least one director and TCI Internet Holdings, Inc. holds at least
15,400,000 shares of Series B common stock and securities representing a
majority of the outstanding voting power of Excite@Home, 75% of the total
number of directors elected by the holders of Series B common stock.
The iMALL bylaws currently provide for two special committees, the FDMS
Committee and the Company Committee. The FDMS Committee is comprised exclusively
of each of the directors that are appointed to iMALL's board of directors by
FDMS. The Company Committee is comprised of directors named by a majority vote
of the board of directors, excluding the FDMS appointed directors and any other
members of the board of directors who are affiliates of FDMS. Prior to each
meeting of the stockholders at which directors are to be elected, the FDMS
Committee and the Company Committee each designate persons as nominees for
election as directors to iMALL's board.
APPROVAL OF THIRD-PARTY CONTENT TRANSACTIONS
The Excite@Home certificate of incorporation provides that with respect to
the execution, delivery and performance of certain agreements between
Excite@Home and third parties which provide or promote content for Excite@Home's
network, these agreements may be approved by Excite@Home by any one of the
following methods:
- approval by the authorized officers of Excite@Home, without the approval
of the board of directors, if the agreements contain Excite@Home's
standard terms and conditions for agreements of that type;
- approval of a majority of the .Com committee; or
- approval of a majority of the board of directors, including all directors
elected by the holders of Series B common stock.
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The iMALL articles of incorporation and bylaws do not contain a similar
provision regarding the approval of specific agreements.
PREFERRED STOCK
The Excite@Home certificate of incorporation authorizes the board of
directors to issue up to 9,650,000 shares of preferred stock in one or more
series and to fix the designations, preferences, powers and rights of the shares
to be included in each series. The iMALL articles of incorporation authorizes
the board of directors to issue up to 10,000,000 shares of preferred stock in
one or more series and to fix the designations, preferences, powers and rights
of the shares to be included in each series.
The Excite@Home certificate of incorporation provides that, except to the
extent otherwise provided in the resolution(s) providing for the issuance of any
series of preferred stock, the holders of shares of the series shall have no
voting rights except as provided by the DGCL. Further, unless otherwise
expressly provided in the certificate of designations for a series of preferred
stock, no consent or vote of the holders of shares of preferred stock shall be
required to amend the Excite@Home certificate of incorporation to increase or
decrease the number of authorized shares of preferred stock or any series of
preferred stock.
CONVERSION RIGHTS
The Excite@Home certificate of incorporation provides that each share of
Series B common stock and Series K common stock is convertible, at the option of
the holder, into one share of Series A common stock. Shares of Series A common
stock are not convertible into shares of Series B or Series K common stock.
The iMALL articles of incorporation and bylaws do not contain a comparable
provision regarding conversion rights.
SHARE DIVIDENDS
The Excite@Home certificate of incorporation provides that if a
distribution in the form of securities of Excite@Home is paid to the holders of
Series A common stock, Series B common stock or Series K common stock, the
distribution must be made only by one of the following methods:
- Excite@Home may distribute shares of Series A common stock to holders of
Series A common stock, Series B common stock and Series K common stock on
an equal per share basis;
- Excite@Home may distribute shares of Series A common stock to holders of
Series A common stock, shares of Series B common stock to holders of
Series B common stock and shares of Series K common stock to holders of
Series K common stock, with these distributions to be made on an equal
per share basis; and
- Excite@Home may distribute any other class or series of securities of
Excite@Home, on an equal per share basis. to holders of Series A common
stock, Series B common stock and Series K common stock, with certain
restrictions.
The iMALL articles of incorporation and bylaws do not contain a comparable
provision regarding share dividends.
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INDEMNIFICATION
The Excite@Home certificate of incorporation provides that its directors
and officers shall be indemnified to the fullest extent authorized by Delaware
law against all expenses, liabilities and losses reasonably incurred by that
person in connection with any action, proceeding or suit brought against that
person by reason of the fact that he or she is or was a director or officer of
Excite@Home or is or was serving at the request of Excite@Home as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or similar entity.
The iMALL articles of incorporation and bylaws provide that its directors
and officers shall be indemnified to the fullest extent authorized by Nevada law
against all expenses, liability and losses reasonably incurred by that person in
connection with any threatened, pending or completed action or suit, including
the amount of judgments, amounts paid in compromise settlements and amounts paid
for services of counsel and other related expenses, by reason of the fact that
he or she was a director or officer of iMALL or is or was serving at the request
of iMALL as a director, officer, employee, agent, partner or fiduciary of, or in
any other capacity for, another corporation, partnership, joint venture, trust
or similar entity.
Neither Excite@Home nor iMALL is permitted to indemnify its officers or
directors if the expenses, liability and losses incurred are the result of the
individual's negligence or misconduct; the person must have acted in good faith
and in a manner the person believed to be not opposed to the best interest of
the corporation. The iMALL bylaws further provide that iMALL may, by action of
its board of directors, indemnify employees and other persons to the same extent
as directors and officers.
Both the DGCL and NRS provide that a corporation shall indemnify the
expenses incurred by any director, officer, employee or agent that has been
successful on the merits or otherwise in defense of any action, suit or
proceeding. The DGCL and NRS further provide that indemnification may be made by
a corporation upon a determination that indemnification of a former or present
director, officer, employee or agent is proper because that person acted in good
faith and in a manner the person believed to be in or not opposed to the best
interest of the corporation. Under the DCGL, this determination must be made by
(1) a majority vote of disinterested directors, even if less than a quorum, (2)
a committee of disinterested directors designated by a majority vote of the
disinterested directors, even if less than a quorum, (3) independent legal
counsel in a legal opinion if there are no disinterested directors or (4) the
stockholders. Under the NRS, this determination must be made by (1) the
stockholders, (2) the board of directors by a majority vote of a quorum
consisting of directors who were not parties to the action, suit or proceeding,
(3) by independent legal counsel in a written opinion of a majority vote if a
quorum consisting of directors who were not parties to the action, suit or
proceeding so orders or (4) by independent legal counsel in a written opinion if
a quorum consisting of directors who were not parties to the action, suit or
proceeding cannot be obtained.
LIMITATION ON LIABILITY
The DGCL permits corporations to adopt a provision in their certificate of
incorporation eliminating the liability of a director to the corporation or its
stockholders for monetary damages for breach of the director's fiduciary duty of
care. With certain exceptions, the NRS permits corporations to adopt similar
provisions in their articles of incorporation eliminating the liability of a
director to the corporation or its stockholders for
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monetary damages for breach of the director's fiduciary duty. The Excite@Home
certificate of incorporation provides that, to the fullest extent permitted by
Delaware law, a director of Excite@Home shall not be liable to Excite@Home or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director.
The iMALL articles of incorporation contain a similar provision limiting
the prospective liability of directors.
DIVIDENDS/DISTRIBUTIONS
Subject to any restrictions contained in a corporation's certificate of
incorporation, the DGCL generally provides that a corporation may declare and
pay dividends out of surplus, defined as net assets minus stated capital, or,
when no surplus exists, out of net profits for the fiscal year in which the
dividend is declared or for the preceding fiscal year. Dividends may not be paid
out of net profits if the capital of the corporation is less than the amount of
capital represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. The Excite@Home certificate of
incorporation contains no restrictions on the declaration or payment of
dividends. The Excite@Home certificate of incorporation provides that whenever a
dividend is paid to the holders of one series of common stock, the other series
of common stock are to receive a dividend per share equal to the dividend per
share paid to the first series of common stock.
The NRS provides that no distribution to stockholders may be made if the
corporation would not be able to pay its debts as they become due in the usual
course of business or the corporation's total assets would be less than the sum
of its total liabilities plus the amount that would be needed, if the
corporation were to be dissolved at the time of distribution, to satisfy the
preferential rights upon dissolution of stockholders whose preferential rights
are superior to those receiving the distribution. A distribution to stockholders
under the NRS may be in the form of a declaration or payment of a dividend, a
purchase, redemption or other acquisition of shares, a distribution of
indebtedness or otherwise. The NRS provides that in declaring and paying
distributions, a director is fully protected in relying in good faith upon the
books of account of the corporation or statements prepared by any of its
officials as to the value and amount of the assets, liabilities or net profits
of the corporation, or any other facts pertinent to the existence and amount of
money from which distributions may properly be declared.
Neither the iMALL articles of incorporation nor its bylaws contain any
provisions with regard to distributions.
LIQUIDATION
Under the DGCL, a dissolution must be consented to in writing by
stockholders holding 100% of the total voting power or the dissolution must be
initiated by the board of directors and approved by the holders of a majority of
the outstanding voting shares of the corporation. Under the NRS, unless
otherwise provided in the corporation's articles of incorporation, stockholders
holding a majority of the total voting power may authorize a corporation's
dissolution.
The Excite@Home certificate of incorporation provides that in the event of
a liquidation, dissolution or winding up of Excite@Home, whether voluntary or
involuntary, after payment of any amounts owed to creditors subject to
preferences of any outstanding preferred stock, and any preferential amounts, if
any, owed to any series of preferred stock,
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the holders of Series A common stock, Series B common stock and Series K common
stock and the holders of any class or series of preferred stock then outstanding
shall share equally, on a share for share basis on an as converted to common
stock basis, in the assets of Excite@Home remaining for distribution to its
stockholders.
In the event of a liquidation, dissolution or winding up of iMALL, after
payment of or adequately provide for any amounts owed to creditors, the
remaining assets of iMALL will be divided equally, on a share for share basis,
to the holders of the common stock of iMALL.
AMENDMENT OF CERTIFICATE OR ARTICLES OF INCORPORATION
Under both the DGCL and the NRS, unless the certificate or articles of
incorporation or bylaws provide otherwise, amendments of the certificate or
articles of incorporation generally require the approval of the holders of a
majority of the outstanding shares entitled to vote. The DGCL provides that if
any amendment would increase or decrease the number of authorized shares of any
class or series or the par value of such shares or would adversely affect the
shares of such class or series, a majority of the outstanding shares of that
class or series would have to approve the amendment. The NRS provides that if
any proposed amendment, including a proposed increase or decrease in the number
of authorized shares, would alter or change any preference or any relative or
other right given to any class or series of outstanding shares, then a majority
of the outstanding shares of the affected class or series would have to approve
the amendment.
AMENDMENT OF BYLAWS
The DGCL provides that the stockholders entitled to vote shall have the
power to adopt, amend or repeal the bylaws of a corporation. The Excite@Home
bylaws provide that the board of directors or stockholders holding not less than
66 2/3% of the total voting power of the then outstanding capital stock of
Excite@Home entitled to vote thereon may adopt, amend or repeal the bylaws.
The iMALL articles of incorporation provides that the board of directors
has the power to make and alter, or amend the bylaws. The iMALL bylaws provide
that the board of directors may amend or repeal the bylaws at any time unless
(1) the articles of incorporation or the NRS reserve the power exclusively to
the stockholders in whole or part, (2) the stockholders in approving, amending
or repealing a particular bylaw provide expressly that the board of directors
may not amend or repeal that bylaw or (3) the bylaw either establishes, amends
or deletes a greater stockholder quorum or voting requirements. An amendment
which changes the voting or quorum requirement for the board must meet the same
quorum requirement and be adopted by the same vote and voting groups required to
take action under the quorum voting requirement then in effect or proposed to be
adopted, whichever is greater.
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STOCKHOLDER VOTING WITH RESPECT TO MERGERS
Both the NRS and the DGCL generally require that a majority of the
stockholders of the merging corporations approve statutory mergers. The DGCL
does not require a stockholder vote of the surviving corporation in a merger,
unless the corporation provides otherwise in its certificate of incorporation,
if:
- the merger agreement does not amend the existing certificate of
incorporation;
- each share of the corporation outstanding before the merger is an
identical outstanding or treasury share of the surviving corporation
after the merger; and
- the number of shares to be issued by the surviving corporation in the
merger does not exceed 20% of the shares of the corporation outstanding
immediately prior to the merger.
The NRS provides that the vote of the stockholders of a surviving
corporation on a plan of merger is not required if:
- the articles of incorporation of the surviving corporation will not
differ from the articles before the merger;
- each stockholder of the surviving corporation whose shares were
outstanding immediately before the effective date of the merger will hold
the same number of shares, with identical designations, preferences,
limitations and relative rights immediately after the merger;
- the number of voting shares outstanding immediately after the merger,
plus the number of voting shares issued as a result of the merger, either
by the conversion of securities issued as a result of the merger or then
exercise of rights and warrants issued as a result of the merger, will
not exceed by more than 20% the total number of voting shares of the
surviving corporation outstanding immediately prior to the merger; and
- the number of participating shares outstanding immediately after the
merger, plus the number of participating shares issuable as a result of
the merger, either by the conversion of securities issued as a result of
the merger or the exercise of rights and warrants issued as a result of
the merger, will not exceed by more than 20% the total number of
participating shares outstanding immediately prior to the merger.
The DGCL generally does not require class voting, except in certain
transactions involving an amendment to the certificate of incorporation which
adversely affects a specific class of shares. The NRS provides that separate
voting by class is required (1) on a plan of merger if the plan contains a
provision that, if contained in the proposed amendment to the articles of
incorporation, would entitle particular stockholders to vote as a class on the
proposed amendment or (2) on a plan of exchange by each class or series of
shares included in the exchange, with each class or series constituting a
separate voting class.
APPRAISAL AND DISSENTERS' RIGHTS
Under both the NRS and the DGCL, a stockholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal or dissenters' rights under which such
stockholder may receive cash in the
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amount of the fair market value of his or her shares in lieu of the
consideration he or she would otherwise receive in the transaction.
Under the DGCL, appraisal rights are not available
- with respect to the sale, lease or exchange of all or substantially all
of the assets of a corporation;
- with respect to a merger or consolidation by a corporation the shares of
which are either listed on a national securities exchange or are held of
record by more than 2,000 holders if the stockholders receive only shares
of the surviving corporation or shares of any other corporation which are
either listed on a national securities exchange or held of record by more
than 2,000 holders, plus cash in lieu of fractional shares; or
- to stockholders of a corporation surviving a merger if no vote of the
stockholders of the surviving corporation is required to approve the
merger.
The NRS provides that dissenters' rights are not available with respect to
a merger or exchange by a corporation the shares of which are listed on a
national securities exchange, included in the national market system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 holders unless the articles of incorporation of the corporation issuing
the shares provides otherwise or the holders of the class or series are required
under the plan of merger or exchange or to accept for the shares anything other
than cash or owner's interests of the surviving entity or any other entity which
was either listed on a national securities exchange, included in the national
market system by the National Association of Securities Dealers or held of
record by more than 2,000 holders.
STOCKHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS
Sections 78.411 to 78.444 of the NRS prohibit a Nevada corporation from
engaging in certain "combinations" with an "interested stockholders." With
certain exceptions, an interested stockholder is a person or group who or which
owns 10% or more of the corporation's outstanding voting stock, including any
rights to acquire stock under an option, warrant, agreement, arrangement or
understanding, or upon the exercise of conversion or exchange rights, and stock
with respect to which the person has voting rights only, or is an affiliate or
associate of the corporation and was the owner of 10% or more of the
corporation's voting stock at any time within the previous three years. For
purposes of Sections 78.411 to 78.444, the term "combination" is defined broadly
to include:
- mergers or consolidations with the interested stockholder or any other
corporation which is, or after the merger or consolidation would be, an
affiliate or associate of the interested stockholder;
- sales or other dispositions to the interested stockholder, or any
affiliate or associate of the interested stockholder, of assets of the
corporation or a subsidiary equal to (i) 5% or more of the aggregate
market value of the corporation's consolidated assets or its outstanding
stock or (2) 10% or more of the corporation's consolidated earning power
or net income;
- the issuance or transfer by the corporation or a subsidiary of stock of
the corporation or the subsidiary having an aggregate market value equal
to 5% or more of the aggregate outstanding stock of the corporation to
the interested stockholder,
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except for the exercise of warrants or rights to purchase shares offered,
or a dividend or distribution paid or made, pro rata to all stockholders
of the corporation;
- the adoption of any plan of proposal for the liquidation or dissolution
of the corporation proposed by, or under agreement with, the interested
stockholder or any affiliate or associate of the interested stockholder;
- a reclassification, recapitalization, merger, consolidation or other
similar transaction, whether or not with, proposed by or under agreement
with the interested stockholder, which has the effect of increasing the
proportionate share of the outstanding shares of any class or series of
the corporation's outstanding stock owned by the interested stockholder
or any affiliate or associate of the interested stockholder, except for
immaterial changes because of adjustments of fractional shares; or
- receipt by the interested stockholder, except proportionately as a
stockholder, directly or indirectly, of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the
corporation or a subsidiary.
Sections 78.411 to 78.444 prohibit combinations with an interested
stockholder for three years from the date of the interested stockholder's
acquisition of the shares of the corporation unless prior to the date on which
the person becomes an interested stockholder, the board of directors approves
the combination or the transaction which resulted in the person becoming an
interested stockholder.
Furthermore, sections 78.411 to 78.444 prohibit combinations with an
interested stockholder after the expiration of the three-year moratorium unless:
- the holders of stock representing a majority of the outstanding voting
power of the corporation not beneficially owned by the interested
stockholder proposing the combination, or any affiliate or associate of
the interested stockholder, approves the combination at a meeting called
for that purpose no earlier than three years after the interested
stockholder's date of acquiring the shares; or
- the aggregate amount of cash and the market value, as of the date of the
consummation of the combination, of the consideration other than cash to
be received per share by all of the holders of common stock not
beneficially owned by the interested stockholder is at least equal to
the higher of (A) the highest price per share paid by the interested
stockholder, at a time when he was the beneficial owner of 5% or more of
the outstanding voting stock of the corporation, for any common shares
of the same class or series acquired by him within three years
immediately before the date of the announcement with respect to the
combination or within three years immediately before the transaction in
which he became an interested stockholder, whichever is higher, plus
compounded interest or (B) the market value per share of common stock on
the date of the announcement with respect to the combination or the
interested stockholder's date of acquiring shares, whichever is higher,
plus interest; and
- the aggregate amount of cash and the market value, as of the date of the
consummation of the combination, of the consideration other than cash to
be received per share by all of the holders of shares other than common
stock not beneficially owned by the interested stockholder is at least
equal to the higher of (A) the highest price per share paid by the
interested stockholder, at a time when he was the beneficial owner of 5%
or more of the outstanding voting stock of the corporation, for any
common shares of the same class or series acquired by
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him within three years immediately before the date of the announcement
with respect to the combination or within three years immediately before
the transaction in which he became an interested stockholder, whichever
is higher, plus compounded interest, (B) the highest preferential amount
per share to which the holders of shares of the class or series of
shares are entitled in the event of any voluntary liquidation,
dissolution or winding up of the corporation, plus the aggregate amount
of any dividends declared or due to which the holders are entitled
before payment on another class or series of shares or (C) the market
value per share of the class or series of stock on the date of the
announcement with respect to the combination or the interested
stockholder's date of acquiring shares, whichever is higher, plus
interest.
Although Nevada corporations may elect to opt out of sections 78.411 to
78.444 of the NRS by amending their articles of incorporation, such amendment
would not be effective until 18 months after the stockholder vote approving it.
As a result, iMALL did not so elect and therefore is subject to these
provisions.
Sections 78.378 through 78.3793 of the NRS further regulate tender offers
and business combinations involving Nevada corporations by providing that any
acquisition by a person, either directly or indirectly, of ownership of, or the
power to direct the voting of 20% or more of the outstanding voting securities
("Control Shares") of a corporation is an "Acquisition of a Controlling
Interest." Before the Control Shares may be voted, such an acquisition must be
approved by the holders of a majority of the voting power of the corporation,
excluding those shares as to which any interested stockholder exercises voting
rights, or, if the acquisition will result in any change of a preference or any
relative or other right given to any class or series of outstanding shares, then
it must be approved by the holders of a majority of each class or series
affected, excluding those shares as to which any interested stockholder
exercises voting rights. A special meeting of stockholders must be held by the
corporation to approve an Acquisition of a Controlling Interest within 50 days
after a request for such meeting is submitted by the person seeking to acquire
control. If the Control Shares are accorded full voting rights and the acquiring
person has acquired Control Shares with a majority or more of the voting power
of the corporation, all stockholders who have not voted in favor of granting
full voting rights to the Control Shares have dissenters' rights. The NRS
further provides that a corporation may opt out of the Acquisition of a
Controlling Interest protections by expressly specifying in its articles of
incorporation or bylaws that these provisions do not apply (which provision must
be in effect on the tenth day following the acquisition). iMALL has amended its
bylaws to provide that the foregoing protections do not apply to it.
Section 203 of the DGCL prohibits a Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for three years
following the date that the person becomes an interested stockholder. With
certain exceptions, an interested stockholder is a person or group who or which
owns 15% or more of the corporation's outstanding voting stock, including any
rights to acquire stock under an option, warrant, agreement, arrangement or
understanding, or upon the exercise of conversion or exchange rights, and stock
with respect to which the person has voting rights only, or is an affiliate or
associate of the corporation and was the owner of 15% or more of the
corporation's voting stock at any time within the previous three years. For
purposes of Section 203, the term "business combination" is defined broadly to
include:
- mergers with or caused by the interested stockholder;
- sales or other dispositions to the interested stockholder, except
proportionately with the corporation's other stockholders, of assets of
the corporation or a subsidiary
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equal to 10% or more of the aggregate market value of the corporation's
consolidated assets or its outstanding stock;
- the issuance or transfer by the corporation or a subsidiary of stock of
the corporation or the subsidiary to the interested stockholder, except
for transfers in a conversion or exchange or a pro rata distribution or
certain other transactions, none of which increase the interested
stockholder's proportionate ownership of any class or series of the
corporation's or the subsidiary's stock; or
- receipt by the interested stockholder, except proportionately as a
stockholder, directly or indirectly, of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the
corporation or a subsidiary.
The three-year moratorium imposed on business combinations by Section 203
does not apply if:
- prior to the date on which the person becomes an interested stockholder
the board of directors approves either the business combination or the
transaction which resulted in the person becoming an interested
stockholder;
- the interested stockholder owns 85% of the corporation's voting stock
upon consummation of the transaction which made him an interested
stockholder, excluding from the 85% calculation shares owned by directors
who are also officers of the target corporation and shares held by
employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer; or
- on or after the date the person becomes an interested stockholder, the
board approves the business combination and it is also approved at a
stockholder meeting by 66 2/3% of the voting stock not owned by the
interested stockholder.
Section 203 only applies to Delaware corporations which have a class of
voting stock that is listed on a national securities exchange are quoted on an
interdealer quotation system such as The Nasdaq National Market or are held of
record by more than 2,000 stockholders. A Delaware corporation may elect not to
be governed by Section 203 by a provision in its original certificate of
incorporation or an amendment to the certificate or to the bylaws, which
amendment must be approved by majority stockholder vote and may not be further
amended by the board of directors. Excite@Home has elected not to be governed by
Section 203, and these provisions do not apply to it. However, Excite@Home could
choose to amend its certificate of incorporation in the future and elect to be
governed by Section 203.
INSPECTION OF STOCKHOLDERS' LIST
The DGCL allows any stockholder to inspect the stockholders' list for a
purpose reasonably related to that person's interest as a stockholder, upon
written demand under oath stating the purpose of the request. The NRS allows any
person who has been a stockholder for at least six months or who holds an
aggregate of 5% or more of the corporation's shares to inspect the stockholders'
list. Both the Excite@Home certificate of incorporation and the iMALL bylaws
allow any stockholder to inspect the stockholder list at least 10 days prior to
annual meeting of stockholders.
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ADDITIONAL MATTER BEING SUBMITTED TO A VOTE
OF IMALL STOCKHOLDERS
THE PROPOSAL TO AMEND IMALL'S ARTICLES OF INCORPORATION
Section C of Article VI of iMALL's articles of incorporation presently
requires approval by the stockholders of iMALL entitled to exercise two-thirds
of the voting power of the corporation for the sale, conveyance, transfer,
exchange or other disposition of all or substantially all of the property of
iMALL. Although the language in this section of the articles of incorporation
does not specifically include a merger, and Nevada law clearly distinguishes
between a merger and the sale, lease or exchange of assets and property as well
as the stockholder vote needed to approve each type of transaction, if the
merger were determined to fall within the meaning of this section, a vote of
two-thirds of the stockholders would be necessary to approve the merger
agreement (rather than the majority vote generally required by Nevada law).
To eliminate any doubt as to the applicability of this voting requirement
to the approval of the merger agreement and the merger, on July 11, 1999, the
iMALL board unanimously approved and resolved to recommend to the stockholders
of iMALL for approval an amendment to the articles of incorporation deleting
this provision in its entirety from the articles of incorporation. If such an
amendment is approved by the stockholders, pursuant to the applicable Nevada
statute, iMALL may thereafter sell, lease, or exchange all or substantially all
of its property and assets, including its good will and its corporate
franchises, when and as authorized by the affirmative vote of the stockholders
of iMALL entitled to exercise at least a majority of the voting power of the
corporation. The full text of the proposed amendment to the articles of
incorporation is attached as Annex D to this prospectus/proxy statement.
The affirmative vote of a majority of the voting power of the shares of
iMALL common stock issued and outstanding on the record date will be required to
approve the amendment to the articles of incorporation.
IMALL'S BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT
TO THE ARTICLES OF INCORPORATION. THE UNANIMOUS RECOMMENDATION OF IMALL'S BOARD
DID NOT INCLUDE THE DIRECTOR DESIGNATED TO IMALL'S BOARD BY FIRST DATA, WHO
APPROPRIATELY ABSTAINED FROM VOTING ON THE AMENDMENT TO THE AMENDMENT OF THE
ARTICLES OF INCORPORATION BECAUSE OF AN ACTUAL OR POTENTIAL CONFLICT OF
INTEREST.
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STOCKHOLDER PROPOSALS
Under Rule 14a-8 of the Exchange Act, iMALL stockholders may present proper
proposals for inclusion in iMALL's proxy statement and for consideration at the
next annual meeting of its stockholders by submitting such proposals to iMALL in
a timely manner. In the event that the merger has not been completed prior to
the annual meeting, in order to be so included for the 1999 annual meeting,
stockholder proposals must have been received by iMALL no later than August 18,
1999, and must have otherwise complied with the requirements of Rule 14a-8. In
addition, if iMALL has not received notice on or before November 1, 1999 of any
matter a stockholder intends to propose for a vote at the 1999 annual meeting
then a proxy solicited by iMALL's board may be voted on such matter in the
discretion of the proxy holders, without discussion of the matter in the proxy
statement soliciting such proxy and without such matter appearing as a separate
matter on the proxy card.
DOCUMENTS INCORPORATED BY REFERENCE IN THIS
PROSPECTUS/PROXY STATEMENT
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED IN OR DELIVERED WITH THIS DOCUMENT.
