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As filed with the Securities and Exchange Commission on May 1, 2000
Registration No. 333-31530
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
to
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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AT HOME CORPORATION
(Exact name of the Registrant as specified in its charter)
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Delaware 77-0408542
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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450 Broadway Street
Redwood City, California 94063
(650) 556-5000
(Address, including zip code, and telephone number, including area code, of
the Registrant's principal executive offices)
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Kenneth A. Goldman
Chief Financial Officer
At Home Corporation
450 Broadway Street
Redwood City, California 94063
(650) 556-5000
(Name, address, including zip code, and telephone number, including area code,
of the Registrant's agent for service)
Copies to:
Jeffrey R. Vetter, Esq.
Tram T. Phi, Esq.
Benjamin G. Hadary, Esq.
Nicholas S. Khadder, Esq.
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
(650) 494-0600
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Approximate date of commencement of proposed sale to the public: From time
to time after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other then securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
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. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
files 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 Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
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PROSPECTUS
[EXCITE@HOME LOGO APPEARS HERE]
At Home Corporation
6,322,003 Shares of Series A Common Stock
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Excite@Home's Series A common stock trades on the Nasdaq National Market.
Last reported sale price on April 28, 2000: $18.625 per share.
Trading Symbol: ATHM
The Offering
Under this prospectus, the selling stockholders named under the section
entitled "Selling Stockholders" of this prospectus may offer and sell shares of
our Series A common stock that they acquired upon our acquisitions of
Worldprints.com International, Inc. and Kendara, Inc. and upon payment of the
earnout in connection with our acquisition of Hartford House, Ltd.
The selling stockholders may sell their shares of Series A common stock in
the open market at prevailing market prices, or in private transactions at
negotiated prices. They may sell the shares directly, or may sell them through
underwriters, brokers or dealers. Underwriters, brokers or dealers may receive
discounts, concessions or commissions from the selling stockholders or from the
purchaser, and this compensation might be in excess of the compensation
customary in the type of transaction involved. See "Plan of Distribution."
We will not receive any of the proceeds from the sale of these shares.
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Investing in our Series A common stock involves a high degree of risk.
Please carefully consider the "Risk Factors" beginning on page 4 of this
prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus is May 1, 2000.
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TABLE OF CONTENTS
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Forward-Looking Statements.................................................. 2
Prospectus Summary.......................................................... 3
Risk Factors................................................................ 4
Use of Proceeds............................................................. 21
Dividend Policy............................................................. 21
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Selling Stockholders........................................................ 22
Plan of Distribution........................................................ 26
Legal Matters............................................................... 28
Experts..................................................................... 28
Where You Can Find More Information......................................... 28
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FORWARD-LOOKING STATEMENTS
We make many statements in this prospectus under the caption "Risk Factors"
and elsewhere that are forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. These statements
relate to our future plans, objectives, expectations and intentions. We may
identify these statements by the use of words such as "believe," "expect,"
"anticipate," "intend" and "plan" and similar expressions. These forward-
looking statements involve risks and uncertainties. Our actual results could
differ materially from those anticipated in these forward-looking statements as
a result of various factors, including those we discuss in "Risk Factors" and
elsewhere in this prospectus. These forward-looking statements speak only as of
the date of this prospectus, and we caution you not to rely on these statements
without also considering the risks and uncertainties associated with these
statements and our business.
@Home, Excite, Excite@Home, Excite Network, MatchLogic and the @ball logo
are trademarks of At Home Corporation and are registered in certain
jurisdictions. Other trademarks and tradenames appearing in this prospectus are
the property of their respective holders.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you
should consider before buying shares in this offering. You should read the
entire prospectus carefully. Unless the context otherwise requires, the terms
we, our, us and Excite@Home refer to At Home Corporation, a Delaware
corporation.
Excite@Home
Excite@Home is a global media company offering broadband Internet
connectivity, personalized web-based content and targeted advertising services.
Our @Home service provides broadband Internet access from consumers' homes over
the cable television infrastructure and offers end-to-end managed connectivity
services for businesses over both cable and digital telecommunications lines.
Our media services include the Excite Network, a leading consumer Internet
portal and MatchLogic, our targeted advertising service. The Excite Network
offers search, content, community, communications services and commerce
functionality to Internet users. Excite's media services focus on comprehensive
navigation, global reach and personalization technology to attract and retain
users and achieve market share. MatchLogic provides advertisers with targeted
ad campaign management and other advertising-related services designed to
improve the effectiveness of their advertising campaigns.
At Home Corporation was incorporated under the laws of the State of Delaware
in March 1995. Our principal executive offices are located at 450 Broadway
Street, Redwood City, California 94063. The primary telephone number for our
principal executive offices is (650) 556-5000.
The Offering
Of the 6,322,003 shares that may be offered under this prospectus, 1,800,130
are held by former stockholders of Kendara, Inc., 3,485,470 are held by former
stockholders of Hartford House, Ltd. and 1,036,403 are held by former
shareholders of Worldprints.com International, Inc. These shares are being
offered on a continuous basis under Rule 415 of the Securities Act.
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Series A common stock that may be offered
by
the selling stockholders................. 6,322,003 shares
Use of proceeds........................... We will not receive any proceeds.
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RISK FACTORS
The risks described below are not the only ones facing our company.
Additional risks not presently known to us, or that we currently deem
immaterial, may also impair our business operations. Our business, financial
condition or results of operations could be seriously harmed by any of these
risks. The trading price of our Series A common stock could decline due to any
of these risks.
Risks Related to Excite@Home's Business
We may fail to integrate our business and technologies with the business and
technologies of Bluemountain.com and the other companies we have recently
acquired or may acquire.
We have completed several acquisitions recently, including our acquisitions
of iMALL, Inc. in October 1999, Bluemountain.com in December 1999 and others.
We intend to pursue additional acquisitions in the future. If we fail to
integrate these businesses, our quarterly and annual results may be adversely
affected. Integrating acquired organizations and products and services could be
expensive, time-consuming and a strain on our resources. Risks we could face
with respect to acquisitions include:
. the difficulty of integrating acquired technology or content and rights
into our services;
. the difficulty of assimilating the personnel of the acquired companies;
. the difficulty of coordinating and integrating geographically-dispersed
operations;
. our ability to retain customers of an acquired company;
. the potential disruption of our ongoing business and distraction of
management;
. the maintenance of brand recognition of acquired businesses;
. the failure to successfully develop acquired in-process technology;
. unanticipated expenses related to technology integration;
. the maintenance of uniform standards, corporate cultures, controls,
procedures and policies;
. the impairment of relationships with employees and customers as a result
of the integration of new management personnel.
In addition, we may be unable to identify future acquisition targets and we
may be unable to complete future acquisitions on reasonable terms.
Our @Home 2000 service may experience unforeseen problems as deployment
continues, and we may not be successful in integrating other aspects of
Excite's Internet services with the @Home service.
Although we have launched @Home 2000, which integrates the technology
platform of the @Home network broadband services with Excite's Internet
services, we have not fully integrated these services. In addition, @Home 2000
has not experienced significant traffic to date due to its recent release and
we cannot ensure that problems will not occur in widespread deployment. Further
integration of the Excite and MatchLogic services with the @Home network
broadband platform poses a number of technical challenges, including
difficulties associated with providing reliable updating and personalization of
content over @Home's broadband services and the difficulties associated with
applying the advertising services and targeting technologies of Excite's
MatchLogic subsidiary over the @Home broadband services. This is particularly
challenging because it is more difficult to provide regularly updated and
personalized information from distributed regional data centers, which we rely
upon to deliver our broadband services, than it is to deliver services from a
central data center, as Excite and MatchLogic currently do, in delivering their
narrowband services. We may not be able to achieve the same level of
reliability in providing updated and personalized Excite broadband content over
the @Home service as we have achieved with the Excite narrowband service.
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Recently-acquired businesses may not be successful.
We have recently acquired companies in an early stage of development and
with unproven business models. Acquired features, functions, products or
services may not achieve market acceptance.
iMALL. Prior to August 1998, substantially all of iMALL's revenues were
attributable to its seminar business. This business was discontinued in August
1998. iMALL has yet to achieve significant revenue from its current business of
providing turnkey electronic commerce services to online merchants or its other
shopping-oriented web sites. A market for iMALL's services may not develop, and
iMALL's services may not become widely accepted.
Bluemountain.com. The acquisition of Bluemountain.com also involves a number
of risks. For example, prior to the acquisition, the Bluemountain.com
electronic greeting card service only sold limited advertising on its web
sites. Bluemountain.com users may not accept a service that displays
advertising. Bluemountain.com users may not continue to use the
Bluemountain.com service for other reasons. For instance, competitive
electronic greeting card sites have increased in popularity. Also, the
popularity of electronic greeting card services could decline generally.
Additionally, advertisers may not choose to advertise on the Bluemountain.com
service if users do not accept advertising or purchase goods or services
advertised on Bluemountain.com in sufficient quantities.
During the first quarter of 2000, we acquired Kendara, Inc. and Rucker
Design Group and we expect to acquire several other companies during 2000.
These companies have specific technology and other capabilities that we may not
be able to successfully integrate with our services or transition to our online
platforms. As a result, we may incur unexpected integration and product
development expenses that could harm our results of operations. We may also be
required to record charges to operations related to the impairment of acquired
technology or other intangible assets.
We have incurred and expect to continue to incur substantial losses.
At Home Corporation was incorporated in March 1995, commenced operations in
August 1995, and has incurred net losses in each fiscal period since its
inception. As of March 31, 2000, we had an accumulated deficit of $2,361
million, which includes depreciation and amortization, cost and amortization of
acquisition-related intangibles and deferred compensation and cost and
amortization of distribution agreements of approximately $2,317 million since
inception. In addition, we currently intend to increase capital expenditures
and operating expenses in order to expand our network, market and provide our
broadband services to potential subscribers and expand our international
operations. As a result of the acquisitions of Excite, iMALL, Bluemountain.com
and other companies, we anticipate that we will incur substantial non-cash
charges including those relating to the amortization of goodwill and other
intangible assets in future periods. Therefore, we anticipate that we will
incur significant net losses for the foreseeable future.
Our quarterly operating results may fluctuate because of a number of factors.
Our quarterly operating results may fluctuate significantly in the future as
a result of a variety of factors, many of which are outside of our control.
These factors include:
. the level of usage of the Internet in general and portal web sites in
particular;
. subscriber growth rates and prices charged by our cable partners;
. demand for Internet advertising;
. the addition or loss of advertisers;
. the level of user traffic on our web sites used for our narrowband
services;
. the mix of types of advertising we sell, such as the mix of targeted
advertising as compared to general rotation advertising;
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. the amount and timing of capital expenditures and other costs relating to
the expansion of our operations;
. the introduction of new products or services by us or our competitors;
. pricing changes for Internet-based advertising;
. the timing of marketing expenditures to promote our brands;
. costs incurred with respect to acquisitions;
. seasonality during the first quarter of each year associated with the
advertising business and Bluemountain.com; and
. general economic conditions.
Our expense levels are based in part on expectations of future revenue and,
to a large extent, are fixed. We may be unable to adjust spending quickly
enough to compensate for any unexpected revenue shortfall.
Our Internet advertising revenue is subject to seasonal fluctuations.
Historically, advertisers spend less in the first and third calendar quarters,
and user traffic for our narrowband services has historically been lower during
the summer and during year-end vacation and holiday periods.
Due to all of the foregoing factors and the other risks described in this
section, you should not rely on quarter-to-quarter comparisons of our results
of operations as an indication of future performance, particularly in light of
the number of acquisitions we have completed. It is possible that in some
future periods our results of operations may be below the expectations of
public market analysts and investors. In this event, the price of our Series A
common stock may fall.
If we do not develop new and enhanced features, products and services for our
narrowband and broadband services, we may not be able to attract and retain a
sufficient number of users.
Because of the competitiveness of our market, we believe it is important to
introduce additional or enhanced features, products and services in the future
in order to differentiate our services and retain our current users and attract
new users. Acquiring or developing new features, products and services may
require a substantial investment of personnel and financial and other
resources. If we introduce a feature, product or service that is not favorably
received by our current users, they may not continue using our services as
frequently and they may choose a competing service.
We must also continually enhance our products and services to incorporate
rapidly changing Internet technologies. We could incur substantial development
costs if we need to modify our products, services or infrastructure to adapt to
changes in Internet technologies. Our business could be harmed if we incur
significant costs to adapt to these changes. If we cannot adapt to these
changes, users may discontinue using our services. Additionally, a new feature,
product or service may not gain acceptance with users and we may not achieve a
return on our investment.
We may also experience difficulties that could delay or prevent us from
introducing new features, products or services. Furthermore, these features,
products or services may contain errors that are discovered after the feature,
product or services are introduced. We may need to modify their design
significantly to correct these errors. In addition, we must consult with and
involve our principal cable partners in the development and design of new
features, products or services for our broadband services. Therefore, the
process of introducing new broadband features, products and services is time
consuming and if our principal cable partners object to a new feature, product
or service, we could be prohibited from offering it in particular areas. Our
business could be adversely affected if we experience difficulties in
introducing new products and services or if users do not accept these new
products or services.
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We depend on the sale of advertisements on our services, and if online
advertising does not become accepted, or if users employ new technology to
block or filter online advertising, our business would be harmed.
We expect to derive a substantial amount of our revenues from the sale of
advertising on our services for the foreseeable future. No standards have been
widely accepted to measure the effectiveness of online advertising. If
standards do not develop, existing advertisers may not continue their current
levels of online advertising. Furthermore, advertisers that have traditionally
relied upon other advertising media may be reluctant to advertise online.
Advertisers that already have invested substantial resources in other
advertising methods may be reluctant to adopt a new strategy. Our business
would be harmed if the market for online advertising fails to develop or
develops more slowly than expected.
Different pricing models are used to sell online advertising. It is
difficult to predict which, if any, will emerge as the industry standard. This
makes it difficult to project future advertising rates and revenues. For
example, advertising rates based on the number of "click throughs," or user
requests for additional information made by clicking on the advertisement,
instead of rates based solely on the number of impressions, or number of times
an advertisement is displayed, could adversely affect our revenues because
impression-based advertising comprises a substantial majority of our current
advertising revenues. Our advertising revenues could be harmed if we are unable
to adapt to new forms of online advertising.
Moreover, "filter" software programs that limit or prevent advertising from
being delivered to a web user's computer are available. Other software programs
are able to hide a web user's identity and prevent "cookies" from being written
to, or read from, the user's hard drive. Cookies are bits of information keyed
to a specific memory location and passed to a web site server through the
user's browser software. This software prevents the proper operation of our
services, including personalization of the My Excite Start Page and targeted
banner advertising. Widespread adoption of software products such as these
could reduce the attractiveness of our personalization features and harm the
commercial viability of online advertising.
We must develop and maintain the awareness of our brands to attract consumers
and advertisers.
Maintaining and strengthening our brands is critical to achieving widespread
acceptance of our services by consumers and advertisers, particularly in light
of the competitive nature of our markets. Promoting and positioning our brands
will depend largely on the success of our marketing efforts and our ability to
provide high quality services. We may find it necessary to increase our
marketing budget or otherwise increase our financial commitment to creating and
maintaining brand loyalty among users. If we fail to promote and maintain our
brands or incur excessive expenses in an attempt to promote and maintain our
brands, our business could be harmed.
Privacy concerns could lead to legislation or new technology that could make it
more difficult for us to deliver targeted advertising.
Due to privacy concerns, some Internet commentators, consumer advocates and
governmental officials have suggested that the use of cookies be limited or
eliminated. In addition, certain currently available web browsers allow a user
to delete cookies or prevent cookies from being stored on the user's hard
drive, and technology that shields e-mail addresses, cookies and other
electronic means of identification could become commercially accepted. Any
reduction or limitation in the use of cookies through legislation, new
technology or otherwise, could limit the effectiveness of our ad targeting,
which could harm our business.
We could face liability related to the privacy of personal information about
our users.
Our narrowband services use cookies to deliver targeted advertising, help
compile demographic information about users and limit the frequency with which
an advertisement is shown to the user. Cookies are placed on the user's hard
drive, often without the user's knowledge or consent. We could face liability
relating to the collection and use of this information, as well as other
misuses such as unauthorized marketing. The Federal Trade Commission and some
states have been investigating Internet companies regarding their use of
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personal information, and some groups have initiated legal action against
Internet companies regarding their privacy practices. In addition, the United
States federal and various state governments have proposed new laws restricting
the collection and use of information regarding Internet users. We could incur
additional expenses if new regulations regarding the use of personal
information are introduced or if government agencies choose to investigate our
privacy practices.
The sponsorship advertising we sell subjects us to financial and other risks.
We derive a substantial portion of our revenues from sponsorship
arrangements. These are advertising relationships under which third parties
receive sponsored services and placements on our services in addition to
traditional banner advertisements across our services. These arrangements
expose us to potential financial risks, including the risk that we fail to
deliver required minimum levels of user impressions, that third party sponsors
do not perform their obligations under these agreements, or that they do not
renew the agreements at the end of their term. These arrangements also require
us to integrate sponsors' content with our services, which can require the
dedication of resources and programming and design efforts to accomplish. We
may not be able to attract additional sponsors or renew existing sponsorship
arrangements when they expire.
In addition, we have granted exclusivity provisions to some of our sponsors,
and may in the future grant additional exclusivity provisions. These
exclusivity provisions may have the effect of preventing us from accepting
advertising or sponsorship arrangements from certain advertisers during the
term of the agreements. Our inability to enter into further sponsorship or
advertising arrangements as a result of any exclusivity arrangements could harm
our business.
Our equity investments in other companies may not yield any returns.
We have made equity investments in many Internet companies, including joint
ventures in other countries. In most instances, these investments are in the
form of illiquid securities of private companies. These companies typically are
in an early stage of development and may be expected to incur substantial
losses. Due to recent market volatility, some of these companies may alter
plans to go public, and others that have gone public have experienced or may
experience significant decreases in the trading prices of their common stock.
Our investments in these companies may not yield any return. Furthermore, if
these companies are not successful, we could incur charges related to write-
downs or write-offs of assets. We also record and continue to record a share of
the net losses in some of these companies, up to our cost basis, if they are
our affiliates. We intend to continue to invest in illiquid securities of
private companies and in joint ventures in the future. Losses or charges
resulting from these investments could harm our operating results.
We must maintain the security of our networks.
We have in the past experienced security breaches in our networks. We have
taken steps to prevent these breaches, to prevent users from sharing files via
the @Home service and to protect against bulk unsolicited e-mail. However,
actual problems with, as well as public concerns about, the security, privacy
and reliability of our networks may inhibit the acceptance of our services.
The need to securely transmit confidential information over the Internet has
been a significant barrier to electronic commerce and communications over the
Internet. Any well-publicized compromise of security could deter more people
from using the Internet or our services to conduct transactions that involve
transmitting confidential information, such as purchases of goods or services.
Because many of our advertisers seek to encourage people to use the Internet to
purchase goods or services, our business could be harmed if this were to occur.
We may also incur significant costs to protect against the threat of security
breaches or to alleviate problems caused by these breaches.
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Our limited experience with international operations may prevent us from
growing our business outside the United States.
A key component of our strategy is to expand into international markets and
offer broadband and narrowband services in those markets. We have limited
experience in developing localized versions of our products and services and in
developing relationships with international cable system operators. We may not
be successful in expanding our product and service offerings into foreign
markets. Some of our investments in international joint ventures include an
option to purchase the interests of other joint venture stockholders which, if
not exercised by a specified date, gives the other joint venture stockholders
the right to purchase our interest in the joint venture for a nominal price. In
addition to the uncertainty regarding our ability to generate revenues from
foreign operations and expand our international presence, we face specific
risks related to providing broadband and narrowband 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;
. potential inability to use European customer information due to new
European governmental regulations; and
. lack of a developed cable infrastructure in many international markets.
We may be liable for our links to third-party web sites.
We could be exposed to liability with respect to the third-party web sites
that may be accessible through our services. These claims may allege, among
other things, that by linking to web sites operated by third parties, we may be
liable for copyright or trademark infringement or other unauthorized actions by
third parties through these web sites. Other claims may be based on errors or
false or misleading information provided by our services. Our business could be
harmed due to the cost of investigating and defending these claims, even to the
extent these types of claims do not result in liability.
We may face potential liability from our electronic commerce-related
advertising arrangements.
Some of our advertising relationships provide that we may receive payments
based on the amount of goods or services purchased by consumers clicking from
our services to a seller's web site. These arrangements may expose us to legal
risks and uncertainties, including potential liabilities to consumers of the
advertised products and services. Although we carry general liability
insurance, our insurance may not cover potential claims of this type or may not
be adequate to indemnify us for all liability that may be imposed.
Some of the liabilities that may result from these arrangements include:
. potential liabilities for illegal activities that may be conducted by the
sellers;
. product liability or other tort claims relating to goods or services sold
through third-party e-commerce sites;
. claims for consumer fraud and false or deceptive advertising or sales
practices;
. breach of contract claims relating to purchases; and
. claims that items sold through these sites infringe third-party
intellectual property rights.
Even to the extent that these claims do not result in material liability,
investigating and defending these claims could harm our business.
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Protection of our intellectual property rights is costly and difficult.
We regard our intellectual property, including our patents, copyrights,
trademarks, trade secrets, and similar intellectual property as critical to our
success. We rely upon patents, trademark and copyright law, trade secret
protection and confidentiality and license agreements to protect our
proprietary rights. Effective protection of intellectual property may not be
available in every country in which our products and services are available. We
cannot guarantee that the steps we have taken to protect our proprietary rights
will be adequate.
We may be subject to intellectual property infringement claims which are costly
to defend and could limit our ability to use certain technologies in the
future.
Many parties are actively developing Internet-related technologies. We
believe that these parties will continue to take steps to protect these
technologies, including seeking patent protection. As a result, we believe that
disputes regarding the ownership of these technologies are likely to arise in
the future. From time to time, parties assert patent infringement claims
against us in the form of letters, lawsuits and other forms of communications.
In addition to patent claims, third parties may assert claims against us
alleging infringement of copyrights, trademark rights, trade secret rights or
other proprietary rights or alleging unfair competition.
We may incur substantial expenses in defending against third-party
infringement claims regardless of the merit of the claims. In the event that
there is a determination that we have infringed third-party proprietary rights,
we could incur substantial monetary liability and be prevented from using the
rights in the future.
Our business depends on the continued growth in Internet use.
We operate in a new and rapidly evolving market. Our 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 the availability of cost-effective
services. Any of these issues could cause the Internet's performance or level
of usage to decline.
Our substantial leverage and debt service obligations may adversely affect our
cash flow.
We have substantial amounts of outstanding indebtedness, primarily from our
convertible subordinated debentures due 2018 and our 4 3/4% convertible
subordinated notes due 2006. We may be unable to generate cash sufficient to
pay the principal of, interest on and other amounts due in respect of our
indebtedness when due. As of March 31, 2000, the total principal amount of our
debt outstanding was $942 million. Our substantial leverage could have
significant negative consequences, including:
. increasing our vulnerability to general adverse economic and industry
conditions;
. limiting our ability to obtain additional financing;
. requiring the dedication of a substantial portion of our expected cash
flow from operations to service our indebtedness, thereby reducing the
amount of our expected cash flow available for other purposes, including
capital expenditures;
. limiting our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and
. placing us at a possible competitive disadvantage compared to less
leveraged competitors and competitors that have better access to capital
resources.
Future acquisitions could result in dilutive issuances of stock and the need
for additional financing.
We have typically paid for our acquisitions by issuing shares of our capital
stock. In the future, we may effect other large or small acquisitions by using
stock, and this will dilute our stockholders. We may also use
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cash to buy companies or technologies in the future, as we did for a portion of
the purchase price for Bluemountain.com, and we may need to incur additional
debt to pay for these acquisitions. Acquisition financing may not be available
on favorable terms or at all. In addition, we will likely be required to
amortize significant amounts of goodwill and other intangible assets in
connection with future acquisitions, which will have a material effect on our
results of operations.
We must manage our growth.
Our growth and recent acquisitions have placed a significant strain on our
managerial, operational, and financial resources. For example, we have grown
from 570 employees at December 31, 1998 to more than 2,400 employees at March
31, 2000. In addition, we plan to continue to hire additional personnel. To
manage our growth, we must continue to implement and improve our operational
and financial systems and to expand, train and manage our employee base. Any
failure to manage growth effectively could harm our business.
Government regulation and legal uncertainties relating to the Internet could
hinder the popularity of the Internet.
New Internet privacy and other laws. There are currently few laws or
regulations that specifically regulate communications or commerce on the
Internet. However, laws and regulations may be adopted in the future that
address issues such as user privacy, pricing, content and the characteristics
and quality of products and services. For example:
. The United States federal government and various state governments have
proposed limitations on the collection and use of information regarding
Internet users. In October 1998, the European Union adopted a directive
that may result in limitations on our ability to collect and use
information regarding Internet users in Europe.