All documents filed by iMALL and Excite@Home under Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act, after the date hereof and before the
date of the special meeting are incorporated by reference into and to be a part
of this prospectus/ proxy statement from the date of filing of those documents.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
IS REFERRED TO IN THIS DOCUMENT. EXCITE@HOME AND IMALL HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
The following documents which were filed by iMALL with the Securities and
Exchange Commission, are incorporated by reference into this prospectus/proxy
statement:
- iMALL's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1998;
- iMALL's Quarterly Reports on Form 10-QSB for the three-month periods
ended March 31 and June 30, 1999;
- iMALL's Current Report on Form 8-K, filed with the Securities and
Exchange Commission on May 14, 1999; and
- iMALL's Current Report on Form 8-K, filed with the Securities and
Exchange Commission on July 13, 1999.
The following documents, which have been filed by Excite@Home with the
Securities and Exchange Commission, are incorporated by reference into this
prospectus/proxy statement:
- Excite@Home's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, filed in February 1999, as amended on March 31, 1999
and further amended on April 27, 1999;
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- Excite@Home's Quarterly Reports on Form 10-Q for the three-month periods
ended March 31 and June 30, 1999;
- Excite@Home's Current Reports on Form 8-K, filed on January 19, 1999,
April 8, 1999, June 14, 1999 as amended August 13, 1999 and August 2,
1999; and
- Excite@Home's Registration Statement on Form 8-A, SEC file number
000-22697 and filing date June 13, 1997, which describes Excite@Home's
different series of common stock.
Any statement contained in a document incorporated or deemed to be
incorporated in this document by reference will be deemed to be modified or
superseded for purposes of this prospectus/proxy statement to the extent that a
statement contained in this document or any other subsequently filed document
that is deemed to be incorporated in this document by reference modifies or
supersedes the statement. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus/proxy statement.
WHERE YOU CAN FIND MORE INFORMATION
The documents incorporated by reference into this prospectus/proxy
statement are available from Excite@Home or iMALL upon request. Excite@Home or
iMALL will provide a copy of any and all of the information that is incorporated
by reference into this prospectus/proxy statement not including exhibits to the
information unless those exhibits are specifically incorporated by reference
into this prospectus/proxy statement, to you, without charge, upon written or
oral request. YOU SHOULD MAKE ANY REQUEST FOR DOCUMENTS BY OCTOBER 20, 1999 TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS.
<TABLE>
<S> <C>
Reports, proxy statements and other information Reports, proxy statements and other information
concerning iMALL may be inspected at: regarding Excite@Home may be inspected at:
The National Association of The National Association of
Securities Dealers Securities Dealers
1735 K Street, N.W. 1735 K Street, N.W.
Washington, D.C. 20006 Washington, D.C. 20006
Requests for documents relating to iMALL should Requests for documents relating to Excite@Home
be directed to: should be directed to:
iMALL, Inc. At Home Corporation
233 Wilshire Boulevard 425 Broadway
Suite 820 Redwood City, California 94063
Santa Monica, California 90401 (650) 569-5000
(310) 309-4000
</TABLE>
Excite@Home and iMALL file reports, proxy statements and other information
with the Securities and Exchange Commission. Copies of reports, proxy statements
and other information filed by either company may be inspected and copied at the
public reference facilities maintained by the Securities and Exchange
Commission:
<TABLE>
<S> <C> <C>
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street. N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
</TABLE>
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Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 or by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission
maintains a web site that contains reports, proxy statements and other
information regarding each of Excite@Home and iMALL. The address of the
Securities and Exchange Commission web site is http://www.sec.gov.
Excite@Home has filed a registration statement under the Securities Act
with the Securities and Exchange Commission with respect to Excite@Home's Series
A common stock to be issued to iMALL stockholders in the merger. This
prospectus/proxy statement constitutes the prospectus of Excite@Home filed as
part of the registration statement. This prospectus/proxy statement does not
contain all of the information set forth in the registration statement because
certain parts of the registration statement are omitted as provided by the rules
and regulations of the Securities and Exchange Commission. You may inspect and
copy the registration statement at any of the addresses listed above.
If you have any questions about the merger, please call iMALL's investor
relations group at (310) 309-4000. You may also call Excite@Home's investor
relations group at (650) 569-6060.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO PURCHASE, THE EXCITE@HOME SERIES A COMMON STOCK OR THE SOLICITATION OF
A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS
UNLAWFUL TO MAKE THE OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN
THAT JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS/PROXY STATEMENT NOR
ANY DISTRIBUTION OF SECURITIES MEANS, UNDER ANY CIRCUMSTANCES, THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH OR INCORPORATED IN THIS DOCUMENT BY
REFERENCE OR IN THE AFFAIRS OF EXCITE@HOME OR IMALL SINCE THE DATE OF THIS
PROSPECTUS/PROXY STATEMENT. THE INFORMATION CONTAINED IN THIS DOCUMENT WITH
RESPECT TO IMALL AND ITS SUBSIDIARIES WAS PROVIDED BY IMALL AND THE INFORMATION
CONTAINED IN THIS DOCUMENT WITH RESPECT TO EXCITE@HOME AND ITS SUBSIDIARIES WAS
PROVIDED BY EXCITE@HOME.
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This prospectus/proxy statement and the documents incorporated in this
document by reference contain forward-looking statements within the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations and business of
Excite@Home and iMALL and on the expected impact of the merger on Excite@Home's
financial performance. Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates" and similar expressions identify
forward-looking statements. These forward-looking statements are not guarantees
of future performance and are subject to certain risks and uncertainties that
could cause actual results to differ materially from the results contemplated by
the forward-looking statements. These risks and uncertainties include:
- the possibility that the value of the Excite@Home Series A common stock
to be issued to iMALL stockholders in the merger will decrease prior to
completion of the merger;
- the possibility that the merger will not be consummated;
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<PAGE> 97
- the possibility that the anticipated benefits from the merger cannot be
fully realized;
- the possibility that costs or difficulties related to the integration of
the businesses of each company are greater than expected;
- the dependence of the companies on the timely development, introduction
and customer acceptance of new Internet services;
- the impact of competition on revenues and margins;
- rapidly changing technology and shifting demand requirements and Internet
usage patterns;
- other risks and uncertainties, including the risks and uncertainties
involved in obtaining new sponsors, advertisers and customers, the impact
of competitive services, products and prices, the unsettled conditions in
the Internet and other high-technology industries and the ability to
attract and retain key personnel; and
- other risk factors as may be detailed from time to time in Excite@Home's
and iMALL's public announcements and filings with the Securities and
Exchange Commission.
In evaluating the merger, you should carefully consider the discussion of
these and other factors in the section entitled "Risk factors" on page 13.
LEGAL OPINION
The validity of the shares of Excite@Home Series A common stock offered by
this prospectus/proxy statement will be passed upon for Excite@Home by Fenwick &
West LLP.
EXPERTS
Ernst & Young LLP, independent auditors, have audited Excite@Home's
consolidated financial statements included in Excite@Home's annual report on
Form 10-K, as amended, for the year ended December 31, 1998, as set forth in
their report included therein, which is incorporated in this prospectus/proxy
statement by reference. Excite@Home's consolidated financial statements are
incorporated by reference in reliance on their report, given on their authority
as experts in accounting and auditing.
The consolidated financial statements of iMALL at December 31, 1998 and for
the years ended December 31, 1998 and 1997, incorporated by reference in this
prospectus/ proxy statement and registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto and are incorporated by reference herein in reliance
upon authority of said firm as experts in giving said reports.
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ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
AT HOME CORPORATION,
SHOP NEVADA, INC.
AND
IMALL, INC.
JULY 12, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 99
TABLE OF CONTENTS
<TABLE>
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<C> <S> <C>
ARTICLE I THE MERGER................................................. A-2
1.1 The Merger.................................................. A-2
1.2 Effective Time; Closing..................................... A-2
1.3 Effect of the Merger........................................ A-2
1.4 Articles of Incorporation; Bylaws........................... A-2
1.5 Directors and Officers...................................... A-2
1.6 Effect on Capital Stock..................................... A-3
1.7 Surrender of Certificates................................... A-4
1.8 No Further Ownership Rights in Company Common Stock......... A-5
1.9 Lost, Stolen or Destroyed Certificates...................... A-5
1.10 Restricted Stock............................................ A-5
1.11 Tax and Accounting Consequences............................. A-6
1.12 Taking of Necessary Action; Further Action.................. A-6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY................. A-6
2.1 Organization; Subsidiaries.................................. A-6
2.2 Company Capital Structure................................... A-7
2.3 Obligations With Respect to Capital Stock................... A-8
2.4 Authority................................................... A-9
2.5 SEC Filings; Company Financial Statements................... A-10
2.6 Absence of Changes.......................................... A-11
2.7 Taxes....................................................... A-12
2.8 Title to Properties; Absence of Liens and Encumbrances...... A-13
2.9 Intellectual Property....................................... A-14
2.10 Compliance with Laws; Permits; Restrictions................. A-17
2.11 Litigation.................................................. A-17
2.12 Employee Benefit Plans...................................... A-18
2.13 Environmental Matters....................................... A-22
2.14 Agreements, Contracts and Commitments....................... A-22
2.15 Change of Control Payments.................................. A-23
2.16 Insurance................................................... A-24
2.17 Disclosure.................................................. A-24
2.18 Board Approval.............................................. A-24
2.19 Brokers' and Finders' Fees.................................. A-25
2.20 Fairness Opinion............................................ A-25
2.21 Nevada Law; Rights Agreement................................ A-25
2.22 Related Party Transactions.................................. A-25
2.23 Internet Yellow Pages....................................... A-25
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB...................................................... A-26
3.1 Organization of Parent and Merger Sub....................... A-26
3.2 Parent and Merger Sub Capital Structure..................... A-26
3.3 Authority................................................... A-27
</TABLE>
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<TABLE>
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PAGE
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<C> <S> <C>
3.4 SEC Filings; Parent Financial Statements.................... A-28
3.5 Absence of Changes.......................................... A-28
3.6 Litigation.................................................. A-29
3.7 Disclosure.................................................. A-29
3.8 Board Approval.............................................. A-29
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME....................... A-30
4.1 Conduct of Business by Company.............................. A-30
ARTICLE V ADDITIONAL AGREEMENTS...................................... A-32
5.1 Proxy Statement/Prospectus; Registration Statement;
Antitrust and Other Filings............................... A-32
5.2 Meeting of Company Stockholders............................. A-33
5.3 Confidentiality; Access to Information...................... A-35
5.4 No Solicitation............................................. A-35
5.5 Public Disclosure........................................... A-36
5.6 Reasonable Efforts; Notification............................ A-37
5.7 Third Party Consents........................................ A-38
5.8 Stock Options............................................... A-38
5.9 Registrations............................................... A-39
5.10 Indemnification............................................. A-39
5.11 Nasdaq Listing.............................................. A-39
5.12 Affiliates; Restrictive Legend.............................. A-39
5.13 Letter of Company's Accountants............................. A-40
5.14 Takeover Statutes........................................... A-40
5.15 Certain Employee Benefits................................... A-40
5.16 Amendment of Company's Articles............................. A-40
5.17 Parent Warrant.............................................. A-40
ARTICLE VI CONDITIONS TO THE MERGER.................................. A-41
6.1 Conditions to Obligations of Each Party to Effect the
Merger.................................................... A-41
6.2 Additional Conditions to Obligations of Company............. A-41
6.3 Additional Conditions to the Obligations of Parent and
Merger Sub................................................ A-42
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER........................ A-43
7.1 Termination................................................. A-43
7.2 Notice of Termination; Effect of Termination................ A-44
7.3 Fees and Expenses........................................... A-45
7.4 Amendment................................................... A-46
7.5 Extension; Waiver........................................... A-46
ARTICLE VIII GENERAL PROVISIONS...................................... A-46
8.1 Non-Survival of Representations and Warranties.............. A-46
8.2 Notices..................................................... A-46
8.3 Interpretation; Certain Defined Terms....................... A-47
8.4 Counterparts................................................ A-48
8.5 Entire Agreement; Third Party Beneficiaries................. A-48
</TABLE>
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<TABLE>
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PAGE
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<C> <S> <C>
8.6 Severability................................................ A-48
8.7 Other Remedies; Specific Performance........................ A-48
8.8 Governing Law............................................... A-49
8.9 Rules of Construction....................................... A-49
8.10 Assignment.................................................. A-49
8.11 Waiver of Jury Trial........................................ A-49
</TABLE>
INDEX OF EXHIBITS
Exhibit A Form of Parent Warrant
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of July 12 1999 among At Home Corporation, a Delaware corporation
("PARENT"), located at 425 Broadway, Redwood City, California 94063, Shop
Nevada, Inc., a Nevada corporation and a wholly-owned subsidiary of Parent
("MERGER SUB"), located at 425 Broadway, Redwood City, California 94063, and
iMALL, Inc., a Nevada corporation ("COMPANY"), located at 233 Wilshire
Boulevard, Suite 820, Santa Monica, California 90401.
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the Nevada Revised Statutes ("NEVADA LAW"), Parent and
Company intend to enter into a business combination transaction.
B. The Merger (as defined in Section 1.1) is intended to constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "CODE").
C. The Board of Directors of Company (i) has determined that the
Merger is advisable and fair to, and in the best interests of, Company and its
stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement for all purposes under Nevada Law
and (iii) has determined to recommend that the stockholders of Company approve
this Agreement and the Merger.
D. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
certain stockholders of Company are entering into voting agreements in which
such stockholders have agreed to vote in favor of the Merger (the "COMPANY
VOTING AGREEMENTS"). The Board of Directors of Company has approved the Company
Voting Agreements.
E. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
(i) certain officers of Company are entering into amendments, with Parent and
Company, to their current employment agreements with Company, effective upon the
Effective Time (as defined in Section 1.2) (such agreements, as amended,
collectively, the "AMENDED EMPLOYMENT AGREEMENTS"), and (ii) certain officers of
Company are entering into noncompetition agreements with Parent, effective upon
the Effective Time (collectively, the "NONCOMPETITION AGREEMENTS").
F. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
(i) Company and First Data Merchant Services Corporation, a Florida corporation
("FIRST DATA"), are entering into two amendments to and restatements of the
Development and Marketing Agreement, dated as of October 30, 1998 (the
"MARKETING AGREEMENT") between Company and First Data, the "FIRST AMENDED AND
RESTATED DEVELOPMENT AND MARKETING AGREEMENT" and the "SECOND AMENDED AND
RESTATED DEVELOPMENT AND MARKETING AGREEMENT", (ii) Company and First Data are
amending the Investment Agreement, dated as of October 30, 1998 between the
Company and First Data, (such agreement, the "INVESTMENT AGREEMENT", and, as
amended, the "AMENDED INVESTMENT AGREEMENT"), and (iii) Parent and First Data
are entering into a Marketing Agreement (the "PARENT-FIRST DATA AGREEMENT", and,
together with the First Amended and Restated Development and Marketing
Agreement, the Second Amended and
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<PAGE> 103
Restated Development and Marketing Agreement, and the Amended Investment
Agreement, collectively, the "FIRST DATA AGREEMENTS").
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of Nevada Law,
Merger Sub shall be merged with and into Company (the "MERGER"), the separate
corporate existence of Merger Sub shall cease and Company shall continue as the
surviving corporation. Company as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "SURVIVING CORPORATION."
1.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
articles of merger, in such appropriate form as determined by the parties, with
the Secretary of State of the State of Nevada in accordance with the relevant
provisions of Nevada Law (the "ARTICLES OF MERGER") (the time of such filing (or
such later time as may be agreed in writing by Company and Parent and specified
in the Articles of Merger) being the "EFFECTIVE TIME") as soon as practicable on
or after the Closing Date (as herein defined). The closing of the Merger (the
"CLOSING") shall take place at the offices of Fenwick & West LLP, Two Palo Alto
Square, Palo Alto, California, at a time and date to be specified by the
parties, which shall be no later than the second business day after the
satisfaction or waiver of the conditions set forth in Article VI, or at such
other time, date and location as the parties hereto agree in writing (the
"CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Nevada Law. Without limiting the generality of the foregoing, at the Effective
Time all the property, rights, privileges, powers and franchises of Company and
Merger Sub shall vest in the Surviving Corporation without reversion or
impairment, and all debts, liabilities and duties of Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of Surviving
Corporation shall be amended to conform to the Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time; provided,
however, that at the Effective Time, Article I of the Articles of Incorporation
of the Surviving Corporation shall not be so amended.
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving
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Corporation shall be the officers of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Company or the holders of any of the following
securities:
(a) Conversion of Company Common Stock. Each share of common stock,
par value $0.008 per share, of Company ("COMPANY COMMON STOCK") issued and
outstanding immediately prior to the Effective Time, other than any shares of
Company Common Stock to be canceled pursuant to Section 1.6(b), will be canceled
and extinguished and automatically converted (subject to Sections 1.6(d) and
(e)) into the right to receive 0.46 (the "EXCHANGE RATIO") of a share of Series
A Common Stock, par value $0.01 per share, of Parent ("PARENT COMMON STOCK"). As
of the Effective Time, all such shares of Company Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares of
Company Common Stock shall cease to have any rights with respect thereto, except
the right to receive upon the surrender of such certificates, certificates
representing the shares of Parent Common Stock, and cash in lieu of fractional
shares of Parent Common Stock to the extent provided in Section 1.7(e).
(b) Cancellation of Company-Owned and Parent-Owned Stock. Each share
of Company Common Stock held by Company or owned by Merger Sub, Parent or any
direct or indirect wholly-owned subsidiary of Company or of Parent immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) Capital Stock of Merger Sub. Each share of common stock, no par
value, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into one validly issued, fully paid and nonassessable
share of common stock, no par value, of the Surviving Corporation. Each
certificate evidencing ownership of shares of the common stock of Merger Sub
shall evidence ownership of such shares of capital stock of the Surviving
Corporation.
(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Stock), reorganization,
recapitalization, reclassification, exchange or other like change with respect
to Parent Common Stock or Company Common Stock occurring on or after the date
hereof and prior to the Effective Time.
(e) Fractional Shares. No fraction of a share of Parent Common Stock
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock that otherwise would be received by such holder) shall
receive from Parent an amount of cash (rounded to the nearest whole cent) equal
to the product of (i) such fraction, multiplied by (ii) the average closing sale
price of one share of Parent Common Stock for the ten most recent days that
Parent Common Stock has traded ending with and including the trading day
immediately prior to the Effective Time, as reported on the Nasdaq Stock Market.
(f) Stock Options; Warrants. At the Effective Time, all options to
purchase Company Common Stock then outstanding under the Company's 1997 Stock
Option Plan and 1999 Stock Option Plan (together, the "COMPANY STOCK OPTION
PLANS") shall be
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assumed by Parent in accordance with Section 5.8 of this Agreement. At the
Effective Time, all Company Warrants (as defined in Section 2.2) then
outstanding shall be assumed by Parent in accordance with Section 5.8 of this
Agreement.
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent shall select a bank or trust company
acceptable to Company to act as the exchange agent (the "EXCHANGE AGENT") in the
Merger.
(b) Provision of Common Stock. Promptly after the Effective Time,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I, the shares of Parent Common Stock issuable pursuant to
Section 1.6 in exchange for outstanding shares of Company Common Stock, and cash
in an amount sufficient for payment in lieu of fractional shares pursuant to
Section 1.6(e) and any dividends or distributions to which holders of shares of
Company Common Stock may be entitled pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly after the Effective Time, Parent
shall cause the Exchange Agent to mail to each holder of record (as of the
Effective Time) of a certificate or certificates ("CERTIFICATES"), which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into shares of Parent Common
Stock pursuant to Section 1.6, (i) a letter of transmittal in customary form
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall contain such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Common
Stock, cash in lieu of any fractional shares pursuant to Section 1.6(e) and any
dividends or other distributions pursuant to Section 1.7(d). Upon surrender of
Certificates for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holders of such Certificates shall be entitled to receive in exchange
therefor certificates representing the number of whole shares of Parent Common
Stock into which their shares of Company Common Stock were converted at the
Effective Time, payment in lieu of fractional shares which such holders have the
right to receive pursuant to Section 1.6(e) and any dividends or distributions
payable pursuant to Section 1.7(d), and the Certificates so surrendered shall
forthwith be canceled. Until so surrendered, outstanding Certificates will be
deemed from and after the Effective Time, for all corporate purposes, to
evidence only the ownership of the number of full shares of Parent Common Stock
into which such shares of Company Common Stock shall have been so converted and
the right to receive an amount in cash in lieu of the issuance of any fractional
shares in accordance with Section 1.6(e) and any dividends or distributions
payable pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Parent Common Stock represented thereby until the holders of record of
such Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest, certificates representing whole
shares of Parent Common Stock issued in exchange therefor along with payment in
lieu of fractional shares pursuant to Section 1.6(e) hereof and the amount of
any such dividends or
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other distributions with a record date after the Effective Time payable with
respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If certificates representing shares of
Parent Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
representing shares of Parent Common Stock in any name other than that of the
registered holder of the Certificates surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation nor
any party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 1.6(e) and 1.7(d)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock into which the shares of Company
Common Stock represented by such Certificates were converted pursuant to Section
1.6, cash for fractional shares, if any, as may be required pursuant to Section
1.6(e) and any dividends or distributions payable pursuant to Section 1.7(d);
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance of such certificates representing shares of Parent
Common Stock, cash and other distributions, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Parent, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.10 Restricted Stock. If any shares of the Company Common Stock that are
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition providing that
such shares ("COMPANY RESTRICTED STOCK") may be forfeited or repurchased by the
Company upon any termination of the stockholders' employment, directorship or
other relationship with the Company (and/or any affiliate of the Company) under
the terms of any restricted stock purchase agreement or other agreement with the
Company that does not by its terms provide that such repurchase option, risk of
forfeiture or other condition lapses upon consummation of the Merger, then the
shares of Parent Common Stock issued upon the conversion of such shares of
Company Common Stock in the Merger will continue to be unvested and subject to
the same
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repurchase options, risks of forfeiture or other conditions following the
Effective Time, and the certificates representing such shares of Parent Stock
may accordingly be marked with appropriate legends noting such repurchase
options, risks of forfeiture or other conditions. The Company shall take all
actions that may be necessary to ensure that, from and after the Effective Time,
Parent is entitled to exercise any such repurchase option or other right set
forth in any such restricted stock purchase agreement or other agreement. A
listing of the holders of Company Restricted Stock, together with the number of
shares of Company Restricted Stock held by each, is set forth on Part 1.10 of
the Company Letter.
1.11 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Code.
The parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 354(a) and 361(a) of the Code and Sections 1.368-2(g) and
1.368-3(a) of the Federal Income Tax Regulations.
(b) It is intended by the parties hereto that the Merger shall
qualify for accounting treatment as a purchase.
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of Company
and Merger Sub will take all such lawful and necessary action. Parent shall
cause Merger Sub to perform all of its obligations relating to this Agreement
and the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
As of the date of this Agreement and as of the Closing Date, Company
represents and warrants to Parent and Merger Sub, subject to the exceptions
specifically disclosed in writing in the disclosure letter and referencing a
specific representation delivered by Company to Parent dated as of the date
hereof and certified by a duly authorized officer of Company (the "COMPANY
LETTER"), as follows:
2.1 Organization; Subsidiaries
(a) Company and, except as disclosed in Part 2.1 of the Company
Letter, each of its subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized; (ii) has the corporate or other power and authority to own, lease and
operate its assets and properties and to carry on its business as now being
conducted; and (iii) except as would not be material to Company, is duly
qualified or licensed to do business in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary.
(b) Other than the corporations identified in Part 2.1 of the Company
Letter , neither Company nor any of the other corporations or other entities
identified in Part 2.1 of the Company Letter owns any capital stock of, or any
equity interest of any nature in, any corporation, partnership, joint venture
arrangement or other business entity, other than the
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entities identified in Part 2.1 of the Company Letter, except for passive
investments in equity interests of public companies as part of the cash
management program of the Company. Except as set forth in Part 2.1(b) of the
Company Letter, all outstanding shares of capital stock of each subsidiary of
Company have been validly issued and are fully paid and nonassessable and are
owned by Company or another subsidiary of Company, free and clear of all
Encumbrances. Neither Company nor any of its subsidiaries has agreed or is
obligated to make, or is bound by any written, oral or other agreement,
contract, subcontract, lease, binding understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan or
legally binding commitment or undertaking of any nature, as in effect as of the
date hereof or as may hereinafter be in effect under which it may become
obligated to make any future investment in or capital contribution to any other
entity. Neither Company nor any of its subsidiaries, has, at any time, been a
general partner of any general partnership, limited partnership or other entity.
Part 2.1 of the Company Letter indicates the jurisdiction of organization of
each entity listed therein and Company's direct or indirect equity interest
therein.
(c) Except as set forth in Part 2.1(c) of the Company Letter, Company
has delivered or made available to Parent a true and correct copy of the
Articles of Incorporation and Bylaws of Company and similar governing
instruments of each of its subsidiaries, each as amended to date, and each such
instrument is in full force and effect. Neither Company nor any of its
subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent governing instruments.
2.2 Company Capital Structure.
(a) The authorized capital stock of Company consists of 37,500,000
shares of Company Common Stock, of which there were 17,990,028 shares issued and
outstanding as of July 9, 1999, and 10,000,000 shares of Preferred Stock, par
value $0.001 per share, of which no shares are issued or outstanding. Except as
disclosed in Part 2.2 of the Company Letter, all outstanding shares of Company
Common Stock are duly authorized, validly issued, fully paid and nonassessable
and are not subject to preemptive rights or rights of first refusal created by
statute, the Articles of Incorporation or Bylaws of Company or any agreement or
document to which Company is a party or by which it is bound. As of the date of
this Agreement, there are 118,750 shares of Company Common Stock held in
treasury by Company. No shares of Company Common Stock have been issued without
certificates. From and after the Effective Time, the shares of Parent Common
Stock issued in exchange for any shares of Company Restricted Stock will,
without any further act of Parent, the Company or any other person, become
subject to the restrictions, conditions and other provisions of such Company
Restricted Stock, and Parent will automatically succeed to and become entitled
to exercise the Company's rights and remedies under such Company Restricted
Stock. As of July 9, 1999, Company had reserved an aggregate of 4,000,000 shares
of Company Common Stock for issuance pursuant to the Company Stock Option Plans.