. Several telecommunications companies have petitioned the Federal
Communications Commission to regulate Internet service providers and
online service providers in a manner similar to long distance telephone
carriers and to impose access fees on these companies. This could
increase the cost of transmitting data over the Internet.
. A portion of the Telecommunications Act, which has since been ruled
unconstitutional, sought to prohibit transmitting certain types of
information and content over the Internet.
Moreover, it may take years to determine the extent to which existing laws
relating to issues such as property ownership, libel and personal privacy are
applicable to the Internet. Any new laws or regulations relating to the
Internet could harm our business.
Tax laws. The tax treatment of the Internet and electronic commerce is
currently unsettled. A number of proposals have been made at the federal, state
and local level and by certain foreign governments that could impose taxes on
the sale of goods and services and certain other Internet activities. Our
business may be harmed by the passage of laws in the future imposing taxes or
other burdensome regulations on online commerce.
Other jurisdictions. Because our service is available in multiple states and
foreign countries, these jurisdictions may claim that we are required to
qualify to do business as a foreign corporation in each of these states and
foreign countries. If we fail to qualify as a foreign corporation in a
jurisdiction where we are required to do so, we could be subject to taxes and
penalties.
We could face liability for defamatory or indecent content provided on our
services.
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
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liability are currently pending against Internet and online services providers.
Our insurance may not adequately protect us from these types of claims.
In addition, legislation has been proposed that prohibits, or imposes
liability for, 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
us to implement measures to reduce our exposure to this liability. This may
require that we 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, governments of some foreign countries, 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 our business.
Our future success depends on our ability to attract, retain and motivate
highly skilled employees.
Our future success depends on our ability to attract, retain and motivate
highly skilled employees. Competition for employees in the Internet industry is
intense, particularly in the Silicon Valley where we are headquartered.
Additionally, it is often more difficult to attract employees once a company's
stock is publicly traded because the exercise price of equity awards such as
stock options are based on the public market, which is highly volatile. We may
be unable to attract, assimilate or retain other highly qualified employees in
the future. We have from time to time experienced, and we expect to continue to
experience in the future, difficulty in hiring and retaining highly skilled
employees with appropriate qualifications. This risk is compounded by the fact
that we are controlled by our principal cable partners or by AT&T alone if the
transactions contemplated by the agreements with our cable partners become
effective, and therefore we may not have the same flexibility as a typical
Silicon Valley company to pursue initiatives proposed by management.
Furthermore, certain key employees possess marketing, technical and other
expertise which is important to the operations of our business, and if these
employees leave, we may not be able to replace them with employees possessing
comparable skills.
Risks Relating to Excite@Home's Broadband Services
Our broadband business is unproven, and it may not achieve profitability.
The profit potential of our broadband business model is unproven and our
broadband services may not achieve widespread consumer or commercial
acceptance. We have had difficulty predicting whether the pricing models or
revenue sharing arrangements with our cable partners for our broadband services
will prove to be viable, whether demand for our broadband services will
continue at the prices our cable partners charge for our broadband services, or
whether current or future pricing levels will be sustainable. If these pricing
levels are not achieved or sustained or if our broadband services do not
achieve or sustain broad market acceptance, our business will be significantly
harmed.
Growth of our broadband service may be inhibited by factors beyond our control.
Our ability to increase the number of subscribers to our broadband service
to achieve our business plans and generate future revenues will depend on many
factors which are beyond our control. For instance, some of our cable partners
have not achieved the subscriber levels that we had originally anticipated.
Other factors include:
. the rate at which our current and future cable partners upgrade their
cable infrastructures for two-way data services;
. our ability and the ability of our cable partners to coordinate timely
and effective marketing campaigns with the availability of cable
infrastructure upgrades;
. the success of our cable partners in marketing and installing the @Home
service in their local cable areas;
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. the prices that our cable partners set for the @Home service and for its
installation;
. the speed at which our 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 the roll-out of these products with the @Home service; and
. the quality of customer and technical support our cable partners provide.
We need to add subscribers at a rapid rate for our broadband business to
succeed, but we may not achieve our subscriber growth goals.
Our actual revenues or the rate at which we add new subscribers may differ
from our forecasts. We may not be able to increase our subscriber base enough
to meet our 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.
Our broadband subscriber growth is limited by installation and price
constraints.
Installation of the @Home service generally requires a customer service
representative employed by a cable partner to install a cable modem at a
customer's location and therefore can be time consuming. If we are unable to
speed the installation of our service, our subscriber growth could be
constrained. 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 service. Recently, companies have begun to offer free
Internet access with the purchase of personal computers and some Internet
service providers have reduced or eliminated Internet access charges in
exchange for placing advertisements on a customer's computer screen. If these
promotions become more widely used, or if Internet access fees decline,
consumers may be less willing to pay a premium for broadband services, or our
broadband services in particular.
If we cannot maintain the scalability and speed of our @Home broadband network,
customers will not accept our broadband services.
Due to the limited deployment of our broadband services, the ability of our
broadband network to connect and manage a substantial number of subscribers at
high transmission speeds is unknown. Therefore, we face risks related to our
network's ability to be scaled up to accommodate increased subscriber levels
while maintaining performance. Our network may be unable to achieve or maintain
a high speed of data transmission, especially as the number of our subscribers
increases. Because of our reliance on regional data centers and the cable
infrastructure located in particular geographic areas to support our broadband
services, our and our cable partners' infrastructure must also be able to
accommodate increased subscribers in a particular area. If the existing
infrastructure for a geographic area does not accommodate additional
subscribers, network performance for an area could decline causing us to lose
subscribers in that area, especially if a cable partner was unwilling to
upgrade its infrastructure in that area.
In recent periods, the performance of the @Home network has experienced some
deterioration in some markets partially as a result of subscriber abuse of the
@Home service. While we are seeking to eliminate this abuse by enforcing our
acceptable-use policy and by limiting users' upstream bandwidth, our failure to
do so may result in slower network performance and reduced customer demand for
our services.
If new "DOCSIS" compliant and self-installable cable modems are not deployed
timely and successfully, our subscriber growth could be constrained.
Currently, each of our subscribers must typically 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
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utilizing compatible cable modems. Some of our cable partners have chosen to
delay deployments of the @Home service until the commercial availability of
DOCSIS-compliant cable modems is widespread, among other reasons. Subscriber
growth could be constrained and our business could be significantly harmed if
our cable partners choose to slow the deployment of the @Home service because
they are not able to obtain a sufficient quantity of DOCSIS-compliant modems
and if such modems do not become widely available through other channels.
We believe that our ability to meet our subscriber goals depends on the
degree to which two-way cable modems become widely available in channels such
as personal computer manufacturers and retail outlets. Currently, this
widespread availability has not yet occurred. Also, cable modem manufacturers
have experienced, and may continue to experience, production and delivery
problems with cable modem components that may restrict the number of modems
available. In addition, these modems must be easy for consumers to install
themselves, rather than requiring a customer service representative to perform
the installation. If two-way cable modems do not become quickly available in
outlets other than through cable television companies, or if they cannot be
installed easily by consumers, it would be difficult for us to attract large
numbers of additional subscribers and our business would be harmed.
Our broadband business may be impacted by cable access proposals and other
government regulation.
Currently, our broadband services are not directly subject to regulations of
the Federal Communication Commission or any other federal, state or local
communications regulatory agency. However, there may be changes in the
regulatory environment relating to the Internet, cable television or
telecommunications markets. These changes could require regulatory compliance
by us, impact our exclusivity arrangements or limit our ability to provide
broadband services to our subscribers, and therefore could adversely affect our
revenues and results of operations. Such possible government regulations
include the following:
. The FCC or local agencies could require our cable partners to grant
competitors access to their cable systems. GTE, 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. Some parties have also
attempted to petition for unbundled access under existing cable
franchising rules, such as those for local programming access. If we or
our cable partners are classified as common carriers, or if government
authorities require third-party access to cable networks or unaffiliated
Internet service providers, our competitors may be able to provide
service over our cable partners' systems. The rates that our 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. Some local jurisdictions, including
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 was appealed to the U.S. Court of Appeals
for the Ninth Circuit and arguments were presented to the court in
November 1999. Although appeals decisions have no time limit, most
rulings occur within three to twelve months after the date arguments are
presented. Numerous other local jurisdictions have considered or are
considering imposing similar third-party access requirements and other
municipalities may consider imposing similar requirements in the future.
. Other litigation. In October 1999, GTE filed a lawsuit in a U.S. District
Court and in November 1999, a class action was filed, each alleging
violations by us of the federal antitrust laws. Although it is too early
to predict the outcome of this litigation, we could be forced to pay
damages, allow other service providers to utilize our network, otherwise
alter the way we do business or incur significant costs in defending
these litigations. Any of these outcomes could harm our business. In
addition, others could initiate litigation on similar legal theories in
the future.
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. Federal regulation. Regulatory changes that affect telecommunications
costs, limit usage of subscriber-related information or increase
competition from telecommunications companies could affect our pricing or
ability to market our broadband services successfully. For example,
changes in the regulation of cable television rates may affect the speed
at which our cable partners upgrade their cable systems to carry our
broadband services.
. Regulation by local franchise authorities. Many of our United States
cable partners' local cable affiliates have elected to classify the
provision of the @Home service as an additional cable service 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 other
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 us or our cable partners to operate without a
uniform set of franchise requirements.
We could lose subscribers, distribution relationships and revenues related to
broadband services to our competitors.
The markets for consumer and business broadband services are extremely
competitive, and we expect that competition will intensify in the future. Our
most direct competitors for broadband services include the following:
. Providers of cable-based Internet services. Media One Group, which AT&T
has agreed to acquire, and Time Warner Inc. have deployed high-speed
Internet access services over their local cable networks through their
own cable-based Internet service, Road Runner. We currently compete with
Road Runner to establish distribution arrangements with cable system
operators and we may compete for subscribers in the future if and when
our cable partners cease to be subject to their exclusivity obligations.
In addition, we compete with other providers of cable-based Internet
services, such as ISP Channel, Inc. and High Speed Access Corporation.
. Telecommunications providers. We compete with national long-distance and
local exchange carriers that offer high-speed, Internet access services
such as asymmetric digital subscriber line, known as DSL. Recently, these
services have been offered in a number of areas and at lower prices than
in the past. If the advanced services offered by these companies are
deregulated, this would further enhance the ability of these companies to
compete against our services.
. Internet and online service providers. We compete with Internet service
providers that provide basic Internet access services, online service
providers such as America Online, and other Internet portals and online
services that have announced broadband strategies, such as Yahoo!.
Many of our 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 we
do. 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 we can. We may not be able
to compete successfully against current or future competitors. Competitive
pressures could significantly impact the growth of our broadband subscriber
base and our ability to renew and enter into new distribution agreements and as
a result may hurt our revenues.
The proposed merger between America Online and Time Warner Inc. creates
uncertainties about which cable markets will be served by Road Runner on an
exclusive or non-exclusive basis, and the merger may improve Road Runner's
ability to negotiate distribution agreements with cable system operators.
Additionally, our principal shareholder, AT&T, will have a substantial
ownership interest in Time Warner and Road Runner if its proposed merger with
MediaOne is completed. This relationship between America Online, AT&T, Time
Warner and Road Runner creates further uncertainties about which cable markets
we will be able to serve and under what terms. The proposed merger would also
give America Online, the dominant dial-up Internet service
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provider, the ability to utilize Road Runner's technology as a basis for
leveraging its marketing prowess and extensive subscriber base to compete for
customers in our cable markets once our exclusivity agreements have expired. As
a result, we may face intense long-term competition for customers in previously
exclusive cable markets.
Our dependence on our network to provide our broadband services exposes us to a
significant risk of system failure.
Our broadband service operations are dependent upon our ability to support
our 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
our network operations center or at a number of our regional data centers could
cause interruptions in our broadband services. Additionally, failure of our
cable partners or companies from which we obtain data transport services to
provide the data communications capacity that we require, for example as a
result of natural disaster or operational disruption, could cause interruptions
in our broadband services. Any damage or failure that causes interruptions in
our network operations could harm our business.
Risks Related to Our Relationships With Our Cable Partners
The success of our business depends on our relationships with our cable
partners. We recently announced extended and modified distribution agreements
with AT&T, Comcast and Cox, which are subject to stockholder and regulatory
approvals, and we also have distribution agreements with other cable partners.
Additionally, we have agreed not to provide a variety of Internet services in
the areas covered by our cable partners. Our agreements with our cable partners
are complex and some of the risks associated with these relationships are set
forth below.
We depend on our 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 our broadband 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 March 31, 2000,
approximately 43% of our North American cable partners' cable infrastructure
was capable of delivering the @Home service. Our cable partners have announced
and are implementing 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 our cable partners, most of which are already highly leveraged. Therefore,
these infrastructure investments have been, and we expect will continue to be,
subject to change, delay or cancellation. Furthermore, because of consolidation
in the cable television industry, as well as the sale or transfer of cable
assets among cable television operators, many cable companies have delayed
upgrading particular systems that they plan to sell or transfer. If these
upgrades are not completed in a timely manner, our broadband services may not
be available on a widespread basis and we may not be able to increase our
subscriber base at the rate we anticipate. Although our commercial success
depends on the successful and timely completion of these infrastructure
upgrades, most of our cable partners are under no obligation to upgrade systems
or to introduce, market or promote our broadband services. As has happened in
the past, even if a cable partner upgrades its cable infrastructure, the
upgraded infrastructure may not function properly, and therefore may cause a
delay in the availability of our broadband services for particular areas. The
failure of our cable partners to complete these upgrades in a timely and
satisfactory manner, or at all, would prevent us from delivering broadband
services and would significantly harm our business.
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Our cable partners are not generally obligated to carry our broadband services,
and the exclusivity obligations that prevent them from carrying competing
services may be terminated.
Most of our cable partners are currently 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 us.
However, our cable partners are generally under no affirmative obligation to
carry any of our broadband services. The current exclusivity obligations of our
principal cable partners, AT&T, Comcast, Cox and Cablevision, expire on June 4,
2002, and may be terminated sooner under some circumstances, as follows:
. under the new agreements, Comcast or Cox may terminate their exclusivity
obligations to us, or their entire relationship with us, at any time on
or after June 4, 2001 by providing six months' prior written notice, with
the termination to become effective on the first June 4 or December 4
following this notice period, provided that they forfeit newly-issued
warrants to purchase shares of our Series A common stock;
. under the new agreements, Comcast may terminate its current exclusivity
obligations at any time if required to do so by Microsoft pursuant to an
agreement between those companies, in which case we may repurchase a
portion of Comcast's equity interest in Excite@Home;
. any principal cable partner may terminate all of its exclusivity
obligations upon a change in law that materially impairs its rights;
. Comcast or Cox may terminate all exclusivity obligations of our principal
cable partners at any time if there is a change of control of TCI that
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; and
. Comcast or Cox may terminate the exclusivity provisions of our principal
cable partners as of June 4 of each year if AT&T and its affiliates do
not meet specified subscriber penetration levels for the @Home service.
Under the new agreements, Comcast and Cox were granted the right to sell
their shares of our Series A common stock to AT&T for a minimum price of $48 a
share at any time between January 1, 2001 and June 4, 2002. This right could
make it easier for Comcast or Cox to terminate their relationship with us
should they choose to do so.
Additionally, under the new agreements, once the current exclusivity
obligations expire on June 4, 2002, these cable partners have agreed to use us
as their provider of platform and connectivity services used in delivering
their high-speed Internet access services over their cable systems in the
United States through June 4, 2008 with respect to AT&T, and through June 4,
2006 with respect to Comcast and Cox. However, these agreements do not prohibit
these cable partners from offering consumers a choice to use other service
providers after June 4, 2002, or sooner with respect to Comcast or Cox if they
terminate their exclusivity obligations. Comcast or Cox may terminate this new
agreement at any time by providing six months' prior written notice, with the
termination to become effective on the first June 4 or December 4 following
this notice period.
If the exclusivity obligations of our cable partners or our new agreements
with these cable partners are terminated, our business could be harmed
significantly and our stock price may suffer an immediate drop.
Our cable partners may offer services that compete with the @Home service, but
we are prohibited from offering competing services.
Many of our cable partners' exclusivity obligations are limited to high-
speed residential Internet services and do not extend to various services that
they may offer without us. These services include, but are not limited to,
telephony services, commercial and business services similar to our @Work
service, Internet services that
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do not use the cable television infrastructure or do not require use of an
Internet backbone and limited Internet services including streaming video and
other downstream-only services. By providing these services, most cable
partners can compete, directly or indirectly, with our broadband delivery
activities.
Until the expiration of our principal cable partners' exclusivity
obligations, we may not offer the services described above using their plant,
or to residences in the geographic areas served by their cable systems, without
their consent. These restrictions apply even if we have integrated such a
service with the @Home service in another geographic area. For example, in
order to provide streaming video longer than 10 minutes in duration, we must
seek a principal cable partner's consent or negotiate a separate agreement,
including a new revenue split, if applicable, prior to offering the service. We
must similarly obtain our cable partners' consent or execute a separate
agreement to provide broadband services over alternate platforms including
fixed wireless, cellular or DSL infrastructures to any residential customers in
the cable partners' geographic area. If our principal cable partners do not
allow us to offer broadband services over alternate platforms, our market for
such services will be severely limited and our business could be harmed.
We depend on our cable partners to promote our services and obtain new
subscribers.
The rate at which we are able to obtain new subscribers depends not only on
the degree to which our cable partners upgrade their cable systems but also on
the level and effectiveness of the efforts of our cable partners to promote our
services. Our cable partners have achieved different levels of subscriber
penetration. In Canada, for example, where our cable partners have high levels
of upgraded cable systems and faced early competition from other providers of
high speed data services, we have relatively high levels of subscriber
penetration (exceeding those in the United States). Among our principal U.S.
cable partners, AT&T, Cox and Comcast are actively promoting our services and
are beginning to increase their penetration rates. Cablevision, however, has
deployed our service to only a small number of subscribers and continues to
offer its own online service called Optimum Online to the majority of
subscribers in cable systems deployed to date. We cannot predict the rate at
which our cable partners will add new subscribers to our services. If our cable
partners do not actively and effectively promote our services, we will not be
able to reach the level of subscribers necessary to achieve a profitable
business model.
We are currently controlled by our principal cable partners, and may become
subject to control by AT&T, and our interests may not always align with AT&T or
our other principal cable partners.
AT&T controls approximately 55% of our voting power. Currently, four of our
eleven directors are directors, officers or employees of AT&T or its
affiliates. AT&T currently owns all 30.8 million outstanding shares of our
Series B common stock, each of which carries ten votes per share. This Series B
common stock ownership gives AT&T the right to elect five Series B directors,
one of which is designated by Comcast and one of which is designated by Cox.
Currently, our board may take action only if approved by the board and by at
least 75%, or four of the five, of our Series B directors. As a result,
corporate actions generally require the approval of AT&T'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.
Under our new agreements with these cable partners, AT&T will acquire
additional voting control over us. If the transactions contemplated by these
agreements become effective, AT&T will have the right to elect at least a
majority of the board of directors. Comcast and Cox will waive their right to
elect directors to our board and their designees will resign their board
positions. All board actions will be decided by a majority vote of the board.
Currently, we depend on a continuing cooperative relationship with our
principal cable partners in order to approve board action and in order to take
action that requires stockholder consent. If the transactions contemplated by
our new agreements with our cable partners become effective, we will be subject
to both board and stockholder voting control by AT&T. It is possible that the
objectives of these companies, or AT&T if the transactions contemplated by our
new agreements become effective, will diverge from what management considers to
be our optimum strategy.
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Warrants issued to our cable partners may result in additional dilution to our
stockholders.
We have entered into agreements with Cablevision, Rogers, Shaw and other
cable partners under which we issued warrants to purchase shares of our Series
A common stock. Under these agreements, warrants to purchase approximately 29.7
million shares of our Series A common stock at an average price of $2.09 per
share were exercisable as of March 31, 2000.
Under our new agreements with our principal cable partners, we granted or
will grant warrants to Comcast and Cox to purchase two shares of Series A
common stock and warrants to AT&T to purchase one share of Series A common
stock and one share of Series B common stock, for each home passed by the cable
systems located in the United States operated by each respective cable partner.
Each warrant will have an exercise price of $29.54 per share. We may grant
additional warrants in the future depending on increases in homes passed by
cable systems owned by these cable partners. Additionally, approximately 50
million shares of Series A common stock held by AT&T will be converted into
shares of Series B common stock, each share of which entitles AT&T to 10 votes
and which will therefore result in additional voting power for AT&T. We will
incur accounting charges with respect to these warrants, although we have not
yet determined the exact timing and amount of these charges.
To the extent that our principal cable partners, Cablevision, Rogers, Shaw
or other cable partners become eligible to and exercise their warrants, our
stockholders would experience substantial dilution. We also may issue
additional stock, or warrants to purchase stock, at prices equal to or less
than fair market value in connection with efforts to expand distribution of the
@Home service.
Risks Related to Our Narrowband Services
Our narrowband services could lose users, advertisers and revenues to
competitors.
Our narrowband services compete with a number of companies both for users
and advertisers and, therefore, for revenues. We expect this competition will
intensify, particularly because there are few barriers to entry in this market.
These competitors include:
. Internet portal companies such as Disney's Go Network, Lycos, Netscape's
Netcenter, NBCi 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 a wide variety of online information, entertainment and
community services such as services that are targeted to vertical markets
or electronic commerce services.
Many providers of Internet services have been entering into distribution
arrangements, co-branding arrangements, content arrangements and other
strategic partnering arrangements with ISPs, online service providers,
providers of web browsers, operators of high-traffic web sites and other
businesses in an attempt to increase traffic and page views, thereby making
their web sites more attractive to advertisers, while also making it more
difficult for consumers to link to services. To the extent that our direct
competitors or other web site operators are able to enter into successful
strategic relationships, these competitors and web sites could experience
increases in traffic and page views, or the traffic and page views on our
narrowband services could remain constant or decline, either of which could
harm our business by making these web sites appear more attractive to
advertisers.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories in the Internet market, greater
name recognition, larger customer bases and significantly greater financial,
technical and marketing resources than we have. These competitors may be able
to undertake more extensive marketing campaigns, adopt more aggressive pricing
policies and make more attractive offers to
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potential employees, distribution partners, advertisers and content providers.
Further, it is possible that our competitors could develop search and retrieval
services or other online services that are equal or superior to ours or that
achieve greater market acceptance than our offerings.
The Internet in general, and our narrowband services specifically, also must
compete with traditional advertising media, such as print, radio and
television, for a share of advertisers' total advertising budgets. To the
extent that the Internet is not perceived as an effective advertising medium,
advertisers may be reluctant to devote a significant portion of their
advertising budgets to Internet advertising.
The proposed merger between Time Warner Inc. and America Online announced in
January 2000 would create a very large, diverse media conglomerate. The
combined companies may be able to use their diverse media holdings and Internet
service delivery capabilities to develop or expand Internet services and
content that could attract a significant number of new users and increased
traffic. Additionally, America Online will likely use Time Warner's
subscription-based services as an advertising mechanism to attract users to the
Internet access services provided by America Online and Road Runner. Increased
competition for users of Internet services and content may result in lower
subscriber growth rates for our online and Internet services and lower
advertising rates and decreased demand for advertising space on our web sites.
If usage of Internet portal sites by Internet users declines, our business
could be harmed.
The success of our Internet portal web sites is also dependent on Internet
users continuing to use "portal" web sites for their information needs. Some
Internet measurement services have reported that the number of unique users of
Internet portal sites has been decreasing in recent periods. If Internet users
begin to become less dependent on portal sites, and instead go directly to
particular web sites, our traffic levels could decrease as measured by unique
users, reach and pages views. As a result, the number of advertising
impressions and the attractiveness of our sites to advertisers could be
impacted, which would harm our media and advertising revenues.
Our systems may not be able to accommodate increases in the number of users of
our narrowband services.
Our web sites for the Excite Network are currently hosted and operated on a
computer network infrastructure separate from our broadband services. The
Excite Network must accommodate a high volume of traffic and deliver
frequently-updated information. The web sites for the Excite Network have in
the past, and may in the future, experience slower response times or other
problems for a variety of reasons. We also depend on third party information
providers to provide updated information and content for these services on a
timely basis. The Excite Network could experience disruptions or interruption
in service due to the failure or delay in the transmission or receipt of this
information. In addition, the users of these Excite Network services depend on
Internet service providers, online service providers and other web site
operators for access to the Excite Network. Each of these parties has
experienced significant outages in the past, and could experience outages,
delays and other difficulties due to system failures unrelated to our systems.
These types of occurrences could cause users to perceive the Excite Network as
not functioning properly and therefore cause them to use other services.
We depend on several third-party relationships for users, advertisers and
revenues.