Stock options granted under the Company Stock Option Plans are collectively
referred to in this Agreement as "COMPANY OPTIONS." As of July 9, 1999, there
were Company Options outstanding to purchase an aggregate of 2,930,598 shares of
Company Common Stock. As of July 9, 1999, there were warrants outstanding to
purchase an aggregate of 2,384,097 shares of Company Common Stock (collectively,
"COMPANY WARRANTS"). As of the date of this Agreement, no event has occurred
which would require an adjustment to the "Warrant Share Amount" or "Exercise
Price" (as such terms are defined therein) of the warrant issuable to First Data
pursuant to the Investment Agreement (the "FIRST DATA WARRANT"). All shares of
Company Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in
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the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Part 2.2 of the Company Letter
list for each person who held Company Options or Company Warrants as of July 8,
1999, the name of the holder of such option or warrant, the Company Stock Option
Plan under which such option was granted, the exercise price of such option or
warrant, the number of shares as to which such option or warrant had vested at
such date, the vesting schedule for such option or warrant and whether the
exercisability of such option or warrant will be accelerated in any way by the
transactions contemplated by this Agreement, and indicates the extent of
acceleration, if any. The terms of the Company Options and Company Warrants,
respectively, permit the assumption of the Company Options and Company Warrants
as provided by Section 5.8 of this Agreement without the consent or approval of
the holders of the Company Options or Company Warrants, Company's stockholders
or otherwise and without any acceleration of the exercise schedule or vesting
provisions of such Company Options or Company Warrants, respectively.
(b) Except as set forth in Part 2.2(b) of the Company Letter, all
outstanding shares of Company Common Stock or other capital stock of Company,
all outstanding Company Options and Company Warrants, and all outstanding shares
of capital stock of each subsidiary of the Company have been issued and granted
in compliance with (i) all applicable securities laws and, to the knowledge of
Company, other applicable Legal Requirements (as defined below) and (ii) all
material requirements set forth in applicable agreements or instruments. For the
purposes of this Agreement, "LEGAL REQUIREMENTS" means any federal, state,
local, municipal, foreign or other law, statute, constitution, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity (as defined below).
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Part 2.3 of the Company Letter, there are no equity securities, partnership
interests or similar ownership interests of any class of Company equity
security, or any securities exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except for securities Company owns
free and clear of all Encumbrances (as defined herein), directly or indirectly
through one or more subsidiaries, and except for shares of capital stock or
other similar ownership interests of certain subsidiaries of Company that are
owned by certain nominee equity holders as required by the applicable law of the
jurisdiction of organization of such subsidiaries, as of the date of this
Agreement, there are no equity securities, partnership interests or similar
ownership interests of any class of equity security of any subsidiary of
Company, or any security exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except as set forth in Part 2.2 or
Part 2.3 of the Company Letter, there are no subscriptions, options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
to which Company or any of its subsidiaries is a party or by which it is bound
obligating Company or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares of
capital stock, partnership interests or similar ownership interests of Company
or any of its subsidiaries or obligating Company or any of its subsidiaries to
grant, extend, accelerate the vesting of or enter into any such subscription,
option, warrant, equity security, call, right, commitment or agreement. Except
as set forth in Part 2.3 of the Company Letter or as contemplated by this
Agreement, there are no registration rights and there is no voting trust, proxy,
rights plan, antitakeover plan or other
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agreement or understanding to which Company is a party or by which it is bound
with respect to any equity security of any class of Company or with respect to
any equity security, partnership interest or similar ownership interest of any
class of any of its subsidiaries. Stockholders of Company will not be entitled
to dissenters' or appraisal rights under applicable state law (including under
Section 92A.300 et seq. of Nevada Law) in connection with the Merger. For
purposes of this Agreement, "ENCUMBRANCES" means any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance, claim,
infringement, interference, option, right of first refusal, preemptive right,
community property interest or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).
2.4 Authority.
(a) Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Company, subject only to the approval of this
Agreement and the Merger by Company's stockholders as contemplated by Section
5.2 and the filing of the Articles of Merger pursuant to Nevada Law.
Notwithstanding Company's agreement in Section 5.16 to seek the approval of
Company's stockholders of the Articles Amendment (as defined in Section 5.16),
whether or not the Articles Amendment is approved and effected, an affirmative
vote of a majority of the voting power of the Company is sufficient for
Company's stockholders to approve this Agreement and the Merger. No separate
voting by a class of the Company's stockholders is or will be required in
connection with the approval of the Merger or the other transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Company and, assuming the due execution and delivery by Parent and Merger Sub,
constitute the valid and binding obligations of Company, enforceable against
Company in accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws affecting the rights of creditors generally
and general principles of equity. The execution and delivery of this Agreement
by Company does not, and the performance of this Agreement by Company will not,
(i) conflict with or violate the Articles of Incorporation or Bylaws of Company
or the equivalent organizational documents of any of its subsidiaries, (ii)
subject to obtaining the approval of this Agreement and the Merger by Company's
stockholders as contemplated by Section 5.2 and compliance with the requirements
set forth in Section 2.4(b) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Company or any of its
subsidiaries or by which Company or any of its subsidiaries or any of their
respective properties is bound or affected, or (iii) result in any material
breach of or constitute a material default (or an event that with notice or
lapse of time or both would become a material default) under, or impair
Company's rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a material Encumbrance on any of
the material properties or assets of Company or any of its subsidiaries pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise, concession, or other instrument or obligation to which
Company or any of its subsidiaries is a party or by which Company or any of its
subsidiaries or its or any of their respective assets are bound or affected.
Part 2.4 of the Company Letter list all consents, waivers and approvals under
any of Company's or any of its subsidiaries' agreements, contracts, licenses or
leases required to be obtained in connection with the consummation of the
transactions contemplated hereby, which, if individually or in
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the aggregate not obtained, would result in a material loss of benefits to
Company or any of its subsidiaries, Parent or the Surviving Corporation.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("GOVERNMENTAL ENTITY"), is required to be obtained or made by Company in
connection with the execution and delivery of this Agreement or the consummation
of the Merger, except for (i) the filing of the Articles of Merger with the
Secretary of State of the State of Nevada and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, (ii) the filing of the Proxy Statement/Prospectus (as defined in
Section 2.17) with the Securities and Exchange Commission ("SEC") in accordance
with the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and
the effectiveness of the Registration Statement (as defined in Section 2.17),
(iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal, foreign
and state securities (or related) laws and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), and the securities or
antitrust laws of any foreign country, and (iv) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not be material to the Company or Parent or have a material adverse
effect on the ability of the parties hereto to consummate the Merger.
2.5 SEC Filings; Company Financial Statements.
(a) Except as disclosed in Part 2.5(a) of the Company Letter, Company
has filed all forms, reports and documents required to be filed by Company with
the SEC since January 1, 1997 and has made available to Parent such forms,
reports and documents in the form filed with the SEC. All such required forms,
reports and documents (including those that Company may file subsequent to the
date hereof) are referred to herein as the "COMPANY SEC REPORTS." As of their
respective dates, the Company SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), or the Exchange Act, as the case may be, and the rules and regulations of
the SEC thereunder applicable to such Company SEC Reports and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except to
the extent corrected prior to the date of this Agreement by a subsequently filed
Company SEC Report. Except as set forth in Part 2.5(a) of the Company Letter,
all documents required to be filed as exhibits to the Company SEC Reports have
been so filed. None of Company'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 Company SEC Reports (the
"COMPANY FINANCIALS"), including each Company SEC Report filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q, 8-K or any successor form under the Exchange Act) and (iii) fairly
presented in all material respects the consolidated financial position of
Company and its subsidiaries as at the respective dates thereof and the
consolidated results of Company's operations and cash flows for the periods
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indicated, except that the unaudited interim financial statements may not
contain footnotes and were or are subject to normal and recurring year-end
adjustments. The audited balance sheet of Company contained in the Company SEC
Reports as of December 31, 1998 is hereinafter referred to as the "COMPANY
BALANCE SHEET." Except as disclosed in the Company Financials, since the date of
the Company Balance Sheet neither Company nor any of its subsidiaries has any
liabilities required under GAAP to be set forth on a consolidated balance sheet
(absolute, accrued, contingent or otherwise) which are, individually or in the
aggregate, material to the business, results of operations or financial
condition of Company and its subsidiaries taken as a whole, except for
liabilities incurred since the date of the Company Balance Sheet in the ordinary
course of business consistent with past practices and liabilities incurred in
connection with this Agreement.
(c) Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Company with the SEC pursuant to
the Securities Act or the Exchange Act.
2.6 Absence of Changes. Except as set forth in Part 2.6 of the Company
Letter, since the date of the Company Balance Sheet there has not been: (i) any
Material Adverse Effect (as defined in Section 8.3(c)) with respect to Company,
(ii) any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, or any issuance
of, any of Company's or any of its subsidiaries' capital stock, or any purchase,
redemption or other acquisition by Company of any of Company's capital stock or
any other securities of Company or its subsidiaries or any options, warrants,
calls or rights to acquire any such shares or other securities except for
repurchases from employees following their termination pursuant to the terms of
their pre-existing stock option or purchase agreements, (iii) any split,
combination or reclassification of any of Company's or any of its subsidiaries'
capital stock, (iv) any granting by Company or any of its subsidiaries of any
increase in compensation or fringe benefits to any of their officers or
employees, except for normal increases of cash compensation in the ordinary
course of business consistent with past practice, or any payment by Company or
any of its subsidiaries of any bonus to any of their officers or employees,
except for bonuses made in the ordinary course of business consistent with past
practice, or any granting by Company or any of its subsidiaries of any increase
in severance or termination pay or any entry by Company or any of its
subsidiaries into, or material modification or amendment of, any currently
effective employment, severance, termination or indemnification agreement or any
agreement the benefits of which are contingent or the terms of which are
materially altered upon the occurrence of a transaction involving Company of the
nature contemplated hereby, (v) any material change or alteration in the policy
of Company relating to the granting of stock options to its employees and
consultants, (vi) entry by Company or any of its subsidiaries into, or material
modification, amendment or cancellation of, any licensing, distribution,
marketing, reseller, merchant services, advertising, sponsorship or other
similar agreement other than any such agreement entered into in the ordinary
course of Company's business consistent with past practice which (A) provides
(or reasonably could provide) for payments by or to, or the incurrence of
obligations or expenses by, Company or its subsidiaries in an amount less than
$25,000 in any year, and (B) involves the performance of obligations for a
period of one year or less (such excepted agreements, collectively, "ORDINARY
COURSE AGREEMENTS"), (vii) any acquisition, sale or transfer of any material
asset of Company or any of its subsidiaries other than in the ordinary course of
business, (viii) any material change by Company in its accounting methods,
principles or practices, except as required by concurrent changes in GAAP, or
(ix) any material revaluation by Company of any of its assets, including,
without limitation,
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writing off notes or accounts receivable other than in the ordinary course of
business. Those agreements deemed to be Ordinary Course Agreements by reason of
subclause (A) of clause (vi) do not provide for payments by or to, or the
incurrence of obligations or expenses by, Company and its subsidiaries in excess
of $250,000 in the aggregate.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "TAX" or
"TAXES" refers to (i) any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts, (ii) any liability for payment of any amounts of the
type described in clause (i) as a result of being a member of an affiliated
consolidated, combined or unitary group, and (iii) any liability for amounts of
the type described in clauses (i) and (ii) as a result of any express or implied
obligation to indemnify another person or as a result of any obligations under
any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) Except as set forth in Part 2.7(b)(i) of the Company Letter,
Company and each of its subsidiaries have timely filed all federal, state, local
and foreign returns, estimates, information statements and reports ("RETURNS")
relating to Taxes required to be filed by or on behalf of Company and each of
its subsidiaries with any Tax authority, except where the failure to file such
Returns would not be material to Company. Such Returns are true, correct and
complete in all material respects, and Company and each of its subsidiaries have
paid all Taxes shown to be due on such Returns.
(ii) Except as set forth in Part 2.7(b)(ii) of the Company
Letter, Company and each of its subsidiaries have withheld with respect to its
employees all federal and state income taxes, Taxes pursuant to the Federal
Insurance Contribution Act ("FICA"), Taxes pursuant to the Federal Unemployment
Tax Act ("FUTA") and other Taxes required to be withheld, except such Taxes
which are not material to Company.
(iii) Neither Company nor any of its subsidiaries has been
delinquent in the payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against Company or any of its
subsidiaries, nor has Company or any of its subsidiaries executed any unexpired
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(iv) No audit or other examination of any Return of Company or
any of its subsidiaries by any Tax authority is presently in progress, nor has
Company or any of its subsidiaries been notified in writing, or to the knowledge
of Company, orally, of any request for such an audit or other examination.
(v) No adjustment relating to any Returns filed by Company or any
of its subsidiaries has been proposed in writing formally or informally by any
Tax authority to Company or any of its subsidiaries or any representative
thereof.
(vi) Neither Company nor any of its subsidiaries has any
liability for unpaid Taxes which has not been accrued for or reserved on the
Company Balance Sheet, whether asserted or unasserted, contingent or otherwise,
which is material to Company, other than any
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liability for unpaid Taxes that may have accrued since the date of the Company
Balance Sheet in connection with the operation of the business of Company and
its subsidiaries in the ordinary course.
(vii) There is no contract, agreement, plan or arrangement to
which Company is a party, including but not limited to the provisions of this
Agreement and the agreements entered into in connection with this Agreement,
covering any employee or former employee of Company or any of its subsidiaries
that, individually or collectively, would give rise to the payment of any amount
that would not be deductible pursuant to Sections 280G, 404 or 162(m) of the
Code. There is no contract, agreement, plan or arrangement to which the Company
is a party or by which it is bound to compensate any individual for excise taxes
paid pursuant to Section 4999 of the Code.
(viii) Neither Company nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by Company.
(ix) Neither Company nor any of its subsidiaries is party to or
has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement.
(x) Except as may be required as a result of the Merger, Company
and its subsidiaries have not been and will not be required to include any
adjustment in Taxable income for any Tax period (or portion thereof) pursuant to
Section 481 or Section 263A of the Code or any comparable provision under state
or foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Closing.
(xi) None of Company's or its subsidiaries' assets are tax exempt
use property within the meaning of Section 168(h) of the Code.
(xii) Company has made available to Parent or its legal or
accounting representatives copies of all foreign, federal and state income tax
and all state sales and use tax Returns for the Company and each of its
subsidiaries filed for all periods since December 31, 1995.
(xiii) There are no Encumbrances of any sort on the assets of the
Company or Subsidiary relating to or attributable to Taxes, other than liens for
Taxes not yet due and payable.
2.8 Title to Properties; Absence of Liens and Encumbrances.
(a) Part 2.8 of the Company Letter list all real property leases to
which Company is a party that provide for annual payments of $100,000 or more,
and each amendment thereto that is in effect as of the date of this Agreement.
All such current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default) that could give rise to a
claim against Company in an amount greater than $25,000. Other than the
leaseholds created under the real property leases identified in Part 2.8 of the
Company Letter, the Company and its subsidiaries own no interests in real
property.
(b) Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its material
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any Encumbrances,
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except as reflected in the Company Financials and except for liens for Taxes not
yet due and payable and such Encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby.
2.9 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and
all rights in, arising out of; or associated therewith: (i) all
United States, international and foreign patents and applications
therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof; (ii)
all inventions (whether patentable or not), invention disclosures,
improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights
registrations and applications therefor, and all other rights
corresponding thereto throughout the world; (iv) all industrial
designs and any registrations and applications therefor throughout
the world; (v) all trade names, URLs, logos, common law trademarks
and service marks, trademark and service mark registrations and
applications therefor throughout the world (collectively,
"TRADEMARKS"); (vi) all databases and data collections and all rights
therein throughout the world including but not limited to User Data
(as defined below); (vii) all moral and economic rights of authors
and inventors, however denominated, throughout the world, and (viii)
any similar or equivalent rights to any of the foregoing anywhere in
the world.
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, Company or one of its
subsidiaries.
"REGISTERED INTELLECTUAL PROPERTY" means all United States,
international and foreign: (i) patents and patent applications
(including provisional applications); (ii) registered trademarks,
applications to register trademarks, intent-to-use applications, or
other registrations or applications related to trademarks; (iii)
registered copyrights and applications for copyright registration;
and (iv) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document
issued, filed with, or recorded by any state, government or other
public legal authority.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means all of the
Registered Intellectual Property owned by, or filed in the name of,
Company or one of its subsidiaries.
"USER DATA" means, known, assumed or inferred information or
attributes about a user or subscriber.
(a) No material Company Intellectual Property or product or service
of Company is subject to any proceeding or outstanding decree, order, judgment,
agreement, or stipulation restricting in any manner the use, transfer, or
licensing thereof by Company, or which may affect the validity, use or
enforceability of such Company Intellectual Property, except for restrictions on
User Data included in published privacy policies of Company or any of its
subsidiaries.
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(b) Each material item of Company Registered Intellectual Property is
valid and subsisting, all necessary registration, maintenance and renewal fees
currently due in connection with such Company Registered Intellectual Property
have been made and all necessary documents, recordations and certificates in
connection with such Company Registered Intellectual Property have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Company Registered Intellectual Property.
(c) Company or one of its subsidiaries owns and has good and
exclusive title to, or has license sufficient for the conduct of its business as
currently conducted to, each material item of Company Intellectual Property free
and clear of any Encumbrance (excluding licenses and related restrictions).
Company reasonably believes that it will be able to obtain on commercially
reasonable terms each material item of Company Intellectual Property, free and
clear of any Encumbrance (excluding licenses and related restrictions), required
to conduct its business as proposed to be conducted. Company or one of its
subsidiaries is the exclusive owner of all material Trademarks used in
connection with the operation or conduct of the business of Company and its
subsidiaries, including the sale of any products or the provision of any
services by Company and its subsidiaries.
(d) Company or one of its subsidiaries owns exclusively, and has good
title to, all copyrighted works that are Company products or which Company
otherwise expressly purports to own.
(e) To the extent that any material Intellectual Property has been
developed or created by a third party for Company or any of its subsidiaries,
Company or its subsidiaries, as the case may be, has a written agreement with
such third party with respect thereto and Company or its subsidiary thereby
either (i) has obtained ownership of and is the exclusive owner of, or (ii) has
obtained a license (sufficient for the conduct of its business as currently
conducted and as proposed to be conducted) to all such third party's
Intellectual Property in such work, material or invention by operation of law or
by valid assignment.
(f) Neither Company nor any of its subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was material Company Intellectual Property, to any third
party.
(g) Part 2.9 of the Company Letter list all material contracts,
licenses and agreements to which Company or any of its subsidiaries is a party
(i) with respect to Company Intellectual Property licensed or transferred to any
third party (other than Ordinary Course Agreements); or (ii) pursuant to which a
third party has licensed or transferred any material Intellectual Property to
Company or any of its subsidiaries.
(h) All material contracts, licenses and agreements relating to the
Company Intellectual Property to which Company or any of its subsidiaries is a
party are in full force and effect. The consummation of the transactions
contemplated by this Agreement will neither violate nor result in the breach,
modification, cancellation, termination, or suspension of such contracts,
licenses and agreements. Company and each of its subsidiaries are in material
compliance with, and have not materially breached any term of any of such
contracts, licenses and agreements and, to the knowledge of Company and its
subsidiaries, all other parties to such contracts, licenses and agreements are
in compliance in all material respects with, and have not materially breached
any term of, such contracts, licenses and agreements. Following the Closing
Date, the Surviving Corporation will be permitted to exercise all of Company's
and its subsidiaries' rights under such contracts, licenses and
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agreements to the same extent Company would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which Company would otherwise be required to pay.
(i) The operation of the business of Company as such business
currently is conducted, including Company's design, development, marketing and
sale of the products or services of Company (including with respect to products
currently under development) has not, does not and will not infringe or
misappropriate the Intellectual Property of any third party or, to its
knowledge, constitute unfair competition or trade practices under the laws of
any jurisdiction.
(j) Company has not received notice from any third party that the
operation of the business of Company or any act, product or service of Company,
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(k) To the knowledge of Company, no person has or is infringing or
misappropriating any material Company Intellectual Property.
(l) Company and its subsidiaries have taken reasonable and
appropriate steps to protect Company's and its subsidiaries' rights in Company's
and such subsidiaries' confidential information and trade secrets that they wish
to protect or any trade secrets or confidential information of third parties
provided to Company or such subsidiaries, and, without limiting the foregoing,
Company and its subsidiaries have and enforce a policy requiring each employee
and contractor to execute a proprietary information/confidentiality agreement
substantially in the form provided to Parent and all current and former
employees and contractors of Company and its subsidiaries have executed such an
agreement, except where the failure to do so in respect of employees not
involved in development of the Company Intellectual Property is not reasonably
expected to be material to Company. All disclosure of material confidential
information of Company or its subsidiaries provided to third parties has been
pursuant to a written agreement between Company or such subsidiary and such
third party
(m) The Development and Operational Services, Marketing Services,
Electronic Commerce Tools, and Company Software (as each such term is defined in
the Marketing Agreement) are and shall remain year 2000 compliant in that: date
data from at least 1900 through 2101 will process without error or interruption
due solely to the change in century, in any level of computer hardware, software
or services, including, microcode, firmware, system and application programs,
files, databases and computer services; there will be no loss of functionality
of any of the foregoing due solely to the change in century, with respect to the
introduction, processing or output of records containing dates falling on or
after January 1, 2000; and on and after January 1, 2000, all of the foregoing
will continue to be interoperable, in the same manner as they are prior to
January 1, 2000, with software and hardware that may deliver records to, receive
records from or interact with the foregoing in the course of processing data,
provided that such other software and hardware uses a century windowing or
interpretive approach (with a pivot year of 50). Except as set forth in Part
2.9(m) of the Company Letter, since January 1, 1998, neither Company nor any of
its subsidiaries has given to customers any written representations or
warranties or indemnities with respect to year 2000 compliance or conformity,
except where Company's liability is limited to amounts paid to Company pursuant
to the contract in which such representation, warranty or indemnity appears and
lost profits and consequential damages are expressly excluded.
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2.10 Compliance with Laws; Permits; Restrictions.
(a) Except as disclosed in Part 2.10 of the Company Letter, neither
Company nor any of its subsidiaries is, in any material respect, in conflict
with, or in default or in violation of (i) any law, rule, regulation, order,
judgment or decree applicable to Company or any of its subsidiaries or by which
Company or any of its subsidiaries or any of their respective properties is
bound or affected, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Company or any of its subsidiaries is a party or by which Company or
any of its subsidiaries or its or any of their respective properties is bound or
affected, except for such conflicts, violations and defaults that (individually
or in the aggregate) would not cause Company to lose any material benefit or
incur any material liability. No investigation or review by any Governmental
Entity is pending or, to Company's knowledge, has been threatened in a writing
delivered to Company against Company or any of its subsidiaries, nor, to
Company's knowledge, has any Governmental Entity indicated an intention to
conduct an investigation of Company or any of its subsidiaries. Neither Company
nor any of its subsidiaries is liable, either primarily or jointly and severally
with any other party, for any fines, penalties or other amounts payable to any
Governmental Entity, which, in the case of a subsidiary (but not Company) exceed
$10,000. There is no agreement, judgment, injunction, order or decree binding
upon Company or any of its subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of Company or any of its subsidiaries, any acquisition of material
property by Company or any of its subsidiaries, the conduct of business by
Company as currently conducted, or the Merger or other transactions contemplated
by this Agreement. Except as set forth in Part 2.10 of the Company Letter,
neither Company nor any of its subsidiaries is subject to any reporting or
filing requirement with or to any Governmental Entity other than such
requirements which are applicable to companies similarly situated to Company or
such subsidiary.
(b) Company and its subsidiaries hold, to the extent legally
required, all permits, licenses, variances, exemptions, orders and approvals
from Governmental Entities that are material to and required for the operation
of the business of Company as currently conducted (collectively, the "COMPANY
PERMITS"). Company and its subsidiaries are in compliance in all respects with
the terms of each Company Permit, except where the failure to be in compliance
with the terms of such Company Permit would not be material to Company.
2.11 Litigation.
(a) Except as disclosed in Part 2.11 of the Company Letter, there are
no claims, suits, actions or proceedings pending or, to the knowledge of
Company, threatened against, relating to or affecting Company or any of its
subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seeks to restrain or enjoin
the consummation of the transactions contemplated by this Agreement or which
could reasonably be expected, either singularly or in the aggregate with all
such claims, actions or proceedings, to be material to Company or, following the
Merger, to the Surviving Corporation, or have a material adverse effect on the
ability of the parties hereto to consummate the Merger. Except as disclosed in
Part 2.11 of the Company Letter, no Governmental Entity has at any time
challenged or questioned in a writing delivered to Company the legal right of
Company to design, offer or sell any of its products or services in the present
manner or style thereof. Except as set forth in Part 2.11 of the Company Letter,
as of the date hereof, to the knowledge of Company, no event has occurred, and
no claim, dispute or other condition or circumstance exists, that will, or that
would reasonably be
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expected to, cause or provide a bona fide basis for a director or executive
officer of Company to seek indemnification from the Company.
(b) Company has never been subject to an audit, compliance review,
investigation or like contract review by the GSA office of the Inspector General
or other Governmental Entity or agent thereof in connection with any government
contract (a "GOVERNMENT AUDIT"), to the Company's knowledge no Government Audit
is threatened or reasonably anticipated, and in the event of such Government
Audit, to the knowledge of the Company no basis exists for a finding of
noncompliance with any material provision of any government contract or a refund
of any amounts paid or owed by any Governmental Entity pursuant to such
government contract. For each item disclosed in the Company Letter pursuant to
this Section 2.11 a true and complete copy of all correspondence and
documentation with respect thereto has been provided to Parent.
2.12 Employee Benefit Plans.
(a) Definitions. With the exception of the definition of "Affiliate"
set forth in Section 2.12(a)(i) below (which definition shall apply only to this
Section 2.12), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "AFFILIATE" shall mean any other person or entity under
common control with Company within the meaning of Section 414(b), (c) or (m) of
the Code and the regulations issued thereunder;
(ii) "COMPANY EMPLOYEE PLAN" shall mean any material plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan" within the meaning of
Section 3(3) of ERISA without regard to materiality which is or has been
maintained, contributed to, or required to be contributed to, by Company or any
Affiliate for the benefit of any Employee;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "EMPLOYEE" shall mean any current, former, or retired common
law employee, officer, or director of Company or any Affiliate;
(vi) "EMPLOYEE AGREEMENT" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or similar agreement or contract between Company or any Affiliate and any
Employee or consultant which pertains to a service provider who is receiving or
will receive payments from the Company of $85,000 or more in any calendar year;
(vii) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
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(ix) "INTERNATIONAL EMPLOYEE PLAN" shall mean each Company
Employee Plan that has been adopted or maintained by Company, whether informally
or formally, for the benefit of Employees outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "MULTIEMPLOYER PLAN" shall mean any "PENSION PLAN" (as
defined below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty Corporation;
and
(xiii) "PENSION PLAN" shall mean each Company Employee Plan which
is an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) Schedule. Part 2.12 of the Company Letter contain an accurate and
complete list of each Company Employee Plan and each Employee Agreement. Company
does not have any plan or commitment to establish any new Company Employee Plan,
to modify any Company Employee Plan or Employee Agreement (except to the extent
required by law or to conform any such Company Employee Plan or Employee
Agreement to the requirements of any applicable law, in each case as previously
disclosed to Parent in writing, or as required by this Agreement), or to enter
into any Company Employee Plan or Employee Agreement, nor does it have any
intention or commitment to do any of the foregoing.