We depend on a number of third party relationships to provide users and
content for the Excite Network, including agreements for links to our services
to be placed on high-traffic web sites and agreements for third parties to
provide content, games and e-mail for narrowband web sites. We are not
guaranteed of recouping our investments in these agreements through additional
users or advertising revenues, and we may have to pay penalties for terminating
agreements early. Some of these third parties could become our competitors, or
provide their services to our competitors, upon termination of such
relationships. If these relationships are terminated and we are not able to
replace them, we could lose users or advertisers.
20
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Series A common stock
by the selling stockholders under this prospectus.
DIVIDEND POLICY
We have never paid any cash dividends on our capital stock. We anticipate
that we will continue to retain any earnings for use in the operation of our
business and we do not currently intend to pay dividends.
21
<PAGE>
SELLING STOCKHOLDERS
Former Stockholders of Hartford House, Ltd. and Kendara, Inc.
The following table sets forth information with respect to the selling
stockholders that received the shares of our Series A common stock that they
may offer under this prospectus in connection with our acquisition of Hartford
House, Ltd. (Bluemountain.com) in December 1999 and Kendara, Inc. in February
2000. Except for the relationships described below, the selling stockholders
have not had any other position, office or other material relationship with us
or any of our predecessors or affiliates.
Except as noted below, the share information provided in the table below is
based on information provided to us by the selling stockholders as of February
15, 2000. Each selling stockholder beneficially owns less than 1% of our
outstanding Series A common stock, based on 363,582,284 shares of Series A
common stock outstanding as of April 15, 2000. We may update, amend or
supplement this prospectus from time to time to update the disclosure in this
section.
The selling stockholders may from time to time offer and sell any or all of
their shares that are registered under this prospectus. Because the selling
stockholders are not obligated to sell their shares, and because the selling
stockholders may also acquire publicly traded shares of our Series A common
stock, we cannot estimate how many shares of the selling stockholders will
beneficially own after this offering.
<TABLE>
<CAPTION>
Shares Total
Owned Shares
Before that May
the be
Name Offering Offered
---- --------- ---------
<S> <C> <C>
Fortuna Ventures, L.P(1)................................... 1,553,240 1,553,240
Stephen Schutz and Susan Schutz, Trustees under Trust dated
December 19, 1985(1)...................................... 1,062,665 1,062,665
Jared Schutz(1)............................................ 823,093 823,093
Mohr, Davidow Ventures V, L.P.(2).......................... 475,446 475,446
Institutional Venture Partners VIII, L.P.(3)............... 451,598 451,598
Pavani Diwanji(4).......................................... 286,580 286,580
Freeman Murray(5).......................................... 233,996 233,996
Bret Comolli(6)............................................ 80,791 80,791
IVP Broadband Fund L.P.(7)................................. 51,123 51,123
Robert Polis, as Trustee of the Robert Nathan Polis
Revocable Trust dated August 25, 1993(1).................. 46,472 46,472
Mohr, Davidow Ventures V, L.P. as nominee for MDV
Entrepreneurs' Network Fund II(A), L.P. and MDV
Entrepreneurs' Network Fund II(B), L.P.(8)................ 35,786 35,786
Brian Wilson............................................... 29,578 29,578
Jean Michel Leon and Christilla Leon....................... 19,719 19,719
Gleb Budman................................................ 14,000 14,000
Stuart Cheshire............................................ 11,831 11,831
Jason Knight............................................... 9,859 9,859
Heinrich Gantenbein........................................ 9,859 9,859
IVM Investment Fund VIII, LLC(9)........................... 8,512 8,512
Paul B. Callahan........................................... 7,887 7,887
Vlad Bolshakov............................................. 7,887 7,887
Arthur Van Hoff............................................ 7,697 7,697
David Cheriton............................................. 7,697 7,697
Christopher Kelly.......................................... 5,915 5,915
G & H Partners............................................. 5,842 5,842
Scott Eikenberry and Ashley Eikenberry..................... 4,929 4,929
Cory Cooke and Janelle Hargrove............................ 4,929 4,929
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Shares Total
Owned Shares
Before that May
the be
Name Offering Offered
---- --------- ---------
<S> <C> <C>
Noel Wilson................................................. 4,929 4,929
Michael Sheridan............................................ 4,046 4,046
Donna Novitsky 3,943 3,943
Wendy Riggs................................................. 1,971 1,971
Steve Jessey................................................ 1,854 1,854
Martin Foster............................................... 1,676 1,676
Carol Dressler.............................................. 1,603 1,603
Richard P. Yoon............................................. 1,577 1,577
Laura Bidinger and Joseph Bidinger.......................... 1,577 1,577
Miko Matsumora.............................................. 1,577 1,577
Bob Adler................................................... 1,090 1,090
Melissa Criqui.............................................. 788 788
James Gosling............................................... 394 394
Geoff Baehr................................................. 394 394
Steve Arnold................................................ 394 394
Ashmeet Sidana.............................................. 394 394
Jeff Whipps................................................. 394 394
Marko Balabanovic........................................... 49 49
Jane Prusakova.............................................. 19 19
--------- ---------
Total..................................................... 5,285,600 5,285,600
</TABLE>
- --------
(1) Based on information provided to us as of February 25, 2000.
(2) Prior to our acquisition of Kendara, Mohr, Davidow Ventures V, L.P. and
Mohr, Davidow Ventures V, L.P. as nominee for MDV Entrepreneurs' Network
Fund II(A), L.P. and MDV Entrepreneurs' Network Fund II(B), L.P. together
held approximately 18.4% of the fully-diluted common shares of Kendara, and
Jonathan Feiber, a representative of these partnerships, served as a
director of Kendara.
(3) Prior to our acquisition of Kendara, Institutional Venture Partners VIII,
L.P., IVP Broadband Fund L.P. and IVM Investment Fund VIII, LLC together
held approximately 18.4% of the fully-diluted common shares of Kendara, and
Timothy M. Haley, a representative of these partnerships, served as a
director of Kendara.
(4) Pavani Diwanji was Chief Technical Officer and a director of Kendara. Prior
to our acquisition of Kendara, Ms. Diwanji held approximately 23.2% of the
fully-diluted common shares of Kendara.
(5) Freeman Murray was Secretary of Kendara. Prior to our acquisition of
Kendara, Mr. Freeman held approximately 19.0% of the fully-diluted common
shares of Kendara.
(6) Bret Comolli was Chief Executive Officer and a director of Kendara. Prior
to our acquisition of Kendara, Mr. Comolli held approximately 10.5% of the
fully-diluted common shares of Kendara.
(7) Prior to our acquisition of Kendara, Institutional Venture Partners VIII,
L.P., IVP Broadband Fund L.P. and IVM Investment Fund VIII, LLC together
held approximately 18.4% of the fully-diluted common shares of Kendara, and
Timothy M. Haley, a representative of these partnerships, served as a
director of Kendara.
(8) Prior to our acquisition of Kendara, Mohr, Davidow Ventures V, L.P. and
Mohr, Davidow Ventures V, L.P. as nominee for MDV Entrepreneurs' Network
Fund II(A), L.P. and MDV Entrepreneurs' Network Fund II(B), L.P. together
held approximately 18.4% of the fully-diluted common shares of Kendara, and
Jonathan Feiber, a representative of these partnerships, served as a
director of Kendara.
(9) Prior to our acquisition of Kendara, Institutional Venture Partners VIII,
L.P., IVP Broadband Fund L.P. and IVM Investment Fund VIII, LLC together
held approximately 18.4% of the fully-diluted common shares of Kendara, and
Jonathan Feiber, a representative of these partnerships, served as a
director of Kendara.
23
<PAGE>
In the acquisition of Kendara, in addition to issuing 1,475,211shares of our
Series A common stock, we issued 202.130 shares of our newly-created Series B
preferred stock which automatically converts into approximately 202,130 shares
of our Series A common stock on February 10, 2001. In addition, we issued
1,279.065 shares of our newly-created Series C preferred stock to Pavani
Diwanji, Freeman Murray and Bret Comolli which automatically converts into
approximately 1,279,065 shares of our Series A common stock as such shares vest
pursuant to stock purchase agreements or option agreements between Kendara and
each of Ms. Diwanji, Mr. Murray and Mr. Comolli.
Former Stockholders of Worldprints.com International, Inc.
The following table sets forth information with respect to the selling
stockholders that received the shares of our Series A common stock that they
may offer under this prospectus in connection with our acquisition of
Worldprints.com, International, Inc. on April 5, 2000. Except for the
relationships described below, the selling stockholders have not had any other
position, office or other material relationship with us or any of our
predecessors or affiliates.
The share information provided in the table below is based on information
provided to us by the selling stockholders as of April 4, 2000. Each selling
stockholder owns less than 1% of our outstanding Series A common stock, based
on 363,582,284 shares of Series A common stock outstanding as of April 15,
2000. We may update, amend or supplement this prospectus from time to time to
update the disclosure in this section.
The selling stockholders may from time to time offer and sell any or all of
their shares that are registered under this prospectus. Because the selling
stockholders are not obligated to sell their shares, and because the selling
stockholders may also acquire publicly traded shares of our Series A common
stock, we cannot estimate how many shares of the selling stockholders will
beneficially own after this offering.
<TABLE>
<CAPTION>
Amount of Total Warrant
Shares Owned Shares Shares
Before the that May be that May be
Name Offering* Offered* Offered**
- ---- ------------ ----------- -----------
<S> <C> <C> <C>
Barrett Capital Limited (1).............. 284,099 284,099 --
The Productivity Fund III, L.P (2)....... 131,594 131,594 46,789
Apex Investment Fund III, L.P. and Apex
Strategic Partners, LLC (3)............. 131,593 131,593 46,789
Timothy F. Stainton (4).................. 97,990 97,990 --
Richard A. Schmelzer (5)................. 72,546 72,546 --
Jon E. Gordon (6)........................ 72,546 72,546 --
Robert Schmelzer (7)..................... 70,826 70,826 --
John Garay (8)........................... 55,971 55,971 55,971
Jim McElhiney............................ 39,010 39,010 39,010
The Wrightville Technical Trust.......... 26,904 26,904 26,904
Virginia Stainton........................ 19,130 19,130 --
Andrew Balfour........................... 8,480 8,480 8,480
Barbara Steele........................... 8,480 8,480 8,480
Sara Zook................................ 4,638 4,638 --
Kevin A. and Dorinda D. Cudney........... 4,638 4,638 --
Kevin O'Connell (9)...................... 4,240 4,240 --
Lewis Visscher (10)...................... 1,999 1,999 --
Mark Bossert............................. 1,719 1,719 --
Total.................................. 1,036,403 1,036,403 232,423
</TABLE>
- --------
* Including shares issuable upon exercise of warrants we assumed in the
acquisition.
** Warrant component of the total shares that the selling stockholders may
offer.
24
<PAGE>
(1) Prior to our acquisition of Worldprints.com, Barrett Capital Limited held
approximately 35.3% of Worldprints.com's outstanding capital stock and
John Garay, a representative of this stockholder, served as a director of
Worldprints.com.
(2) Prior to our acquisition of Worldprints.com, The Productivity Fund III,
L.P. held approximately 10.5% of Worldprints.com's outstanding capital
stock.
(3) Prior to our acquisition of Worldprints.com, Apex Investment Fund III,
L.P. and Apex Strategic Partners, LLC, each an affiliate of the other,
held approximately 10.5% of Worldprints.com's outstanding capital stock
and James Johnson, a representative of these stockholders served as a
director of Worldprints.com.
(4) Prior to our acquisition of Worldprints.com, Timothy F. Stainton held
approximately 12.2% of Worldprints.com's outstanding capital stock.
(5) Mr. Richard Schmelzer served as President, Chief Executive Officer and a
director Worldprints.com.
(6) Mr. Gordon served as Chief Operating Officer, Treasurer, an Assistant
Secretary and a director of Worldprints.com.
(7) Mr. Robert Schmelzer served as Vice President--Content and an Assistant
Secretary of Worldprints.com.
(8) Mr. Garay served as a director of Worldprints.
(9) Mr. O'Connell served as Vice President--Corporate Development, General
Counsel and Secretary of Worldprints.com.
(10) Mr. Visscher served as Vice President--Finance and Administration of
Worldprints.com.
On April 5, 2000, we completed our acquisition of Worldprints.com, a
Colorado corporation, the operator of the Worldprints.com web site, which
promotes and sells images in a variety of media. We plan to incorporate the
Worldprints.com content across our complement of content offerings.
The acquisition was accomplished by merging Worldprints.com with and into
Walter Acquisition Corporation, a wholly-owned subsidiary of Excite@Home, with
Walter Acquisition Corporation surviving as the continuing corporation. The
transaction was accounted for as a purchase and the merger is intended to
qualify as a tax-free reorganization.
In the acquisition, in addition to issuing 803,980 shares of our Series A
common stock, we issued shares of our Series B preferred stock which
automatically convert into approximately 803,980 shares of our Series A common
stock on the first anniversary of the merger's completion. We also converted
outstanding Worldprints.com options into options to purchase up to 278,198
shares of our Series A common stock and outstanding Worldprints.com warrants
into warrants to purchase up to 232,423 shares of our Series A common stock. In
addition to the securities we issued in the acquisition, we also paid, prior to
the completion of the transaction, $4 million plus interest of
Worldprints.com's outstanding debt and assumed $6.5 million plus interest in
loans that we previously made to Worldprints.com. We were obligated under the
merger agreement to file a registration statement on Form S-3 with the
Securities and Exchange Commission to register for resale the shares of Series
A common stock issued in the acquisition and the shares of Series A common
stock issuable upon exercise of the warrants issued in the merger. We are also
obligated under the merger agreement to file a registration statement on Form
S-8 with respect to the converted options.
Forty percent of the Series B preferred stock issued in the acquisition was
held back from the selling stockholders by Excite@Home as security for the
Worldprints.com shareholders' indemnification obligations under the merger
agreement. These shares will be released to the former Worldprints.com
shareholders on March 31, 2001, less any shares returned to Excite@Home in
respect of damages incurred by Excite@Home or subject to Excite@Home claims for
damages still outstanding at that date.
25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF EXCITE@HOME APPEARS HERE]
At Home Corporation
6,322,003 Shares of
Series A common stock
----------------
PROSPECTUS
May 1, 2000
----------------
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. The selling stockholders are offering to sell, and
seeking offers to buy, shares of common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of common stock.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered hereby. Normal commission expenses and brokerage fees are payable
individually by the selling stockholders. All amounts are estimated except the
Securities and Exchange Commission registration fee and the Nasdaq National
Market filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 54,517.24
Nasdaq National Market filing fee.................................. 17,500.00
Accounting fees and expenses....................................... 10,000.00
Legal fees and expenses............................................ 40,000.00
Miscellaneous...................................................... 7,892.76
-----------
Total............................................................ $130,000.00
===========
</TABLE>
ITEM 15. Indemnification of Directors and Officers.
As permitted by the Delaware General Corporation Law, the registrant's
certificate of incorporation, as amended and restated, 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; and
. 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, as amended and restated, 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
this 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 the person
may collect as indemnification from the other corporation, partnership,
joint venture, trust, enterprise or nonprofit entity;
. that the registrant must advance to all indemnified parties the expenses
(including attorneys' fees) incurred in defending any proceeding
provided that indemnified parties (if they are directors or officers)
must provide the registrant an undertaking to repay the 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.
II-1
<PAGE>
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.
The following documents are incorporated by reference:
Document
1. Fifth Amended and Restated Certificate of Incorporation (see Exhibit
3.01).
2. Form of Indemnification Agreement entered into between the registrant
and each of its directors and executive officers (incorporated by
reference to Exhibit 10.09 to the registrant's registration statement
on Form S-1 (File No. 333-27323) declared effective by the Commission
on July 11, 1997).
In addition, the registrant has entered into various merger agreements and
related registration rights agreements in connection with its acquisitions of
and mergers with various companies under which the parties to those agreements
have agreed to indemnify the registrant and its directors, officers, employees
and controlling persons against specified liabilities, including liabilities
arising under the Securities Act, the Exchange Act or other federal or state
laws.
Item 16. Exhibits.
The following exhibits are filed with this registration statement or
incorporated into this registration statement by reference:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------- -------------
<C> <S>
4.01 The Registrant's Fifth Amended and Restated Certificate of
Incorporation filed with the Delaware Secretary of State on May 28,
1999 (incorporated by reference to Exhibit 4.01 to the Registrant's
registration statement on Form S-8, File No. 333-79883, filed with the
Commission on June 3, 1999).
4.02 The Registrant's Second Amended and Restated Bylaws as adopted on July
16, 1997 (incorporated by reference to Exhibit 3.05 to the
Registrant's registration statement on Form S-1, File No. 333-27323,
declared effective by the Commission on July 11, 1997).
4.03 Form of certificate of the Registrant's Series A Common Stock
(incorporated by reference to Exhibit 4.05 to the Registrant's
registration statement on Form S-1, File No. 333-27323, declared
effective by the Commission on July 11, 1997).
4.04 Form of Certificate of Designation of Series B Non-Voting Convertible
Preferred Stock of At Home Corporation.*
4.05 Form of Certificate of Designation of Series C Non-Voting Convertible
Preferred Stock of At Home Corporation.*
4.06 Agreement and Plan of Reorganization, dated October 23, 1999, by and
among At Home Corporation and Hartford House, Ltd. (incorporated by
reference to Exhibit 2.01 of our Quarterly Report on Form 10-Q for the
quarter ending on September 30, 1999).
4.07 Agreement and Plan of Reorganization, dated February 2, 2000, by and
among At Home Corporation, Grisham Acquisition Corporation, Kendara,
Inc. and a representative of the former stockholders of Kendara, Inc.
4.08 Agreement and Plan of Reorganization, dated April 5, 2000, by and
among At Home Corporation, Walter Acquisition Corporation,
Worldprints.com International, Inc. and the founding shareholders of
Worldprints.com International, Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------- -------------
<C> <S>
5.01 Opinion of Fenwick & West LLP regarding the legality of offer and sale
of 5,285,600 shares of Series A common stock being registered.*
5.02 Opinion of Fenwick & West LLP regarding legality of offer and sale of
1,036,403 shares of Series A common stock being registered.
23.01 Consent of Ernst & Young LLP, Independent Auditors.
23.02 Consent of Fenwick & West LLP for Exhibit 5.01 legal opinion (included
in Exhibit 5.01).
23.03 Consent of Fenwick & West LLP for Exhibit 5.02 legal opinion (included
in Exhibit 5.02).
24.01 Power of attorney.*
</TABLE>
- --------
* Previously filed.
ITEM 17. Undertakings.
The registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(c) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to the information in the registration statement;
provided, however, that paragraphs (1)(a) and (1)(b) above do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by Registrant pursuant to Section 13 or Section 15(d) of
the Exchange Act that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered in the registration statement, and
the offering of the securities at that time shall be deemed to be the initial
bona fide offering of those securities.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered in the registration statement, and the
offering of the securities at that time shall be deemed to be the initial bona
fide offering of those securities.
(5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions discussed in Item 6 hereof, or otherwise,
the registrant has been advised that in the opinion of the Commission this
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. If a claim for indemnification against these
liabilities (other than the payment by the registrant of expenses incurred or
paid
II-3
<PAGE>
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by the
director, officer or controlling person in connection with the securities being
registered under this registration statement, 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
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of this issue.
(6) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(7) For purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
At Home Corporation, certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and 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 28th
day of April, 2000.
AT HOME CORPORATION
/s/ George Bell
By: __________________________________
George Bell
President and Chief Executive
Officer
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
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
Principal Executive Officer:
<S> <C> <C>
/s/ George Bell President, Chief Executive April 28, 2000
____________________________________ Officer and Director
George Bell
Principal Financial Officer:
* Executive Vice President and April 28, 2000
____________________________________ Chief Financial Officer
Kenneth A. Goldman
Principal Accounting Officer:
* Vice President, Corporate April 28, 2000
____________________________________ Controller and Treasurer
Robert A. Lerner
Additional Directors:
* Chairman April 28, 2000
____________________________________
Thomas A. Jermoluk
* Director April 28, 2000
____________________________________
William R. Hearst III
* Director April 28, 2000
____________________________________
John C. Malone
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director April 28, 2000
____________________________________
John C. Petrillo
* Director April 28, 2000
____________________________________
Brian L. Roberts
* Director April 28, 2000
____________________________________
David M. Woodrow
/s/ David Pine April 28, 2000
*By: _______________________________
David Pine
Attorney-in-fact
</TABLE>
II-6
<PAGE>
Exhibits Index
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
------- -------------
<C> <S>
4.07 Agreement and Plan of Reorganization, dated February 2, 2000, by and
among At Home Corporation, Grisham Acquisition Corporation, Kendara,
Inc. and a representative of the former stockholders of Kendara, Inc.
4.08 Agreement and Plan of Reorganization, dated April 5, 2000, by and
among At Home Corporation, Walter Acquisition Corporation,
Worldprints.com International, Inc. and the founding shareholders of
Worldprints.com International, Inc.
5.02 Opinion of Fenwick & West LLP regarding legality of offer and sale of
1,036,403 shares of Series A common stock being registered.
23.01 Consent of Ernst & Young LLP, Independent Auditors.
23.03 Consent of Fenwick & West LLP for Exhibit 5.02 legal opinion (included
in Exhibit 5.02).
</TABLE>
<PAGE>
EXHIBIT 4.07
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made and
entered into as of February 2, 2000 (the "Agreement Date") by and among At Home
Corporation, a Delaware corporation ("Excite@Home"), Grisham Acquisition
Corporation, a Delaware corporation that is a wholly-owned subsidiary of
Excite@Home ("Sub"), Kendara, Inc., a Delaware corporation ("Kendara"), and
Timothy M. Haley, the representative of the stockholders of Kendara (the
"Representative").
Recitals
A. The parties intend that, Kendara will be merged with and into Sub in a
forward triangular merger, with Sub to be the surviving corporation (the
"Merger"), all pursuant to the terms and conditions of this Agreement and
applicable law. The parties also intend for the Merger to be treated as a
"reorganization" under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and to be treated as a "purchase" transaction for
accounting purposes.
B. The Boards of Directors of Excite@Home, Sub and Kendara have
determined that the Merger is in the best interests of their respective
companies and stockholders, have approved the Merger and, accordingly, have
agreed to effect the Merger provided for herein upon the terms and conditions of
this Agreement.
C. Concurrently with the execution and delivery of this Agreement, the
founding stockholders of Kendara listed on the List of Founders (collectively,
the "Kendara Founders" and each individually, a "Kendara Founder") attached
hereto as Exhibit A will execute and deliver to Excite@Home an Investment
Representation Letter in the form and substance of Exhibit B attached hereto,
---------
under which each such Kendara Founder will provide certain representations and
warranties to Excite@Home, and will agree to irrevocably vote all shares of
Kendara capital stock owned by such Kendara Founder in favor of the Merger and
the transactions contemplated by the Merger (the "Investment Representation
Letter").
D. Immediately prior to the Effective Time (as defined in Section 1.8) of
the Merger, all shares of Kendara Preferred Stock (as defined in Section 1.15)
outstanding as of immediately prior to the Effective Time will convert into
shares of Kendara Common Stock (as defined in Section 1.11) at the then
applicable conversion ratio defined in the Certificate of Incorporation of
Kendara, as amended to date.
E. Upon the Effective Time of the Merger, and subject to the terms and
conditions hereof, (i) the shares of capital stock of Kendara that are
outstanding immediately prior to the effectiveness of the Merger will be
converted into shares of the Series A Common Stock of Excite@Home, Series B Non-
Voting Convertible Preferred Stock of Excite@Home and Series C Non-Voting
Convertible Preferred Stock of Excite@Home, (ii) options, warrants and other
rights to purchase Kendara capital stock that are outstanding immediately prior
to the effectiveness of the Merger will be converted into options, warrants and
other rights to purchase Series A
<PAGE>
Common Stock of Excite@Home, and (iii) Kendara will be merged with and into Sub,
in each case, as provided in this Agreement.
Now, therefore, in consideration of the foregoing and the mutual promises,
covenants and conditions contained herein, the parties hereby agree as follows:
ARTICLE 1
Certain Definitions
As used in this Agreement, the following terms will have the meanings set
forth below:
1.1 "Common Stock Conversion Number" means the quotient (calculated to the
fourth decimal place) obtained by dividing (a) the Kendara Common Stock Amount
Per Share by (b) the Excite@Home Average Price Per Share.
1.2 "Excite@Home Ancillary Agreements" means, collectively, each
certificate to be delivered by Excite@Home or an officer or officers of
Excite@Home at the Closing pursuant to Article 8 of this Agreement and each
agreement (other than this Agreement) which Excite@Home is to enter into as a
party thereto pursuant to this Agreement.
1.3 "Excite@Home Average Price Per Share" means $38.65.
1.4 "Excite@Home Common Stock" means Excite@Home Series A Common Stock,
par value $0.01 per share.
1.5 "Excite@Home Series B Preferred Stock" means Excite@Home Series B Non-
Voting Convertible Preferred Stock, par value $0.01 per share, having the
rights, preferences, limitations and terms set forth in the Certificate of
Designation substantially in the form attached hereto as Exhibit C (the "Series
---------
B Certificate of Designation").
1.6 "Excite@Home Series C Preferred Stock" means Excite@Home Series C Non-
Voting Convertible Preferred Stock, par value $0.01 per share, having the
rights, preferences, limitations and terms set forth in the Certificate of
Designation substantially in the form attached hereto as Exhibit D (the "Series
---------
C Certificate of Designation" and, together with the Series B Certificate of
Designation, the "Certificates of Designation").
1.7 "Excite@Home Preferred Stock" means Excite@Home Series B Preferred
Stock and Excite@Home Series C Preferred Stock.
1.8 The "Effective Time" means the date and time on which the Merger first
becomes legally effective under the laws of the State of Delaware as a result of
the filing with the Delaware Secretary of State of a Certificate of Merger in
substantially the form attached hereto as Exhibit E (the "Certificate of
---------
Merger") and any required related certificates pursuant to, and in conformity
with, the requirements of Section 251 of the Delaware General Corporation Law
("Delaware Law").
-2-
<PAGE>
1.9 "Encumbrance" means, with respect to any asset, any mortgage, deed of
trust, lien, pledge, charge, security interest, title retention devices,
collateral assignments, claims, charges, restrictions or other encumbrances of
any kind in respect of such asset.
1.10 "Kendara Ancillary Agreements" means, collectively, the Certificate
of Merger, each certificate to be delivered by Kendara or an officer or officers
of Kendara at the Closing pursuant to Article 9 of this Agreement, and each
other agreement (other than this Agreement) which Kendara is to enter into as a
party thereto pursuant to this Agreement.
1.11 "Kendara Common Stock" means common stock, $0.0001 par value per
share, of Kendara.
1.12 "Kendara Common Stock Amount Per Share" means the quotient
(calculated to the fourth decimal place) obtained by dividing (a) the Total
Merger Consideration by (b) the Kendara Fully Diluted Share Number.
1.13 "Kendara Fully Diluted Share Number" means the aggregate number of
shares of Kendara Common Stock, Kendara Preferred Stock, Kendara Options and
Kendara Warrants (each, on a fully exercised and converted to Common Stock
basis) that are issued and outstanding immediately prior to the Effective Time;
provided that the shares of Kendara Common Stock issuable upon the exercise of
the Permitted Non-Dilutive Options shall not be included in this aggregate
number of shares.
1.14 "Kendara Options" shall have the meaning given in Section 2.3 of this
Agreement.
1.15 "Kendara Preferred Stock" means Series A Preferred Stock, $0.0001 par
value per share, of Kendara.
1.16 "Kendara Stockholders" means the record holders of issued and
outstanding Kendara Common Stock and Kendara Preferred Stock immediately prior
to the Effective Time of the Merger.
1.17 "Kendara Warrants" shall have the meaning given in Section 2.4 of
this Agreement.
1.18 "knowledge," when used with reference to (a) an individual, means the
actual knowledge after reasonable inquiry of such individual, or (b) a person
that is not an individual, means the collective actual knowledge of the officers
and directors of such party, after reasonable inquiry of the employees
(including, for Kendara, Brian Wilson) and agents of such party.
1.19 "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 Authority.
-3-
<PAGE>
1.20 "Material Adverse Change" or "Material Adverse Effect," when used
with reference to any entity or group of related entities, means any event,
change, violation, inaccuracy, circumstance or effect (regardless of whether or
not such events or changes are inconsistent with the representations or
warranties made by such party in this Agreement) that is or is reasonably likely
to be, individually or in the aggregate, materially adverse to the condition
(financial or otherwise), capitalization, properties, employees, assets
(including intangible assets), business, operations or results of operations of
such entity and its subsidiaries, taken as a whole; provided, that in no event
shall a change in the price of the publicly traded stock of Excite@Home
constitute, in and of itself, a Material Adverse Change or Material Adverse
Effect in Excite@Home; provided further, that in no event shall (a) conditions
affecting the industry generally in which Kendara operates or the U.S. economy
as a whole; (b) continuing losses of Kendara, provided, that such losses do not
materially increase between the Agreement Date and the Closing; (c) any effect
on Kendara directly resulting from actions not taken by Kendara pursuant to
Section 5.3 due to prior written consent not being provided by Excite@Home
following a written request from Kendara to Excite@Home to undertake such
actions; or (d) any effect on Kendara resulting from the announcement of the
Merger, constitute, in and of itself, a Material Adverse Change or Material
Adverse Effect in Kendara.
1.21 "Permitted Non-Dilutive Options" means the sum of (a) options granted
to employees hired by Kendara after December 20, 1999 to acquire an aggregate of
210,509 shares of Kendara Common Stock granted by Kendara before the Agreement
Date, and (b) options to employees of Kendara hired between the Agreement Date
and the Closing to acquire an aggregate of 289,491 shares of Kendara Common
Stock granted by Kendara after the Agreement Date; provided that the vesting of
such options does not accelerate in connection with the Merger or any of the
other transactions contemplated hereby, such options vest over a four-year
period, with not more than twenty-five percent in the first year and 2 1/12%
each full calendar month thereafter, the exercise price of such option is not
less than the fair market value of Kendara Common Stock on the date of grant,
and the number of shares subject to such option is consistent with the past
practice of Kendara; provided further that in the case of clause (b) such
options are granted only with the prior written consent of Excite@Home.
1.22 "person" means any individual, corporation (including any not-for-
profit corporation), partnership, limited liability partnership, joint venture,
estate, trust, firm, company (including any limited liability company or joint
stock company), association, organization, entity or Governmental Authority.
1.23 "Sub Ancillary Agreements" means, collectively, each certificate to
be delivered by Sub or an officer or officers of Sub at the Closing pursuant to
Article 8 of this Agreement and each agreement (other than this Agreement) which
Sub is to enter into as a party thereto pursuant to this Agreement.
1.24 "Termination Date" means February 29, 2000.
1.25 "Total Merger Consideration" means $120,000,000.
-4-
<PAGE>
Other capitalized terms defined elsewhere in this Agreement and not defined
in this Article 1 will have the meanings assigned to such terms in this
Agreement.
ARTICLE 2
Plan of Reorganization
2.1 Conversion of Shares.
--------------------
2.1.1 Conversion of Sub Stock. At the Effective Time, each share of
-----------------------
Sub common stock that is issued and outstanding immediately prior to the
Effective Time will continue after the Effective Time to be an identical
outstanding share of the Surviving Corporation (as defined below).
2.1.2 Conversion of Kendara Common Stock. Subject to the terms and
----------------------------------
conditions of this Agreement, at the Effective Time, each share of Kendara
Common Stock held by a Kendara Stockholder that is issued and outstanding
immediately prior to the Effective Time will, by virtue of the Merger and
without the need for any further action on the part of the holder thereof
(except as expressly provided herein), be converted into and represent the right
to receive the number of shares of Excite@Home Common Stock that is equal to the
Common Stock Conversion Number; provided, however, that (i) ten percent of the
shares of Kendara Common Stock held by the Kendara Stockholders (other than the
Kendara Founders) will be converted into and represent the right to receive, in
proportion to each such stockholder's interest, the number of shares of
Excite@Home Series B Preferred Stock that is equal to the product obtained by
multiplying (a) each share included in such ten percent of Kendara Common Stock
by (b) the quotient obtained by dividing the Common Stock Conversion Number by
1,000; (ii) twenty percent of Kendara Common Stock (other than Unvested Kendara
Shares, as defined in Section 2.1.5) held by the Kendara Founders will be
converted into and represent the right to receive, in proportion to each such
founder's interest, the number of shares of Excite@Home Series B Preferred Stock
that is equal to the product obtained by multiplying (a) each share included in
such twenty percent of Kendara Common Stock by (b) the quotient obtained by
dividing the Common Stock Conversion Number by 1,000, and (iii) each Unvested
Kendara Share held by a Kendara Founder will be converted into and represent the
right to receive the number of Excite@Home Series C Preferred Stock that is
equal to the quotient obtained by dividing the Common Stock Conversion Number by
1,000. The preceding provisions of this Section 2.1.2 are subject to the
provisions of Section 2.1.3 (regarding rights of holders of Dissenting Shares),
Section 2.1.4 (regarding the elimination of fractional shares of Excite@Home
Common Stock) and Section 2.5 (regarding the withholding of Escrow Shares).
2.1.3 Dissenting Shares. Holders of shares of Kendara Common Stock who
-----------------
have complied with all requirements for perfecting stockholders' rights of
appraisal, as set forth in Section 262 of Delaware Law, shall be entitled to
their rights under the Delaware Law with respect to such shares ("Dissenting
Shares").
2.1.4 Fractional Shares. No fractional shares of Excite@Home Common
-----------------
Stock will be issued in connection with the Merger. In lieu thereof, each holder
of Kendara Common Stock who would otherwise be entitled to receive a fraction of
a share of Excite@Home Common Stock pursuant to Section 2.1.2, computed after
aggregating all shares of Excite@Home
-5-
<PAGE>
Common Stock to be received by such holder pursuant to Section 2.1.2, will
instead receive from Excite@Home, upon surrender of such holder's Kendara
Certificates pursuant to Article 7 hereof, an amount of cash (rounded to the
nearest cent) equal to the product obtained by multiplying (a) the Excite@Home
Average Price Per Share by (b) the fraction of a share of Excite@Home Common
Stock that such holder would otherwise have been entitled to receive.
Excite@Home Preferred Stock will be issued in fractional shares to the extent
conversion of Kendara Common Stock into Excite@Home Preferred Stock pursuant to
Section 2.1.2 results in the need to issue fractional shares of Excite@Home
Preferred Stock.
2.1.5 Continuation of Vesting and Repurchase Rights. If any shares of
---------------------------------------------
Kendara Common Stock (other than shares of Kendara Common Stock held by the
individuals listed on Schedule 2.1.5 ("Advisor Unvested Kendara Shares"))
outstanding immediately prior to the Effective Time are at the Effective Time
unvested or are subject to a repurchase option (other than a right of first
refusal) or any other condition providing that such shares may be forfeited to
Kendara upon any termination of the stockholder's employment, directorship or
other relationship with Kendara (and/or any affiliate of Kendara) under the
terms of any restricted stock purchase agreement, stock option agreement
(including any stock option agreement under the Kendara Plan (as defined below))
or other agreement with Kendara ("Unvested Kendara Shares"), then such
repurchase option or other condition shall be assigned to Excite@Home and the
shares of Excite@Home Common Stock or Excite@Home Series C Preferred Stock, as
the case may be, issued upon the conversion of such Unvested Kendara Shares in
the Merger will continue to be unvested and will continue to be subject to the
same repurchase options or conditions, as applicable, immediately following the
Effective Time as they were subject to immediately prior to the Effective Time;
and such repurchase options relating to Advisor Unvested Kendara Shares shall
not be assigned to Excite@Home and the shares of Excite@Home Common Stock or
Excite@Home Series C Preferred Stock, as the case may be, issued upon conversion
of such Advisor Unvested Kendara Shares will be vested but will not be subject
to any repurchase options or conditions, as applicable, immediately following
the Effective Time. If shares of Kendara Common Stock held by a Kendara
Stockholder (other than a Kendara Founder) are Unvested Kendara Shares, ninety
percent of such Unvested Kendara Shares shall be converted into Excite@Home
Common Stock in accordance with Section 2.1.2 and the remaining ten percent
shall be converted into Excite@Home Series B Preferred Stock in accordance with
Section 2.1.2, which Excite@Home Series B Preferred Stock shall be Escrow Shares
(as defined in Section 2.5); so that as such Unvested Kendara Shares would have
vested if not converted, the Excite@Home Common Stock and the Excite@Home Series
B Preferred Stock will vest, provided that such Excite@Home Series B Preferred
Stock shall remain Escrow Shares. The certificates representing such shares of
Excite@Home Common Stock and Excite@Home Preferred Stock shall accordingly be
marked with appropriate legends noting such repurchase options or other
conditions. Kendara shall take all actions that may be necessary to ensure
that, from and after the Effective Time, Excite@Home is entitled to exercise any
such repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement (other than a right of first refusal).
-6-
<PAGE>
2.2 Adjustments for Capital Changes. Notwithstanding the provisions of
-------------------------------
Section 2.1, if Excite@Home recapitalizes, either through a subdivision (or
stock split) of any of its outstanding shares of Excite@Home Common Stock into a
greater number of such shares, or a combination (or reverse stock split) of any
of its outstanding shares of Excite@Home Common Stock into a lesser number of
such shares, or reorganizes, reclassifies or otherwise changes its outstanding
shares of Excite@Home Common Stock into the same or a different number of shares
of other classes or series of Excite@Home stock (other than through a
subdivision or combination of shares provided for in the preceding clause), or
declares a dividend or other distribution on its outstanding shares payable in
shares of Excite@Home Common Stock, in shares or securities convertible into
shares of Excite@Home Common Stock and/or other Excite@Home equity securities
(each, a "Capital Change"), at any time after the Agreement Date and prior to
the Effective Time, then the Excite@Home Average Price Per Share and the Common
Stock Conversion Number will be proportionally and equitably adjusted.
2.3 Kendara Options. At the Effective Time, all outstanding options
---------------
(collectively, "Kendara Options") to purchase Kendara Common Stock, including
all Kendara Options granted under Kendara's 1999 Stock Plan (the "Kendara Plan")
and the Permitted Non-Dilutive Options, will be assumed by Excite@Home and
Kendara's repurchase right with respect to any unvested shares of Kendara Common
Stock acquired upon the exercise of Kendara Options shall be assigned to
Excite@Home. Each Kendara Option so assumed by Excite@Home shall be entitled,
in accordance with the terms of such option, to purchase after the Effective
Time that number of shares of Excite@Home Common Stock, determined by
multiplying (a) the number of shares of Kendara Common Stock subject to such
Kendara Option at the Effective Time by (b) the Common Stock Conversion Number,
and the exercise price per share for each such assumed Option will equal the
exercise price of the Kendara Option immediately prior to the Effective Time
divided by the Common Stock Conversion Number. If the foregoing calculation
results in an assumed option being exercisable for a fraction of a share, then
the number of shares of Excite@Home Common Stock subject to such option will be
rounded down to the nearest whole number and the exercise price of such option
will be rounded up to the nearest cent. The term, exercisability, vesting
schedule, status as an "incentive stock option" under Section 422A of the Code,
if applicable, and all other terms of the Kendara Options will otherwise be
unchanged. Continuous employment with Kendara will be credited to an optionee
for purposes of determining the number of shares that are vested after the
Effective Time. Excite@Home will cause the Excite@Home Common Stock issued upon
exercise of the assumed Kendara Options to be registered on Form S-8 of the
Securities and Exchange Commission ("SEC") as soon as is practicable after the
Effective Time (but no later than fifteen whole business days after the
Effective Time), and will exercise reasonable commercial efforts to maintain the
effectiveness of such registration statement for so long as such assumed Kendara
Options remain outstanding and will reserve a sufficient number of shares of
Excite@Home Common Stock for issuance upon exercise thereof. Excite@Home will
administer the Kendara Plan assumed pursuant to this Section 2.3 in a manner
that complies with Rule 16b-3 promulgated by the SEC under the Securities
Exchange Act of 1934, as amended ("Exchange Act").
2.4 Kendara Warrants. At the Effective Time, all then outstanding
----------------
warrants, exchangeable or convertible securities or rights to purchase or
otherwise acquire, that are
-7-
<PAGE>
exercisable or convertible, ultimately or potentially, into any Kendara Common
Stock (each, a "Kendara Warrant") shall by virtue of the Merger, and without any
further action on the part of any holder thereof, be assumed by Excite@Home and
converted into a warrant or like security (each, a "Excite@Home Warrant") to
purchase that number of shares of Excite@Home Common Stock determined by
multiplying (a) the number of shares of Kendara Common Stock that are subject to
such Kendara Warrant immediately prior to the Effective Time by (b) the Common
Stock Conversion Number, at an exercise price per share of such Excite@Home
Common Stock equal to the exercise price per share of Kendara Common Stock that
was in effect for such Kendara Warrant immediately prior to the Effective Time
divided by the Common Stock Conversion Number. If the foregoing calculation
would result in an assumed Kendara Warrant being exercisable (a) for a fraction
of a share of Excite@Home Common Stock, then the number of shares of Excite@Home
Common Stock subject to such Excite@Home Warrant will be rounded down to the
nearest whole number of shares of Excite@Home Common Stock, or (b) for a
fraction of a cent, then the exercise price of such Kendara Warrant will be
rounded up to the nearest cent. The exercisability period and other terms and
conditions of the Kendara Warrants will remain unchanged.
2.5 Escrow of Shares. At the Effective Time, Excite@Home will withhold
----------------
from the shares of Excite@Home Common Stock, Excite@Home Series B Preferred
Stock and Excite@Home Series C Preferred Stock to be issued to Kendara
Stockholders in the Merger upon conversion of their Kendara Common Stock
pursuant to Section 2.1.2 above, all of the shares of Excite@Home Series B
Preferred Stock and the Escrow Excite@Home Series C Preferred Stock (as defined
below) issued to such Kendara Stockholders pursuant to Section 2.1.2 (such
withheld shares of Excite@Home Preferred Stock and any shares of Excite@Home
capital stock or other securities into which such shares of Excite@Home
Preferred Stock are converted or exchanged and any dividends or distributions
received in respect of such shares of Excite@Home Preferred Stock or other stock
or securities to which such shares of Excite@Home Preferred Stock are converted
or exchanged, being hereinafter referred to as the "Escrow Shares"), and will
hold the certificates representing such Escrow Shares as security for the
Kendara Stockholders' indemnification obligations for Damages (as defined in
Section 11.2) under Article 11 hereof. The Escrow Shares will be represented by
a certificate or certificates issued in the names of each Kendara Stockholder in
proportion to each such stockholder's interest therein and will be held by
Excite@Home, subject to the terms and conditions of Article 11 hereof, until the
Release Date (as defined in Section 11.1 hereof). "Escrow Excite@Home Series C
Preferred Stock" shall mean twenty percent of the Excite@Home Series C Preferred
Stock issued to Kendara Founders that vest or as to which Kendara's repurchase
option lapses on or prior to the first anniversary of the Effective Time
pursuant to the terms of an Amended Restricted Stock Purchase Agreement between
each Kendara Founder and Kendara in the form and substance attached hereto as
Exhibit F.
- ---------
2.6 Effects of the Merger. At and upon the Effective Time of the Merger:
---------------------
(a) the separate existence of Kendara will cease and Kendara will be
merged with and into Sub, and Sub will be the surviving corporation of the
Merger (sometimes
-8-
<PAGE>
hereinafter referred to as the "Surviving Corporation") pursuant to the terms of
this Agreement and the Certificate of Merger;
(b) the Certificate of Incorporation of Sub will continue unchanged
and be the Certificate of Incorporation of the Surviving Corporation immediately
after the Effective Time;
(c) the Bylaws of Sub will continue unchanged and be the Bylaws of
the Surviving Corporation immediately after the Effective Time;
(d) each share of Kendara Common Stock that is outstanding
immediately prior to the Effective Time will be converted as provided in this
Article 2;
(e) each Kendara Option and Kendara Warrant that is outstanding
immediately prior to the Effective Time will be assumed and converted as
provided in this Article 2;
(f) each share of Sub common stock that is outstanding immediately
prior to the Effective Time will continue to be an identical share of the
Surviving Corporation as provided in Section 2.1.1;
(g) the officers of the Surviving Corporation immediately after the
Effective Time will be those individuals who were the officers of Sub
immediately prior to the Effective Time, and each such individual shall,
immediately after the Effective Time, hold the same office or offices of the
Surviving Corporation as the office or offices that such individual held with
Sub immediately prior to the Effective Time;
(h) the members of the Board of Directors of the Surviving
Corporation immediately after the Effective Time will be the members of the
Board of Directors of Sub immediately prior to the Effective Time; and
(i) the Merger will, from and after the Effective Time, have all of
the effects provided by applicable law.
2.7 Securities Law Issues; Registration Rights. Excite@Home shall issue
------------------------------------------
the shares of Excite@Home Common Stock and Excite@Home Preferred Stock to be
issued to the Kendara Stockholders in the Merger pursuant to Section 2.1.2 and
to be issuable to holders of Kendara Warrants pursuant to Section 2.4 pursuant
to an exemption or exemptions from registration under Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") and/or Regulation D
promulgated under the Securities Act and the exemption from qualification under
the laws of the State of California and other applicable state securities laws.
Excite@Home and Kendara shall comply with all applicable provisions of, and
rules under, the Securities Act in connection with offering and issuance of
shares of Excite@Home Common Stock and Excite@Home Preferred Stock in the
Merger. Within fifteen whole business days following the Effective Time,
Excite@Home will cause to be filed with the SEC and use commercially reasonable
efforts to cause to become effective as soon as practicable, a shelf
registration statement on Form S-3 providing for the resale by (i) the Kendara
Stockholders of the shares of Excite@Home Common
-9-
<PAGE>
Stock issued to them in the Merger pursuant to Section 2.1.2 hereof, (ii) the
Kendara Stockholders of the shares of Excite@Home Common Stock issued to them as
a result of the conversion of the Excite@Home Series C Preferred Stock issued to
them in the Merger pursuant to Section 2.1.2 hereof (but not including any
shares of Excite@Home Common Stock issued upon the conversion of Excite@Home
Series C Preferred Stock that are Escrow Shares pursuant to Section 2.5 hereof),
and (iii) the holders of Kendara Warrants of the shares of Excite@Home Common
Stock to be issued to them upon exercise of their Excite@Home Warrants into
which their Kendara Warrants have converted in the Merger pursuant to Section
2.4 hereof, all pursuant to the terms and conditions of Article 12 hereof.
2.8 Tax-Free Reorganization; No Representations by Kendara. The parties
------------------------------------------------------
intend to adopt this Agreement as a tax-free plan of reorganization and to
consummate the Merger in accordance with the provisions of Section 368(a)(1)(A)
of the Code by virtue of the provisions of Section 368(a)(2)(D) of the Code.
Each of the parties hereto agrees to cooperate in order to qualify the
transaction as a tax free reorganization, and to report the Merger for federal
and state income tax purposes in a manner consistent with such characterization.
However, Excite@Home makes no representations or warranties to Kendara or to any
Kendara Stockholder or other holder of Kendara securities regarding the tax
treatment of the Merger, whether the Merger will qualify as a tax-free plan of
reorganization under the Code, or any of the tax consequences to any Kendara
Stockholder or such holder of this Agreement, the Merger or any of the other
transactions or agreements contemplated hereby, and Kendara and the Kendara
Stockholders acknowledge that Kendara and the Kendara Stockholders are relying
solely on their own tax advisors in connection with this Agreement, the Merger
and the other transactions contemplated by this Agreement.
2.9 Further Assurances. If, at any time before or after the Effective
------------------
Time, Excite@Home believes or is advised that any further instruments, deeds,
assignments or assurances are reasonably necessary or desirable to consummate
the Merger or to carry out the purposes and intent of this Agreement at or after
the Effective Time, then Excite@Home, the Surviving Corporation and their
respective officers and directors will execute and deliver all such proper
deeds, assignments, instruments and assurances and do all other things necessary
or desirable to consummate the Merger and to carry out the purposes and intent
of this Agreement.
ARTICLE 3
Representations and Warranties of Kendara
Kendara represents and warrants to Excite@Home that, except as set forth in
the letter addressed to Excite@Home from Kendara and dated as of the Agreement
Date (including all schedules thereto) which has been delivered by Kendara to
Excite@Home concurrently with the parties' execution of this Agreement (the
"Kendara Disclosure Letter"), each of the representations, warranties and
statements contained in the following sections of this Article 3 is true and
correct as of the Agreement Date and will be true and correct on and as of the
Closing Date (as defined in Section 7.1 hereof). For all purposes of this
Agreement, the statements
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contained in the Kendara Disclosure Letter and its schedules shall also be
deemed to be representations and warranties made and given by Kendara under
Article 3 of this Agreement.
3.1 Organization and Good Standing. Kendara is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware and has continuously been in good standing under the laws of the state
of Delaware at all times since its inception. Kendara has the corporate power
and authority to own, operate and lease its properties and to carry on its
business as now conducted and as proposed to be conducted, and is qualified to
transact business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities make such qualification necessary, except to the extent that any
failure to qualify would not individually or in the aggregate have a Material
Adverse Effect. Kendara has delivered to Excite@Home true and correct copies of
the currently effective Certificate of Incorporation and Bylaws of Kendara, each
as amended to date. Kendara is not in violation of its Certificate of
Incorporation or Bylaws.