(c) Documents. Company has provided to Parent: (i) correct and
complete copies of all documents embodying each Company Employee Plan and each
Employee Agreement including all amendments thereto; (ii) the most recent annual
actuarial valuations, if any, prepared for each Company Employee Plan; (iii) the
three (3) most recent annual reports (Form Series 5500 and all schedules and
financial statements attached thereto), if any, required under ERISA or the Code
in connection with each Company Employee Plan or related trust; (iv) if the
Company Employee Plan is funded, the most recent annual and periodic accounting
of Company Employee Plan assets; (v) the most recent summary plan description
together with the summary of material modifications thereto, if any, required
under ERISA with respect to each Company Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and rulings relating
to Company Employee Plans and copies of all applications and correspondence to
or from the IRS or the DOL with respect to any filings required under the Code
or ERISA or any examination or submission under IRS Revenue Procedure 98-22 with
respect to any Company Employee Plan; (vii) all material written agreements and
contracts relating to each Company Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts; (viii) all communications material to any Employee or Employees
relating to any Company Employee Plan and any proposed Company Employee Plans,
in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability to
Company; (ix) all COBRA forms and related notices currently in use; and (x) all
registration statements and prospectuses prepared in connection with each
Company Employee Plan.
(d) Employee Plan Compliance. (i) Company has performed in all
material respects all obligations required to be performed by it under, is not
in default or violation of; and has no knowledge of any default or violation by
any other party to each Company Employee Plan, and each Company Employee Plan
has been established and maintained in all material respects in accordance with
its terms and in substantial compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA or
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the Code provided that any disqualifying defect in the operation of the plan may
be corrected under APRSC as defined in Revenue Procedure 98-22; (ii) each
Company Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code has either
received a favorable determination letter from the IRS with respect to each such
Plan as to its qualified status under the Code or has remaining a period of time
under applicable Treasury regulations or IRS pronouncements in which to apply
for such a determination letter and make any amendments necessary to obtain a
favorable determination; (iii) Company has not engaged in any "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA, and not otherwise exempt under Section 408 of ERISA, with respect
to any Company Employee Plan; (iv) there are no actions, suits or claims
pending, or, to the knowledge of Company, threatened or reasonably anticipated
(other than routine claims for benefits) against any Company Employee Plan or
against the assets of any Company Employee Plan; (v) each Company Employee Plan
can be amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without material liability to Parent, Company or any
of its Affiliates (other than ordinary administration expenses typically
incurred in a termination event); (vi) there are no audits, inquiries or
proceedings pending or, to the knowledge of Company, threatened by the IRS or
DOL with respect to any Company Employee Plan; and (vii) neither Company nor any
Affiliate is subject to any penalty or tax with respect to any Company Employee
Plan under Section 402(i) of ERISA or Sections 4975 through 4980 of the Code.
Company has timely made all required contributions to each Company Employee Plan
through the date hereof (and the Closing Date) or has accrued such amounts on
the Company Financials.
(e) Pension Plans. Company does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has Company contributed to or
been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan
provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and Company has
never represented, promised or contracted (whether in oral or written form) to
any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) COBRA; FMLA. Neither Company nor any Affiliate has, prior to the
Effective Time, and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees.
(i) Effect of Transaction.
(i) Except as disclosed in Part 2.12(i)(i) of the Company Letter,
the execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration,
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forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(ii) Except as disclosed in Part 2.12(i)(ii) of the Company
Letter, no payment or benefit which will or may be made by Company or its
Affiliates with respect to any Employee as a result of the transactions
contemplated by this Agreement will be characterized as an "excess parachute
payment," within the meaning of Section 280G(b)(1) of the Code or will be
treated as a nondeductible expense within the meaning of Section 162 of the
Code.
(j) Employment Matters. Company and each of its subsidiaries: (i) is
in compliance in all material respects with all applicable foreign, federal,
state and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Employees; (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other payments to
Employees; (iii) to Company's knowledge, is not liable for any arrears of wages
or any taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any material payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, or, to
Company's knowledge, threatened or reasonably anticipated claims or actions
against Company under any worker's compensation policy or long-term disability
policy. To Company's knowledge, no Employee of Company has violated any
employment contract, nondisclosure agreement or noncompetition agreement by
which such Employee is bound due to such Employee being employed by Company and
disclosing to Company or using trade secrets or proprietary information of any
other person or entity.
(k) Labor. No work stoppage or labor strike against Company is
pending, threatened or reasonably anticipated. Company does not know of any
activities or proceedings of any labor union to organize any Employees. There
are no actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of Company, threatened or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to Company. Neither Company nor any
of its subsidiaries has engaged in any unfair labor practices within the meaning
of the National Labor Relations Act. Company is not presently, nor has it been
in the past, a party to, or bound by, any collective bargaining agreement or
union contract with respect to Employees and no collective bargaining agreement
is being negotiated by Company.
(l) International Employee Plan. Each International Employee Plan has
been established, maintained and administered in material compliance with its
terms and conditions and with the requirements prescribed by any and all
statutory or regulatory laws that are applicable to such International Employee
Plan. Furthermore, no International Employee Plan has any unfunded liabilities,
that as of the Effective Time, will not be offset by insurance or fully accrued.
Except as required by law, no condition exists that would prevent Company or
Parent from terminating or amending any International Employee Plan at any time
for any reason.
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2.13 Environmental Matters.
(a) Hazardous Material. Except as would not result in material
liability to Company, no underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies and other hazardous substances used in compliance with law
(a "HAZARDOUS MATERIAL") are present, as a result of the actions of Company or
any of its subsidiaries or any affiliate of Company, or, to Company's knowledge
(in this case not including a duty of inquiry), as a result of any actions of
any third party or otherwise, in, on or under any property, including the land
and the improvements, ground water and surface water thereof that Company or any
of its subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not result in a
material liability to Company (in any individual case or in the aggregate) (i)
neither Company nor any of its subsidiaries has transported, stored, used,
manufactured, disposed of released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the Closing
Date, and (ii) neither Company nor any of its subsidiaries has disposed of;
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. Company and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the
"COMPANY ENVIRONMENTAL PERMITS") material to and necessary for the conduct of
Company's and its subsidiaries' Hazardous Material Activities and other
businesses of Company and its subsidiaries as such activities and businesses are
currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ or injunction is pending, and to Company's
knowledge, no action, proceeding, revocation proceeding, amendment procedure,
writ or injunction has been threatened by any Governmental Entity against
Company or any of its subsidiaries in a writing delivered to Company concerning
any Company Environmental Permit, Hazardous Material or any Hazardous Materials
Activity of Company or any of its subsidiaries. To the knowledge of Company(in
this case not including a duty of inquiry), there is no fact or circumstance
which could involve Company or any of its subsidiaries in any environmental
litigation or impose upon Company any material environmental liability.
2.14 Agreements, Contracts and Commitments. Except as otherwise set
forth in Part 2.14 of the Company Letter, neither Company nor any of its
subsidiaries is a party to or is bound by:
(a) any employment agreement, contract or commitment with any
employee or member of Company's Board of Directors, other than those that are
terminable by Company or any of its subsidiaries on no more than thirty days
notice without liability or financial obligation, except to the extent general
principles of wrongful termination law may limit
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Company's or any of its subsidiaries' ability to terminate employees at will, or
any consulting agreement;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification, any guaranty or any instrument
evidencing indebtedness for borrowed money by way of direct loan, sale of debt
securities, purchase money obligation, conditional sale, or otherwise;
(d) any agreement, obligation or commitment containing covenants
purporting to limit or which effectively limit the Company's or any of its
subsidiaries' freedom to compete in any line of business or in any geographic
area or which would so limit Company or Surviving Corporation or any of its
subsidiaries after the Effective Time or granting any exclusive distribution or
other exclusive rights;
(e) any agreement, contract or commitment currently in force relating
to the disposition or acquisition by Company or any of its subsidiaries after
the date of this Agreement of a material amount of assets not in the ordinary
course of business or pursuant to which Company has any material ownership
interest in any corporation, partnership, joint venture or other business
enterprise other than Company's subsidiaries;
(f) any licensing, distribution, marketing, reseller, merchant
services, advertising, sponsorship or other similar agreement other than
Ordinary Course Agreements;
(g) any agreement, contract or commitment currently in force to
provide source code to any third party for any product or technology; or
(h)(i) any other agreement, contract or commitment currently in
effect that is material to Company's business as presently conducted and
proposed to be conducted entered into since the filing of Company's Quarterly
Report on Form 10-Q for the Fiscal Quarter ending March 31, 1999, or (ii) any
amendment or modification to any agreement, contract or commitment required to
be publicly filed by Company pursuant to the Exchange Act which has not been so
filed as a result of such amendment or modification having been entered into
subsequent to the filing of such Form 10-Q.
Neither Company nor any of its subsidiaries, nor to Company's knowledge any
other party to a Company Contract (as defined below), is in breach, violation or
default under, and neither Company nor any of its subsidiaries has received
written notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which Company or any of its subsidiaries is a party or by which it is bound
that are required to be disclosed in the Company Letter pursuant to clauses (a)
through (h) above, pursuant to Section 2.9 hereof, or pursuant to Item
601(b)(10) of Regulation S-K under the Exchange Act (any such agreement,
contract or commitment, a "COMPANY CONTRACT") in such a manner as would permit
any other party to cancel or terminate any such Company Contract, or would
permit any other party to seek material damages or other remedies (for any or
all of such breaches, violations or defaults, in the aggregate).
2.15 Change of Control Payments. Part 2.15 of the Company Letter set
forth each plan or agreement pursuant to which any amounts may become payable
(whether currently or
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in the future) to current or former officers and directors of Company as a
result of or in connection with the Merger.
2.16 Insurance. Part 2.16 of the Company Letter sets forth a complete
list of each insurance policy held by Company or any of its subsidiaries and
true and correct copies of such policies have been provided to Parent. There is
no material claim pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. Each such policy is in full force and effect. All premiums
due and payable under all such policies have been paid and the Company and its
subsidiaries are otherwise in compliance in all material respects with the terms
of such policies and bonds. To the knowledge of Company, there has been no
threatened termination of, or material premium increase with respect to, any of
such policies.
2.17 Disclosure. None of the information supplied by Company for
inclusion in the registration statement on Form S-4 (or any similar successor
form thereto) to be filed by Parent with the SEC in connection with the issuance
of Parent Common Stock in the Merger (the "REGISTRATION STATEMENT") will, at the
time the Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading, except that no representation or
warranty is made by the Company with respect to statements made or incorporated
by reference therein about Parent or Merger Sub supplied by Parent for inclusion
or incorporation by reference in the Registration Statement. None of the
information supplied by Company for inclusion in the proxy statement/prospectus
to be filed with the SEC as part of the Registration Statement (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"PROXY STATEMENT/PROSPECTUS") will, at the time the Proxy Statement/Prospectus
is mailed to Company's stockholders, or at the time of the meeting of the
Company's stockholders to consider the approval of this Agreement, the Merger
and the Articles Amendment (the "COMPANY'S STOCKHOLDERS' MEETING") or as of the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders' Meeting which has become misleading,
except that no representation or warranty is made by Company with respect to
statements made or incorporated by reference therein about Parent or Merger Sub
supplied by Parent for inclusion or incorporation by reference in the Proxy
Statement/Prospectus. The Proxy Statement/Prospectus will comply as to form in
all material respects with the provisions of the Securities Act, the Exchange
Act and the rules and regulations thereunder.
2.18 Board Approval. The Board of Directors of Company, by unanimous
written consent dated July 10, 1999, (i) declared that, prior to such date, it
had not acted on any proposed agreement, arrangement or understanding with
Parent or any other party with respect to the transactions contemplated by this
Agreement, the Company Voting Agreements or the Merger, and (ii) approved the
continuation of negotiations for the purpose of reaching an agreement with
respect thereto, and, at a meeting duly held on July 11, 1999, unanimously
determined that the Merger is advisable and fair to, and in the best interests
of, Company and its stockholders, approved this Agreement, the Company Voting
Agreements, the Merger, the Articles Amendment and the other transactions
contemplated by this
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Agreement under relevant Nevada Law, and determined to recommend that the
stockholders of Company approve this Agreement, the Merger and the Articles
Amendment.
2.19 Brokers' and Finders' Fees. Except for fees payable to BancBoston
Robertson Stephens, Inc. pursuant to an engagement letter dated June 14, 1999,
as amended June 18, 1999, a copy of which has been provided to Parent, Company
has not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.20 Fairness Opinion. Company's Board of Directors has received a
written opinion from BancBoston Robertson Stephens, Inc., dated as of the date
hereof, to the effect that, as of the date hereof, the Exchange Ratio is fair to
Company's stockholders from a financial point of view, and has delivered to
Parent a copy of such opinion.
2.21 Nevada Law; Rights Agreement. The Board of Directors of Company, by
unanimous written consent dated July 10, 1999, has taken all actions so that the
provisions of Section 78.378 et seq. of Nevada Law applicable to the acquisition
of a "controlling interest" (as defined in such Section 78.3785) and the
restrictions on any "combination" with an "interested stockholder" (as defined
in Sections 78.416 and 78.423, respectively) set forth in Section 78.438 and
Section 78.439 of Nevada Law and any other applicable law or regulation having
an adverse effect upon the consummation of the Merger and other transactions
contemplated hereby, in each case, will not apply to the execution, delivery or
performance of this Agreement or the Company Voting Agreements or to the
consummation of the Merger or the other transactions contemplated by this
Agreement or the Company Voting Agreements. Without limiting the foregoing, the
Board of Directors of Company has amended Company's Bylaws to exempt from the
provisions of Sections 78.378 to 78.3793 of Nevada Law the execution, delivery
and performance of this Agreement and the Company Voting Agreements and the
consummation of the Merger and the other transactions contemplated by this
Agreement and the Company Voting Agreements, which Bylaw amendment cannot by its
terms be repealed or amended in a manner adverse to Parent without Parent's
prior written consent unless this Agreement has been terminated in accordance
with its terms. Neither Company nor any of its subsidiaries has adopted, nor are
any of them subject to, a stockholder rights plan, "poison pill" or other
anti-takeover or similar plan or arrangement, or entered into a stockholder
rights agreement or any similar agreement or instrument with any entity (a
"RIGHTS AGREEMENT").
2.22 Related Party Transactions. Except as set forth in the Company SEC
Reports, and except as contemplated by this Agreement or as executed
concurrently herewith or prior hereto at the request of Parent, since the date
of Company's last proxy statement filed with the SEC, no event has occurred as
of the date of this Agreement that would be required to be reported by Company
pursuant to Item 404 of Regulation S-K promulgated by the SEC.
2.23 Internet Yellow Pages. From January 1, 1999 through the date of this
Agreement, Company's "Internet Yellow Pages" line of business has been
responsible for less than $10,000 of revenues to Company and its subsidiaries.
Company is currently able to, and immediately following the Closing, Surviving
Corporation or Parent would be able to, discontinue the business operations of
the "Internet Yellow Pages" without material liability to any third party. To
Company's knowledge, no third party (other than RMS Internet Marketing Group,
Inc. ("RMS")) has the right to resell space on the "Internet Yellow Pages".
Company and its subsidiaries have, prior to the date of this Agreement,
terminated all agreements and business dealings with RMS.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As of the date of this Agreement and as of the Closing Date, Parent and
Merger Sub represent and warrant to Company, subject to the exceptions
specifically disclosed in writing in the disclosure letter and referencing a
specific representation delivered by Parent to Company dated as of the date
hereof and certified by a duly authorized officer of Parent (the "PARENT
LETTER"), as follows:
3.1 Organization of Parent and Merger Sub.
(a) Each of Parent and Merger Sub (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized; (ii) has the corporate or other power and
authority to own, lease and operate its assets and properties and to carry on
its business as now being conducted; and (iii) except as would not be material
to Parent, is duly qualified or licensed to do business in each jurisdiction
where the character of the properties owned, leased or operated by it or the
nature of its activities makes such qualification or licensing necessary.
(b) Parent and Merger Sub have made available to Company a true and
correct copy of the Certificate of Incorporation or Articles of Incorporation
and Bylaws of Parent and Merger Sub, each as amended to date, and each such
instrument is in full force and effect. Neither Parent, Merger Sub nor any of
their subsidiaries is in violation of any of the provisions of its Certificate
of Incorporation or Bylaws or equivalent governing instruments.
3.2 Parent and Merger Sub Capital Structure.
(a) The authorized capital stock of Parent consists of 719,719,414
shares of common stock, par value $0.01 per share, of which 683,700,000 shares
have been designated Series A Common Stock (or Parent Common Stock), 30,800,000
shares have been designated Series B Common Stock and 5,219,414 shares have been
designated Series K Common Stock, of which there were 331,563,340 shares of
Series A Common Stock, 30,800,000 shares of Series B Common Stock and 5,219,414
shares of Series K Common Stock issued and outstanding as of June 30, 1999, and
9,650,000 shares of Preferred Stock, par value $0.01 per share, of which no
shares are issued or outstanding as of June 30, 1999. All outstanding shares of
Parent Common Stock are duly authorized, validly issued, fully paid and
nonassessable. As of June 30, 1999: (i) there were options outstanding to
purchase an aggregate of 50,608,261 shares of Parent Common Stock pursuant to
Parent's stock option plans; and (ii) 1,775,542 shares of Parent Common Stock
reserved for future issuance under Parent's 1997 Employee Stock Purchase Plan.
All shares of Parent Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable.
(b) The authorized capital stock of Merger Sub consists of 1,000
shares of common stock, no par value, all of which, as of the date hereof, are
issued and outstanding and are held by Parent. All of the outstanding shares of
Merger Sub's common stock have been duly authorized and validly issued, and are
fully paid and nonassessable. Merger Sub was formed for the purpose of
consummating the Merger and has no material assets or liabilities except as
necessary for such purpose.
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(c) The Parent Common Stock to be issued in the Merger, when issued
in accordance with the provisions of this Agreement, will be validly issued,
fully paid and nonassessable.
3.3 Authority.
(a) Parent has all requisite corporate power and authority to enter
into this Agreement and the Company Voting Agreements and to consummate the
transactions contemplated hereby and thereby. Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the Company Voting Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub, subject only to the
filing of the Articles of Merger pursuant to Nevada Law. This Agreement and the
Company Voting Agreements have each been duly executed and delivered by Parent
and this Agreement has been duly executed and delivered by Merger Sub and,
assuming the due authorization, execution and delivery by Company, constitute
the valid and binding obligations of Parent and Merger Sub, respectively,
enforceable against Parent and Merger Sub in accordance with their terms, except
as enforceability may be limited by bankruptcy and other similar laws affecting
the rights of creditors generally and general principles of equity. The
execution and delivery of this Agreement and the Company Voting Agreements by
Parent and the execution and delivery of this Agreement by Merger Sub does not,
and the performance of this Agreement and the Company Voting Agreements by
Parent and the performance of this Agreement by Merger Sub will not, (i)
conflict with or violate the Certificate of Incorporation or Bylaws of Parent or
Merger Sub, (ii) subject to compliance with the requirements set forth in
Section 3.3(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Parent or Merger Sub or by which any of their
respective properties is bound or affected, or (iii) result in any material
breach of or constitute a material default (or an event that with notice or
lapse of time or both would become a material default) under, or impair Parent's
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of; or
result in the creation of a material Encumbrance on any of the material
properties or assets of Parent or Merger Sub pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or Merger Sub is a party or by
which Parent or Merger Sub or any of their respective properties are bound or
affected. Part 3.3 of the Parent Letter list all consents, waivers and approvals
under any of Parent's or any of its subsidiaries' agreements, contracts,
licenses or leases required to be obtained in connection with the consummation
of the transactions contemplated hereby, which, if individually or in the
aggregate not obtained, would result in a material loss of benefits to Parent or
the Surviving Corporation as a result of the Merger.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained or
made by Parent or Merger Sub in connection with the execution and delivery of
this Agreement and the Company Voting Agreements or the consummation of the
Merger, except for (i) the filing of the Articles of Merger with the Secretary
of State of the State of Nevada, (ii) the filing of the Registration Statement
and a Schedule 13D with regard to the Company Voting Agreements in accordance
with the Securities Act and the Exchange Act, and the effectiveness of the
Registration Statement, (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal, foreign and state
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securities (or related) laws and the HSR Act and the securities or antitrust
laws of any foreign country, and (iv) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made would not be
material to Parent or Company or have a material adverse effect on the ability
of the parties hereto to consummate the Merger.
3.4 SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, reports and documents required to be
filed by Parent with the SEC since January 1, 1997, and has made available to
Company such forms, reports and documents in the form filed with the SEC. All
such required forms, reports and documents (including those that Parent may file
subsequent to the date hereof) are referred to herein as the "PARENT SEC
REPORTS." As of their respective dates, the Parent SEC Reports (i) were prepared
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Parent SEC Reports, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except to the extent
corrected prior to the date of this Agreement by a subsequently filed Parent SEC
Report. All documents required to be filed as exhibits to the Parent SEC Reports
have been so filed. None of Parent'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 Parent SEC Reports (the
"PARENT FINANCIALS"), including any Parent SEC Reports filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 1O-Q, 8-K or any successor form under the Exchange Act) and (iii) fairly
presented in all material respects the consolidated financial position of Parent
and its subsidiaries as at the respective dates thereof and the consolidated
results of Parent's operations and cash flows for the periods indicated, except
that the unaudited interim financial statements may not contain footnotes and
were or are subject to normal and recurring year-end adjustments. The audited
balance sheet of Parent contained in Parent SEC Reports as of December 31, 1998
is hereinafter referred to as the "PARENT BALANCE SHEET." Except as disclosed in
the Parent Financials, since the date of the Parent Balance Sheet neither Parent
nor any of its subsidiaries has any liabilities required under GAAP to be set
forth on a balance sheet (absolute, accrued, contingent or otherwise) which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Parent and its subsidiaries taken as a
whole, except for liabilities incurred since the date of the Parent Balance
Sheet in the ordinary course of business consistent with past practices and
liabilities incurred in connection with this Agreement.
(c) Parent has heretofore furnished to Company a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Securities Act or the Exchange Act.
3.5 Absence of Changes. Since the date of the Parent Balance Sheet there
has not been: (i) any Material Adverse Effect with respect to Parent, (ii) any
declaration, setting
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aside or payment of any dividend on, or other distribution (whether in cash,
stock or property) in respect of, any of Parent's or any of its subsidiaries'
capital stock, or any purchase, redemption or other acquisition by Parent of any
of Parent's capital stock or any other securities of Parent or its subsidiaries
or any options, warrants, calls or rights to acquire any such shares or other
securities except for repurchases from employees following their termination
pursuant to the terms of their pre-existing stock option or purchase agreements,
(iii) other than a two-for-one stock split of Parent's common stock on June 16,
1999, any split, combination or reclassification of any of Parent's or any of
its subsidiaries' capital stock, (iv) any material change by Parent in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP, or (v) any material revaluation by Parent of any of its assets,
including, without limitation, writing off notes or accounts receivable other
than in the ordinary course of business.
3.6 Litigation. There are no claims, suits, actions or proceedings
pending or, to the knowledge of Parent, threatened against, relating to or
affecting Parent or any of its subsidiaries, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or which could reasonably be expected, either
singularly or in the aggregate with all such claims, actions or proceedings, to
be material to Parent or have a material adverse effect on the ability of the
parties hereto to consummate the Merger.
3.7 Disclosure. None of the information supplied by Parent for inclusion
in the Registration Statement will, at the time the Registration Statement is
filed with the SEC and at the time it becomes effective under the Securities Act
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation or warranty is made by Parent with
respect to statements made or incorporated by reference therein about Company
supplied by Company for inclusion or incorporation by reference in the
Registration Statement. None of the information supplied by Parent for inclusion
in the Proxy Statement/Prospectus will, at the time the Proxy
Statement/Prospectus is mailed to Company's stockholders, at the time of the
Company Stockholders' Meeting or as of the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, or omit to state
any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Stockholders' Meeting which has become misleading, except that no representation
or warranty is made by Parent with respect to statements made or incorporated by
reference therein about Company supplied by Company for inclusion or
incorporation by reference in the Proxy Statement/Prospectus. The Registration
Statement will comply as to form in all material respects with the provisions of
the Securities Act and the rules and regulations thereunder.
3.8 Board Approval. The Board of Directors of Parent has approved this
Agreement, the Company Voting Agreements, the Merger and the other transactions
contemplated by this Agreement.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company and each of its
subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its business in all material respects in the usual, regular
and ordinary course, in substantially the same manner as heretofore conducted
and in compliance in all material respects with all applicable laws and
regulations, pay its debts and taxes when due subject to good faith disputes
over such debts or taxes, pay or perform other material obligations when due
subject to good faith disputes over such obligations, and use its commercially
reasonable efforts consistent with past practices and policies to (i) preserve
intact its present business organization, (ii) keep available the services of
its present officers and employees and (iii) preserve its relationships with
customers, suppliers, licensors, licensees, and others with which it has
business dealings. In addition, Company will promptly notify Parent of any
material event involving its business or operations.
In addition, except as permitted by the terms of this Agreement, and except
as provided in Part 4.1 of the Company Letter, without the prior written consent
of Parent, during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement pursuant to its terms or
the Effective Time, Company shall not do any of the following and shall not
permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change
the period of exercisability of options or repurchase of restricted stock
(including Company Restricted Stock), or reprice options granted under any
employee, consultant, director or other stock plans or authorize cash payments
in exchange for any options granted under any of such plans;
(b) Grant any severance or termination pay to any officer or employee
except pursuant to written agreements in effect, or policies existing, on the
date hereof and as previously disclosed in writing to Parent, or adopt any new
severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company Intellectual
Property, other than non-exclusive licenses in the ordinary course of business
and consistent with past practice;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of Company or its subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber any
shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into, or exercisable or exchangeable
for, shares of capital stock, or enter into other agreements or commitments of
any character obligating it to issue any such shares or convertible, exercisable
or exchangeable securities, other than (i) grants of Company Options to newly
hired
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employees, consistent with Company's past practices regarding such grants, not
to exceed Company Options in respect of 100,000 shares of Company Common Stock
in the aggregate, and (ii) the issuance delivery and/or sale of shares of
Company Common Stock pursuant to the exercise of Company Options or Company
Warrants outstanding as of July 9, 1999 and Company Options granted pursuant to
the preceding clause (i);
(g) Cause, permit or propose any amendments to its Articles of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof; or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
business of Company or enter into any material joint ventures, strategic
partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of Company;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Company, enter
into any "keep well" or other agreement to maintain any financial statement
condition or enter into any arrangement having the economic effect of any of the
foregoing;
(k) Adopt or amend any employee benefit plan or employee stock
purchase or employee stock option plan; enter into, amend, terminate or waive
any rights under any employment agreement or collective bargaining agreement
(other than offer letters and letter agreements entered into in the ordinary
course of business consistent with past practice with employees who are
terminable "at will"); pay any special bonus or special remuneration to any
director or employee; increase the salaries or wage rates or fringe benefits
(other than in the ordinary course of business, consistent with past practice)
of, or make any change with respect to the rights to severance, indemnification,
acceleration of options, or lapse or termination of repurchase or similar rights
of Company Restricted Stock for, its directors, officers, employees or
consultants; change in any material respect any management policies or
procedures;
(1) Make any payments outside of the ordinary course of business in
excess of $50,000 in the aggregate, or any capital expenditures, capital
additions or capital improvements in excess of $100,000 in the aggregate;
(m) Modify, amend or terminate any Company Contract or other contract
or agreement to which Company or any subsidiary thereof is a party that is
material to the Company and its subsidiaries as a whole or waive, release or
assign any material rights or claims thereunder, other than (i) the
modification, amendment or termination of Ordinary Course Agreements in the
ordinary course of business, consistent with past practice or (ii) immaterial
oral modifications or amendments in the ordinary course of business, consistent
with past practice;
(n) Enter into (i) any licensing, distribution, marketing, reseller,
merchant services, advertising, sponsorship or other similar agreement other
than in the ordinary course
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of business, consistent with Company's past practice, or (ii) any contracts,
agreements, or obligations granting any exclusive distribution or other
exclusive rights;
(o) Materially revalue any of its assets or, except as required by
GAAP, make any change in accounting methods, principles or practices;
(p) [Intentionally omitted];
(q) Pay, discharge or satisfy any material claim, liability or
obligation arising other than in the ordinary course of business, other than the
payment, discharge or satisfaction of liabilities reflected or reserved against
in the Company Financials;
(r) Enter into any Rights Agreement, or take or fail to take any
action which would, or could reasonably be expected to, cause the Company's
representations set forth in Section 2.21 to be or become untrue in any respect;
or
(s) Agree in writing or otherwise to take any of the actions
described in Section 4.1 (a) through (r) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Antitrust and
Other Filings. As promptly as practicable after the execution of this Agreement,
Company and Parent will prepare and file with the SEC, the Prospectus/Proxy
Statement and Parent will prepare and file with the SEC the Registration
Statement in which the Prospectus/Proxy Statement will be included as a
prospectus. Each of Company and Parent will respond to any comments of the SEC,
will use its respective commercially reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after such filing and each of Company and Parent will cause the Prospectus/Proxy
Statement to be mailed to Company's stockholders at the earliest practicable
time after the Registration Statement is declared effective by the SEC. As
promptly as practicable after the date of this Agreement, each of Company and
Parent will prepare and file (i) with the United States Federal Trade Commission
and the Antitrust Division of the United States Department of Justice
Notification and Report Forms relating to the transactions contemplated herein
as required by the HSR Act, as well as comparable pre-merger notification forms
required by the merger notification or control laws and regulations of any
applicable jurisdiction, as agreed to by the parties (the "ANTITRUST FILINGS")
and (ii) 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"). Company and Parent each shall promptly supply the other with any
information which may be required in order to effectuate any filings pursuant to
this Section 5.1. Each of Company and Parent will notify the other promptly upon
the receipt of any comments from the SEC or its staff or any other government
officials in connection with any filing made pursuant hereto and of any request
by the SEC or its staff or any other government officials for amendments or
supplements to the Registration Statement, the Prospectus/Proxy Statement or any
Antitrust Filings or Other Filings or for additional information and will supply
the other with copies of all correspondence between such party or any of its
representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Registration
Statement, the Prospectus/Proxy Statement, the Merger or any Antitrust Filing or
Other Filing. Each of Company and Parent will cause all documents that it is
responsible
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for filing with the SEC or other regulatory authorities under this Section 5.1
to comply in all material respects with all applicable requirements of law and
the rules and regulations promulgated thereunder. Whenever any event occurs
which is required to be set forth in an amendment or supplement to the
Prospectus/Proxy Statement, the Registration Statement or any Antitrust Filing
or Other Filing, Company or Parent, as the case may be, will promptly inform the
other of such occurrence and cooperate in filing with the SEC or its staff or
any other government officials, and/or mailing to stockholders of Company, such
amendment or supplement. Notwithstanding the foregoing, neither Parent nor any
of its affiliates shall be under any obligation to make proposals, execute or
carry out agreements or submit to orders providing for the sale or other
disposition or holding separate (through the establishment of a trust or
otherwise) of any assets or categories of assets of Parent, any of its
affiliates or Company or the holding separate of the shares of Company Common
Stock or imposing or seeking to impose any limitation on the ability of Parent
or any of its subsidiaries or affiliates to conduct their business or own such
assets or to acquire, hold or exercise full rights of ownership of the shares of
Company Common Stock.
5.2 Meeting of Company Stockholders.
(a) Company will take all action necessary in accordance with the
Nevada Law and its Articles of Incorporation and Bylaws to call, notice, convene
and hold the Company Stockholders' Meeting to be held as promptly as
practicable, and in any event (to the extent permissible under applicable law)
within 45 days after the declaration of effectiveness of the Registration
Statement, for the purpose of voting upon approval of this Agreement, the Merger
and the Articles Amendment. Subject to Section 5.2(c), Company will solicit from
its stockholders proxies in favor of the approval of this Agreement, the Merger
and the Articles Amendment, and will use its commercially reasonable efforts to
take all other action necessary or advisable to secure the vote or consent of
its stockholders required by the rules of Nasdaq or Nevada Law to obtain such
approvals. Notwithstanding anything to the contrary contained in this Agreement,
Company may adjourn or postpone the Company Stockholders' Meeting to the extent
necessary to ensure that any necessary supplement or amendment to the
Prospectus/Proxy Statement is provided to Company's stockholders in advance of a
vote on this Agreement, the Merger and the Articles Amendment or, if as of the
time for which Company Stockholders' Meeting is originally scheduled (as set
forth in the Prospectus/Proxy Statement) there are insufficient shares of
Company Common Stock represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of the Company's Stockholders' Meeting.
Company shall ensure that the Company Stockholders' Meeting is called, noticed,
convened, held and conducted prior to and separate from any meeting of Company's
stockholders at which any Acquisition Proposal or Acquisition Transaction is
considered or voted upon. Company will use its commercially reasonable efforts
to ensure that all proxies solicited by Company in connection with the Company
Stockholders' Meeting are solicited in compliance with the Nevada Law, its
Articles of Incorporation and Bylaws, the rules of Nasdaq and all other
applicable legal requirements. Company's obligation to call, give notice of,
convene, hold and conduct the Company Stockholders' Meeting in accordance with
this Section 5.2(a) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Company of any
Acquisition Proposal (as defined in Section 5.4) (including a Superior Offer (as
defined in Section 5.2(c)), or by any withdrawal, amendment or modification of
the recommendation of the Board of Directors of Company to Company's
stockholders to approve this Agreement and the Merger.
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(b) Subject to Section 5.2(c): (i) the Board of Directors of Company
shall unanimously recommend that Company's stockholders vote in favor of and
approve this Agreement, the Merger and the Articles Amendment at the Company
Stockholders' Meeting; (ii) the Prospectus/Proxy Statement shall include a
statement to the effect that the Board of Directors of the Company has
unanimously recommended that Company's stockholders vote in favor of and approve
this Agreement, the Merger and the Articles Amendment at the Company
Stockholders' Meeting; and (iii) neither the Board of Directors of Company nor
any committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Parent, the unanimous
recommendation of the Board of Directors of Company that Company's stockholders
vote in favor of and approve this Agreement, the Merger and the Articles
Amendment. For purposes of this Agreement, said recommendation of the Board of
Directors shall be deemed to have been modified in a manner adverse to Parent if
said recommendation shall no longer be unanimous, provided that, for all
purposes of this Agreement, an action by the Board of Directors of Company or a
committee thereof shall be unanimous if each member of such Board of Directors
or committee has approved such action other than (i) any such member who has
appropriately abstained from voting on such matter because of an actual or
potential conflict of interest and (ii) any such member who is unable to vote in
connection with such action as a result of death or disability.
(c) Nothing in this Agreement shall prevent the Board of Directors of
Company from withholding, withdrawing, amending or modifying its unanimous
recommendation in favor of the Merger if (i) a Superior Offer is made to the
Company and is not withdrawn, (ii) Company shall have provided written notice to
Parent (a "NOTICE OF SUPERIOR OFFER") advising Parent that Company has received
a Superior Offer, specifying all of the material terms and conditions of such
Superior Offer and identifying the person or entity making such Superior Offer,
(iii) Parent shall not have, within five business days of Parent's receipt of
the Notice of Superior Offer, made an offer that the Company Board by a majority
vote determines in its good faith judgment (after consultation with its
financial adviser) to be at least as favorable to the Company's stockholders as
such Superior Offer (it being agreed that the Board of Directors of Company
shall convene a meeting to consider any such offer by Parent promptly following
the receipt thereof), (iv) the Board of Directors of Company concludes in good
faith, after consultation with its outside counsel, that, in light of such
Superior Offer, the withholding, withdrawal, amendment or modification of such
recommendation is required in order for the Board of Directors of Company to
comply with its fiduciary obligations to the Company's stockholders under
applicable law and (v) the Company shall not have violated any of the
restrictions set forth in Section 5.4 or this Section 5.2. The Company shall
provide Parent with at least three business days prior notice (or such lesser
prior notice as provided to the members of the Company's Board of Directors but
in no event less than twenty-four hours) of any meeting of the Company's Board
of Directors at which the Company's Board of Directors is reasonably expected to
consider any Acquisition Proposal (as defined in Section 5.4) to determine
whether such Acquisition Proposal is a Superior Offer. Subject to applicable
laws, nothing contained in this Section 5.2 shall limit the Company's obligation
to hold and convene the Company Stockholders' Meeting (regardless of whether the
unanimous recommendation of the Board of Directors of the Company shall have
been withdrawn, amended or modified). For purposes of this Agreement "SUPERIOR
OFFER" shall mean an unsolicited, bona fide written offer made by a third party
to consummate any of the following transactions: (i) a merger or consolidation
involving Company pursuant to which the stockholders of Company immediately
preceding such transaction hold less than 50% of the equity interest in the
surviving or resulting entity of such transaction or (ii) the acquisition by any
person or group (including by way of a tender offer or an exchange offer or
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a two step transaction involving a tender offer followed with reasonable
promptness by a cash-out merger involving Company), directly or indirectly, of
ownership of 100% of the then outstanding shares of capital stock of Company, on
terms that the Board of Directors of Company determines, in its reasonable
judgment (after consultation with its financial adviser) to be more favorable to
Company's stockholders than the terms of the Merger; provided, however, that any
such offer shall not be deemed to be a "Superior Offer" if any financing
required to consummate the transaction contemplated by such offer is not
committed and is not likely in the reasonable judgment of the Board of Directors
of Company to be obtained by such third party on a timely basis.
(d) Nothing contained in this Agreement shall prohibit Company or its
Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act.
5.3 Confidentiality; Access to Information.
(a) The parties acknowledge that Company and Parent have previously
executed a Confidentiality Agreement (as defined in the Company Letter), which
Confidentiality Agreement will continue in full force and effect in accordance
with its terms.
(b) Access to Information. Company will afford Parent and its
accountants, counsel and other representatives reasonable access during normal
business hours to the properties, books, records and personnel of Company during
the period prior to the Effective Time to obtain all information concerning the
business, including the status of product development efforts, properties,
results of operations and personnel of Company, as Parent may reasonably
request. No information or knowledge obtained by Parent in any investigation
pursuant to this Section 5.3 will affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.4 No Solicitation.
(a) From and after the date of this Agreement until the Effective
Time or termination of this Agreement pursuant to Article VII, Company and its
subsidiaries will not, nor will they authorize or permit any of their respective
officers, directors, affiliates or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly: (i) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal (as hereinafter defined); (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any Acquisition Proposal; (iii) engage in
discussions with any person with respect to any Acquisition Proposal, except as
to the existence of these provisions; (iv) except as permitted by Section
5.2(c), approve, endorse or recommend any Acquisition Proposal; or (v) enter
into any letter of intent or similar document or any contract, agreement,
agreement in principle or commitment contemplating or otherwise relating to any
Acquisition Transaction; provided, however, that prior to the approval of this
Agreement and the Merger at the Company Stockholders' Meeting, this Section
5.4(a) shall not prohibit Company from furnishing nonpublic information
regarding Company and its subsidiaries to, or entering into discussions with,
any person or group who has submitted (and not withdrawn) to Company an
unsolicited, written, bona fide Acquisition Proposal that the Board of Directors
of Company reasonably concludes (after consultation with its financial adviser)
may constitute a Superior Offer if (1) neither Company nor any representative of
Company or its subsidiaries shall have
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violated any of the restrictions set forth in this Section 5.4, (2) the Board of
Directors of Company concludes in good faith, after consultation with its
outside legal counsel, that such action is required in order for the Board of
Directors of Company to comply with its fiduciary obligations to Company's
stockholders under applicable law, (3) prior to furnishing any such nonpublic
information to, or entering into any such discussions with, such person or
group, Company gives Parent written notice of the identity of such person or
group and all of the material terms and conditions of such Acquisition Proposal
and of Company's intention to furnish nonpublic information to, or enter into
discussions with, such person or group, and Company receives from such person or
group an executed confidentiality agreement containing terms at least as
restrictive with regard to Company's confidential information as the
Confidentiality Agreement, (4) Company gives Parent at least three business days
advance notice of its intent to furnish such nonpublic information or enter into
such discussions, and (5) contemporaneously with furnishing any such nonpublic
information to such person or group, Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). Company and its subsidiaries
will immediately cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding two sentences by any
officer, director or employee of Company or any of its subsidiaries or any
investment banker, attorney or other advisor or representative of Company or any
of its subsidiaries shall be deemed to be a breach of this Section 5.4 by
Company.
For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean any offer
or proposal (other than an offer or proposal by Parent) relating to any
Acquisition Transaction. For the purposes of this Agreement, "ACQUISITION
TRANSACTION" shall mean any transaction or series of related transactions other
than the transactions contemplated by this Agreement involving: (A) any
acquisition or purchase from the Company by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 5% interest in the total outstanding voting
securities of the Company or any of its subsidiaries or any tender offer or
exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 5% or more of the total outstanding voting
securities of the Company, or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving the
Company; (B) any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of business),
acquisition or disposition of more than 5% of the assets of the Company; or (C)
any liquidation or dissolution of the Company.
(b) In addition to the obligations of Company set forth in paragraph
(a) of this Section 5.4, Company as promptly as practicable shall advise Parent
orally and in writing of any request for non-public information or any other
inquiry which Company reasonably believes could lead to an Acquisition Proposal
or of any Acquisition Proposal, the material terms and conditions of such
request, inquiry or Acquisition Proposal, and the identity of the person or
group making any such request, inquiry or Acquisition Proposal. Company will
keep Parent informed as promptly as practicable in all material respects of the
status and details (including material amendments or proposed amendments) of any
such request, inquiry or Acquisition Proposal.
5.5 Public Disclosure. Parent and Company will consult with each other,
and to the extent practicable, agree, before issuing any press release or
otherwise making any public
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statement with respect to the Merger, this Agreement or an Acquisition Proposal
and will not issue any such press release or make any such public statement
prior to such consultation, except as may be required by law or any listing
agreement with a national securities exchange or Nasdaq. The parties have agreed
to the text of the joint press release announcing the signing of this Agreement.
5.6 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective in an expeditious manner, the Merger
and the other transactions contemplated by this Agreement, including using
reasonable efforts to accomplish the following: (i) the taking of all reasonable
acts necessary to cause the conditions precedent set forth in Article VI to be
satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers,
consents, approvals, orders and authorizations from Governmental Entities and
the making of all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any) and
the taking of all reasonable steps as may be necessary to avoid any suit, claim,
action, investigation or proceeding by any Governmental Entity, (iii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iv) the defending of any suits, claims, actions, investigations or proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (v) the execution or delivery of any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. Notwithstanding anything
in this Agreement to the contrary, neither Parent nor any of its affiliates
shall be under any obligation to make proposals, execute or carry out agreements
or submit to orders providing for the sale or other disposition or holding
separate (through the establishment of a trust or otherwise) of any assets or
categories of assets of Parent, any of its affiliates or Company or the holding
separate of the shares of Company Common Stock or imposing or seeking to impose
any limitation on the ability of Parent or any of its subsidiaries or affiliates
to conduct their business or own such assets or to acquire, hold or exercise
full rights of ownership of the shares of Company Common Stock.
(b) Each of Company and Parent will give prompt notice to the other
of (i) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the Merger, (ii)
any notice or other communication from any Governmental Entity in connection
with the Merger, (iii) any litigation relating to, involving or otherwise
affecting Company, Parent or their respective subsidiaries that relates to the
consummation of the Merger. Company shall give prompt notice to Parent of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate, or any failure of Company to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.3 would not be satisfied, provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. Parent shall give prompt notice to Company of any
representation or warranty made by it or Merger Sub contained in this Agreement
becoming untrue or inaccurate, or any failure of Parent or Merger Sub to comply
with or satisfy in any material respect any
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covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, in each case, such that the conditions set forth in Section 6.2
would not be satisfied, provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
5.7 Third Party Consents. As soon as practicable following the date
hereof, Parent and Company will each use its commercially reasonable efforts to
obtain any consents, waivers and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
5.8 Stock Options.
(a) At the Effective Time, each outstanding Company Option, whether
or not then exercisable, will be assumed by Parent. Each Company Option so
assumed by Parent under this Agreement will continue to have, and be subject to,
the same terms and conditions set forth in the applicable Company Stock Option
Plan immediately prior to the Effective Time (including any repurchase rights or
vesting provisions), except that (i) each Company Stock Option will be
exercisable (or will become exercisable in accordance with its terms) for that
number of whole shares of Parent Common Stock equal to the product of the number
of shares of Company Common Stock that were issuable upon exercise of such
Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of Parent
Common Stock and (ii) the per share exercise price for the shares of Parent
Common Stock issuable upon exercise of such assumed Company Stock Option will be
equal to the quotient determined by dividing the exercise price per share of
Company Common Stock at which such Company Option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the nearest
whole cent. Continuous employment with Company or its subsidiaries shall be
credited to the optionee for purposes of determining the vesting of all assumed
Company Options after the Effective Time.
(b) It is intended that Company Options assumed by Parent shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent such Company Options qualified as
incentive stock options immediately prior to the Effective Time and the
provisions of this Section 5.8 shall be applied consistent with such intent.
(c) At the Effective Time, each Company Warrant, whether or not then
exercisable, will be assumed by Parent. Each Company Warrant so assumed by
Parent under this Agreement will continue to have, and be subject to, the same
terms and conditions set forth in the applicable Company Warrant immediately
prior to the Effective Time (including any vesting provisions), except that (i)
each Company Warrant will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company Common Stock that
were issuable upon exercise of such Company Warrant immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock and (ii) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
assumed Company Warrant will be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such Company Warrant
was exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent.
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5.9 Registrations. Parent agrees to file a registration statement on
Form S-8 for the shares of Parent Common Stock issuable with respect to assumed
Company Options as soon as is reasonably practicable after the Effective Time
and shall maintain the effectiveness of such registration statement thereafter
for so long as any of such options or other rights remain outstanding. Parent
agrees to file at its expense a registration statement on Form S-3 for the
shares of Parent Common Stock issuable with respect to Company Warrants assumed
by Parent hereunder as soon as is reasonably practicable after the Effective
Time and shall maintain the effectiveness of such registration statement
thereafter for a period ending on the one year anniversary of the Effective
Time. The registration rights granted hereunder shall be subject to customary
blackout periods imposed by Parent in its discretion.
5.10 Indemnification. From and after the Effective Time, Parent will
cause the Surviving Corporation to fulfill and honor in all respects the
obligations of Company pursuant to any indemnification agreements between
Company and its directors and officers as of the Effective Time (the
"INDEMNIFIED PARTIES") and any indemnification provisions under Company's
Articles of Incorporation or Bylaws as in effect on the date hereof. The
Articles of Incorporation and Bylaws of the Surviving Corporation will contain
provisions with respect to exculpation and indemnification that are
substantially as favorable to the Indemnified Parties as those contained in the
Articles of Incorporation and Bylaws of Company as in effect on the date hereof,
which provisions will not be amended, repealed or otherwise modified for a
period of six years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, immediately prior to the
Effective Time, were directors, officers, employees or agents of Company, unless
such modification is required by law. This Section 5.10 shall survive the
consummation of the Merger, is intended to benefit Company, the Surviving
Corporation and each Indemnified Party, shall be binding on all successors and
assigns of the Surviving Corporation and Parent, and shall be enforceable by the
Indemnified Parties. For a period of six years after the Effective Time, Parent
will cause the Surviving Corporation to use its commercially reasonable efforts
to maintain in effect, if available, directors' and officers' liability
insurance covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy on terms comparable to those
applicable to the current directors and officers of Company; provided, however,
that in no event will Parent or Surviving Corporation be required to expend in
excess of 150% of the annual premium currently paid by Company for such
coverage, and if the annual premium for such coverage exceeds 150% of such
existing annual premium, Parent or Surviving Corporation shall maintain
insurance policies which provide the maximum coverage available at an annual
premium equal to 150% of such amount.
5.11 Nasdaq Listing. Prior to the Effective Time, Parent agrees to
authorize for listing on the Nasdaq Stock Market the shares of Parent Common
Stock issuable, and those required to be reserved for issuance, in connection
with the Merger, upon official notice of issuance
5.12 Affiliates; Restrictive Legend. Not less than five business days
prior to the Closing, Company will deliver to Parent a complete list of those
persons who may be deemed to be, in Company's reasonable judgment, affiliates of
Company within the meaning of Rule 145 promulgated under the Securities Act.
Parent will give stop transfer instructions to its transfer agent with respect
to any Parent Common Stock received pursuant to the Merger by any stockholder of
the Company who may reasonably be deemed to be an affiliate of
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Company and there will be placed on the certificates representing such Parent
Common Stock, or any substitutions therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES AND MAY ONLY BE TRANSFERRED IN CONFORMITY WITH RULE 145(d) UNDER
SUCH ACT.
5.13 Letter of Company's Accountants. Company shall use all reasonable
efforts to cause to be delivered to Parent a letter of Arthur Andersen LLP,
dated no more than two business days before the date on which the Registration
Statement becomes effective (and reasonably satisfactory in form and substance
to Parent), that is customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
5.14 Takeover Statutes. If any "control share acquisition", "fair
price", "moratorium" or other similar anti-takeover statute or regulation is or
may become applicable to the Merger or the other transactions contemplated by
this Agreement, each of Parent and Company and their respective Boards of
Directors shall grant such approvals and take such lawful actions as are
necessary to ensure that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise act to
eliminate or minimize the effects of such statute and any regulations
promulgated thereunder on such transactions.
5.15 Certain Employee Benefits. As soon as practicable after the
execution of this Agreement, Company and Parent shall confer and work together
in good faith to agree upon mutually acceptable employee benefit and
compensation arrangements (and terminate Company Employee Plans immediately
prior to the Effective Time if appropriate) so as to provide benefits to Company
employees generally equivalent in the aggregate to those provided to similarly
situated employees of Parent. In addition, Company agrees that it and its
subsidiaries shall terminate any and all severance, separation, retention and
salary continuation plans, programs or arrangements (other than contractual
agreements disclosed in Part 5.15 of the Company Letter) prior to the Effective
Time.
5.16 Amendment of Company's Articles. Company agrees that at the Company
Stockholders' Meeting, in addition to seeking the approval of this Agreement and
the Merger by Company's stockholders, Company shall also seek the approval of
Company's stockholders, by the vote required under applicable law, of an
amendment of Company's Articles of Incorporation to delete in its entirety
Article VI.C. thereof (such amendment, the "ARTICLES AMENDMENT").
5.17 Parent Warrant. At the Effective Time, Parent shall issue to First
Data a warrant in substantially the form attached hereto as Exhibit A (the
"PARENT WARRANT"). At the time of issuance, the Parent Warrant shall entitle the
holder thereof to purchase 2,300,000 shares of Parent Common Stock at an
exercise price of $36.9565 per share; provided, however, that if the Parent
Warrant had been issued on the date hereof with such terms and prior to the time
at which it is actually issued pursuant to this Section 5.17, the number of
shares of Parent Common Stock covered by the Parent Warrant, the exercise price
per share or the type of securities deliverable upon exercise of the Parent
Warrant would have been adjusted or changed pursuant to the terms of the Parent
Warrant, the Parent Warrant shall be issued with such adjustments or changes.
First Data is an intended third party beneficiary of this Section 5.17.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Company Stockholder Approval. This Agreement and the Merger shall
have been approved by the requisite vote of the stockholders of Company under
applicable law and the governance documents of the Company.
(b) Registration Statement Effective; Proxy Statement. The SEC shall
have declared the Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose, and no similar proceeding in respect
of the Proxy Statement/Prospectus, shall have been initiated or threatened in
writing by the SEC.
(c) No Order; HSR Act. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger, or
prohibiting Parent's ownership or operation of, or compelling Parent to dispose
of or hold separate, all or a material portion of the business or assets of
Company or its subsidiaries. All waiting periods, if any, under the HSR Act
relating to the transactions contemplated hereby will have expired or terminated
early and all material foreign antitrust approvals required to be obtained prior
to the Merger in connection with the transactions contemplated hereby shall have
been obtained.
(d) Tax Opinions. Parent and Company shall each have received written
opinions from their respective tax counsel (Fenwick & West LLP and Latham &
Watkins LLP, respectively), in form and substance reasonably satisfactory to
them, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and such opinions shall not have been
withdrawn; provided, however, that if the counsel to either Parent or Company
does not render such opinion, this condition shall nonetheless be deemed to be
satisfied with respect to such party if counsel to the other party renders such
opinion to such party. The parties to this Agreement agree to make such
reasonable representations as requested by such counsel for the purpose of
rendering such opinions.
(e) Nasdaq Listing. The shares of Parent Common Stock to be issued in
the Merger shall have been approved for quotation on the Nasdaq Stock Market.