3.2 Subsidiaries. Kendara does not have any subsidiary or any equity or
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ownership interest, whether direct or indirect, in any corporation, partnership,
limited liability company, joint venture or other business entity. Kendara is
not obligated to make nor bound by any agreement or obligation to make any
investment in or capital contribution in or on behalf of any other entity.
3.3 Power, Authorization and Validity.
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3.3.1 Power and Authority. Subject to approval by Kendara
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Stockholders, Kendara has all requisite corporate power and authority to enter
into, execute, deliver and perform its obligations under, this Agreement and all
Kendara Ancillary Agreements and to consummate the Merger. The Merger and the
execution, delivery and performance by Kendara of this Agreement, each of the
Kendara Ancillary Agreements and all other agreements, transactions and actions
contemplated hereby or thereby, have been duly and validly approved and
authorized by Kendara's Board of Directors, and the Kendara Founders have
executed and delivered to Excite@Home Investment Representation Letters agreeing
to vote in favor of the Merger and the execution, delivery and performance by
Kendara of this Agreement, each of the Kendara Ancillary Agreements and all
other agreements, transactions and actions contemplated hereby or thereby.
3.3.2 No Consents. Except for approval of the Kendara Stockholders
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that may be required by the California Corporations Code and for such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities (or related laws)
and the securities or antitrust laws of any foreign country, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency, commission or other governmental
authority (each, a "Governmental Authority"), or any other person or entity,
governmental or otherwise (including any consent, approval, order,
authorization, registration, declaration or filing pursuant to the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")), is
necessary or required to be made or obtained by Kendara to enable Kendara to
lawfully execute and deliver,
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enter into, and to perform its obligations under, this Agreement and each of the
Kendara Ancillary Agreements, or to consummate the Merger. The aggregate HSR
Assets of Kendara do not, and will not immediately prior to Closing of the
Merger, equal or exceed $10,000,000, and there is no person, or group of persons
under Common Control, who Control(s) Kendara. To Kendara's knowledge, no Kendara
Stockholder holds or will hold immediately prior to the Closing, $10,000,000 or
more in assets as calculated under the HSR Act for individuals. For purposes of
this Section, the term "HSR Assets" means the total assets (as set forth on the
most recent regularly prepared balance sheet) of Kendara, and, to the extent
they are not consolidated in such balance sheet, the total assets (as set forth
on the most recent regularly prepared balance sheet(s)) of all entities
Controlled by Kendara. For the purposes of this Section, the term "Control" or
"Controlling" means either: (a) holding beneficial ownership, whether direct or
indirect through fiduciaries, agents, controlled entities or other means, of
fifty percent or more of the outstanding voting securities of an issuer; or (b)
in the case of an entity that has no outstanding voting securities, having the
right to fifty percent or more of the profits of the entity, or having the right
in the event of dissolution to fifty percent or more of the assets of the
entity; or (c) having the contractual power presently to designate fifty percent
or more of the directors of a corporation, or in the case of unincorporated
entities, of individuals exercising similar functions. For the purposes of this
Section, "Common Control" means sharing an Ultimate Parent. For the purposes of
this Section, "Ultimate Parent" means a person who is not Controlled by any
other entity.
3.3.3 Enforceability. This Agreement and each of the Kendara
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Ancillary Agreements are, or when executed by Kendara will be, valid and binding
obligations of Kendara, enforceable against Kendara in accordance with their
respective terms, subject to the effect of (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to rights of creditors generally and (b) rules of law and equity
governing specific performance, injunctive relief and other equitable remedies.
3.4 Capitalization of Kendara.
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3.4.1 Outstanding Securities. The authorized capital stock of
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Kendara consists entirely of: (a) 24,000,000 shares of Kendara Common Stock, of
which a total of 8,179,510 shares are issued and outstanding and (b) 10,000,000
shares of Kendara Preferred Stock, 5,314,816 of which are issued and
outstanding. The numbers of issued and outstanding shares of Kendara Common
Stock and Kendara Preferred Stock held by each of the Kendara Stockholders are
set forth in Schedule 3.4.1(a) to this Agreement. Except as expressly set forth
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Schedule 3.4.1(a), no shares of Kendara Common Stock or Kendara Preferred Stock
are issued or outstanding. Kendara holds no treasury shares. An aggregate of
2,857,142 shares of Kendara Common Stock are reserved and authorized for
issuance pursuant to the Kendara Plan, of which options to purchase a total of
677,632 shares of Kendara Common Stock are outstanding, which number does not
include the Permitted Non-Dilutive Options. There are no outstanding Kendara
Warrants. Schedule 3.4.1(b) of this Agreement lists for each person who holds
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Kendara Options, the name of the holder of each such Kendara Option, the
exercise price for each such Kendara Option, the number of shares or other
securities covered by each such Kendara Option, and the vesting schedule and the
extent each such Kendara Option are vested as of the Agreement Date.
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At or prior to the Closing, Kendara shall update Schedule 3.4.1(b) to list each
person who holds a Permitted Non-Dilutive Option, the exercise price for each
such Option, the number of shares or other securities covered by each such
Option, and the vesting schedule. True and complete copies of the standard
agreement under the Kendara Plan and each agreement for each Kendara Option that
does not conform to the standard agreement under the Kendara Plan have been
delivered by Kendara to Excite@Home or its legal counsel, Fenwick & West LLP.
The vesting or exercisability (or any other material terms) of any Kendara
Option, except as disclosed in the Kendara Disclosure Letter, will not
accelerate or otherwise change as a result of the execution and delivery of this
Agreement or the consummation of the Merger or the transactions contemplated
hereby or the occurrence of any subsequent event (such as the termination of
employment of the option holder following consummation of the Merger). No
Kendara Options have been granted or are outstanding except under and pursuant
to the Kendara Plan.
3.4.2 Valid Issuance. As of the Closing Date, there will have been
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no change in the authorized or outstanding capital stock of Kendara as
represented in Section 3.4.1. All issued and outstanding shares of Kendara
Common Stock and Kendara Preferred Stock have been duly authorized and validly
issued, are fully paid and nonassessable, are not subject to any preemptive
right, right of first refusal, right of first offer or right of rescission, and
have been offered, issued, sold and delivered by Kendara in compliance with (a)
all registration or qualification requirements (or applicable exemptions
therefrom) of all applicable securities laws and, to the knowledge of Kendara,
other applicable Legal Requirements and (b) all requirements set forth in
applicable agreements or instruments. All shares of Kendara Common Stock subject
to issuance under Kendara Options and Kendara Warrants, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
All outstanding Kendara Options and Kendara Warrants have been issued and
granted in compliance with (a) all registration or qualification requirements
(or applicable exemptions therefrom) of all applicable securities laws and, to
the knowledge of Kendara, other applicable Legal Requirements and (b) all
requirements set forth in applicable agreements or instruments.
3.4.3 No Other Options, Warrants or Rights. Other than is set forth
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in Sections 3.4.1 and 3.4.2 above, there are no options, warrants, convertible
securities or other securities, calls, commitments, conversion privileges,
preemptive rights, rights of first refusal, rights of first offer or other
rights or agreements outstanding to purchase or otherwise acquire (whether
directly or indirectly) any shares of Kendara's authorized but unissued capital
stock or any securities convertible into or exchangeable for any shares of
Kendara's capital stock or obligating Kendara to grant, issue, extend, or enter
into any such option, warrant, convertible security or other security, call,
commitment, conversion privilege, preemptive right, right of first refusal,
right of first offer or other right or agreement to obtain any shares of
Kendara's capital stock, and there is no liability for dividends accrued but
unpaid.
3.4.4 No Voting Arrangements or Registration Rights. Except as
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contemplated by this Agreement, there are no voting agreements, voting trusts or
proxies applicable to any of Kendara's outstanding capital stock or any Kendara
Options or to the conversion of any shares of Kendara's capital stock in the
Merger pursuant to any agreement or obligation to which Kendara
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is a party or, to Kendara's knowledge, pursuant to any other agreement or
obligation. Kendara is not under any obligation to register under the Securities
Act any of its presently outstanding shares of stock or other securities or any
stock or other securities that may be subsequently issued.
3.5 No Conflict. Neither the execution and delivery of this Agreement
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nor any of the Kendara Ancillary Agreements by Kendara, nor the consummation of
the Merger or any of the other transactions contemplated hereby or thereby, will
conflict with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of, or constitute a default under:
(a) any provision of the Certificate of Incorporation or Bylaws of Kendara as
currently in effect; (b) any federal, state, local or foreign judgment, writ,
decree, order, statute, rule or regulation applicable to Kendara or any of its
material assets or properties; or (c) any material instrument, agreement,
contract, undertaking, understanding, letter of intent, memorandum of
understanding or commitment (whether verbal or in writing) to which Kendara is a
party or by which Kendara or any of its material assets or properties are bound,
except in the case of (b) or (c) for any such conflicts, terminations, breaches,
impairments, violations or defaults which would not have a Material Adverse
Effect on Kendara or which would not have a material adverse effect on Kendara's
ability to consummate the Merger. Neither Kendara's entering into this
Agreement nor the consummation of the Merger or the transactions contemplated
thereby will give rise to, or trigger the application of, any rights of any
third party that would come into effect upon the effectiveness of the Merger.
The consummation of the Merger by Kendara will not require the consent, release,
waiver or approval of any third party (including the consent of any party
required to be obtained in order to keep any agreement between such party and
Kendara in effect following the Merger or to provide that Kendara is not in
breach or violation of any such agreement following the Merger), other than the
approval of this Agreement and the Merger by Kendara Stockholders under Delaware
law and California law except where the failure to obtain such consent, release,
waiver or approval would not have a Material Adverse Effect on Kendara.
3.6 Litigation. There is no action, suit, arbitration, mediation,
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proceeding, claim or investigation pending against Kendara (or against any
officer, director, employee or agent of Kendara in their capacity as such or
relating to their employment, services or relationship with Kendara) before any
court, Governmental Authority or arbitrator, nor, to Kendara's knowledge, has
any such action, suit, arbitration, mediation, proceeding, claim or
investigation been threatened. There is no judgment, decree, injunction, rule or
order of any court, Governmental Authority or arbitrator outstanding against
Kendara. To Kendara's knowledge, there is no basis for any person to assert a
claim against Kendara based upon: (a) Kendara's entering into this Agreement or
any Kendara Ancillary Agreement or consummating the Merger or any of the
transactions contemplated by this Agreement or any Kendara Ancillary Agreement;
or (b) a claim of ownership of, or options, warrants or other rights to acquire
ownership of, any shares of the capital stock of Kendara or any rights as a
Kendara stockholder, including any option, warrant or preemptive rights or
rights to notice or to vote, other than for the rights of the Kendara
Stockholders with respect to the Kendara Common Stock shown as being owned by
such persons on Schedule 3.4.1(a) hereof and the rights of holders of Kendara
Options and Kendara Warrants shown as being owned by such persons on Schedule
3.4.1(b) hereof.
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3.7 Taxes.
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3.7.1 Kendara has timely filed all federal, state, local and foreign
tax and information returns required to be filed by it, has timely paid all
taxes required to be paid by it for which payment is due, except to the extent
that an accrual or reserve for such taxes has been reflected in accordance with
GAAP (as defined in Section 3.8) on the Balance Sheet (as defined in Section
3.8), has established an adequate accrual or reserve for the payment of all
taxes payable in respect of the periods subsequent to the periods covered by its
most recent applicable tax returns (which accrual or reserve as of the Balance
Sheet Date is fully reflected on the Balance Sheet and in any more recent
balance sheet of Kendara provided by Kendara to Excite@Home on or before the
Agreement Date), has made all necessary estimated tax payments, except to the
extent that an accrual or reserve for such taxes has been reflected in
accordance with GAAP on the Balance Sheet, and has no liability for taxes in
excess of the amount so paid or accruals or reserves so established. All such
returns and reports are true, correct and complete, except to the extent that an
accrual or reserve for such taxes has been reflected in accordance with GAAP on
the Balance Sheet, and Kendara has provided Excite@Home with true and correct
copies of such returns and reports. Kendara is not delinquent in the payment of
any tax or in the filing of any tax returns, except to the extent that an
accrual or reserve for such taxes has been reflected in accordance with GAAP on
the Balance Sheet, and no deficiencies for any tax have been threatened,
claimed, proposed or assessed against Kendara or any of the officers, employees
or agents of Kendara in their capacity as such. Kendara has not received any
notification from the Internal Revenue Service or any other taxing authority
regarding any material issues that: (a) are currently pending before the
Internal Revenue Service or any other taxing authority (including but not
limited to any sales or use tax authority) regarding Kendara, or (b) have been
raised by the Internal Revenue Service or other taxing authority and not yet
finally resolved. No tax return of Kendara is under audit by the Internal
Revenue Service or any state or local taxing agency or authority and any such
past audits (if any) have been completed and fully resolved to the satisfaction
of the applicable tax authority conducting such audit and all taxes and any
penalties or interest determined by such audit to be due from Kendara have been
paid in full to the applicable taxing authorities. No tax liens are currently in
effect against any assets of Kendara other than liens which arise by operation
of law for taxes not yet due and payable. There is not in effect any waiver by
Kendara of any statute of limitations with respect to any taxes or agreed to any
extension of time for filing any tax return which has not been filed; and
Kendara has not consented to extend to a date later than the date hereof the
period in which any tax may be assessed or collected by any taxing authority.
Kendara is not a "personal holding company" within the meaning of the Code.
Kendara has not filed any election under Section 341(f) of the Code. Kendara has
withheld all taxes, including but not limited to federal and state income taxes,
FICA, Medicare, FUTA and other taxes, required to be withheld, and paid such
withheld amounts to the appropriate tax authority within the time prescribed by
law. Since its inception, Kendara has not been a "United States real property
holding corporation," as defined in Section 897(c)(2) of the Code, and in
Section 1.897-2(b) of the Treasury Regulations issued thereunder (the
"Regulations"), and Kendara has filed with the Internal Revenue Service all
statements, if any, with its United States income tax returns which are required
under Section 1.897-2(h) of the Regulations.
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3.7.2 For the purposes of this Section, the terms "tax" and "taxes"
include all federal, state, local and foreign income, alternative or add-on
minimum income, gains, franchise, excise, property, property transfer, sales,
use, employment, license, payroll, ad valorem, documentary, stamp, withholding,
occupation, recording, value added or transfer taxes, governmental charges,
fees, customs duties, levies or assessments (whether payable directly or by
withholding), and, with respect to any such taxes, any estimated tax, interest,
fines and penalties or additions to tax and interest on such fines, penalties
and additions to tax.
3.8 Kendara Financial Statements. Kendara has delivered to Excite@Home
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as an attachment to the Kendara Disclosure Letter the unaudited consolidated
balance sheet of Kendara as of December 31, 1999 and Kendara's unaudited
consolidated statements of operations, statements of cash flows and statements
of changes in stockholders' equity (or, as applicable, statement of changes in
members' interests) for the year ended December 31, 1999 (all such financial
statements of Kendara and any notes thereto are hereinafter collectively
referred to as the "Kendara Financial Statements"). The Kendara Financial
Statements: (a) are derived from and are in accordance with the books and
records of Kendara, (b) fairly present the financial condition of Kendara at the
dates therein indicated and the results of operations for the periods therein
specified, and (c) have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a basis consistent with prior
periods except for any absence of notes thereto. Kendara has no material debt,
liability or obligation of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, except for those (a) shown on
Kendara's unaudited balance sheet as of December 31, 1999 included in the
Kendara Financial Statements (the "Balance Sheet"), (b) that may have been
incurred after December 31, 1999 (the "Balance Sheet Date") in the ordinary
course of Kendara's business consistent with its past practices, and (c) that
are not material in amount, either individually or collectively, and are not
required to be set forth in the Balance Sheet under GAAP. All reserves
established by Kendara that are set forth in or reflected in the Balance Sheet
are adequate. At the Balance Sheet Date, there were no material loss
contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting Standards Board in March
1975) which are not adequately provided for in the Balance Sheet as required by
said Statement No. 5. The Financial Statements comply in all material respects
with the American Institute of Certified Public Accountants' Statement of
Position 97-2. Kendara's unaudited balance sheet at the Closing Date shall have
a cash balance of equal to or greater than (a) $3,600,000 if the Closing occurs
on or prior to February 11, 2000; and (b) $2,600,000 if the closing occurs after
February 11, 2000 but on or before the Termination Date. At the Closing Date,
Kendara's Current Assets were and will be equal to or greater than its Total
Liabilities. For purposes of the preceding sentence, "Current Assets" shall
mean cash and other assets expected to be converted into cash within one year,
and "Total Liabilities" shall mean probable future sacrifices of economic
benefits arising from present obligations of Kendara to transfer assets or
provide services to other persons in the future as a result of past
transactions.
3.9 Title to Properties. Kendara has good and marketable title to all of
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its assets and properties (including those shown on the Balance Sheet), free and
clear of all Encumbrances, other than liens for current taxes that are not yet
due and payable and except for liens which in the aggregate do not secure more
than $10,000 in liabilities. All machinery, vehicles, equipment
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and other tangible personal property owned or leased by Kendara or used in its
business are in good condition and repair, normal wear and tear excepted, and
all leases of real or personal property to which Kendara is a party are fully
effective and afford Kendara peaceful and undisturbed leasehold possession of
the real or personal property that is the subject of the lease. Kendara is not
in violation of any zoning, building, safety or environmental ordinance,
regulation or requirement or other law or regulation applicable to the operation
of its owned or leased properties, nor has Kendara received any notice of
violation of law with which it has not complied. Kendara does not own any real
property. Item 3.9 to the Kendara Disclosure Letter sets forth a complete and
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accurate list and a brief description of all personal property owned or leased
by Kendara with an individual value of $1,000 or greater.
3.10 Absence of Certain Changes. Since the Balance Sheet Date, Kendara
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has operated its business in the ordinary course consistent with its past
practice, and since such date there has not been with respect to Kendara any:
(a) Material Adverse Change in Kendara;
(b) amendment or change in the Certificate of Incorporation or
Bylaws;
(c) incurrence, creation or assumption by Kendara of (i) any
Encumbrance on any of the assets or properties of Kendara, (ii) any obligation
or liability or any indebtedness for borrowed money, or (iii) any contingent
liability as a guarantor or surety with respect to the obligations of others;
(d) grant or issuance of any options, warrants or other rights to
acquire from Kendara, directly or indirectly, except as described in Sections
3.4.1 and 3.4.2 hereof, or any offer, issuance or sale by Kendara of any debt or
equity securities of Kendara;
(e) any acceleration or release of any vesting condition to the
right to exercise any option, warrant or other right to purchase or otherwise
acquire any shares of Kendara's capital stock, or any acceleration or release of
any right to repurchase shares of Kendara's capital stock upon the stockholder's
termination of employment or services with Kendara or pursuant to any right of
first refusal;
(f) payment or discharge by Kendara of any Encumbrance on any asset
or property of Kendara, or the payment or discharge of any liability of Kendara,
in each case that was not either shown on the Balance Sheet or incurred in the
ordinary course of Kendara's business after the Balance Sheet Date in an amount
not in excess of $10,000 for any single liability to a particular creditor;
(g) purchase, license, sale, assignment or other disposition or
transfer, or any agreement or other arrangement for the purchase, license, sale,
assignment or other disposition or transfer, of any of the assets, properties or
goodwill of Kendara other than a license of any product or products of Kendara
made in the ordinary course of Kendara's business consistent with its past
practice;
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(h) damage, destruction or loss of any property or asset, whether or
not covered by insurance, having (or likely with the passage of time to have) a
Material Adverse Effect on Kendara;
(i) declaration, setting aside or payment of any dividend on, or the
making of any other distribution in respect of, the capital stock of Kendara, or
any split, combination or recapitalization of the capital stock of Kendara or
any direct or indirect redemption, purchase or other acquisition of any capital
stock of Kendara or any change in any rights, preferences, privileges or
restrictions of any outstanding security of Kendara;
(j) change or increase in the compensation payable or to become
payable to any of the officers, directors, or employees of Kendara, or in any
bonus or pension, insurance or other benefit payment or arrangement (including
without limitation stock awards, stock option grants, stock appreciation rights
or stock option grants) made to or with any of such officers, employees or
agents except in connection with normal employee salary or performance reviews
or otherwise in the ordinary course of Kendara's business consistent with its
past practice and except as contemplated in this Agreement;
(k) change with respect to the management, supervisory or other key
personnel of Kendara;
(l) obligation or liability incurred by Kendara to any of its
officers, directors or stockholders, except for normal and customary
compensation and expense allowances payable to officers in the ordinary course
of Kendara's business consistent with its past practice;
(m) making by Kendara of any loan, advance or capital contribution
to, or any investment in, any officer, director or stockholder of Kendara or any
firm or business enterprise in which any such person had a direct or indirect
material interest at the time of such loan, advance, capital contribution or
investment;
(n) entering into, amendment of, relinquishment, termination or non-
renewal by Kendara of any contract, lease, transaction, commitment or other
right or obligation other than in the ordinary course of its business consistent
with its past practice; or any written or oral indication or assertion by the
other party thereto of any material problems with Kendara's services or
performance under such contract, lease, transaction, commitment or other right
or obligation or its desire to so amend, relinquish, terminate or not renew any
such contract, lease, transaction, commitment or other right or obligation;
(o) material change in the manner in which Kendara extends discounts,
credits or warranties to customers or otherwise deals with its customers;
(p) entering into by Kendara of any transaction, contract or
agreement that by its terms requires or contemplates a current and/or future
financial commitment, expense (inclusive of overhead expense) or obligation on
the part of Kendara that involves in excess of $25,000 or that is not entered
into in the ordinary course of Kendara's business, or the conduct of
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any business or operations other than in the ordinary course of Kendara's
business consistent with its past practice;
(q) any license, transfer or grant of a right under any Kendara IP
Rights (as defined in Section 3.13 below), other than those licensed,
transferred or granted in the ordinary course of Kendara's business consistent
with its past practices; or
(r) any agreement or arrangement made by Kendara to take any action
which, if taken prior to the Agreement Date, would have made any representation
or warranty of Kendara set forth in Article 3 of this Agreement untrue or
incorrect as of the date when made.
3.11 Contracts and Commitments/Licenses and Permits. Item 3.11 to the
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Kendara Disclosure Letter sets forth a list of each of the following written or
oral contracts, agreements, leases, licenses, permits, assignments, mortgages,
transactions, obligations, commitments or other instruments to which Kendara is
a party or to which Kendara or any of its assets or properties is bound:
(a) any contract or agreement providing for payments (whether fixed,
contingent or otherwise) by or to Kendara in an aggregate amount of $25,000 or
more;
(b) any dealer, distributor, OEM (Original Equipment Manufacturer),
VAR (Value Added Reseller), sales representative or similar agreement under
which any third party is authorized to sell, sublicense, lease, distribute,
market or take orders for, any product, service or technology of Kendara;
(c) any contract providing for the development of any software,
content (including without limitation textual content and visual, photographic
or graphics content), technology or intellectual property for (or for the
benefit or use of) Kendara, or providing for the purchase or license of any
software, content (including without limitation textual content and visual or
graphics content), technology or intellectual property to (or for the benefit or
use of) Kendara, which software, content, technology or intellectual property is
in any manner used or incorporated (or is contemplated by Kendara to be used or
incorporated) in connection with any aspect or element of any product, service
or technology of Kendara (other than software generally available to the public
at a per copy license fee of less than $500 per copy) to the extent necessary
for the conduct of the business of Kendara as presently conducted or
contemplated or previously contemplated;
(d) any joint venture or partnership contract or other agreement
which has involved, or is reasonably expected to involve, a sharing of profits,
expenses or losses with any other party;
(e) any contract or commitment for or relating to the employment of
any officer, employee or consultant of Kendara or any other type of contract or
understanding with any officer, employee or consultant of Kendara that is not
immediately terminable by Kendara without cost or other liability, except those
contemplated in Section 9.11 of this Agreement;
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(f) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or other agreement or commitment for
the borrowing of money, for a line of credit or for a leasing transaction of a
type required to be capitalized in accordance with Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board;
(g) any lease or other agreement under which Kendara is lessee of or
holds or operates any items of tangible personal property or real property owned
by any third party;
(h) any agreement that restricts Kendara from engaging in any aspect
of its business; from participating or competing in any line of business or
market; from freely setting prices for Kendara's products, services or
technologies (including but not limited to most favored customer pricing
provisions); from engaging in any business in any market or geographic area; or
from soliciting potential employees, consultants, contractors or other suppliers
or customers;
(i) any Kendara IP Rights Agreement (as defined in Section 3.13);
(j) any agreement relating to the sale, issuance, grant, exercise,
award, purchase, repurchase or redemption of any shares of capital stock or
other securities of Kendara or any options, warrants or other rights to purchase
or otherwise acquire any such shares of capital stock, other securities or
options, warrants or other rights therefor, except for those agreements
conforming to the standard agreement under the Kendara Plan;
(k) any contract with or commitment to any labor union; and
(l) any Governmental Permit (as defined in Section 3.14.3).