6.2 Additional Conditions to Obligations of Company. The obligation of
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Company:
(a) Representations and Warranties. Each representation and warranty
of Parent and Merger Sub contained in this Agreement (i) shall have been true
and correct as of the date of this Agreement and (ii) shall be true and correct
on and as of the Closing Date with the same force and effect as if made on the
Closing Date except (A) in each case, or in the aggregate, as does not
constitute a Material Adverse Effect on Parent at the Closing Date, and (B) for
those representations and warranties which address matters only as of a
particular date (which representations shall have been true and correct (subject
to the qualifications set
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forth in the preceding clause (A)) as of such particular date) (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the Parent
Schedules made or purported to have been made after the execution of this
Agreement shall be disregarded). The Company shall have received a certificate
with respect to the foregoing signed on behalf of Parent by an authorized
officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and Company shall have received a certificate to such
effect signed on behalf of Parent by an authorized officer of Parent.
(c) Material Adverse Effect. No Material Adverse Effect with respect
to Parent shall have occurred since the date of this Agreement and be
continuing.
6.3 Additional Conditions to the Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to consummate and effect the
Merger shall be subject to the satisfaction at or prior to the Closing Date of
each of the following conditions, any of which (subject to Section 8.5) may be
waived, in writing, exclusively by Parent:
(a) Representations and Warranties. Each representation and warranty
of the Company contained in this Agreement (i) shall have been true and correct
as of the date of this Agreement and (ii) shall be true and correct on and as of
the Closing Date with the same force and effect as if made on and as of the
Closing Date except (A) in each case, or in the aggregate, as does not
constitute a Material Adverse Effect on Company at the Closing Date; provided,
however, such Material Adverse Effect qualification shall be inapplicable with
respect to the representations and warranties contained in Sections 2.2(a) and
(b), 2.3, 2.18, 2.20 and 2.21 (which representations shall be true and correct
at the applicable times in all material respects) and (B) for those
representations and warranties which address matters only as of a particular
date (which representations shall have been true and correct (subject to the
qualifications set forth in the preceding clause (A)) as of such particular
date) (it being understood that, for purposes of determining the accuracy of
such representations and warranties, any update of or modification to the
Company Letter made or purported to have been made after the execution of this
Agreement shall be disregarded). Parent shall have received a certificate with
respect to the foregoing signed on behalf of the Company by an authorized
officer of the Company.
(b) Agreements and Covenants. Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date; provided, that this condition shall be deemed to be satisfied with respect
to the agreements and covenants required by this Agreement to be performed or
complied with by Company set forth in the introductory language in Section 4.1,
or Sections 4.1(c), 4.1(i), 4.1(l), 4.1(m), 4.1(n), 4.1(o), 4.1(q), or 4.1(s) as
4.1(s) relates to clauses (c), (i), (l), (m), (n), (o) or (q) of Section 4.1 if
such nonperformance of any such agreement or covenant does not or would not have
a Material Adverse Effect on Company; and, provided, further, that this
condition shall be deemed to be satisfied with respect to the agreements and
covenants required by this Agreement to be performed or complied with by Company
set forth in Sections 5.1, 5.3, 5.5, 5.6, 5.7, 5.12, 5.13, 5.15 if such
nonperformance of any such agreement or covenant does not or would not have a
material adverse effect on the ability or likelihood of the parties hereto to
consummate the
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Merger. Parent shall have received a certificate with respect to this condition
signed on behalf of Company by the Chief Executive Officer and the Chief
Financial Officer of Company.
(c) Material Adverse Effect. No Material Adverse Effect with respect
to Company shall have occurred since the date of this Agreement and be
continuing.
(d) Consents. Company shall have obtained all consents, waivers and
approvals required in connection with the consummation of the transactions
contemplated hereby, the failure of which to obtain, individually or in the
aggregate, would have a Material Adverse Effect on Company.
(e) Employment and Noncompetition Agreements. Each Amended Employment
Agreement shall be in full force and effect. Richard Rosenblatt, and at least
two of Phillip Windley, Joseph Ruskiewicz and Steven Fulling, shall each be
employed by Company. Each Noncompetition Agreement shall be in full force and
effect.
(f) First Data Transactions. Each of the First Data Agreements shall
be in full force and effect.
(g) Amendment of Articles. The Articles Amendment shall have been
approved by the requisite vote of the stockholders of Company under applicable
law and the governance documents of Company.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the requisite approval of the
Company's stockholders:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by March 1, 2000 for any reason; provided, however, that the right
to terminate this Agreement under this Section 7.1(b) shall not be available to
any party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date and such
action or failure to act constitutes a breach of this Agreement;
(c) by either Company or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action is final and nonappealable;
(d) by either Company or Parent if the required approval of Company's
stockholders contemplated by this Agreement shall not have been obtained by
reason of the failure to obtain the required vote at a meeting of Company's
stockholders duly convened therefore or at any adjournment thereof; provided,
however, that the right to terminate this Agreement under this Section 7.1(d)
shall not be available to Company where the failure to obtain the Company
stockholder approval shall have been caused by (i) the action or failure to act
of Company and such action or failure to act constitutes a breach by Company of
this Agreement or (ii) a breach of any Company Voting Agreement by any party
thereto other than Parent;
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(e) by Parent (at any time prior to the approval of this Agreement
and the Merger by the required vote of the stockholders of Company) if a
Triggering Event (as defined below) shall have occurred.
(f) by Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in Parent's representations and warranties or breach by Parent is
curable by Parent through the exercise of its commercially reasonable efforts,
then Company may not terminate this Agreement under this Section 7.1(f) for 30
days after delivery of written notice from Company to Parent of such breach,
provided Parent continues to exercise commercially reasonable efforts to cure
such breach (it being understood that Company may not terminate this Agreement
pursuant to this paragraph (f) if such breach by Parent is cured during such
30-day period, or if Company shall have materially breached this Agreement); or
(g) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of Company set forth in this Agreement, or if
any representation or warranty of Company shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in Company's representations and warranties or breach by Company is
curable by Company through the exercise of its commercially reasonable efforts,
then Parent may not terminate this Agreement under this Section 7.1(g) for 30
days after delivery of written notice from Parent to Company of such breach,
provided Company continues to exercise commercially reasonable efforts to cure
such breach (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph (g) if such breach by Company is cured during such
30-day period, or if Parent shall have materially breached this Agreement).
For the purposes of this Agreement, a "TRIGGERING EVENT" shall be deemed to
have occurred if: (i) the Board of Directors of Company or any committee thereof
shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its unanimous recommendation in favor of the approval
of this Agreement or the Merger; (ii) Company shall have failed to include in
the Proxy Statement/Prospectus the unanimous recommendation of the Board of
Directors of Company in favor of the approval of this Agreement and the Merger;
(iii) the Board of Directors of Company fails to reaffirm its unanimous
recommendation in favor of the adoption and approval of this Agreement and the
Merger within 10 business days after Parent requests in writing that such
recommendation be reaffirmed at any time following the public announcement of an
Acquisition Proposal; (iv) the Board of Directors of Company or any committee
thereof shall have approved or publicly recommended any Acquisition Proposal;
(v) Company shall have entered into any letter of intent of similar document or
any agreement, contract or commitment accepting any Acquisition Proposal; or
(vi) a tender or exchange offer relating to securities of Company shall have
been commenced by a Person unaffiliated with Parent, and Company shall not have
sent to its stockholders pursuant to Rule 14e-2 promulgated under the Securities
Act, within 10 business days after such tender or exchange offer is first
published sent or given, a statement disclosing that Company recommends
rejection of such tender or exchange offer.
7.2 Notice of Termination; Effect of Termination. Any termination of
this Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice
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of the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
be of no further force or effect, except (i) as set forth in this Section 7.2,
Section 7.3 and Article 8, each of which shall survive the termination of this
Agreement, and (ii) nothing herein shall relieve any party from liability for
any willful breach of such party's representations, warranties, covenants or
agreements in this Agreement. No termination of this Agreement shall affect the
obligations of the parties contained in the Confidentiality Agreement, all of
which obligations shall survive termination of this Agreement in accordance with
their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Parent and Company
shall share equally all fees and expenses, other than attorneys' and accountants
fees and expenses, incurred in relation to the printing and filing (with the
SEC) of the Proxy Statement/Prospectus (including any preliminary materials
related thereto) and the Registration Statement (including financial statements
and exhibits) and any amendments or supplements thereto.
(b) Company Payments. In the event that this Agreement is terminated
by Parent pursuant to Sections 7.1(e), (i) Company shall promptly, but in no
event later than two days after the date of such termination, pay Parent a fee
equal to $2,500,000 in immediately available funds, and (ii) if, within 15
months following the termination of this Agreement, a Company Acquisition (as
defined below) is consummated or Company enters into an agreement providing for
a Company Acquisition, Company shall promptly, but in no event later than two
days after the consummation of such Company Acquisition or the entry by the
Company into such agreement, pay Parent a fee equal to $19,600,000 in
immediately available funds. In the event that (i) this Agreement is terminated
by Parent or Company, as applicable, pursuant to Section 7.1(d), (ii) following
the date hereof and prior to the termination of this Agreement, a third party
has publicly announced an Acquisition Proposal and (iii) within 15 months
following the termination of this Agreement, a Company Acquisition is
consummated or the Company enters into an agreement providing for a Company
Acquisition, Company shall promptly, but in no event later than two days after
the consummation of such Company Acquisition or the entry by the Company into
such agreement, pay Parent a fee equal to $22,100,000 in immediately available
funds. For the purposes of this Agreement, "COMPANY ACQUISITION" shall mean any
of the following transactions (other than the transactions contemplated by this
Agreement); (i) a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company pursuant
to which the stockholders of the Company immediately preceding such transaction
hold less than 50% of the aggregate equity interests in the surviving or
resulting entity of such transaction, (ii) a sale or other disposition by the
Company of assets representing in excess of 50% of the aggregate fair market
value of the Company's business immediately prior to such sale or (iii) the
acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by the Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 50% of the voting power of the then outstanding shares
of capital stock of the Company. Company acknowledges that the agreements
contained in this Section 7.3(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent would
not enter into this Agreement; accordingly, if Company fails to pay in a timely
manner the amounts due pursuant to this Section 7.3(b),
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and, in order to obtain such payment, Parent makes a claim that results in a
judgment against Company for the amounts set forth in this Section 7.3(b),
Company shall pay to Parent its reasonable costs and expenses (including
reasonable attorneys' fees and expenses) in connection with such suit, together
with interest on the amounts set forth in this Section 7.3(b) at the prime rate
of The Chase Manhattan Bank in effect on the date such payment was required to
be made. Payment of the fees described in this Section 7.3(b) shall not be in
lieu of damages incurred in the event of breach of this Agreement.
7.4 Amendment. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of Parent and Company.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
and warranties of Company, Parent and Merger Sub contained in this Agreement
shall terminate at the Effective Time, and only the covenants that by their
terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via facsimile (receipt confirmed) to the parties at
the following addresses or facsimile numbers (or at such other address or
facsimile numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
At Home Corporation
425 Broadway
Redwood City, California 94063
Attention: Chief Executive Officer
Fax No.: 650-596-5100
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attention: Gordon K. Davidson
Douglas N. Cogen
Fax No.: 650-494-1417
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(b) if to Company, to:
iMALL, Inc.
233 Wilshire Boulevard, Suite 820
Santa Monica, California 90401
Attention: Chief Executive Officer
Fax No.:
with a copy to:
Latham & Watkins
633 West 5th Street
Los Angeles, California 90071
Attention: Paul Tosetti
Fax No.: 213-891-8763
8.3 Interpretation; Certain Defined Terms.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise indicated. The words "INCLUDE,"
"INCLUDES" and "INCLUDING" when used herein shall be deemed in each case to be
followed by the words "WITHOUT LIMITATION." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "THE BUSINESS OF" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
Reference to the subsidiaries of an entity shall be deemed to include all direct
and indirect subsidiaries of such entity. Reference to a statute, regulation or
agreement shall include all amendments thereto.
(b) For purposes of this Agreement, the term "KNOWLEDGE" as applied
to a party hereto, means, with respect to any matter in question, that any of
the officers or directors of such party has actual knowledge of such matter,
after reasonable inquiry of such matter.
(c) For purposes of this Agreement, the term "MATERIAL ADVERSE
EFFECT" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or effect that is or is reasonably likely to
be materially adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of such entity
taken as a whole with its subsidiaries, except to the extent that any such
change, event, violation, inaccuracy, circumstance or effect directly and
primarily results from (i) changes in general economic conditions or changes
affecting the industry generally in which such entity operates (provided that
such changes do not affect such entity in a materially disproportionate manner),
(ii) changes in the trading prices for such entity's capital stock, or (iii) the
announcement or pendency of the Merger; provided, that in any litigation
regarding this definition, Company shall be required to sustain the burden of
proving by clear and convincing evidence that the exclusion set forth in clause
(iii) is applicable.
(d) For purposes of this Agreement, the term "PERSON" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
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(e) For purposes of this Agreement, a "SUBSIDIARY" of a specified
entity will be any corporation, partnership, limited liability company, joint
venture or other legal entity of which the specified entity (either alone or
through or together with any other subsidiary) owns, directly or indirectly, 50%
or more of the stock or other equity or partnership interests the holders of
which are generally entitled to vote for the election of the Board of Directors
or other governing body of such corporation or other legal entity.
(f) For purposes of this Agreement, an action by the Board of
Directors of Company or a committee thereof shall be "UNANIMOUS" if each member
of such Board of Directors or committee has approved such action other than (i)
any such member who has appropriately abstained from voting on such matter
because of an actual or potential conflict of interest and (ii) any such member
who is unable to vote in connection with such action as a result of death or
disability.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Letter and the
Parent Letter (a) constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being agreed that the Confidentiality Agreement shall
continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any other
person any rights or remedies hereunder, except as specifically provided in
Sections 5.10 or 5.17. Neither the condition contained in Section 6.3(f) may be
waived, nor may Section 5.17 or this sentence be amended, by Parent or Merger
Sub, without the prior written consent of First Data, who is made a third party
beneficiary of this sentence.
8.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
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<PAGE> 150
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law; provided
that issues involving the corporate governance of any of the parties hereto
shall be governed by their respective jurisdictions of incorporation, and issues
involving the consummation and effects of the Merger shall be governed by the
laws of the State of Nevada.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Any purported assignment in
violation of this Section shall be void.
8.11 WAIVER OF JURY TRIAL. EACH OF PARENT, COMPANY AND MERGER SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
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<PAGE> 151
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
AT HOME CORPORATION
By: /s/ MARK C. STEVENS
-----------------------------------
Name: Mark C. Stevens
Title: Executive Vice President
SHOP NEVADA, INC.
By: /s/ MARK C. STEVENS
-----------------------------------
Name: Mark C. Stevens
Title: President
IMALL, INC.
By: /s/ RICHARD M. ROSENBLATT
-----------------------------------
Name: Richard M. Rosenblatt
Title: Chief Executive Officer
[AGREEMENT AND PLAN OF MERGER]
A-50
<PAGE> 152
ANNEX B
VOTING AGREEMENT
This VOTING AGREEMENT (the "AGREEMENT") is made and entered into as of July
12, 1999, between At Home Corporation, a Delaware corporation ("PARENT"), and
the undersigned stockholder ("STOCKHOLDER") of iMall, Inc., a Nevada corporation
("COMPANY").
RECITALS
A. Concurrently with the execution of this Agreement, Parent, Company
and Shop Nevada, Inc., a Nevada corporation and a wholly-owned subsidiary of
Parent ("MERGER SUB"), are entering into an Agreement and Plan of Merger (the
"MERGER AGREEMENT") which provides for the merger (the "MERGER") of Merger Sub
with and into Company. Pursuant to the Merger, shares of capital stock of
Company will be converted into shares of Series A Common Stock of Parent on the
basis described in the Merger Agreement. Capitalized terms used but not defined
herein shall have the meanings set forth in the Merger Agreement.
B. Stockholder is the record holder of such number of outstanding
shares of Company Common Stock as is indicated on the final page of this
Agreement.
C. As a material inducement to enter into the Merger Agreement, Parent
desires Stockholder to agree, and Stockholder is willing to agree, to vote the
Shares (as defined below), and such other shares of capital stock of Company
over which Stockholder has voting power, so as to facilitate consummation of the
Merger.
Intending to be legally bound, the parties agree as follows:
1. Agreement to Vote Shares.
1.1 Definitions. For purposes of this Agreement:
"SHARES" shall mean all issued and outstanding shares of Company Common
Stock owned of record or beneficially by Stockholder or over which Stockholder
exercises voting power, in each case, as of the record date for persons entitled
(a) to receive notice of, and to vote at the meeting of the stockholders of
Company called for the purpose of voting on the matters referred to in Section
1.2, or (b) to take action by written consent of the stockholders of Company
with respect to the matters referred to in Section 1.2. Stockholder agrees that
any shares of capital stock of Company that Stockholder purchases or with
respect to which Stockholder otherwise acquires beneficial ownership or over
which Stockholder exercises voting power after the execution of this Agreement
and prior to the date of termination of this Agreement pursuant to Section 3
below shall be subject to the terms and conditions of this Agreement to the same
extent as if they constituted Shares on the date hereof.
"SUBJECT SECURITIES" shall mean: (i) all securities of Company (including
all shares of Company Common Stock and all options, warrants and other rights to
acquire shares of Company Common Stock) beneficially owned by Stockholder as of
the date of this Agreement; and (ii) all additional securities of Company
(including all additional shares of Company Common Stock and all additional
options, warrants and other rights to acquire shares of Company Common Stock) of
which Stockholder acquires ownership during the period from the date of this
Agreement through the earlier of termination of this Agreement pursuant to
Section 3 below or the record date for the meeting at which stockholders of
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Company are asked to vote upon approval of the Merger Agreement and the Merger
(the "RECORD DATE").
Stockholder shall be deemed to have effected a "TRANSFER" of a security if
Stockholder directly or indirectly: (i) sells, pledges, encumbers, transfers or
disposes of, or grants an option with respect to, such security or any interest
in such security; or (ii) enters into an agreement or commitment providing for
the sale, pledge, encumbrance, transfer or disposition of, or grant of an option
with respect to, such security or any interest therein. Stockholder shall not be
deemed to have effected a "Transfer" of a security by virtue of entering into a
merger, consolidation or other business combination of any nature with another
entity or entities.
1.2 Agreement to Vote Shares. Until the termination of this Agreement
pursuant to Section 3 below, at every meeting of the stockholders of Company
called with respect to any of the following, and at every adjournment thereof,
and on every action or approval by written consent of the stockholders of
Company with respect to any of the following, Stockholder shall cause the Shares
to be voted (i) in favor of approval of the Merger Agreement and the Merger,
(ii) in favor of approval of an amendment to the Articles of Incorporation of
the Company which deletes Article VI.C of the Company's Articles of
Incorporation regarding a supermajority vote requirement in certain dispositions
of assets of the Company and (iii) against approval of (a) any proposal made in
opposition to or in competition with consummation of the Merger, (b) any merger,
consolidation, sale of assets, reorganization or recapitalization with any party
other than Parent or its affiliates or (c) any liquidation or winding up of
Company.
1.3 Irrevocable Proxy. Concurrently with the execution of this Agreement,
Stockholder agrees to deliver to Parent a proxy in the form attached hereto as
Exhibit I (the "PROXY"), which shall be irrevocable, with respect to the Shares.
1.4 No Transfer of Subject Securities. Until the earlier of termination
of this Agreement pursuant to Section 3 below or the Record Date, except as may
be required by (i) the foreclosure on any encumbrance secured by such Subject
Securities as of the date hereof or (ii) court order, Stockholder agrees not to
Transfer any of the Subject Securities.
2. Representations and Warranties of Stockholder. Stockholder (i) is
the owner of record or beneficially or Stockholder exercises voting power of the
shares of Company Common Stock indicated on the final page of this Agreement,
which at the date hereof are free and clear of any liens, claims, options,
charges or other encumbrances that would adversely affect the ability of
Stockholder to carry out the terms of this Agreement; and (ii) has the legal
capacity or full corporate power and authority to make, enter into and carry out
the terms of this Agreement.
3. Termination. This Agreement shall terminate and shall have no
further force or effect as of the first to occur of (i) such date and time as
the Merger shall become effective in accordance with the terms and provisions of
the Merger Agreement, or (ii) such date and time as the Merger Agreement shall
have been terminated pursuant to Article VII thereof.
4. Miscellaneous.
4.1 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
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4.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without prior written consent of the other. Any purported
assignment in violation of this Section shall be void.
4.3 Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
4.4 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity.
4.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial delivery service to the respective parties
as follows (or at such other address for a party as shall be specified by like
notice):
If to Parent:
At Home Corporation
425 Broadway Street
Redwood City, CA 94063
Attn: General Counsel
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attn: Gordon K. Davidson
Douglas N. Cogen
If to Stockholder, to the address for notice set forth on the last
page hereof.
4.6 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of California,
without regard to the principles of conflict of laws thereof.
4.7 Entire Agreement. This Agreement contains the entire understanding of
the parties in respect of the subject matter hereof, and supersedes all prior
negotiations and understandings, both oral and written, between the parties with
respect to such subject matter.
4.8 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
4.9 Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.
* * * * *
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<PAGE> 155
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be
duly executed on the date and year first above written.
AT HOME CORPORATION
By:
-----------------------------------
Name:
Title:
STOCKHOLDER:
--------------------------------------
Name:
Stockholder's Address for Notice:
--------------------------------------
--------------------------------------
--------------------------------------
Shares of Company Common Stock
Beneficially Owned by Stockholder:
--------------------------------------
[VOTING AGREEMENT]
B-4
<PAGE> 156
EXHIBIT I
IRREVOCABLE PROXY
The undersigned stockholder (the "STOCKHOLDER") of iMall, Inc., a Nevada
corporation (the "COMPANY"), hereby irrevocably appoints and constitutes the
members of the Board of Directors of At Home Corporation, a Delaware corporation
("PARENT"), and each of them (the "PROXYHOLDERS"), the agents, attorneys and
proxies of the undersigned, with full power of substitution and resubstitution,
to the full extent of the undersigned's rights with respect to the shares of
capital stock of Company which are listed below (the "SHARES"), and any and all
other shares or securities issued or issuable in respect thereof on or after the
date hereof and prior to the date this proxy terminates, to vote the Shares as
follows: the agents and proxies named above are empowered at any time prior to
termination of this proxy to exercise all voting and other rights (including,
without limitation, the power to execute and deliver written consents with
respect to the Shares) of the undersigned at every annual, special or adjourned
meeting of Company stockholders, and in every written consent in lieu of such a
meeting, or otherwise, (i) in favor of approval of the Merger (as defined in the
Voting Agreement dated the date hereof between the Stockholder and Parent (the
"VOTING AGREEMENT")) and the Agreement and Plan of Merger (the "MERGER
AGREEMENT") among Parent, a wholly-owned subsidiary of Parent and Company, (ii)
in favor of approval of an amendment to the Articles of Incorporation of the
Company which deletes Article VI.C of the Company's Articles of Incorporation
regarding a supermajority vote requirement in certain dispositions of assets of
the Company, and (iii) against approval of (a) any proposal made in opposition
to or in competition with consummation of the Merger, (b) any merger,
consolidation, sale of assets, reorganization or recapitalization with any party
other than Parent or its affiliates or (c) any liquidation or winding up of
Company. The Proxyholders may not exercise this proxy on any other matter. The
Stockholder may vote the Shares on all such other matters. The proxy granted by
the Stockholder to the Proxyholders hereby is granted as of the date of this
Irrevocable Proxy in order to secure the obligations of the Stockholder set
forth in Section 1 of the Voting Agreement, and is irrevocable and coupled with
an interest in such obligations and in the interests in Company to be purchased
and sold pursuant the Merger Agreement. This proxy will terminate upon the
termination of the Voting Agreement in accordance with its terms. Upon the
execution hereof, all prior proxies given by the undersigned with respect to the
Shares and any and all other shares or securities issued or issuable in respect
thereof on or after the date hereof are hereby revoked and no subsequent proxies
will be given until such time as this proxy shall be terminated in accordance
with its terms. Any obligation of the undersigned hereunder shall be binding
upon the successors and assigns of the undersigned. The undersigned stockholder
authorizes the Proxyholders to file this proxy and any substitution or
revocation of substitution with the Secretary of the Company and with any
Inspector of Elections at any meeting of the stockholders of the Company.
This proxy is irrevocable and shall survive the insolvency, incapacity,
death or liquidation of the undersigned. Dated: July 12, 1999.
--------------------------------------
Signature
--------------------------------------
Name (and Title)
Shares of Company Common Stock
beneficially owned:
--------------------------------------
B-5
<PAGE> 157
ANNEX C
July 11, 1999
Board of Directors
iMALL, Inc.
233 Wilshire Boulevard
Santa Monica, CA 90401
Members of the Board:
We understand that iMALL, Inc. (the "Company"), At Home Corporation
("Acquiror"), and Shop Nevada, Inc. (a wholly owned subsidiary of Acquiror,
"Merger Sub") are proposing to enter into the Agreement and Plan of Merger dated
as of July 12, 1999 among Acquiror, Merger Sub and the Company (the
"Agreement"), which will provide, among other things, for the merger (the
"Merger") of Merger Sub with and into the Company. Upon consummation of the
Merger, the Company will become a wholly owned subsidiary of Acquiror. Under the
terms set forth in the Agreement, at the effective time of the Merger, the
outstanding shares of common stock of the Company, par value $0.008 per share
("Company Common Stock"), other than certain shares to be cancelled pursuant to
the Agreement, will be converted into the right to receive 0.4600 (the "Exchange
Ratio") shares of the Series A common stock of Acquiror, par value $0.01 per
share ("Acquiror Common Stock"). The terms and conditions of the Merger are set
out more fully in the Agreement.
You have asked whether, in our opinion, the Exchange Ratio is fair from a
financial point of view and as of the date hereof to the "Holders of Company
Common Stock." The "Holders of Company Common Stock" shall be defined as all
holders of Company Common Stock other than Acquiror, Merger Sub or any
affiliates of Acquiror or Merger Sub.
For purposes of this opinion we have, among other things:
(i) reviewed certain publicly available financial statements and other
business and financial information of the Company and Acquiror,
respectively;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company prepared by the management
of the Company;
(iii) reviewed certain financial forecasts and other forward looking
financial information prepared by the management of the Company. In
addition, we reviewed with Acquiror certain publicly available
estimates of research analysts relating to Acquiror;
(iv) held discussions with the respective managements of the Company and
Acquiror concerning the businesses, past and current operations,
financial condition and future prospects of both the Company and
Acquiror, independently and combined, including discussions with the
managements of the Company and Acquiror concerning cost savings and
other synergies that are expected to result from the Merger, as well
as their views regarding the strategic rationale for the Merger;
(v) reviewed the financial terms and conditions set forth in the
Agreement and the agreements ancillary thereto;
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<PAGE> 158
(vi) reviewed the stock price and trading history of the Company and
Acquiror;
(vii) compared the financial performance of the Company and Acquiror and
the prices and trading activity of Company Common Stock and Acquiror
Common Stock with that of certain other publicly traded companies we
deemed comparable with the Company and Acquiror, respectively;
(viii) compared the financial terms of the Merger with the financial terms,
to the extent publicly available, of other transactions that we
deemed relevant;
(ix) reviewed the pro forma impact of the Merger on Acquiror's cash
earnings per share and revenue per share;
(x) participated in discussions and negotiations among representatives of
the Company and Acquiror and their financial and legal advisors; and
(xi) made such other studies and inquiries, and reviewed such other data,
as we deemed relevant.