A true and complete copy of each agreement or document required by these
subsections (a) through (l) of this Section to be listed on Item 3.11 to the
---------
Kendara Disclosure Letter (such agreements and documents being hereinafter
collectively referred to as the "Kendara Material Agreements") and a copy of
each Governmental Permit required by subsection (l) of this Section to be listed
on Item 3.11 to the Kendara Disclosure Letter has been delivered to
Excite@Home's legal counsel.
3.12 No Default; No Consent Required; No Restrictions. Kendara is not in
------------------------------------------------
material breach or default under any Kendara Material Agreement. Kendara has no
material liability for renegotiation of government contracts or subcontracts, if
any. Except as set forth in Item 3.12 to the Kendara Disclosure Letter, no
---------
consent, notice or approval of any third party is required to ensure that,
following the Effective Time, any Kendara Material Agreement will continue to be
in full force and effect without any breach or violation thereof caused by
virtue of the Merger or by any other transaction called for by this Agreement or
any Kendara Ancillary Agreement. Kendara is not a party to, and no asset or
property of Kendara is bound or affected by, any judgment, injunction, order,
decree, contract, covenant or agreement (noncompete or otherwise) that restricts
or prohibits, purports to restrict or prohibit, Kendara or, following the
Effective Time, the Surviving Corporation or Excite@Home, from freely engaging
in any business now conducted or contemplated by Kendara or from competing
anywhere in the world (including any
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contracts, covenants or agreements restricting the geographic area in which
Kendara may sell, license, market, distribute or support any products or
technology or provide services; or restricting the markets, customers or
industries that Kendara may address in operating its business; or restricting
the prices which Kendara may charge for its products or technology or services),
or includes any grants by Kendara of exclusive rights or licenses. No event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time) will, or would reasonably be expected to, (a) result in a
violation or breach of any of the provisions of any Kendara Material Agreement,
or (b) to Kendara's knowledge, give any third party (i) the right to declare a
default or exercise any remedy under any Kendara Material Agreement, (ii) the
right to a rebate, chargeback, penalty or change in delivery schedule under any
Kendara Material Agreement, (iii) the right to accelerate the maturity or
performance of any obligation of Kendara under any Kendara Material Agreement,
or (iv) the right to cancel, terminate or modify any Kendara Material Agreement,
except in each such case for such defaults, acceleration rights, termination
rights and other rights that have not had and would not reasonably be expected
to have individually or in the aggregate a Material Adverse Effect on Kendara.
Kendara has not received any notice or other communication regarding any actual
or possible violation or breach of, or default under, any Kendara Material
Agreement.
3.13 Intellectual Property.
---------------------
3.13.1 Kendara owns, or has the valid right or license to use, possess,
sell, license, copy, distribute, market, advertise and/or dispose of all
Intellectual Property (as defined below) to the extent necessary or required for
the conduct of the Kendara Business (as defined below) (such Intellectual
Property being hereinafter collectively referred to as the "Kendara IP Rights"),
and such rights to use, possess, sell, license, copy, distribute, market,
advertise and/or dispose of are sufficient for such conduct of such business. As
used herein, the term "Kendara Business" means the business of Kendara as
presently conducted, presently proposed to be conducted, and as previously
proposed to be conducted (but only with respect to the relevance engine and
display technology, commonly referred to as the Kendara Assistant, for
previously proposed to be conducted business). As used herein, the term
"Intellectual Property" means, collectively, all worldwide industrial and
intellectual property rights, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark registrations and
applications therefor, trade dress rights, trade names, service marks, service
mark registrations and applications therefor, Internet domain names, Internet
and World Wide Web URLs or addresses, copyrights, copyright registrations and
applications therefor, mask work rights, mask work registrations and
applications therefor, franchises, licenses, inventions, trade secrets, know-
how, customer lists, supplier lists, proprietary processes and formulae,
software source code and object code, algorithms, net lists, architectures,
structures, screen displays, photographs, images, layouts, inventions,
development tools, designs, blueprints, specifications, technical drawings (or
similar information in electronic format) and all documentation and media
constituting, describing or relating to the foregoing, including, without
limitation, manuals, programmers' notes, memoranda and records. As used in this
Section 13, "Kendara-Owned IP Rights" means Kendara IP Rights which are owned or
exclusively licensed to Kendara; and "Kendara-Licensed IP Rights" means Kendara
IP Rights which are not Kendara-Owned IP Rights. By way of clarification, if a
vendor grants certain license rights to Kendara, only the license rights granted
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by the vendor to Kendara is included under the term Kendara-Licensed IP Rights
and Kendara IP Rights.
3.13.2 Neither the execution, delivery and performance of this Agreement,
the Certificate of Merger, or the consummation of the Merger and the other
transactions contemplated by this Agreement and/or by Kendara Ancillary
Agreements will, in accordance with their terms: (a) constitute a material
breach of or default under any instrument, contract, license or other agreement
governing any Kendara IP Right to which Kendara is a party (collectively, the
"Kendara IP Rights Agreements"); (b) cause the forfeiture or termination of, or
give rise to a right of forfeiture or termination of, any Kendara IP Right; or
(c) materially impair the right of Kendara or the Surviving Corporation to use,
possess, sell or license any Kendara IP Right or portion thereof. There are no
royalties, honoraria, fees or other payments payable by Kendara to any third
person (other than salaries payable to employees and independent contractors not
contingent on or related to use of their work product) as a result of the
ownership, use, possession, license-in, sale, marketing, advertising or
disposition of any Kendara IP Rights by Kendara to the extent necessary for the
conduct of the Kendara Business and none will become payable as a result of the
consummation of the transactions contemplated by this Agreement, in and of
themselves, except for per copy license fees of less than $500 for software
generally commercially available to the public.
3.13.3 Neither the manufacture, marketing, license, sale, furnishing
or intended use of any product or service currently licensed, utilized, sold,
provided or furnished by Kendara or currently under development by Kendara
violates any license or agreement between Kendara and any third party or
infringes or misappropriates any Intellectual Property Right of any other party;
and there is no pending or threatened, claim or litigation contesting the
validity, ownership or right of Kendara to exercise any Kendara IP Right nor, to
the best knowledge of Kendara, is there any legitimate basis for any such claim,
nor has Kendara received any notice asserting that any Kendara IP Right or the
proposed use, sale, license or disposition thereof conflicts or will conflict
with the rights of any other party, nor, to the best knowledge of Kendara, is
there any legitimate basis for any such assertion.
3.13.4 No current or former employee, consultant or independent contractor
of Kendara: (a) is in material violation of any term or covenant of any
employment contract, patent disclosure agreement, invention assignment
agreement, non-disclosure agreement, noncompetition agreement or any other
contract or agreement with any other party by virtue of such employee's,
consultant's, or independent contractor's being employed by, or performing
services for, Kendara or using trade secrets or proprietary information of
others without permission that would be likely to have a Material Adverse Effect
on Kendara; or (b) has developed any technology, software or other
copyrightable, patentable, or otherwise proprietary work for Kendara that is
subject to any agreement under which such employee, consultant or independent
contractor has assigned or otherwise granted to any third party any rights
(including without limitation Intellectual Property) in or to such technology,
software or other copyrightable, patentable or otherwise proprietary work. The
employment of any employee of Kendara or the use by Kendara of the services of
any consultant or independent contractor does not subject Kendara to any
liability to any third party for improperly soliciting such employee or
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consultant, or independent contractor to work for Kendara, whether such
liability is based on contractual or other legal obligations to such third
party.
3.13.5 Kendara has taken reasonably necessary and appropriate steps to
protect, preserve and maintain the secrecy and confidentiality of the Kendara IP
Rights (in the case of Kendara-Licensed IP Rights, to the extent required by
such third parties) and to preserve and maintain all Kendara's interests and
proprietary rights in Kendara IP Rights. All officers, employees and consultants
of Kendara having access to proprietary information of Kendara, its customers or
business partners and inventions owned by Kendara, have executed and delivered
to Kendara an agreement regarding the protection of such proprietary information
and the assignment of Kendara's inventions to Kendara (in the case of
proprietary information of Kendara's customer and business partners, to the
extent required by such customers and business partners); and copies of all such
agreements have been delivered to Excite@Home's counsel. Kendara has secured
valid written assignments from all of Kendara's consultants, contractors and
employees who were involved in, or who contributed to, the creation or
development of any Kendara-Owned IP Rights, of the rights to such contributions
that may be owned by such persons or that Kendara does not already own by
operation of law. No current or former employee, officer, director, consultant
or independent contractor of Kendara has any right, license, claim or interest
whatsoever in or with respect to any Kendara IP Rights.
3.13.6 Item 3.13.6 to the Kendara Disclosure Letter contains a true and
-----------
complete list of (i) all worldwide registrations made by or on behalf of Kendara
of any patents, copyrights, mask works, trademarks, service marks, Internet
domain names or Internet or World Wide Web URLs or addresses with any
governmental or quasi-governmental authority; and (ii) all applications,
registrations, filings and other formal written governmental actions made or
taken pursuant to federal, state and foreign laws by Kendara to secure, perfect
or protect its interest in Kendara IP Rights, including, without limitation, all
patent applications, copyright applications, and applications for registration
of trademarks and service marks. All registered patents, trademarks, service
marks, Internet domain names, Internet or World Wide Web URLs or addresses, and
copyrights held by Kendara are valid, enforceable and subsisting.
3.13.7 Kendara owns all right, title and interest in and to all
Kendara-Owned IP Rights free and clear of all security interests, liens,
pledges, mortgages, assignments, claims, licenses, restrictions and encumbrances
(other than licenses and rights listed in Item 3.13.8). Kendara's right, license
and interest in and to all Kendara-Licensed IP Rights are free and clear of all
security interests, liens, pledges, mortgages, assignments, claims, licenses,
and encumbrances (other than licenses and rights listed in Item 3.13.8).
3.13.8 Item 3.13.8 to the Kendara Disclosure Letter contains a true and
-----------
complete list of (i) all licenses, sublicenses and other agreements as to which
Kendara is a party and pursuant to which any person or entity is authorized to
use any Kendara IP Rights, and (ii) all licenses, sublicenses and other
agreements as to which Kendara is a party and pursuant to which Kendara is
authorized to use any third party patents, trademarks, Internet domain names,
Internet or World Wide Web URLs or addresses, or copyrights, including but not
limited to software.
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3.13.9 Neither Kendara nor any other party acting on behalf, has
disclosed or delivered to any party, or permitted the disclosure or delivery to
any escrow agent or other party, of any Kendara Source Code (as defined below).
No event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will, or would reasonably be expected to,
result in the disclosure or delivery by Kendara or any other party acting on
Kendara's behalf to any party of any Kendara Source Code (as defined below).
Item 3.13.9 of the Kendara Disclosure Letter identifies each contract, agreement
- -----------
and instrument (whether written or oral) pursuant to which Kendara has
deposited, or is or may be required to deposit, with an escrowholder or any
other party, any Kendara Source Code and further describes whether the execution
of this Agreement or the consummation of the Merger or any of the other
transactions contemplated by this Agreement, in and of itself, would reasonably
be expected to result in the release from escrow of any Kendara Source Code. As
used in this Section 3.13.9, "Kendara Source Code" means, collectively, any
software source code, or any material portion or aspect of the software source
code, or any material proprietary information or algorithm contained in or
relating to any software source code, of any Kendara-Owned IP Rights or any
other product marketed or currently proposed to be marketed by Kendara.
3.13.10 There is no unauthorized use, disclosure, infringement or
misappropriation of any Kendara IP Rights by any third party, including any
employee or former employee of Kendara. Kendara has not agreed to indemnify any
person for any infringement of any Intellectual Property of any third party by
any product or service that has been sold, licensed to third parties, leased to
third parties, supplied, marketed, distributed, or provided by Kendara.
3.13.11 To Kendara's knowledge, all software developed by Kendara and
licensed by Kendara to customers and all other products manufactured, sold,
licensed, leased or delivered by Kendara to customers and all services provided
by Kendara to customers on or prior to the Closing Date conform in all material
respects (to the extent required in contracts with such customers) to applicable
contractual commitments, express and implied warranties, product specifications
and product documentation and to any representations provided to customers and
Kendara has no material liability (and, to Kendara's knowledge, there is no
legitimate basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against Kendara giving rise to
any material liability relating to the foregoing contracts that could have a
Material Adverse Effect on Kendara) for replacement or repair thereof or other
damages in connection therewith in excess of any reserves therefor reflected on
the Balance Sheet.
3.13.12 All of the software, hardware or other technology developed,
owned, licensed and/or marketed or distributed by Kendara to the extent
necessary for the conduct of the Kendara Business are Year 2000 Compliant. "Year
2000 Compliant" means, to the extent related to date-related errors, as applied
to software, hardware or other technology, that: (i) such software, hardware or
other technology will operate and correctly store, represent and process
(including sort) all dates (including single and multi-century formulas and leap
year calculations), such that date-related errors will not occur when the date
being used is in the Year 2000, or in a year preceding or following the Year
2000; (ii) such software, hardware or other technology has been written and
tested to support numeric and date transitions from the twentieth century to the
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twenty-first century, and back (including without limitation all calculations,
aging, reporting, printing, displays, reversals, disaster and vital records
recoveries) without date-related error, corruption or impact to current and/or
future operations; and (iii) such software, hardware or other technology will
function without error or interruption related to any date information,
specifically including errors or interruptions from functions which may involve
date information from more than one century. Notwithstanding anything to the
contrary, the foregoing applies only if such software, hardware or other
technology receive properly formatted data.
No government funding; facilities of a university, college, other
educational institution or research center; or funding from third parties (other
than funds received in consideration for capital stock of Kendara) was used in
the development of the computer software programs or applications owned by the
Company. No current or former employee, consultant or independent contractor of
Kendara, who was involved in, or who contributed to, the creation or development
of any Kendara IP Rights, has performed services for the government, university,
college, or other educational institution or research center during a period of
time during which such employee, consultant or independent contractor was also
performing services for Kendara.
3.14 Compliance with Laws.
--------------------
3.14.1 Kendara has complied, and is now and at the Closing Date will be in
compliance with, all applicable federal, state or local laws, ordinances,
regulations, and rules, and all orders, writs, injunctions, awards, judgments,
and decrees, and to Kendara's knowledge, all foreign laws, ordinances,
regulations and rules, applicable to it or to its assets, properties, and
business (and any regulations promulgated thereunder) (collectively, "Applicable
Law"), except for such noncompliance which, individually or in the aggregate,
would not have a Material Adverse Effect on Kendara. Kendara holds all valid
licenses and other governmental permits that are necessary and/or legally
required to be held by it to conduct its business as presently conducted, except
where the failure to hold such licenses and permits would not individually or in
the aggregate have a Material Adverse Effect on Kendara.
3.14.2 All materials and products distributed or marketed by Kendara have
at all times made all disclosures to users or customers required by Applicable
Law and none of such disclosures made or contained in any such materials have
been inaccurate, misleading or deceptive, except where the failure to make such
disclosure or where such inaccurate, misleading or deceptive disclosures,
individually or in the aggregate, would not have a Material Adverse Effect on
Kendara.
3.14.3 Kendara holds all material permits, licenses and approvals from,
and has made all material filings with, government (and quasi-governmental)
agencies and authorities, that are necessary for Kendara to conduct its present
business without any violation of Applicable Law ("Governmental Permits") and
all such Governmental Permits are in full force and effect. Kendara has not
received any notice or other communication from any Governmental Authority
regarding (a) any actual or possible violation of law or any Governmental Permit
or any failure to comply with any term or requirement of any Governmental
Permit, or (b) any actual or possible
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revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Permit.
3.14.4 Neither Kendara nor any director, officer, agent or employee of
Kendara has, for or on behalf of Kendara, (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (c) made any other payment in violation of Applicable Law,
which violation, for the purposes of clause (c) only, does not have a Material
Adverse Effect on Kendara.
3.15 Certain Transactions and Agreements. None of the officers and
-----------------------------------
directors of Kendara and, to Kendara's knowledge, none of the employees or
stockholders of Kendara, nor any member of their immediate families, has any
direct ownership interest in any firm or corporation that competes with, or does
business with, or has any contractual arrangement with, Kendara (except with
respect to any interest in less than two percent of the stock of any corporation
whose stock is publicly traded). To Kendara's knowledge, none of the officers,
directors, employees or stockholders of Kendara, nor any member of their
immediate families, has any indirect ownership interest in any firm or
corporation that competes with, or does business with, or has any contractual
arrangement with, Kendara (except with respect to any interest in less than two
percent of the stock of any corporation whose stock is publicly traded). None
of said officers, directors, employees or stockholders or any member of their
immediate families, is a party to, or otherwise directly or indirectly
interested in, any contract or informal arrangement with Kendara, except for
normal compensation for services as an officer, director or employee thereof
that have been disclosed to Excite@Home and except for agreements related to the
purchase of the stock of Kendara by such persons. None of said officers,
directors, employees, stockholders or family members has any interest in any
property, real or personal, tangible or intangible (including but not limited to
any Kendara IP Rights or any other Intellectual Property) that is used in, or
that pertains to, the business of Kendara, except for the rights of a
stockholder.
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3.16 Employees, ERISA and Other Compliance.
-------------------------------------
3.16.1 Kendara is in compliance in all material respects with all
applicable laws, agreements and contracts relating to employment, employment
practices, immigration, wages, hours, and terms and conditions of employment,
including, but not limited to, employee compensation matters, and has correctly
classified employees as exempt employees and non-exempt employees under the Fair
Labor Standards Act, except to the extent that noncompliance or incorrect
classification of employees would not have a Material Adverse Effect on Kendara.
A list of all employees, officers and consultants of Kendara and their current
title and/or job description and compensation is set forth on Item 3.16.1 to
-----------
Kendara Disclosure Letter. Kendara does not have any employment contracts or
consulting agreements currently in effect that are not terminable at will (other
than agreements with the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions).
3.16.2 Kendara (a) is not now, nor has ever been, subject to a union
organizing effort, (b) is not subject to any collective bargaining agreement
with respect to any of its employees, (c) is not subject to any other contract,
written or oral, with any trade or labor union, employees' association or
similar organization or (d) has any current labor disputes. Kendara has good
labor relations, and has no knowledge of any facts indicating that the
consummation of the Merger or any of the other transactions contemplated hereby
will have a material adverse effect on such labor relations, and has no
knowledge that any of its key employees intends to leave their employ. All of
the employees of Kendara are legally permitted to be employed by Kendara in the
United States of America in their current job capacities.
3.16.3 Kendara has no pension plan, which constitutes, or has since the
enactment of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") constituted, a "multiemployer plan" as defined in Section 3(37) of
ERISA. No pension plan of Kendara is subject to Title IV of ERISA.
3.16.4 (a) Item 3.16.4 to the Kendara Disclosure Letter lists each
-----------
employment, severance or other similar contract, arrangement or policy, each
"employee benefit plan" as defined in Section 3(3) of ERISA and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' benefits, vacation benefits, severance
benefits, disability benefits, death benefits, hospitalization benefits,
retirement benefits, deferred compensation, profit-sharing, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
for employees, consultants or directors which is entered into, maintained or
contributed to by Kendara and covers any employee or former employee of Kendara.
Such contracts, plans and arrangements as are described in this Section 3.16.4
are hereinafter collectively referred to as "Kendara Benefit Arrangements."
(b) Each Kendara Benefit Arrangement has been maintained in compliance
in all material respects with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations that are applicable to such
Kendara Benefit Arrangement, except to the extent that noncompliance would not
have a Material Adverse Effect on Kendara and, unless
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otherwise indicated in Item 3.16.4 to the Kendara Disclosure Letter, each such
Kendara Benefit Arrangement that is an "employee pension benefit plan" as
defined in Section 3(2) of ERISA which is intended to qualify under Section
401(a) of the Code has received a favorable determination letter that such plan
satisfied the requirements of the Tax Reform Act of 1986 (a copy of which
letter(s) have been delivered to Excite@Home and its counsel).
(c) Kendara has delivered to Excite@Home or its counsel a complete and
correct copy and description of each Kendara Benefit Arrangement.
(d) Kendara has timely filed and delivered to Excite@Home and its
counsel the most recent annual report (Form 5500) for each Kendara Benefit
Arrangement that is an "employee benefit plan" as defined under ERISA.
(e) Kendara has not ever been a participant in any "prohibited
transaction," within the meaning of Section 406 of ERISA with respect to any
employee pension benefit plan (as defined in Section 3(2) of ERISA) which
Kendara sponsors as employer or in which Kendara participates as an employer,
which was not otherwise exempt pursuant to Section 408 of ERISA (including any
individual exemption granted under Section 408(a) of ERISA), or which could
result in an excise tax under the Code.
(f) All contributions due from Kendara with respect to any of Kendara
Benefit Arrangements have been made or have been accrued on Kendara's financial
statements (including without limitation the Kendara Financial Statements), and
no further contributions will be due or will have accrued thereunder as of the
Closing Date.
(g) All individuals who, pursuant to the terms of any Kendara Benefit
Arrangement, are entitled to participate in any such Kendara Benefit
Arrangement, are currently participating in such Kendara Benefit Arrangement or
have been offered an opportunity to do so and have declined in writing.
(h) Kendara will have no liability to any employee or to any
organization or any other entity as a result of the termination of any employee
leasing arrangement in excess of $100,000.
3.16.5 There has been no amendment to, written interpretation or
announcement (whether or not written) by Kendara relating to, or change in
employee participation or coverage under, any Kendara Benefit Arrangement that
would increase materially the expense of maintaining such Kendara Benefit
Arrangement above the level of the expense incurred in respect thereof during
the calendar year 1999.
3.16.6 The group health plans (as defined in Section 4980B(g) of the Code)
that benefit employees of Kendara are in compliance, in all material respects,
with the continuation coverage requirements of Section 4980B of the Code as such
requirements affect Kendara and its employees. As of the Closing Date, there
will be no material outstanding, uncorrected violations under the Consolidation
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), with respect to
any of Kendara Benefit Arrangements, covered employees, or qualified
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beneficiaries that could result in a Material Adverse Effect on Kendara, or in a
Material Adverse Effect on Excite@Home after the Effective Time.
3.16.7 Unless otherwise indicated in Item 3.16.7 to the Kendara Disclosure
Letter, no benefit payable or which may become payable by Kendara pursuant to
any Kendara Benefit Arrangement or as a result of or arising under this
Agreement or the Certificate of Merger will constitute an "excess parachute
payment" (as defined in Section 280G(b)(1) of the Code) which is subject to the
imposition of an excise Tax under Section 4999 of the Code or which would not be
deductible by reason of Section 280G of the Code. Unless otherwise indicated in
Item 3.16.7 to the Kendara Disclosure Letter, Kendara is not a party to any:
(a) agreement with any executive officer or other key employee thereof (i) the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving Kendara in the nature of the
Merger or any of the other transactions contemplated by this Agreement or any
Kendara Ancillary Agreement, (ii) providing any term of employment or
compensation guarantee, or (iii) providing severance benefits or other benefits
after the termination of employment of such employee regardless of the reason
for such termination of employment; or (b) agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights 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 the Merger or any of
the other transactions contemplated by this Agreement or any Kendara Ancillary
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 or any
Kendara Ancillary Agreement.
3.17 Corporate Documents. Kendara has made available to Excite@Home or
-------------------
its legal counsel for examination all documents and information listed in the
Kendara Disclosure Letter or in any schedule thereto or in any other exhibit or
schedule called for by this Agreement which have been requested by Excite@Home
or its legal counsel, including the following: (a) copies of Kendara's
Certificate of Incorporation and Bylaws as currently in effect; (b) Kendara's
minute book containing all records of all proceedings, consents, actions, and
meetings of Kendara Stockholders, board of directors and any committees thereof;
(c) Kendara's stock ledger, option ledger, and warrant ledger and journal
reflecting all stock issuances and transfers, and all grants of options and
warrants to purchase Kendara capital stock and other Kendara securities; (d) all
permits, orders, and consents issued by, and filings by Kendara with, any
regulatory agency with respect to Kendara, or any securities of Kendara, and all
applications for such permits, orders, and consents; and (e) all the Kendara
Material Agreements.
3.18 No Brokers. Neither Kendara nor any affiliate of Kendara is
----------
obligated for the payment of any fees or expenses of any investment banker,
broker, finder or similar party in connection with the origin, negotiation or
execution of this Agreement or in connection with the Merger or any other
transaction contemplated by this Agreement, and Excite@Home will not incur any
liability, either directly or indirectly, to any such investment banker, broker,
finder or similar party as a result of, this Agreement, the Merger or any act or
omission of Kendara, any of its employees, officers, directors, stockholders,
agents or affiliates.
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3.19 Books and Records.
-----------------
3.19.1 The books, records and accounts of Kendara (a) are in all material
respects true, complete and correct, (b) have been maintained in accordance with
good business practices on a basis consistent with prior years, (c) are stated
in reasonable detail and accurately and fairly reflect the transactions and
dispositions of the assets of Kendara, and (d) accurately and fairly reflect the
basis for the Kendara Financial Statements.
3.19.2 Kendara has devised and maintains a system of internal accounting
controls sufficient to provide reasonable assurances that: (a) transactions are
executed in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in conformity with generally accepted accounting principles or any
other criteria applicable to such statements, and (ii) to maintain
accountability for assets; and (c) the amount recorded for assets on the books
and records of Kendara is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3.20 Insurance. Since its organization, Kendara has maintained, and now
---------
maintains, policies of insurance and bonds of the type and in amounts reasonably
and customarily carried by persons conducting businesses or owning assets
similar in type and size to those of Kendara, including without limitation all
legally required workers' compensation insurance and errors and omissions,
casualty, fire and general liability insurance. 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.
All premiums due and payable under all such policies and bonds have been timely
paid and Kendara is otherwise in material compliance with the terms of such
policies and bonds. Kendara has no knowledge of any threatened termination of,
or material premium increase with respect to, any of such policies. All
policies of insurance now held by Kendara are set forth in Item 3.20 to Kendara
---------
Disclosure Letter, together with the name of the insurer under each policy, the
type of policy, the policy coverage amount and any applicable deductible.
3.21 Environmental Matters.
---------------------
3.21.1 Kendara is in material compliance with all applicable Environmental
Laws (as defined below), which compliance includes the possession by Kendara of
all permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof.
Kendara has not received any notice or other communication (in writing or
otherwise), whether from a governmental body, citizens groups, employee or
otherwise, that alleges that Kendara is not in compliance with any Environmental
Law, and there are no circumstances that may prevent or interfere with the
compliance by Kendara with any current Environmental Law in the future. To
Kendara's knowledge, no current or prior owner of any property leased or
possessed by Kendara has received any notice or other communication (in writing
or otherwise), whether from a government body, citizens group, employee or
otherwise, that alleges that such current or prior owner or Kendara is not in
compliance with any Environmental Law. All governmental authorizations
currently held by
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Kendara pursuant to any Environmental Law (if any) are identified in Item 3.21
---------
of Kendara Disclosure Letter.
3.21.2 For purposes of this Section 3.21: (a) "Environmental Law" means
any federal, state or local statute, law regulation or other legal requirement
relating to pollution or protection of human health or the environment
(including ambient air, surface water, ground water, land surface or subsurface
strata), including any law or regulation relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern;
and (b) "Material of Environmental Concern" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other substance that is currently regulated by an Environmental Law or that is
otherwise a danger to health, reproduction or the environment.
3.22 Board Actions. The Board of Directors of Kendara (a) has
-------------
unanimously determined that the Merger is in the best interests of the Kendara
Stockholders and is on terms that are fair to such Kendara Stockholders, and has
recommended the Merger to the Kendara Stockholders, and (b) will submit the
Merger, this Agreement, each of the Kendara Ancillary Agreements and all other
agreements, transactions and actions contemplated hereby and thereby, to the
extent that stockholder approval is required thereof under Applicable Law and
Kendara's Certificate of Incorporation and Bylaws, to the vote and approval of
Kendara Stockholders.
3.23 No Existing Discussions. Neither Kendara nor any director,
-----------------------
officer, stockholder, employee or agent of Kendara is engaged, directly or
indirectly, in any discussions or negotiations with any third party relating to
any Alternative Transaction (as defined in Section 5.7).
3.24 Disclosure. Neither this Agreement, its exhibits and schedules and
----------
the Kendara Disclosure Letter, nor any Kendara Ancillary Agreements delivered by
Kendara to Excite@Home under this Agreement, taken together, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances under which such statements were made, not misleading.
ARTICLE 4
Representations and Warranties of Excite@Home and Sub
Excite@Home and Sub hereby represent and warrant to Kendara that, except as
set forth in the letter addressed to Kendara from Excite@Home and dated as of
the Agreement Date which has been delivered by Excite@Home to Kendara
concurrently herewith (the "Excite@Home Disclosure Letter"), each of the
following representations, warranties and statements contained in the following
Sections of this Article 4 are true and correct as of the Agreement Date and
will be true and correct on and as of the Closing Date. For all purposes of
this Agreement, the statements contained in the Excite@Home Disclosure Letter
and its schedules shall also be
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deemed to be representations and warranties made and given by Excite@Home and
Sub under Article 4 of this Agreement.
4.1 Organization and Good Standing. Excite@Home is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted and as proposed to
be conducted. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the corporate power
and authority to own, operate and lease its properties and to carry on its
business. Excite@Home owns all of the issued and outstanding capital stock of
Sub. Each of Excite@Home and Sub is duly qualified or licensed to do business
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed would not have a Material Adverse Effect on Excite@Home.
Excite@Home has made available to Kendara or its legal counsel, Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP accurate and complete copies
of the Certificates of Incorporation, Certificates of Designation and Bylaws of
Excite@Home and Sub, as currently in full force and effect. Neither Excite@Home
nor Sub is in violation of its Certificate of Incorporation, Certificates of
Designation or Bylaws.
4.2 Power, Authorization and Validity.
---------------------------------
4.2.1 Power and Authority. Excite@Home has all requisite corporate
-------------------
power and authority to enter into, execute, deliver and perform its obligations
under, this Agreement and all the Excite@Home Ancillary Agreements and to
consummate the Merger. The Merger and the execution, delivery and performance of
this Agreement and each of the Excite@Home Ancillary Agreements by Excite@Home
have been duly and validly approved and authorized by Excite@Home's Board of
Directors in compliance with applicable law (including the Delaware General
Corporation Law) and Excite@Home's Certificate of Incorporation and Bylaws.
Neither the Merger nor the execution, delivery and performance of this Agreement
and each of the Excite@Home Ancillary Agreements by Excite@Home requires the
approval of Excite@Home's stockholders. Sub has all requisite corporate power,
capacity and authority to execute, deliver and perform its obligations under,
this Agreement and all the Sub Ancillary Agreements and to consummate the
Merger. The execution, delivery and performance of this Agreement and each of
the Sub Ancillary Agreements by Sub have been duly and validly approved and
authorized by Sub's Board of Directors and its sole stockholder in compliance
with Applicable Law and Sub's Certificate of Incorporation and Bylaws.
4.2.2 No Consents. No consent, approval, order or authorization of,
-----------
or registration, declaration or filing with, any court, administrative agency,
commission or other Governmental Authority is necessary or required to be made
or obtained by Excite@Home or Sub to enable Excite@Home and Sub to enter into,
and to perform their respective obligations under, this Agreement, the
Excite@Home Ancillary Agreements or the Sub Ancillary Agreements, respectively,
and for Excite@Home and Sub to consummate the Merger, except for: (a) the filing
of the Certificate of Merger with the Delaware Secretary of State as required
under
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Delaware Law, (b) the filing by Excite@Home with the Securities and Exchange
Commission ("SEC") or any state securities law authorities of any notices or
filings required in connection with the exemptions from the registration or
qualification requirements of the Securities Act and/or applicable state
securities laws which Excite@Home relies on in issuing shares of Excite@Home
Common Stock and Excite@Home Preferred Stock pursuant to this Agreement; (c) the
filing by Excite@Home of such reports and information with the SEC under the
Exchange Act and the rules and regulations promulgated by the SEC thereunder, as
may be required in connection with this Agreement, the Merger and the other
transactions contemplated by this Agreement; (d) the filing by Excite@Home with
the SEC of the Form S-3 registration statement to be filed by Excite@Home
pursuant to this Agreement; (e) the filing by Excite@Home with the SEC of the
Form S-8 registration statement to be filed by Excite@Home pursuant to this
Agreement; (f) the filing by Excite@Home with the Delaware Secretary of State of
the Certificates of Designation to be filed by Excite@Home pursuant to this
Agreement; (g) such other filings as may be required by the Nasdaq Stock Market
with respect to the Merger and the other transactions contemplated by this
Agreement, and the issuance of the shares of Excite@Home Common Stock and the
assumption of Kendara Options and Kendara Warrants by Excite@Home in the Merger;
and (h) such other filings, if any, as may be required in order for Excite@Home
to comply with applicable federal and state securities laws.
4.2.3 Enforceability. This Agreement and the Excite@Home Ancillary
--------------
Agreements are, or when executed by Excite@Home will be, valid and binding
obligations of Excite@Home, enforceable against Excite@Home in accordance with
their respective terms, subject to the effect of (a) applicable bankruptcy and
other similar laws affecting the rights of creditors generally and (b) rules of
law and equity governing specific performance, injunctive relief and other
equitable remedies. This Agreement and the Sub Ancillary Agreements are, or
when executed by Sub will be, valid and binding obligations of Sub, enforceable
against Sub in accordance with their respective terms, subject to the effect of
(a) applicable bankruptcy and other similar laws affecting the rights of
creditors generally and (b) rules of law and equity governing specific
performance, injunctive relief and other equitable remedies.
4.3 Excite@Home and Sub Capital Structure.
-------------------------------------
(a) The authorized capital stock of Excite@Home 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 Excite@Home
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
351,954,355 shares of Series A Common Stock, 30,800,000 shares of Series B
Common Stock and 2,000,000 shares of Series K Common Stock issued and
outstanding as of December 31, 1999; and 9,650,000 shares of Preferred Stock,
par value $0.01 per share, of which 10,143.549 shares are issued or outstanding
as of December 31, 1999. At the Effective Time, Excite@Home shall have
designated a sufficient number of shares of Series B Preferred Stock and Series
C Preferred Stock to fulfill Excite@Home's obligations to issue shares of such
stock pursuant to the terms of this Agreement. All outstanding shares of
Excite@Home Common Stock are duly authorized, validly issued, fully paid and
nonassessable. As of December 31, 1999: (i) there were options outstanding to
purchase an aggregate of
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59,330,438 shares of Excite@Home Common Stock pursuant to Excite@Home's stock
option plans; and (ii) 1,422,310 shares of Excite@Home Common Stock reserved for
future issuance under Excite@Home's 1997 Employee Stock Purchase Plan. All
shares of Excite@Home 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 Sub consists of 1,000 shares of
common stock, $0.001 par value per share, 100 of which, as of the date hereof,
are issued and outstanding and are held by Excite@Home. All of the outstanding
shares of Sub's common stock have been duly authorized and validly issued, and
are fully paid and nonassessable. Sub was formed for the purpose of consummating
the Merger and has no material assets or liabilities except as necessary for
such purpose.
(c) The Excite@Home Common Stock and Excite@Home Preferred Stock to
be issued in the Merger, and the Excite@Home Common Stock to be issued upon the
conversion of the Excite@Home Preferred Stock, when issued in accordance with
the provisions of this Agreement and the Certificates of Designation, will be
validly issued, fully paid and nonassessable and will be issued in compliance
with all applicable federal and state securities laws.
4.4 No Conflict. Neither the execution and delivery of this Agreement nor
-----------
any of the Excite@Home Ancillary Agreements or Sub Ancillary Agreements by
Excite@Home or Sub, nor the consummation of the Merger or any of the other
transactions contemplated hereby or thereby, will conflict with, or (with or
without notice or lapse of time, or both) result in a termination, breach,
impairment or violation of or constitute a default under: (a) any provision of
the Certificate of Incorporation, the Certificates of Designation or Bylaws of
Excite@Home or Sub as currently in effect; (b) any federal, state, local or
foreign judgment, writ, decree, order, statute, rule or regulation applicable to
Excite@Home or Sub or any of their respective material assets or properties; or
(c) any note, bond, mortgage, indenture, lease, license, permit, franchise,
material instrument, agreement, or contract, undertaking, understanding, letter
of intent, memorandum of understanding or commitment (whether verbal or in
writing) to which Excite@Home or any of its subsidiaries is a party or by which
Excite@Home or any of its subsidiaries or any of their respective material
assets or properties are bound, except in the case of (b) and (c) for any such
conflicts, terminations, breaches, impairments, violations or defaults which
would not have a Material Adverse Effect on Excite@Home or a material adverse
effect on Excite@Home's or Sub's ability to consummate the Merger.
4.5 SEC Filings.
-----------
(a) Excite@Home has filed all forms, reports and documents required
to be filed by Excite@Home with the SEC since January 1, 1999, 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
Excite@Home may file subsequent to the date hereof) are referred to herein as
the "Excite@Home SEC Reports." As of their respective dates,
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the Excite@Home 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 Excite@Home
SEC Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing, 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 by a subsequently filed Excite@Home SEC Report.
(b) Each of the audited consolidated financial statements (including,
in each case, any related notes thereto) contained in the Excite@Home SEC
Reports (the "Excite@Home Financials"), including any Excite@Home SEC Reports
filed after the date hereof until the Closing Date, (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 Excite@Home and its subsidiaries as at the
respective dates thereof and the consolidated results of Excite@Home'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
Excite@Home contained in Excite@Home SEC Reports as of September 30, 1999 is
hereinafter referred to as the "Excite@Home Balance Sheet." Except as disclosed
in the Excite@Home Financials, since September 30, 1999 neither Excite@Home 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 Excite@Home and its subsidiaries taken as a
whole, except for liabilities incurred since the date of the Excite@Home Balance
Sheet in the ordinary course of business consistent with past practices and
liabilities incurred in connection with this Agreement.
4.6 Disclosure. Excite@Home has made available to Kendara an
----------
investor disclosure package consisting of Excite@Home's annual report on Form
10-K for its fiscal year ending December 31, 1998 (the "Fiscal Year End"), all
Forms 10-Q and 8-K filed by Excite@Home with the SEC since the Fiscal Year End
and up to the date of this Agreement and all proxy materials distributed to
Excite@Home's stockholders since the Fiscal Year End and up to the date of this
Agreement (the "Excite@Home Disclosure Package").
4.7 Absence of Certain Changes. Except as set forth in the Excite@Home
--------------------------
SEC Documents, since the Excite@Home Balance Sheet Date, Excite@Home has
conducted its business in the ordinary course consistent with past practice and
there has not occurred: (a) any change, event or condition (whether or not
covered by insurance) that has resulted in a Material Adverse Effect on
Excite@Home; (b) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by Excite@Home or any
revaluation by Excite@Home of any of its assets; (c) any declaration, setting
aside, or payment of a dividend or
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other distribution with respect to the shares of Excite@Home, or any direct or
indirect redemption, purchase or other acquisition by Excite@Home of any of its
shares of capital stock; or (d) any negotiation or agreement by Excite@Home or
any of its subsidiaries to do any of the things described in the preceding
clauses (a) through (d) (other than negotiations with Kendara and its
representatives regarding the transactions contemplated by this Agreement).
4.8 Litigation. There is no action, suit, arbitration, proceeding or
----------
investigation pending against Excite@Home before any court, Governmental
Authority or arbitrator, nor, to Excite@Home's knowledge, has any such action,
suit, arbitration, proceeding or investigation been threatened that,
individually or in the aggregate, would have a Material Adverse Effect on
Excite@Home. As of the date hereof, there is no judgment, decree or order
against Excite@Home or any of its subsidiaries or, to the knowledge of
Excite@Home, any of their respective directors or officers (in their capacities
as such), that could prevent, enjoin, alter or materially delay any of the
transactions contemplated by this Agreement or that could have a Material
Adverse Effect on Excite@Home.
4.9 Delivery of Documents. Excite@Home has delivered true and complete
---------------------
copies of all documents requested by Kendara and which are referred to in this
Article 4 or in any Schedule delivered by Excite@Home to Kendara.
ARTICLE 5
Pre Closing Covenants of Kendara
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with the provisions of Article 10, Kendara covenants and agrees with Excite@Home
as follows:
5.1 Advice of Changes. Kendara will promptly advise Excite@Home in
-----------------
writing of any (a) event occurring subsequent to the Agreement Date that would
render any representation or warranty of Kendara contained in Article 3 of this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate and (b) Material Adverse Change in Kendara.
5.2 Maintenance of Business. Kendara will carry on and preserve its
-----------------------
business and its relationships with customers, advertisers, suppliers, employees
and others with whom Kendara has contractual relations in substantially the same
manner as it has prior to the Agreement Date consistent with past practices. If
Kendara becomes aware of a material deterioration in the relationship with any
key customer, key advertiser, key supplier or key employee, it will promptly
bring such information to the attention of Excite@Home in writing and, if
requested by Excite@Home, will exert reasonable commercial efforts to promptly
restore the relationship.
5.3 Conduct of Business. Kendara will continue to conduct its business
-------------------
and maintain its business relationships in the ordinary and usual course and
Kendara will not, without the prior written consent of Excite@Home:
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(a) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person other than in the ordinary course of business
consistent with past practice;
(b) lend any money, other than reasonable and normal advances to
employees for bona fide expenses that are incurred in the ordinary course of
Kendara's business consistent with Kendara's past practices;
(c) enter into any material transaction or agreement or take any
other action not in the ordinary course of Kendara's business consistent with
Kendara's past practices;
(d) grant any Encumbrance on any of its assets;
(e) sell, transfer or dispose of any of its assets except in the
ordinary course of Kendara's business consistent with Kendara's past practices;
(f) enter into any material lease or contract for the purchase or
sale of any property, whether real or personal, tangible or intangible; pay any
bonus, increased salary or special remuneration to any officer, director,
employee or consultant (except for normal salary increases consistent with
Kendara's past practices and not to exceed 5% of such officer's, employee's or
consultant's base annual compensation, and except pursuant to arrangements
disclosed in writing to Excite@Home prior to the Agreement Date or disclosed in
writing subsequent to the Agreement Date and approved in writing by Excite@Home)
or enter into any new employment or consulting agreement with any such person;
(h) change any of its accounting methods;
(i) declare, set aside or pay any cash or stock dividend or other
distribution in respect of its capital stock, redeem, repurchase or otherwise
acquire any of its capital stock or other securities (except for the repurchase
of stock from employees, directors, consultants or contractors of Kendara in
connection with the termination of their services with Kendara at the original
purchase price of such stock), pay or distribute any cash or property to any
stockholder or security holder of Kendara or make any other cash payment to any
stockholder or security holder of Kendara that is unusual, extraordinary, or not
made in the ordinary course of Kendara's business consistent with its past
practices;
(j) amend or terminate any contract, agreement or license to which
Kendara is a party except those amended or terminated in the ordinary course of
Kendara's business, consistent with its past practices, and which are not
material in amount or effect;
(k) waive or release any material right or claim except in the
ordinary course of Kendara's business consistent with its past practices;
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(l) issue, sell, create or authorize any shares of its capital stock
of any class or series or any other of its securities (other than pursuant to
the exercise of any Kendara Options or Kendara Warrants), or issue, grant or
create any warrants, obligations, subscriptions, options (other than the grant
of options to employees to purchase Kendara Common Stock, provided that the
vesting of such options does not accelerate in connection with the Merger or any
of the other transactions contemplated hereby, such options vest over a four-
year period, with not more than twenty-five percent in the first year and 21/12%
each full calendar month thereafter, the exercise price of such option is not
less than the fair market value of Kendara Common Stock on the date of grant,
and the number of shares subject to such option is consistent with the past
practice of Kendara; or the grant of the Permitted Non-Dilutive Options),
convertible securities, or other commitments to issue shares of its capital
stock or any securities that are potentially exchangeable for, or convertible
into, shares of its capital stock;
(m) subdivide or split or combine or reverse split the outstanding
shares of its capital stock of any class or series or enter into any
recapitalization affecting the number of outstanding shares of its capital stock
of any class or series or affecting any other of its securities;
(n) merge, consolidate or reorganize with, or acquire, or enter into
any other business combination with, any corporation, partnership, limited
liability company or any other entity (other than Excite@Home or Sub) or enter
into any negotiations, discussions or agreement for such purpose;
(o) amend its Certificate of Incorporation or Bylaws;
(p) license any of its technology or Intellectual Property, or
acquire any Intellectual Property (or any license thereto) from any third party;
materially change any insurance coverage;
(r) agree to any audit assessment by any tax authority or file any
federal or state income or franchise tax return unless copies of such returns
have first been delivered to Excite@Home for its review at a reasonable time
prior to filing;
(s) other than as contemplated in Sections 5.11 and 5.12, modify or
change the exercise or conversion rights or exercise or purchase prices of any
capital stock of Kendara, any Kendara stock options, warrants or other Kendara
securities, or accelerate or otherwise modify (i) the right to exercise any
option, warrant or other right to purchase any capital stock or other securities
of Kendara or (ii) the vesting or release of any shares of capital stock or
other securities of Kendara from any repurchase options or rights of refusal
held by Kendara or any other party or any other restrictions; or
(t) agree to do any of the things described in the preceding clauses
5.3(a) through 5.3(s).
5.4 Regulatory Approvals. Kendara will promptly execute and file, or
--------------------
join in the execution and filing, of any application, notification or any other
document that may be
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necessary in order to obtain the authorization, approval or consent of any
Governmental Authority, whether federal, state, local or foreign, which may be
reasonably required, or which Excite@Home may reasonably request, in connection
with the consummation of the Merger or any other transactions contemplated by
this Agreement or any Kendara Ancillary Agreement. Kendara will use diligent
efforts to obtain, and to cooperate with Excite@Home to promptly obtain, all
such authorizations, approvals and consents.
5.5 Necessary Consents. Kendara will use diligent efforts to promptly
------------------
obtain such written consents and authorizations of third parties, give notices
to third parties and take such other actions as may be necessary or appropriate
in order to effect the consummation of the Merger and the other transactions
contemplated by this Agreement, to enable Excite@Home to carry on Kendara's
business immediately after the Effective Time and to keep in effect and avoid
the breach, violation of, termination of, or adverse change to, any agreement or
contract to which Kendara is a party or is bound or by which any of its assets
is bound.
5.6 Litigation. Kendara will notify Excite@Home in writing promptly after
----------
learning of any claim, action, suit, arbitration, mediation, proceeding or
investigation by or before any court, arbitrator or arbitration panel, board or
governmental agency, initiated by or against it, or known by it to be threatened
against Kendara or any of its officers, directors, employees or stockholders in
their capacity as such.
5.7 No Other Negotiations. Kendara will not, and Kendara will not
---------------------
authorize, encourage or permit any officer, director, employee, stockholder,
affiliate or agent of Kendara or any attorney, investment banker or other person
on Kendara's or their behalf to, directly or indirectly: (i) solicit, initiate,
encourage or induce the making, submission or announcement of, any offer or
proposal from any party concerning any Alternative Transaction (as defined
below) or take any other action that could reasonably be expected to lead to an
Alternative Transaction or a proposal therefor; (ii) consider any inquiry, offer
or proposal received from any party concerning any Alternative Transaction
(other than to respond to such inquiry, offer or proposal by indicating that
Kendara is not interested in any Alternative Transaction); (iii) furnish any
information regarding Kendara to any person or entity in connection with or in
response to any inquiry, offer or proposal for or regarding any Alternative
Transaction (other than to respond to such inquiry, offer or proposal by
indicating that Kendara is not interested in any Alternative Transaction); (iv)
participate in any discussions or negotiations with any person or entity with
respect to any Alternative Transaction (other than to respond to such inquiry,
offer or proposal by indicating that Kendara is not interested in any
Alternative Transaction); (v) otherwise cooperate with, facilitate or encourage
any effort or attempt by any person or entity (other than Excite@Home) to effect
any Alternative Transaction; or (vi) execute, enter into or become bound by any
letter of intent, agreement, commitment or understanding between Kendara and any
third party that is related to, provides for or concerns any Alternative
Transaction. Kendara will promptly notify Excite@Home orally and in writing of
any inquiries or proposals received by Kendara, directors, officers,
stockholders, employees or agents regarding any Alternative Transaction and
will, identify the party making the inquiry or proposal and the nature and terms
of any inquiry or proposal. Any violation of the restrictions set forth in this
Section by any officer, director or employee of Kendara or any attorney,
investment banker or other director or
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representative of Kendara shall be deemed a breach of this Section 5.7 by
Kendara. As used herein, the term "Alternative Transaction" means any
commitment, agreement or transaction involving or providing for (a) the possible
disposition of all or any substantial portion of Kendara's business, assets or
capital stock, whether by way of merger, consolidation, sale of assets, sale of
stock, stock exchange, tender offer and/or any other form of business
combination, or (b) any initial public offering of capital stock or other
securities of Kendara pursuant to a registration statement filed under the
Securities.
5.8 Access to Information. Kendara will allow Excite@Home and its agents
---------------------
access at reasonable time to the files, books, records, technology, contracts,
personnel and offices of Kendara, including, without limitation, any and all
information relating to Kendara's taxes, commitments, contracts, leases,
licenses, financial condition and real, personal and intangible property,
subject to the terms of the agreement between Kendara and Excite@Home dated as
of November 30, 1999 (the "Confidentiality Agreement"). Kendara will cause its
accountants to cooperate with Excite@Home and Excite@Home's agents (provided
that, prior to any disclosure to such agents, such agents are bound by the terms
of a confidentiality agreement with substantially similar restriction as
included in the Confidentiality Agreement to restrict the use and disclosure of
Kendara's confidential information) in making available all financial
information reasonably requested by Excite@Home, including without limitation
the right to examine all working papers pertaining to all financial statements
prepared or audited by such accountants.