In our review and analysis, and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us (including information furnished to us orally or
otherwise discussed with us by managements of the Company and Acquiror) or
publicly available and have neither attempted to verify, nor assumed
responsibility for verifying, any of such information. We have relied upon the
assurances of managements of the Company and Acquiror that they are not aware of
any facts that would make such information inaccurate or misleading.
Furthermore, we did not obtain or make, or assume any responsibility for
obtaining or making, any independent evaluation or appraisal of the properties,
assets or liabilities (contingent or otherwise) of the Company or Acquiror, nor
were we furnished with any such evaluation or appraisal. With respect to the
financial forecasts and projections (and the assumptions and bases therefor) for
each of the Company and Acquiror that we have reviewed, upon the advice of the
managements of the Company and Acquiror, we have assumed that such forecasts and
projections have been reasonably prepared in good faith on the basis of
reasonable assumptions and reflect the best currently available estimates and
judgments as to the future financial condition and performance of the Company
and Acquiror, respectively, and we have further assumed that such projections
and forecasts will be realized in the amounts and in the time periods currently
estimated. In this regard, we note that each of the Company and Acquiror face
exposure to the Year 2000 problem. We have not undertaken any independent
analysis to evaluate the reliability or accuracy of the assumptions made by the
managements of the Company and Acquiror with respect to the potential effect
that the Year 2000 problem might have on their respective forecasts. We have
assumed that the Merger will be consummated upon the terms set forth in the
Agreement without material alteration thereof, including, among other things,
that the Merger will be accounted for as "purchase method" business combination
in accordance with U.S. generally accepted accounting principles ("GAAP"), that
the Merger will be treated as tax-free reorganization pursuant to the Internal
Revenue Code of 1986, as amended and that the First Data Corporation agreement
described in the Agreement will be executed and in full force and effect. In
addition, we have assumed that the historical financial statements of each of
the Company and Acquiror reviewed by us have been prepared and fairly presented
in accordance with U.S. GAAP consistently applied. We have relied as to all
legal matters relevant to rendering our opinion on the advice of counsel.
This opinion is necessarily based upon market, economic and other
conditions as in effect on, and information made available to us as of, the date
hereof. It should be understood that
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<PAGE> 159
subsequent developments may affect the conclusion expressed in this opinion and
that we disclaim any undertaking or obligation to advise any person of any
change in any matter affecting this opinion which may come or be brought to our
attention after the date of this opinion. Our opinion is limited to the
fairness, from a financial point of view and as to the date hereof, to the
Holders of Company Common Stock of the Exchange Ratio. We do not express any
opinion as to (i) the value of any employee agreement or other arrangement
entered into in connection with the Merger, (ii) any tax or other consequences
that might result from the Merger or (iii) what the value of Acquiror Common
Stock will be when issued to the Company's stockholders pursuant to the Merger
or the price at which the shares of Acquiror Common Stock that are issued
pursuant to the Merger may be traded in the future. Our opinion does not address
the relative merits of the Merger and the other business strategies that the
Company's Board of Directors has considered or may be considering, nor does it
address the decision of the Company's Board of Directors to proceed with the
Merger.
In connection with the preparation of our opinion, we were not authorized
to solicit, and did not solicit, third-parties regarding alternatives to the
Merger.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee upon the consummation of the Merger. In addition,
the Company has agreed to indemnify us for certain liabilities that may arise
out of the rendering of this opinion. In the past, we have provided certain
investment banking services to the Company. In the ordinary course of business,
we may trade in the Company's securities and Acquiror's securities for our own
account and the account of our customers and, accordingly, may at any time hold
a long or short position in the Company's securities or Acquiror's securities.
Our opinion expressed herein is provided for the information of the Board
of Directors of the Company in connection with its evaluation of the Merger. Our
opinion is not intended to be and does not constitute a recommendation to any
stockholder of the Company as to how such stockholder should vote, or take any
other action, with respect to the Merger. This opinion may not be summarized,
described or referred to or furnished to any party except with our express prior
written consent.
Based upon and subject to the foregoing considerations, it is our opinion
that as of the date hereof, the Exchange Ratio is fair to the Holders of Company
Common Stock from a financial point of view.
Very truly yours,
/s/ BANCBOSTON ROBERTSON STEPHENS
INC.
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<PAGE> 160
ANNEX D
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
IMALL, INC.
Pursuant to Nevada Revised Statutes 78.385 and 78.390, the undersigned does
hereby certify:
FIRST: That the Board of Directors of iMALL, Inc. at a meeting duly
convened and held on July 11, 1999, adopted a Resolution setting forth a
proposed amendment to the Articles of Incorporation, declaring said
amendment to be advisable and directing that said amendment be recommended
for approval to the stockholders of iMALL, Inc. The Resolution setting
forth the proposed amendment is as follows:
RESOLVED, Section C of Article VI of iMALL's Articles of
Incorporation, requiring the vote or written consent of stockholders
entitled to exercise two-thirds of the voting power of iMALL, Inc. to
approve any sale, conveyance, transfer, exchange or other disposition of
all or substantially all of the property and assets of iMALL, be and such
Section hereby is, deleted in its entirety.
FURTHER RESOLVED, that the Board of Directors of iMALL declare
said amendment to be advisable and direct that the amendment be recommended
for approval to the stockholders of iMALL, Inc.
SECOND: That said amendment was duly adopted by % of the voting
power of iMALL, Inc.
Dated , 1999.
iMALL, INC.
By:
----------------------------------
Anthony P. Mazzarella
Executive Vice President and
Secretary
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<PAGE> 161
<TABLE>
<S> <C>
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES ss.:
</TABLE>
On , 1999, before me, , a notary public in and
for said State, personally appeared Anthony P. Mazzarella, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacities, and that by his signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
- --------------------------------------------------------- (Seal)
Notary Public
D-2
<PAGE> 162
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to the corporation or
its stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Certificate of Incorporation further provides:
- for mandatory indemnification, to the fullest extent permitted by
applicable law, for any person who is or was a director or officer, or is
or was serving at the request of the Registrant as a director, officer,
employee or agent of another corporation or of a partnership, joint
venture, trust, enterprise or nonprofit entity, including service with
respect to employee benefit plans, against all liability and loss
suffered and expenses (including attorneys' fees) reasonably incurred by
such person;
- that the Registrant's obligation to indemnify any person who was or is
serving at the Registrant's request as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust,
enterprise or nonprofit entity must be reduced by any amount such person
may collect as indemnification from such other corporation, partnership,
joint venture, trust, enterprise or nonprofit entity;
- that the Registrant must advance to all indemnified parties the expenses
(including attorney's fees) incurred in defending any proceeding provided
that indemnified parties (if they are directors or officers) must provide
the Registrant an undertaking to repay such advances if indemnification
is determined to be unavailable;
- that the rights conferred in the Certificate of Incorporation are not
exclusive; and
- that the Registrant may not retroactively amend the Certification of
Incorporation provisions relating to indemnity.
The indemnification provision in the Registrant's Certificate of
Incorporation and the Indemnification Agreements entered into between the
Registrant and each of its directors and executive officers may be sufficiently
broad to permit indemnification of the Registrant's directors and officers for
liabilities arising under the Securities Act.
The Registrant has also obtained directors' and officers' liability
insurance.
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<PAGE> 163
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
NUMBER EXHIBIT TITLE
- ------ -------------
<C> <S>
2.01 Agreement and Plan of Merger by and among At Home
Corporation, Shop Nevada, Inc. and iMALL, Inc., dated as of
July 12, 1999(1)
3.01 Third Amended and Restated Certificate of Incorporation of
Registrant filed August 14, 1996(3)
3.02 Certificate of Amendment of Third Amended and Restated
Certificate of Incorporation of Registrant filed April 11,
1997(3)
3.03 Certificate of Designation of Series C Convertible
Participating Preferred Stock of Registrant filed April 11,
1997(3)
3.04 Form of Certificate of Amendment of the Third Amended and
Restated Certificate of Incorporation of Registrant
effective July 15, 1997(3)
3.05 Form of Second Amended and Restated Bylaws of Registrant
effective July 16, 1997(3)
3.06 Form of Fourth Amended and Restated Certificate of
Incorporation of Registrant filed July 16, 1997(3)
3.07 Certificate of Amendment of Fourth Amended and Restated
Certificate of Incorporation of Registrant(4)
4.01 Third Amended and Restated Registration Rights Agreement,
dated April 11, 1997, among Registrant and the parties
indicated therein(3)
4.02 Letter Agreement relating to Tag-Along/Drag-Along Rights,
dated April 11, 1997, among Registrant and the parties
indicated therein(3)
4.03 Canadian Purchase Letter Agreement, dated April 11, 1997,
among Registrant and the parties indicated therein(3)
4.04 Form of Amended and Restated Stockholders' Agreement, dated
August 1, 1996, among Registrant and the parties indicated
therein, as amended on May 15, 1997(3)
4.05 Form of certificate of Registrant's Series A Common Stock(3)
4.06 Narrative Communications Corp. 1998 Equity Incentive Plan,
assumed by Registrant as of December 30, 1998(5)
4.07 Stock Option Agreement, dated January 19, 1999 between
Registrant and Excite, Inc.(2)
4.08 Registrant's 1997 Equity Incentive Plan, as amended(6)
4.09 Registrant's 1997 Employee Stock Purchase Plan, as
amended(6)
5.01 Opinion of Fenwick & West LLP
8.01 Opinion of Fenwick & West LLP as to tax matters
8.02 Opinion of Latham & Watkins as to tax matters
23.01 Consent of Ernst & Young LLP
23.02 Consent of Arthur Andersen LLP
23.03 Consent of BancBoston Robertson Stephens Inc.
23.04 Consent of Fenwick & West LLP (included in Exhibit 5.01
above)
23.05 Consent of Latham & Watkins (included in Exhibit 8.02 above)
99.01 Form of Proxy of iMALL, Inc.
</TABLE>
II-2
<PAGE> 164
- -------------------------
(1) Incorporated by reference to exhibits to the Schedule 13D filed by
Registrant on August 2, 1999 (File No. 005-51623).
(2) Incorporated by reference to exhibits to the Schedule 13D filed by
Registrant on January 29, 1999 (File No. 005-47909).
(3) Incorporated by reference to exhibits of the same number to Registrant's
registration statement on Form S-1 declared effective by the Securities and
Exchange Commission on July 11, 1997 (File No. 333-27323).
(4) Incorporated by reference to Registrant's annual report on Form 10-K/A,
filed with the Securities and Exchange Commission on March 31, 1999.
(5) Incorporated by reference to exhibits of the same number to Registrant's
annual report on Form 10-K, filed with the Securities and Exchange
Commission on February 19, 1999.
(6) Incorporated by reference to exhibits of the same number to Registrant's
registration statement on Form S-8 filed with the Securities and Exchange
Commission on July 28, 1998 (File No. 333-60037).
(b) Financial Statement Schedules
The information required to be set forth herein is incorporated by
reference to At Home Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998, as amended March 31, 1999 and further amended
April 27, 1999.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(c) That every prospectus (i) that is filed pursuant to paragraph (b)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE> 165
(d) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(e) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 166
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
At Home Corporation, has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Redwood City, State
of California, on this 27th day of September, 1999.
AT HOME CORPORATION
By: /s/ THOMAS A. JERMOLUK
-----------------------------------
Thomas A. Jermoluk
Chairman and
Chief Executive Officer
POWER OF ATTORNEY
Each individual whose signature appears below constitutes and appoints
Thomas A. Jermoluk, Kenneth A. Goldman and David G. Pine, and each of them, his
true and lawful attorneys-in-fact and agents, each with the power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ THOMAS A. JERMOLUK Chairman, and September 27, 1999
- ------------------------------------------------ Chief Executive
Thomas A. Jermoluk Officer
PRINCIPAL FINANCIAL OFFICER:
/s/ KENNETH A. GOLDMAN Senior Vice September 27, 1999
- ------------------------------------------------ President and
Kenneth A. Goldman Chief Financial
Officer
</TABLE>
II-5
<PAGE> 167
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
PRINCIPAL ACCOUNTING OFFICER:
/s/ ROBERT A. LERNER Corporate September 27, 1999
- ------------------------------------------------ Controller
Robert A. Lerner
ADDITIONAL DIRECTORS:
/s/ WILLIAM R. HEARST III Vice Chairman September 27, 1999
- ------------------------------------------------
William R. Hearst III
/s/ GEORGE BELL Director September 27, 1999
- ------------------------------------------------
George Bell
/s/ C. MICHAEL ARMSTRONG Director September 27, 1999
- ------------------------------------------------
C. Michael Armstrong
/s/ L. JOHN DOERR Director September 27, 1999
- ------------------------------------------------
L. John Doerr
Director September , 1999
- ------------------------------------------------
Leo J. Hindery, Jr.
Director September , 1999
- ------------------------------------------------
John C. Malone
Director September , 1999
- ------------------------------------------------
John C. Petrillo
Director September , 1999
- ------------------------------------------------
Brian L. Roberts
Director September , 1999
- ------------------------------------------------
James R. Shaw, Jr.
/s/ DAVID M. WOODROW Director September 27, 1999
- ------------------------------------------------
David M. Woodrow
</TABLE>
II-6
<PAGE> 168
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<C> <S>
5.01 Opinion of Fenwick & West LLP
8.01 Opinion of Fenwick & West LLP as to tax matters
8.02 Opinion of Latham & Watkins as to tax matters
23.01 Consent of Ernst & Young LLP
23.02 Consent of Arthur Andersen LLP
23.03 Consent of BancBoston Robertson Stephens Inc.
99.01 Form of Proxy of iMALL, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 5.01
September 22, 1999
At Home Corporation
450 Broadway
Redwood City, California 94063
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form S-4
(the "REGISTRATION STATEMENT") to be filed by you with the Securities and
Exchange Commission (the "COMMISSION") on or about September 22, 1999 in
connection with the registration under the Securities Act of 1933, as amended,
of an aggregate of 10,021,614 shares of your Series A Common Stock (the
"STOCK").
In rendering this opinion, we have examined the following:
(1) your registration statement on Form 8-A filed with the Commission on
June 13, 1997 (File No. 000-22697), together with the order of
effectiveness issued by the Commission therefor on July 11, 1997;
(2) your Annual Report on Form 10-K for the year ended December 31, 1998,
as amended;
(3) your Quarterly Report on Form 10-Q for the quarters ended March 31 and
June 30, 1999;
(4) your Current Reports on Form 8-K filed with the Commission on January
14, 1999, January 21, 1999, February 19, 1999, April 8, 1999 and June
14, 1999, and your amended Current Report on Form 8-K filed with the
Commission on February 19, 1999;
(5) the Registration Statement, together with the exhibits filed as a part
thereof;
(6) the prospectus prepared in connection with the Registration Statement
(the "PROSPECTUS");
(7) the Nasdaq National Market Notification Form for Listing of Additional
Shares prepared in connection with the conversion of the Debentures;
(8) your Fifth Amended and Restated Certificate of Incorporation filed
with the Delaware Secretary of State on May 28, 1999 and your Second
Amended and
<PAGE> 2
September 22, 1999
Page 2
Restated Bylaws, each of which are listed as exhibits to the
Registration Statement;
(9) the minutes of meetings and actions by written consent of the
stockholders and Board of Directors that are contained in your minute
books that are in our possession;
(10) summary reports from you confirming the number of shares of your
capital stock outstanding as of September 2 , 1999 and the number of
options, warrants and any other rights to acquire shares of your
capital stock outstanding as of September 2 , 1999; and
(11) a Management Certificate addressed to us and dated of even date
herewith executed by you containing certain factual and other
representations.
By telephone call to the offices of the Commission, we have confirmed the
continued effectiveness of your registration under the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"), and the timely filing by you of all
reports required to be filed by you pursuant to Rules 13, 14 and 15 promulgated
under the Exchange Act.
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity and completeness of all documents submitted
to us as originals, the conformity to originals and completeness of all
documents submitted to us as copies, the legal capacity of all natural persons
executing the same, the lack of any undisclosed termination, modification,
waiver or amendment to any document reviewed by us and the due authorization,
execution and delivery of all documents where due authorization, execution and
delivery are prerequisites to the effectiveness thereof.
As to matters of fact relevant to this opinion, we have relied solely upon
our examination of the documents referred to above and have assumed the current
accuracy and completeness of the information obtained from public officials and
records referred to above. We have made no independent investigation or other
attempt to verify the accuracy of any of such information or to determine the
existence or non-existence of any other factual matters; however, we are not
aware of any facts that would cause us to believe that the opinion expressed
herein is not accurate.
We are admitted to practice law in the State of California, and we express
no opinion herein with respect to the application or effect of the laws of any
jurisdiction other than the existing laws of the United States of America and
the State of California and (without reference to case law or secondary sources)
the existing Delaware General Corporation Law.
In connection with our opinion expressed below, we have assumed that, at or
prior to the time of the delivery of any shares of Stock, the Registration
Statement will have been declared effective under the Securities Act of 1933, as
amended, that the registration will apply to such
<PAGE> 3
September 22, 1999
Page 3
shares of Stock and will not have been modified or rescinded and that there will
not have occurred any change in law affecting the validity or enforceability of
such shares of Stock.
Based upon the foregoing, it is our opinion that up to 10,021,614 shares of
Stock to be issued and sold by you, when issued and sold in accordance in the
manner referred to in the Prospectus and the Registration Statement, will be
validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the Prospectus constituting a part thereof and any
amendments thereto.
This opinion speaks only as of its date and we assume no obligation to
update this opinion should circumstances change after the date hereof. This
opinion is intended solely for the your use as an exhibit to the Registration
Statement for the purpose of the above sale of the Stock and is not to be relied
upon for any other purpose.
Very truly yours,
FENWICK & WEST LLP
By: /s/ Jeffrey R. Vetter
-------------------------------------
Jeffrey R. Vetter
<PAGE> 1
EXHIBIT 8.01
September 24, 1999
@Home Corporation
425 Broadway
Redwood City, California 94603
Attention: Board of Directors
Re: EXHIBIT TAX OPINION RENDERED IN CONNECTION WITH THE
FILING OF AN S-4 REGISTRATION STATEMENT PERTAINING TO
THE MERGER TRANSACTION BETWEEN AND AMONG @HOME
CORPORATION INC., SHOP NEVADA, INC. AND iMALL, INC.
Ladies and Gentlemen:
We have been requested to render this opinion concerning certain matters
of U.S. federal income tax law in connection with the proposed merger (the
"MERGER") involving iMALL, Inc., a corporation organized and existing under the
laws of the State of Nevada ("TARGET") and Shop Nevada, Inc., a corporation
organized and existing under the laws of State of Nevada ("MERGER SUB"), which
is a wholly owned first tier subsidiary of @Home Corporation., a corporation
organized and existing under the laws of the State of Delaware ("PARENT"). The
Merger is further described in and is in accordance with the Securities and
Exchange Commission Form S-4 Registration Statement to be filed on or soon after
September 24, 1999, and related Exhibits thereto, (the "S-4 REGISTRATION
STATEMENT"). Our opinion has been requested solely in connection with the filing
of the S-4 Registration Statement with the Securities and Exchange Commission
with respect to the Merger and cannot be use or relied upon by any person or
entity for any other purpose.
The Merger is structured as a statutory merger of Merger Sub with and
into the Target, with Target surviving the merger and becoming a wholly-owned
subsidiary of Parent, all pursuant to the applicable corporate laws of the State
of Nevada, the State of Delaware, and in accordance with the Agreement and Plan
of Reorganization by and among Merger Sub, Parent, and Target, dated as of July
12, 1999, and exhibits thereto (collectively, the "MERGER AGREEMENT"). Except as
otherwise indicated, capitalized terms used herein have the meanings set forth
in the Merger Agreement. All section references, unless otherwise indicated, are
to the Internal Revenue Code of 1986, as amended (the "CODE").
<PAGE> 2
Exhibit Tax Opinion
September 24, 1999
Page 2
We have acted as legal counsel to Parent and Merger Sub in connection
with the Merger. As such, and for the purpose of rendering this opinion, we have
examined and are relying upon (without any independent investigation or review
thereof) the truth and accuracy, at all relevant times, of the statements,
covenants, representations and warranties contained in the following documents
(including all schedules and exhibits thereto), among others:
1. The Merger Agreement;
2. A Tax Matters Certificate of Parent and Merger Sub dated
September 22, 1999, signed by an authorized officer of each of Parent and Merger
Sub and delivered to us from Parent and Merger Sub, and incorporated herein in
its entirety by reference, attached hereto as Exhibit A;
3. A Tax Matters Certificate of Target dated September 22, 1999,
signed by an authorized officer of Target and delivered to us from Target, and
incorporated herein in its entirety by reference, attached hereto as Exhibit B;
and
4. Such other instruments and documents related to the formation,
organization and operation of Merger Sub, Parent, or Target or the consummation
of the Merger and other transactions contemplated thereby as we have deemed
necessary or appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations and are relying thereon (without any independent investigation
or review thereof) that:
a. Original documents (including signatures thereto) are authentic,
documents submitted to us as copies conform to the original documents, and that
all such documents have been (or will be by the Effective Time of the Merger)
duly executed and delivered where due execution and delivery are prerequisites
to the effectiveness thereof;
Any representation or statement made "to the best of knowledge" or
otherwise similarly qualified is correct without such qualification, and all
statements and representations, whether or not qualified, are true and will
remain true through the Effective Date, and thereafter where relevant;
All statements, descriptions and representations contained in any of the
documents referred to herein or otherwise made to us are true and correct in all
material respects and no actions have been (or will be) taken which are
inconsistent with such representations;
b. All covenants contained in the Merger Agreement (including
exhibits thereto) are performed without waiver or breach of any material
provision thereof;
The Merger will be consummated pursuant to the Merger Agreement and will
be effective under the laws of the States of Nevada and Delaware;
No Merger Sub stockholder has guaranteed or will guarantee any Merger
Sub
2
<PAGE> 3
Exhibit Tax Opinion
September 24, 1999
Page 3
indebtedness outstanding during the period immediately prior to the Merger,
and at all relevant times prior to and including the Effective Date, (i) no
outstanding indebtedness of Parent, Merger Sub, or Target has represented or
will represent equity for tax purposes; (ii) no outstanding equity of Parent,
Merger Sub or Target has represented or will represent indebtedness for tax
purposes; (iii) no outstanding security, instrument, agreement or arrangement
that provides for, contains, or represents either a right to acquire Merger Sub
capital stock (or to share in the appreciation thereof) constitutes or will
constitute "stock" for purposes of Section 368(c) of the Code;
Target and Merger Sub will report the Merger on their respective U.S.
federal income tax returns in a manner consistent with the opinion set forth
below and will comply with all reporting obligations set forth in the Code and
the Treasury Regulations promulgated thereunder.
In addition to the above, our opinion is conditioned on the delivery of
an opinion of counsel to Target from Latham & Watkins rendered in connection
with the filing of the S-4 Registration Statement and that such opinion will not
have been withdrawn prior to the Effective Date.
Based on the foregoing documents, materials, assumptions and
information, and subject to the qualifications and assumptions set forth herein,
we are of the opinion that, if the Merger is consummated in accordance with the
provisions of the Merger Agreement (and without any waiver, breach or amendment
of any of the provisions thereof), the Merger will be a "reorganization" for
U.S. federal income tax purposes within the meaning of Section 368(a) of the
Code and Parent, Merger Sub and Target each will be a "party to the
reorganization" within the meaning of Section 368(b) of the Code.
Our opinions set forth above are based on the existing provisions of the
Code, Treasury Regulations (including Temporary Treasury Regulations)
promulgated under the Code, published Revenue Rulings, Revenue Procedures and
other announcements of the Internal Revenue Service (the "SERVICE") and existing
court decisions, any of which could be changed at any time. Any such changes
might be retroactive with respect to transactions entered into prior to the date
of such changes and could significantly modify the opinions set forth above.
Nevertheless, we undertake no responsibility to advise you of any subsequent
developments in the application, operation or interpretation of the U.S. federal
income tax laws.
Our opinion concerning certain of the U.S. federal income tax
consequences of the Merger are limited to the specific U.S. federal income tax
consequences presented above. No opinion is expressed as to any transaction
other than the Merger, including any transaction undertaken in connection with
the Merger. In addition, this opinion does not address any estate, gift, state,
local or foreign tax consequences that may result from the Merger. In
particular, we express no opinion regarding: (i) the amount, existence, or
availability after the Merger, of any of the U.S. federal income tax attributes
of Merger Sub, Parent, or Target; (ii) any transaction in which Merger Sub
Common Stock is acquired or Parent Common Stock is disposed other than pursuant
to the Merger; (iii) the potential application of the "disqualifying
disposition" rules of Section 421 of the Code to dispositions of Merger Sub
Common Stock; (iv) the effects of the Merger and
3
<PAGE> 4
Exhibit Tax Opinion
September 24, 1999
Page 4
Parent's assumption of outstanding options to acquire Merger Sub stock on the
holders of such options under any Merger Sub employee stock option or stock
purchase plan, respectively; (v) the effects of the Merger on any Merger Sub
stock acquired by the holder subject to the provision of Section 83(a) of the
Code; (vi) the effects of the Merger on any payment which is or may be subject
to the provisions of Section 280G of the Code; (vii) the application of the
collapsible corporation provisions of Section 341 of the Code to Merger Sub,
Parent, or Target as a result of the Merger; (viii) the application of the
alternative minimum tax provisions contained in the Code; and (ix) any special
tax consequences applicable to insurance companies, securities dealers,
financial institutions, tax-exempt organizations or foreign persons.
No ruling has been or will be requested from the Service concerning the
U.S. federal income tax consequences of the Merger. In reviewing this opinion,
you should be aware that the opinion set forth above represents our conclusions
regarding the application of existing U.S. federal income tax law to the instant
transaction. If the facts vary from those relied upon (including if any
representations, covenant, warranty or assumption upon which we have relied is
inaccurate, incomplete, breached or ineffective), our opinions contained herein
could be inapplicable. You should be aware that an opinion of counsel represents
only counsel's best legal judgment, and has no binding effect or official status
of any kind, and that no assurance can be given that contrary positions may not
be taken by the Service or that a court considering the issues would not hold
otherwise.
This opinion is being delivered solely for the purpose of being included
as an exhibit to the S-4 Registration Statement; it may not be used or relied
upon or utilized for any other purpose (including, without limitation,
satisfying any conditions in the Merger Agreement) or by any other person or
entity, and may not be made available to any other person or entity, without our
prior written consent. We do, however, consent to the use of this opinion as an
exhibit to the S-4 Registration Statement and to the use of our name in the S-4
Registration Statement wherever it appears.
Very truly yours,
/s/ FENWICK & WEST LLP
-----------------------------------------
FENWICK & WEST LLP
A Limited Liability Partnership Including
Professional Corporations
Exhibit A: Tax Matters Certificate of At Home Corporation and Shop Nevada, Inc.
dated September 24, 1999
Exhibit B: Tax Matters Certificate of iMALL, Inc. dated September 22, 1999
4
<PAGE> 5
EXHIBIT A
TAX MATTERS CERTIFICATE
September 24, 1999
Latham & Watkins
633 West 5th Street, Suite 4000
Los Angeles, California 90071
Fenwick & West, LLP
Two Palo Alto Square, Suite 800
Palo Alto, California 94306
RE: @HOME CORPORATION TAX REPRESENTATIONS IN CONNECTION WITH THE
AGREEMENT AND PLAN OF MERGER MADE AND ENTERED INTO AS OF JULY
12, 1999 AMONG AT HOME CORPORATION, SHOP NEVADA, INC., AND
iMALL, INC.
Ladies and Gentlemen:
This certificate is delivered to you in connection with your
rendering of an opinion regarding certain United States federal income tax
consequences of the merger of Shop Nevada, Inc., a Nevada corporation ("Merger
Sub") and wholly owned subsidiary of @Home Corporation, a Delaware corporation
("Parent"), with and into iMALL, Inc., a Nevada corporation (the "Company"),
pursuant to the Agreement and Plan of Merger (the "Merger Agreement") made and
entered into as of July 12, 1999 among Parent, Merger Sub, and the Company, and
for purposes of the opinions so to be delivered by you. Capitalized terms not
defined herein shall have the meanings specified in the Merger Agreement.
A. Statements and Representations. The undersigned hereby
certifies and represents on behalf of Parent and Merger Sub and as to Parent and
Merger Sub, after due inquiry and investigation, that the following statements
and representations are true, correct and complete in all respects at the date
hereof and through the Effective Time, and thereafter where relevant.
1. The Merger will be consummated in accordance with the
Merger Agreement.
2. Neither Parent nor Merger Sub (nor any other subsidiary
of Parent) has acquired or, except as a result of the Merger, will acquire, or
has owned in the past five years, any shares of stock of the Company or other
securities, warrants or instruments giving the holder
<PAGE> 6
Latham & Watkins
Fenwick & West, LLP
September 24, 1999
Page 2
thereof the right to acquire Company stock or other securities issued by the
Company.
3. The fair market value of the Parent Common Stock and
other consideration received by each Company stockholder will be approximately
equal to the fair market value of the Company stock surrendered in the exchange.
In connection with the Merger, no Company stockholders will receive in exchange
for Company stock, directly or indirectly, any consideration from Parent other
than Parent Common Stock and cash in lieu of a fractional share thereof.
4. Immediately after the Effective Time, the Company will
hold at least 90 percent of the fair market value of its net assets and at least
70 percent of the fair market value of its gross assets and at least 90 percent
of the fair market value of Merger Sub's net assets and at least 70 percent of
the fair market value of Merger Sub's gross assets held immediately prior to the
Effective Time. For purposes of this representation, amounts paid by the Company
or Merger Sub to dissenters, amounts paid by the Company or Merger Sub to
Company stockholders who receive cash or other property, amounts used by the
Company or Merger Sub to pay Merger expenses, and all redemptions and
distributions (except for regular, normal dividends) made by the Company, and
Merger Sub assets disposed of by Merger Sub prior to the Merger and in
contemplation thereof (including without limitation any asset disposed of by
Merger Sub, other than in the ordinary course of business, during the period
ending on the Effective Time and beginning with the commencement of negotiations
(whether formal or informal) between the Company and Parent regarding the
Merger), will be included as assets of the Company or Merger Sub, respectively,
immediately prior to the Effective Time.
5. Except with respect to open-market purchases of Parent
stock pursuant to a general stock repurchase program of Parent that has not been
created or modified in connection with the Merger, neither Parent, nor any
person related to Parent within the meaning of Treasury Regulation sections
1.368-1(e)(3), (e)(4) and (e)(5), has acquired any shares of Company stock in
contemplation of the Merger, or otherwise as part of a plan of which the Merger
is a part, and neither Parent nor any such related person has any plan or
intention to purchase, redeem, or otherwise reacquire any of the Parent stock
issued pursuant to the Merger Agreement following the Merger.
6. Prior to the Merger, Parent will be in control of Merger
Sub within the meaning of section 368(c) of the Internal Revenue Code of 1986,
as amended (the "Code").
7. Except for transfers described in section 368(a)(2)(C)
of the Code or Treasury Regulation section 1.368-2(k)(2), if any, Parent has no
plan or intention to cause the Company, after the Effective Time, to issue
additional shares of stock that would result in Parent losing control of the
Company within the meaning of section 368(c) of the Code.
8. Parent has no plan or intention to (i) liquidate the
Company; (ii) to merge the Company with or into another corporation; (iii) to
sell or otherwise dispose of the stock of the Company except for transfers
described in section 368(a)(2)(C) of the Code or Treasury Regulation section
1.368-2(k); or (iv) to cause the Company to sell or otherwise dispose of any of
<PAGE> 7
Latham & Watkins
Fenwick & West, LLP
September 24, 1999
Page 3
its assets or any of the assets acquired from Merger Sub, except for
dispositions made in the ordinary course of business or transfers of assets to a
corporation controlled by the Company.
9. Merger Sub is a corporation newly formed for the purpose
of participating in the Merger and at no time prior to the Effective Time has it
conducted any business activities or had significant assets.
10. Merger Sub will have no liabilities assumed by the
Company, and will not transfer to the Company any assets subject to liabilities,
in the Merger.
11. No liabilities of the Company or the Company
stockholders will be assumed by Parent in the Merger.
12. Following the Merger, Parent will cause the Company to
continue its "historic business" or use a "significant portion" of its "historic
business" assets in a business, as such terms are described in Treasury
Regulation section 1.368-1(d).
13. Except as provided in Section 7.3(a) of the Merger
Agreement, Parent, Merger Sub, the Company, and the stockholders of the Company
will pay their respective expenses, if any, incurred in connection with the
Merger. Any expenses of the Company paid by Parent are expenses described in
Rev. Rul. 73-54, 1973-1 C.B. 187.
14. There is no intercorporate indebtedness existing between
Parent and the Company or between Merger Sub and the Company that was issued,
acquired, or will be settled at a discount.
15. In the Merger, shares of Company stock representing
control of the Company, as defined in section 368(c) of the Code, will be
exchanged solely for "voting stock" (within the meaning of sections 368(a)(1)(C)
and (2)(E) of the Code) of Parent. For purposes of this representation, shares
of Company stock exchanged for cash or other property originating with Parent or
any person related to Parent within the meaning of Treasury Regulation sections
1.368-1(e)(3), (e)(4) and (e)(5) will be treated as outstanding Company stock at
the Effective Time.
16. Cash payments to be made to stockholders of the Company
in lieu of fractional shares of Parent stock that would otherwise be issued to
such stockholders in the Merger will be made for the purpose of saving Parent
the expense and inconvenience of issuing and transferring fractional shares of
Parent stock, and do not represent separately bargained for consideration. The
total cash consideration that will be paid in the Merger to stockholders of the
Company in lieu of fractional shares of Parent stock will not exceed one percent
of the total consideration that will be issued in the Merger to stockholders of
the Company in exchange for their shares of Company stock. The fractional share
interest of each stockholder of the Company will be aggregated, and no
stockholder of the Company will receive cash in lieu of fractional shares in an
amount equal to or greater than the value of one full share of Parent Common
Stock.
<PAGE> 8
Latham & Watkins
Fenwick & West, LLP
September 24, 1999
Page 4
17. Neither Parent nor Merger Sub are investment companies,
as defined in sections 368(a)(2)(F)(iii) and (iv) of the Code.
18. None of the compensation to be received by any
shareholder-employees of the Company and designated as compensation will be
separate consideration for, or allocable to, any of their Company stock. None of
the Parent stock to be received by any shareholder-employees of the Company
pursuant to the Merger will be separate consideration for, or allocable to, any
employment agreement. The compensation to be paid to any shareholder-employees
of the Company will be for services actually rendered and will be commensurate
with amounts paid to third parties bargaining at arm's-length for similar
services.
19. The terms of the Merger Agreement and all other
agreements entered into in connection therewith are the product of arm's-length
negotiations.
20. The Merger is being undertaken for purposes of enhancing
the business of Parent and for other good and valid business purposes of Parent.
21. Company stock will be surrendered in the Merger for
Parent Common Stock (and cash in lieu of fractional shares) pursuant to the
exchange ratio set forth in the Merger Agreement, which was the product of an
arm's-length agreement between Parent and the Company as to the relative fair
market values of the Merger Consideration and the Company Common Stock.
22. Neither Parent nor Merger Sub will take any position on
any federal, state or local income or franchise tax return, or take any other
tax reporting position that is inconsistent with the treatment of the Merger as
a reorganization within the meaning of section 368(a) of the Code, unless
otherwise required by a "determination" (as defined in section 1313(a)(1) of the
Code) or by applicable state or local tax law (and then only to the extent
required by such applicable state or local tax law).
23. Parent and Merger Sub each hereby undertakes to inform
each of you and the Company immediately should any of the foregoing statements
or representations become untrue, incorrect or incomplete in any respect at or
prior to the Effective Time.
24. The undersigned is authorized to make all of the
representations set forth herein.
<PAGE> 9
Latham & Watkins
Fenwick & West, LLP
September 24, 1999
Page 5
B. Reliance by You in Rendering the Opinion. The
undersigned recognizes and agrees that (i) your respective tax opinions will be
based on, among other things, the representations set forth herein and on the
statements contained in the Merger Agreement and documents related thereto, and
(ii) your respective tax opinions will be subject to certain limitations and
qualifications including that they may not be relied upon if any such statements
or representations are not accurate in all respects.
Very truly yours,
AT HOME CORPORATION
By:
-----------------------------------
Name:
Title:
<PAGE> 10
EXHIBIT B
TAX MATTERS CERTIFICATE
September 22, 1999
Latham & Watkins
633 West 5th Street, Suite 4000
Los Angeles, California 90071
Fenwick & West, LLP
Two Palo Alto Square, Suite 800
Palo Alto, California 94306
RE: iMALL, INC. TAX REPRESENTATIONS IN CONNECTION WITH THE AGREEMENT
AND PLAN OF MERGER MADE AND ENTERED INTO AS OF JULY 12, 1999
AMONG @HOME CORPORATION, SHOP NEVADA, INC., AND iMALL, INC.
Ladies and Gentlemen:
This certificate is delivered to you in connection with your
rendering of an opinion regarding certain United States federal income tax
consequences of the merger of Shop Nevada, Inc., a Nevada corporation ("Merger
Sub") and wholly owned subsidiary of @Home Corporation, a Delaware corporation
("Parent"), with and into iMALL, Inc., a Nevada corporation (the "Company"),
pursuant to the Agreement and Plan of Merger (the "Merger Agreement") made and
entered into as of July 12, 1999 among Parent, Merger Sub, and the Company, and
for purposes of the opinions so to be delivered by you. Capitalized terms not
defined herein shall have the meanings specified in the Merger Agreement.
A. Statements and Representations. The undersigned hereby
certifies and represents on behalf of the Company and as to the Company, after
due inquiry and investigation, that the following statements and representations
are true, correct and complete in all respects at the date hereof and through
the Effective Time, and thereafter where relevant.
1. The Merger will be consummated in accordance with the
Merger Agreement.
2. Immediately after the Effective Time, the Company will
hold at least 90 percent of the fair market value of its net assets and at
<PAGE> 11
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Fenwick & West, LLP
September 22, 1999
Page 2
least 70 percent of the fair market value of its gross assets and at least 90
percent of the fair market value of Merger Sub's net assets and at least 70
percent of the fair market value of Merger Sub's gross assets held immediately
prior to the Effective Time. For purposes of this representation, amounts paid
by the Company or Merger Sub to dissenters, amounts paid by the Company or
Merger Sub to Company stockholders who receive cash or other property, amounts
used by the Company or Merger Sub to pay Merger expenses, and all redemptions
and distributions (except for regular, normal dividends) made by the Company,
and Merger Sub assets disposed of by Merger Sub prior to the Merger and in
contemplation thereof (including without limitation any asset disposed of by
Merger Sub, other than in the ordinary course of business, during the period
ending on the Effective Time and beginning with the commencement of negotiations
(whether formal or informal) between the Company and Parent regarding the
Merger), will be included as assets of the Company or Merger Sub, respectively,
immediately prior to the Effective Time.
3. The Company has no plan or intention to issue additional
shares of its stock that would result in Parent losing control of the Company
within the meaning of section 368(c) of the Internal Revenue Code of 1986, as
amended (the "Code").
4. No liabilities of the Company will be assumed by Parent
in the Merger.
5. Following the Merger, the Company will continue its
"historic business" or use a "significant portion" of its "historic business"
assets in a business, as such terms are described in Treasury Regulation section
1.368-1(d).
6. Except as otherwise specifically set forth in the Merger
Agreement, each of the Company and the Company stockholders has paid and will
pay only their respective expenses, if any, incurred in connection with the
Merger, and the Company has not agreed to assume, nor will it directly or
indirectly assume, any expense or other liability, whether fixed or contingent,
of any Company stockholders.
7. There is no intercorporate indebtedness existing between
Parent and the Company or between Merger Sub and the Company that was issued,
acquired, or will be settled at a discount.
8. In the Merger, shares of Company stock representing
control of the Company, as defined in section 368(c) of the Code, will be
exchanged solely for voting stock of Parent, and Parent will be in control (as
defined in section 368(c) of the Code) of the Company immediately after the
Effective Time. For purposes of this representation, shares of Company stock
exchanged for cash or other property originating with Parent or any person
related to Parent within the meaning of Treasury Regulation sections
1.368-1(e)(3), (e)(4), and (e)(5) will be treated as outstanding Company stock
on the date of the transaction.
9. Neither the Company nor any person related to the
Company within the meaning of Treasury Regulation sections 1.368-1(e)(3),
(e)(4), and (e)(5) has purchased, redeemed or otherwise acquired, or made any
extraordinary distributions (as defined in Treasury Regulation section
1.368-1T(e)(1)(ii)(A)) with respect to, any stock of the Company prior to or
<PAGE> 12
Latham & Watkins
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September 22, 1999
Page 3
in contemplation of the Merger, or otherwise as part of a plan of which the
Merger is a part.
10. At the Effective Time, the Company will not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire stock in the Company that, if
exercised or converted, would affect Parent's acquisition or retention of
control of the Company, as defined in section 368(c) of the Code.
11. The Company is not an investment company, as defined in
sections 368(a)(2)(F)(iii) and (iv) of the Code.
12. At the Effective Time, the fair market value of the
assets of the Company will exceed the sum of its liabilities, plus, without
duplication, the amount of liabilities, if any, to which the assets are subject.
13. None of the compensation received by any
shareholder-employees of the Company and designated as compensation will be
separate consideration for, or allocable to, any of their Company stock. None of
the Parent stock received by any shareholder-employees of the Company in the
Merger will be separate consideration for, or allocable to, any employment
agreement. The compensation paid to any shareholder-employees of the Company
will be for services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's-length for similar services.
14. The Company is not under the jurisdiction of a court in
a Title 11 or similar case within the meaning of section 368(a)(3)(A) of the
Code.
15. Company stock will be surrendered in the Merger for
Parent Common Stock and cash in lieu of fractional shares pursuant to the
exchange ratio set forth in the Merger Agreement, which was the product of an
arm's-length agreement between Parent and the Company as to the relative fair
market values of the Merger Consideration and the Company stock.
16. The Company will not take any position on any federal,
state or local income or franchise tax return, or take any other tax reporting
position that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of section 368(a) of the Code, unless
otherwise required by a "determination" (as defined in section 1313(a)(1) of the
Code) or by applicable state or local tax law (and then only to the extent
required by such applicable state or local tax law).
17. The terms of the Merger Agreement and all other
agreements entered into in connection therewith are the product of arm's-length
negotiations.
18. The Company hereby undertakes to inform each of you and
Parent immediately should any of the foregoing statements or representations
become untrue, incorrect or incomplete in any respect at or prior to the
Effective Time.
<PAGE> 13
Latham & Watkins
Fenwick & West, LLP
September 22, 1999
Page 2
19. The undersigned is authorized to make all of the
representations set forth herein.
B. Reliance by You in Rendering the Opinion. The
undersigned recognizes and agrees that (i) your respective tax opinions will be
based on, among other things, the representations set forth herein and on the
statements contained in the Merger Agreement and documents related thereto, and
(ii) your respective tax opinions will be subject to certain limitations and
qualifications including that they may not be relied upon if any such statements
or representations are not accurate in all respects.
Very truly yours,
iMALL, INC.
By: _______________________________
Name:
Title:
<PAGE> 1
EXHIBIT 8.02
September 28, 1999
iMALL, Inc.
233 Wilshire Boulevard
Suite 820
Santa Monica, California 90401
Re: AGREEMENT AND PLAN OF MERGER DATED AS OF JULY 12, 1999 AMONG
AT HOME CORPORATION, SHOP NEVADA, INC. AND IMALL, INC.
Ladies and Gentlemen:
We have acted as counsel to iMALL, Inc., a Nevada corporation (the
"Company"), in connection with the proposed merger of Shop Nevada, Inc., a
Nevada corporation ("Merger Sub") and wholly-owned subsidiary of At Home
Corporation ("Parent"), with and into the Company (such transaction, the
"Merger") pursuant to an Agreement and Plan of Merger dated as of July 12, 1999
(the "Merger Agreement") among Parent, Merger Sub and the Company. Capitalized
terms not defined herein have the meanings specified in the Merger Agreement.
This opinion is being delivered in connection with the filing of the
registration statement on Form S-4 relating to the proposed Merger pursuant to
the Merger Agreement (the "Registration Statement") filed with the Securities
and Exchange Commission ("SEC") on September 28, 1999 to which this opinion
appears as an exhibit.
In acting as counsel to the Company in connection with the Merger, we have
participated in the preparation of the Merger Agreement and the preparation and
filing of the Registration Statement with the SEC.
You have requested that we render the opinion set forth below. In rendering
our opinion, we have examined and, with your consent, are relying upon (without
any independent investigation or review thereof) the truth and accuracy, at all
relevant times, of the statements, covenants, representations and warranties
contained in (i) the Merger Agreement (including any Exhibits, Annexes and
Schedules thereto), (ii) the Registration Statement (including the
Prospectus/Proxy Statement filed as part thereof), (iii) the representations
made to us by Parent and Merger Sub, and the Company in their respective letters
provided to us and to Fenwick & West, counsel to Parent, each dated the date
hereof (the "Representation Letters"), and (iv) such other documents and
corporate records as we have deemed necessary or appropriate for purposes of our
opinion.
In addition, we have assumed, with your consent, that:
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there
has been
<PAGE> 2
iMALL, Inc.
September 28, 1999
Page 2
(or will be by the Effective Time of the Merger) due execution and
delivery of all documents where due execution and delivery are
prerequisites to effectiveness thereof;
2. The Merger will be consummated in the manner contemplated by, and
in accordance with the provisions of, the Merger Agreement, and
will be effective under the laws of the State of Nevada;
3. All statements, descriptions and representations contained in any
of the documents referred to herein or otherwise made to us are
true, complete and correct, and no actions have been taken or
will be taken which are inconsistent with such statements,
descriptions or representations or which make any such
statements, descriptions or representations untrue, incomplete or
incorrect at the Effective Time;
4. Any statements made in any of the documents referred to herein
"to the knowledge of" or similarly qualified are true, complete
and correct and will continue to be true, complete and correct at
all times up to and including the Effective Time, in each case
without such qualification; and
5. The parties have complied with and, if applicable, will continue
to comply with, the covenants contained in the Merger Agreement.
Based upon the foregoing, and subject to the qualifications and limitations
stated herein, we are of the opinion that the Merger will constitute a
reorganization under section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
In addition to the matters set forth above, this opinion is subject to the
exceptions, limitations and qualifications set forth below.
1. This opinion represents our best judgment regarding the
application of United States federal income tax laws arising
under the Code, existing judicial decisions, administrative
regulations and published rulings and procedures. Our opinion is
not binding upon the Internal Revenue Service or the courts, and
there is no assurance that the Internal Revenue Service will not
assert a contrary position. Furthermore, no assurance can be
given that future legislative, judicial or administrative
changes, on either a prospective or retroactive basis, would not
adversely affect the accuracy of the conclusions stated herein.
Nevertheless, we undertake no responsibility to advise you of any
new developments in the application or interpretation of the
United States federal income tax laws.
<PAGE> 3
iMALL, Inc.
September 28, 1999
Page 3
2. No opinion is expressed as to any transaction other than the
Merger as described in the Merger Agreement or to any transaction
whatsoever, including the Merger, if all the transactions
described in the Merger Agreement are not consummated in
accordance with the terms of the Merger Agreement and without
waiver or breach of any provisions thereof or if all of the
representations, warranties, statements and assumptions upon
which we have relied are not true and accurate at all relevant
times. In the event that any one of the statements,
representations, warranties or assumptions upon which we have
relied to issue this opinion is incorrect, our opinion might be
adversely affected and may not be relied upon.
This opinion is rendered to you in connection with the filing of the
Registration Statement with the SEC and is not to be used, circulated, quoted or
otherwise referred to or relied upon for any other purpose without our express
written permission. In addition, this opinion may not be relied upon by or
furnished to any other person, firm, corporation or entity without our prior
written consent. We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm name therein under the
caption "The Merger -Material United States federal income tax consequences of
the Merger." In giving this consent, we do not admit that we are within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules or regulations of the SEC promulgated
thereunder.
Very truly yours,
LATHAM & WATKINS
<PAGE> 1
EXHIBIT 23.01
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
prospectus/proxy statement that is made a part of the Registration Statement on
Form S-4 of At Home Corporation, filed with the Securities and Exchange
Commission (the "SEC") on or about September 23, 1999, for the registration of
shares of At Home Corporation's Series A Common Stock and to the incorporation
by reference therein of our report dated January 19, 1999 with respect to the
consolidated financial statements and schedule of At Home Corporation included
in At Home Corporation's Annual Report on Form 10-K, as amended, for the year
ended December 31, 1998, filed with the SEC.
/s/ ERNST & YOUNG LLP
San Jose, California
September 22, 1999
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated March 3, 1999
included in iMALL, Inc.'s Form 10-KSB for the year ended December 31, 1998 and
our report dated May 6, 1999 included in iMALL, Inc.'s Form 8-K filed on May 14,
1999 relating to the acquisition of Pure Payments, Inc. and to all references to
our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Los Angeles, California
September 27, 1999
<PAGE> 1
EXHIBIT 23.03
CONSENT OF BANCBOSTON ROBERTSON STEPHENS INC.
We hereby consent to the inclusion of and reference to our opinion dated
July 11, 1999 to the Board of Directors of iMALL, Inc. ("iMALL") in the
Registration Statement on Form S-4 (the "Registration Statement") of At Home
Corporation ("At Home"), covering common stock of At Home to be issued in
connection with the proposed business combination involving iMALL and At Home.
In giving the foregoing consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended (the "Securities Act"), or the rules and regulations
promulgated thereunder, nor do we admit that we are experts with respect to any
part of the Registration Statement within the meaning of the term "experts" as
used in the Securities Act or the rules and regulations promulgated thereunder.
/s/ BANCBOSTON ROBERTSON STEPHENS
INC.
BancBoston Robertson Stephens Inc.
San Francisco, California
September 28, 1999
<PAGE> 1
Exhibit 99.01
PROXY
IMALL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR A SPECIAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Richard M. Rosenblatt and Anthony P.
Mazzarella, and each of them, as proxies, with full power of substitution, to
represent and vote all shares of Common Stock which the undersigned would be
entitled to vote at the special meeting of iMALL, Inc., to be held at the
Miramar Sheraton Hotel, 101 Wilshire Boulevard, Santa Monica, California, on
October 27, 1999, at 10:00 a.m., and at any adjournments thereof on proposal 1
and proposal 2 as I have specified and such other matters as may come before
the meeting.
Please specify your choices by marking the appropriate boxes on the
reverse side.
SEE REVERSE SIDE
<PAGE> 2
[X] Please mark your votes as in this example.
The Board of Directors recommends a vote FOR Proposal 1 and FOR Proposal 2.
<TABLE>
<S> <C> <C> <C>
1. Proposal to approve an amendment to the articles of FOR AGAINST ABSTAIN
incorporation of iMALL Inc., deleting in its entirety Section C [ ] [ ] [ ]
of Article VI of the articles of incorporation which
requires the vote or written consent of the stockholders
entitled to exercise two-thirds of the voting power of
the corporation to approve any sale, conveyance, transfer,
exchange or other disposition of all or substantially all
of the property and assets of the corporation.
2. Proposal to approve an Agreement and Plan of Merger, FOR AGAINST ABSTAIN
dated as of July 12, 1999, among At Home Corporation, [ ] [ ] [ ]
Shop Nevada, Inc., a wholly-owned subsidiary of At Home
Corporation, and iMALL, Inc., under which Shop Nevada, Inc.
will be merged with iMALL, Inc., with iMALL, Inc. continuing
as the surviving corporation.
</TABLE>
Change of Address/Comments on reverse side. [ ]
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the special meeting or any adjournment or
postponement thereof.
If more than one of the proxies listed on the reverse side shall be present
at the meeting or any adjournment thereof, the majority of said proxies so
present and voting shall exercise all of the powers conferred hereby.
The undersigned hereby revokes any proxy heretofore given to vote upon or
act with respect to such shares and hereby ratifies and confirms all that the
proxies listed on the reverse side, or either of them, may lawfully do by virtue
hereof.
<TABLE>
<S> <C> <C> <C>
____________________ Date: ___________, 1999 ____________________________ Dated: _______, 1999
Signature Signature if Held Jointly
</TABLE>
NOTE: Please sign exactly as name appears on the certificate or certificates
representing shares to be voted by this proxy, as shown on the label
above. When signing as executor, administrator, attorney, trustee, or
guardian, please give full title as such. If a corporation, please sign
full corporation name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person(s).