5.9 Satisfaction of Conditions Precedent. Kendara will use its diligent
------------------------------------
efforts to satisfy or cause to be satisfied all the conditions precedent which
are set forth in Article 9, and Kendara will use its diligent efforts to cause
the Merger and the other transactions contemplated by this Agreement to be
consummated in accordance with this Agreement.
5.10 Kendara Employee Plans and Benefit Arrangements. Upon the request of
-----------------------------------------------
Excite@Home, Kendara will terminate any Kendara Benefit Plan and any leased
employee arrangement or professional employee organization immediately prior to
the Effective Time.
5.11 Amendments of Kendara Options. Kendara shall amend and obtain the
-----------------------------
written consent of each holder of Kendara Options listed on Schedule 5.11 hereto
-------------
to amend outstanding Kendara Options granted to each such holder to eliminate
acceleration of vesting under such Kendara Option (including upon termination of
the option holder at any time following the Effective Time) conditioned on the
occurrence of, and effective immediately prior to, the Effective Time.
5.13 Right of First Refusal and Registration Rights. Kendara shall amend
----------------------------------------------
Kendara's Bylaws to repeal Article IX of such Bylaws relating to Kendara's and
the Kendara Stockholders' right of first refusal. Kendara and the holders of
Kendara Preferred Stock shall amend the Investors' Rights Agreement dated as of
May 26, 1999 between Kendara and such holders to terminate the registration
rights of such holders.
5.14 Information Statement. Kendara will deliver to counsel to
---------------------
Excite@Home a draft of an information statement on the Agreement Date and,
within two business days following the
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<PAGE>
Agreement Date, will send to the Kendara Stockholders such information statement
for the purpose of considering and approving the Merger Agreement, the Merger
and the transactions contemplated hereby.
5.15 Kendara Stockholder Approval. Kendara shall obtain the valid and
----------------------------
affirmative vote of at least 90% of the outstanding shares of Kendara Common
Stock and Kendara Preferred Stock within two business days of the Agreement
Date.
5.16 Tax Representation Letter. Kendara shall make such reasonable
-------------------------
representations as are requested by its counsel and Excite@Home's counsel for
the purpose of their rendering the tax opinions discussed in Section 8.8 and
Section 9.7.
ARTICLE 6
Excite@Home Covenants
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with Article 10, Excite@Home covenants and agrees as follows:
6.1 Advice of Changes. Excite@Home will promptly advise Kendara in
-----------------
writing of any (a) event that would render any representation or warranty of
Excite@Home or Sub contained in this Agreement or the Excite@Home Disclosure
Letter, if made on or as of the date of such event or the Closing Date, to be
untrue or inaccurate, (b) any breach of any covenant or obligation of
Excite@Home or Sub pursuant to this Agreement, any Excite@Home Ancillary
Agreement or any Sub Ancillary Agreement, and (c) Material Adverse Change in
Excite@Home.
6.2 Regulatory Approvals. Excite@Home will execute and file, or join in
--------------------
the execution and filing, of any application, notification or other document
that may be necessary in order to obtain the authorization, approval or consent
of any governmental body, federal, state, local or foreign, which may be
reasonably required, in connection with the consummation of the Merger and the
other transactions contemplated by this Agreement and the Excite@Home Ancillary
Agreements and Sub Ancillary Agreements in accordance with the terms of this
Agreement. Excite@Home will use diligent efforts to obtain all such
authorizations, approvals and consents. Notwithstanding anything in this
Agreement to the contrary, neither Excite@Home 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 Excite@Home, or any of its affiliates or Kendara, or the holding
separate of the shares of Kendara Common Stock or imposing or seeking to impose
any limitation on the ability of Excite@Home 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 Kendara Common Stock.
6.3 Satisfaction of Conditions Precedent. Excite@Home will use its
------------------------------------
diligent efforts to satisfy or cause to be satisfied all of the conditions
precedent which are set forth in Article 8,
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and Excite@Home will use its diligent efforts to cause the transactions
contemplated by this Agreement to be consummated in accordance with the terms of
this Agreement.
6.4 Listing of Additional Shares. Excite@Home will use its diligent
----------------------------
efforts to cause the shares of (a) Excite@Home Common Stock to be issued in the
Merger upon conversion of Kendara Common Stock, and (b) when issued, the shares
of Excite@Home Common Stock issued upon conversion of the Excite@Home Preferred
Stock to be issued in the Merger upon conversion of Kendara Common Stock, to be
approved for listing on the Nasdaq Stock Market, subject to notice of issuance.
6.5 Blue Sky Laws. Excite@Home shall take such steps as may be necessary
-------------
to comply with the securities and Blue Sky laws of all jurisdictions which are
applicable in connection with the Merger; provided, however, that Excite@Home
shall not be required to qualify to do business or execute a general consent to
service of process in any jurisdiction.
6.6 Tax Free Reorganization. Excite@Home will cooperate with Kendara and
-----------------------
take all reasonable actions as may be necessary to ensure that this Agreement
involves a tax-free plan of reorganization and that the Merger is consummated in
accordance with the provisions of Section 368(a)(1)(A) and Section 368(a)(2)(D)
of the Code.
6.7 Indemnification.
---------------
(a) From and after the Effective Time, the Surviving Corporation
shall indemnify, defend and hold harmless each person who is now, or has been at
any time prior to the date of this Agreement or who becomes prior to Effective
Time, an officer, director or employee of Kendara (the "Indemnified Parties") in
respect of acts or omissions occurring on or prior to the Effective Time to the
extent provided under the Kendara's Certificate of Incorporation, Bylaws and
indemnification agreements in effect on the date hereof, provided that such
indemnification shall be subject to any limitation imposed from time to time
under applicable law.
(b) If the Surviving Corporation or any of its respective successors
or assigns (i) consolidates with or mergers into any other person or entity and
shall not be the continuing or surviving person of such consolidation or merger,
or (ii) transfers all or substantially all of its properties and assets to any
person or entity, then and in each such case, proper provision shall be made so
that such successors or assigns of the Surviving Corporation shall assume the
obligations set forth in this Section 6.7.
6.8 Employee Benefit Plans. Excite@Home will provide benefits to
----------------------
employees of Kendara as soon as reasonably practicable following the Effective
Time that are substantially identical in the aggregate to the benefits currently
provided to similarly situated employees of Excite@Home. From and after the
Effective Time, Excite@Home shall grant all employees of Kendara credit for all
service (to the same extent as service with Excite@Home is taken into account
with respect to similarly situated employees of Excite@Home) with Kendara prior
to the Effective Time for (a) eligibility and vesting purposes and (b) for
purposes of vacation accrual after the Effective Time as if such service with
Kendara was service with Excite@Home.
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6.9 Filing of Certificates of Designation. Promptly following the
-------------------------------------
fulfillment, satisfaction or waiver by Excite@Home of each of the conditions
specified in Article 9 (other than the condition specified in Section 9.13),
Excite@Home will use its diligent efforts to file the Certificates of
Designation with the Secretary of State of the State of Delaware.
6.10 Tax Representation Letter. Excite@Home shall make such reasonable
-------------------------
representations as are requested by its counsel and Kendara's counsel for the
purpose of their rendering the tax opinions discussed in Section 8.8 and Section
9.7.
ARTICLE 7
Closing Matters
7.1 The Closing. Subject to termination of this Agreement as provided in
-----------
Article 10 below, the closing of the transactions to consummate the Merger (the
"Closing") will take place at the offices of Fenwick & West LLP, 275 Battery
Street, San Francisco, California at 10:00 a.m., Pacific Time on the second
business day after all of the conditions to Closing set forth in Sections 8 and
9 hereof have been satisfied and/or waived in accordance with this Agreement, or
on such other day as Excite@Home and Kendara may mutually agree upon (the
"Closing Date"). Concurrently with the Closing, the Certificate of Merger will
be filed with the Delaware Secretary of State.
7.2 Exchange of Certificates.
------------------------
7.2.1 At the Effective Time, shares of Kendara Common Stock that are
outstanding immediately prior thereto (other than Dissenting Shares for which
dissenters rights have been or will be perfected in accordance with Delaware
law), will, by virtue of the Merger and without further action, cease to exist,
and all such shares will be converted into the right to receive from Excite@Home
the number of shares of Excite@Home Common Stock and Excite@Home Preferred Stock
to which such holder is entitled pursuant to Section 2.1.2, subject to the
provisions of Section 2.1.4 (regarding the elimination of fractional shares of
Excite@Home Common Stock) and Section 2.5 (regarding the withholding of Escrow
Shares). As soon as reasonably practicable (and in any event no later than
eight business days after the Effective Time), Excite@Home shall make available
to EquiServe Limited Partnership (the "Exchange Agent") certificates
representing Excite@Home Common Stock and Excite@Home Preferred Stock to be
issued in exchange for outstanding shares of Kendara Common Stock and cash in an
amount sufficient to permit the payment of cash in lieu of fractional shares
pursuant to Section 2.1.4. As soon as practicable after the Effective Time (and
in any event no later than ten (10) Business Days after the Effective Time), the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Kendara Common Stock (the "Kendara
Certificates") and which shares were converted into the right to receive shares
of Common Stock and Excite@Home Preferred Stock pursuant to Section 2.1.2, (a) a
-------------
letter of transmittal in customary form (which shall specify that delivery shall
be effected, and risk of loss and title to the Kendara Certificates shall pass,
only upon delivery of the Kendara Certificates to the Exchange Agent and shall
be in such form and have such other provisions as Excite@Home may reasonably
specify)
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<PAGE>
and (b) instructions for use in effecting the surrender of the Kendara
Certificates in exchange for certificates representing shares of Excite@Home
Common Stock and Excite@Home Preferred Stock and cash in lieu of fractional
shares. Upon surrender of a Kendara Certificate for cancellation or upon
delivery of an affidavit of lost certificate and an indemnity in form and
substance satisfactory to Excite@Home (the "Affidavit") to the Exchange Agent or
to such other agent or agents as may be appointed by Excite@Home, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, (a) Excite@Home or its transfer agent will issue
to each tendering holder of a Kendara Certificate or an Affidavit, certificates
(a "Tendering Kendara Holder") for the number of shares of Excite@Home Common
Stock and Excite@Home Preferred Stock to which such holder is entitled pursuant
to Section 2.1.2, subject to the provisions of Section 2.1.4 (regarding the
elimination of fractional shares of Excite@Home Common Stock) and Section 2.5
(regarding the withholding of Escrow Shares); and (b) Excite@Home or its
transfer agent will pay by check to each Tendering Kendara Holder cash in the
amounts payable to such holder in accordance with the provisions of Sections
2.1.4.
7.2.2 No dividends or distributions payable to holders of record of
Excite@Home Common Stock or Excite@Home Preferred Stock after the Effective Time
will be paid to the holder of any unsurrendered Kendara Certificate unless and
until the holder of such unsurrendered Kendara Certificate surrenders such
Kendara Certificate or an Affidavit to Excite@Home as provided above. Subject to
the effect, if any, of applicable escheat and other laws, following surrender of
any Kendara Certificate or Affidavit, there will be delivered to the person
entitled thereto, without interest, the amount of any dividends and
distributions theretofore paid with respect to Excite@Home Common Stock and
Excite@Home Preferred Stock so withheld as of any date subsequent to the
Effective Time and prior to such date of delivery.
7.2.3 After the Effective Time there will be no further registration
of transfers on the stock transfer books of Kendara or its transfer agent of any
shares of capital stock of Kendara that were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Kendara Certificates or an
Affidavit are presented for any reason, they will be canceled and exchanged as
provided in this Section 7.2.
7.2.4 Until Kendara Certificates or an Affidavit representing shares
of Kendara Common Stock that are outstanding immediately prior to the Effective
Time are surrendered pursuant to Section 7.2.1 above, such Kendara Certificates
will be deemed, for all purposes, to evidence ownership of the number of shares
of Excite@Home Common Stock and Excite@Home Preferred Stock into which such
shares of Kendara Common Stock will have been converted pursuant to Section
2.1.2, subject to the provisions of Section 2.1.4 (regarding the elimination of
fractional shares of Excite@Home Common Stock) and Section 2.5 (regarding the
withholding of Escrow Shares).
7.3 Appraisal Rights. If holders of Kendara Common Stock are entitled to
----------------
appraisal rights pursuant to the Delaware General Corporation Law (the "DGCL")
in connection with the Merger, any shares held by Kendara Stockholders who
exercise and perfect such appraisal rights
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<PAGE>
("Dissenting Shares") shall not be converted into a right to receive Excite@Home
Common Stock or Excite@Home Preferred Stock, but shall be converted into the
right to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to the DGCL. Kendara shall give Excite@Home
prompt notice (and in no event more than two business days) of any demand
received by Kendara for appraisal of Kendara Common Stock, and Excite@Home shall
have the right to control all negotiations and proceedings with respect to such
demand. Kendara agrees that, except with the prior written consent of
Excite@Home, it will not voluntarily make any payment with respect to, or settle
or offer to settle, any such demand for appraisal. In the event that any Kendara
Stockholder fails to make an effective demand for payment or otherwise loses his
status as a holder of Dissenting Shares (a "Dissenting Stockholder"),
Excite@Home shall, as of the later of the Effective Time of the Merger or ten
business days from the occurrence of such event, issue and deliver, upon
surrender by such Dissenting Stockholder of its Kendara Certificate or
Certificates, the shares of Excite@Home Common Stock and Excite@Home Preferred
Stock and any cash payment in lieu of fractional shares, in each case without
interest thereon, to which such Dissenting Shareholder would have been entitled
to under Section 2.1.2 of this Agreement (less the number of shares of
Excite@Home Common Stock and Excite@Home Preferred Stock to be held in escrow
with respect to such stockholder pursuant to Section 2.5).
ARTICLE 8
Conditions to Obligations of Kendara
Kendara's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Kendara, but only in a writing signed by
Kendara):
8.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Excite@Home and Sub set forth in Article 4 (a) that are qualified
as to materiality will be true and correct and (b) that are not qualified as to
materiality shall be true and correct in all material respects, in each case on
and as of the Closing with the same force and effect as if they had been made on
the Closing Date (except for any such representations or warranties that, by
their terms, speak only as of a specific date or dates, in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and such representations and warranties that are not qualified
as to materiality shall be true and correct in all material respects, on and as
of such specified date or dates), and at the Closing Kendara will have received
a certificate to such effect executed by an officer of Excite@Home.
8.2 Covenants. Excite@Home will have performed and complied in all
---------
material respects with all of its covenants contained in Article 6 on or before
the Closing (to the extent that such covenants require performance by
Excite@Home on or before the Closing), and at the Closing Kendara will have
received a certificate to such effect signed by an officer of Excite@Home.
8.3 No Material Adverse Change. There will not have been any Material
--------------------------
Adverse Change in Excite@Home, whether or not resulting from a breach in any
representation, warranty
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<PAGE>
or covenant in this Agreement, and at the Closing Kendara will have received a
certificate to such effect signed by and officer of Excite@Home.
8.4 Requisite Approvals. This Agreement will have been duly and validly
-------------------
approved and adopted by Excite@Home's Board of Directors in accordance with
Applicable Law and Excite@Home's Certificate of Incorporation and Bylaws, each
as amended. This Agreement will have been approved and adopted by Sub's Board
of Directors and sole stockholder in accordance with Applicable Law and Sub's
Certificate of Incorporation and Bylaws, each as amended.
8.5 Compliance with Law; No Legal Restraints; No Litigation. There will
-------------------------------------------------------
not be issued or enacted or adopted, or threatened in writing by any
Governmental Authority, any order, decree, temporary, preliminary or permanent
injunction, legislative enactment, statute, regulation, action or proceeding, or
any judgment or ruling by any Governmental Authority that prohibits or renders
illegal or imposes limitations on the Merger or any other material transaction
contemplated by this Agreement or any Excite@Home Ancillary Agreements or any
Sub Ancillary Agreements. No litigation or proceeding will be threatened or
pending for the purpose or with the probable effect of enjoining or preventing
the consummation of the Merger or any of the other material transactions
contemplated by this Agreement or which could be reasonably expected to have a
Material Adverse Effect on Excite@Home.
8.6 Government Consents. There will have been obtained at or prior to the
-------------------
Closing Date such permits or authorizations, and there will have been taken all
such other actions by any regulatory authority having jurisdiction over the
parties and the actions herein proposed to be taken, as may be required to
lawfully consummate the Merger, including but not limited to requirements under
applicable federal and state securities laws.
8.7 Opinion of Excite@Home's Counsel. Kendara will have received from
--------------------------------
Fenwick & West LLP, counsel to Excite@Home, an opinion covering the matters set
forth in Exhibit G.
---------
8.8 Kendara Tax Opinion. Kendara shall have received an opinion of
-------------------
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP, counsel to
Kendara, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization under Section 368(a) of the Code and that each of
Excite@Home, Sub and Kendara will be a party to the reorganization within the
meaning of Section 368(b) of the Code and such opinion shall not have been
withdrawn or modified in any material respect. In the event that Kendara's
counsel shall not render such opinion, then Excite@Home's counsel may render
such opinion in satisfaction of the condition set forth in this Section 8.8.
8.9 Nasdaq Listing. The shares of Excite@Home Common Stock that are
--------------
issuable upon the conversion of outstanding shares of Kendara Common Stock, upon
the conversion of Excite@Home Preferred Stock issued in the Merger and upon
exercise of outstanding Kendara Options and Kendara Warrants, shall be
authorized for listing on the Nasdaq Stock Market, subject to notice of
issuance.
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8.10 Certificates of Designation Effective. The Certificates of
-------------------------------------
Designation shall have been duly adopted by Excite@Home by all necessary
corporate action, and shall have been duly filed with and accepted by the
Secretary of State of the State of Delaware.
8.11 Hart-Scott-Rodino Compliance. All applicable waiting periods under
----------------------------
the HSR Act shall have expired or early termination shall have been granted by
both the Federal Trade Commission and the United States Department of Justice.
ARTICLE 9
Conditions to Obligations of Excite@Home
The obligations of Excite@Home hereunder are subject to the fulfillment or
satisfaction on, and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Excite@Home, but only in a writing signed
by Excite@Home):
9.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Kendara set forth in Article 3 (a) that are qualified as to
materiality will be true and correct and (b) that are not qualified as to
materiality shall be true and correct in all material respects, in each case on
and as of the Closing with the same force and effect as if they had been made at
the Closing Date (except for any such representations or warranties that, by
their terms, speak only as of a specific date or dates, in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and such representations and warranties that are not qualified
as to materiality shall be true and correct in all material respects, on and as
of such specified date or dates), and at the Closing Excite@Home will have
received a certificate to such effect executed by Kendara's President or Chief
Executive Officer. The representations and warranties of each Kendara
Stockholder set forth in such Kendara Stockholder's Investment Representation
Letter shall be true and correct in all material respects.
9.2 Covenants. Kendara will have performed and complied in all material
---------
respects with all of its covenants contained in Article 5 at or before the
Closing (to the extent that such covenants require performance by Kendara at or
before the Closing), and at the Closing Excite@Home will have received a
certificate to such effect signed by Kendara's President or Chief Executive
Officer.
9.3 No Material Adverse Change. There will not have been any Material
--------------------------
Adverse Change in Kendara, whether or not resulting from a breach in any
representation, warranty or covenant in this Agreement, and at the Closing
Excite@Home will have received a certificate to such effect signed by Kendara's
President or Chief Executive Officer.
9.4 Compliance with Law; No Legal Restraints; No Litigation. There will
-------------------------------------------------------
not be any issued, enacted or adopted, or threatened in writing by any
Governmental Authority any order, decree, temporary, preliminary or permanent
injunction, legislative enactment, statute, regulation, action, proceeding
judgment or ruling by any Governmental Authority that prohibits or renders
illegal or imposes limitations on: (a) the Merger or any other material
transaction contemplated by this Agreement or any Kendara Ancillary Agreement;
or (b) Excite@Home's right (or the right of any Excite@Home subsidiary) to own,
retain, use or operate any of its
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products, properties or assets (including equity, properties or assets of
Kendara) on or after consummation of the Merger or seeking a disposition or
divestiture of any such properties or assets. No litigation or proceeding will
be threatened or pending for the purpose or with the probable effect of
enjoining or preventing the consummation of any of the transactions contemplated
by this Agreement, or which could be reasonably expected to have a Material
Adverse Effect on Kendara or Excite@Home.
9.5 Government Consents. There will have been obtained at or prior to the
-------------------
Closing Date such permits or authorizations, and there will have been taken all
such other actions by any governmental or regulatory authority having
jurisdiction over the parties and the actions herein proposed to be taken, as
may be required to consummate the Merger, including but not limited to
requirements under applicable federal and state securities laws.
9.6 Opinion of Kendara's Counsel. Excite@Home will have received from
----------------------------
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP, counsel to
Kendara, an opinion opining to the matters set forth in Exhibit H.
---------
9.7 Excite@Home Tax Opinion. Kendara shall have received an opinion of
-----------------------
Fenwick & West LLP, counsel to Excite@Home to the effect that the Merger will be
treated for federal income tax purposes as a reorganization under Section 368(a)
of the Code and that each of Excite@Home, Sub and Kendara will be a party to the
reorganization within the meaning of Section 368(b) of the Code and such opinion
shall not have been withdrawn or modified in any material respect. In the event
that Excite@Home's counsel shall not render such opinion, then Kendara's counsel
may render such opinion in satisfaction of the condition set forth in this
Section 9.7.
9.8 Consents. Excite@Home will have received duly executed copies of all
--------
third-party consents, approvals, assignments, notices, waivers, authorizations
or other certificates (including those set forth in Item 3.12 to the Kendara
Disclosure Letter) contemplated by this Agreement, the Kendara Disclosure Letter
or deemed reasonably necessary to provide for the continuation in full force and
effect of any and all material contracts, agreements and leases of Kendara after
the Merger and the preservation of Kendara's IP Rights and other assets and
properties after the Merger and for Excite@Home to consummate the Merger and the
other transactions contemplated by this Agreement, the Excite@Home Ancillary
Agreements and the Kendara Ancillary Agreements, in each case, in form and
substance satisfactory to Excite@Home.
9.9 Requisite Approvals. This Agreement, the Merger and the Kendara
-------------------
Ancillary Agreements will have been duly and validly approved and adopted, as
required by applicable law and Kendara's Certificate of Incorporation and
Bylaws, by (a) all of the members of Kendara's Board of Directors, (b) the valid
and affirmative vote of at least 90% of the outstanding shares of Kendara Common
Stock and Kendara Preferred Stock.
9.10 Investment Representation Letters; Exemptions Available. Excite@Home:
-------------------------------------------------------
(a) will have received an executed counterpart of the Investment Representation
Letter executed by each Kendara Stockholder who approved and adopted this
Agreement, the Merger and the
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Kendara Ancillary Agreements; and (b) must be reasonably satisfied that there
are not more than thirty-five Kendara Stockholders who are not "accredited
investors" within the meaning of Regulation D promulgated under the Securities.
9.11 Continued Employment of Certain Personnel. Each of the persons listed
-----------------------------------------
on Schedule 9.11 to this Agreement will have executed and delivered to
Excite@Home employment agreements substantially in the form attached hereto as
Exhibit I (the "Employment Agreements"), and each such person will be employed
- ---------
by Kendara.
9.12 Resignation of Directors and Officers. The directors and officers of
-------------------------------------
Kendara in office immediately prior to the Effective Time of the Merger (other
than any such director who is designated in Section 2.6(h)) to be a director of
Kendara immediately after the Effective Time) will have resigned as directors of
the Surviving Corporation in writing effective as of the Effective Time.
9.13 Certificates of Designation Effective. The Certificates of
-------------------------------------
Designation shall have been duly adopted by Excite@Home by all necessary
corporate action, and shall have been duly filed with and accepted by the
Secretary of State of the State of Delaware.
9.14 Hart-Scott-Rodino Compliance. All applicable waiting periods under
----------------------------
the HSR Act shall have expired or early termination shall have been granted by
both the Federal Trade Commission and the United States Department of Justice.
9.15 Amendments of Kendara Options. Each outstanding Kendara Option
-----------------------------
listed on Schedule 5.11 hereto shall have been duly amended to eliminate any
acceleration of vesting thereunder.
9.16 Execution of Amended Restricted Stock Purchase Agreements. Kendara
---------------------------------------------------------
and each Kendara Founder shall have executed an Amended Restricted Stock
Purchase Agreement.
9.17 Payment of Transaction Expenses. Kendara shall have paid all
-------------------------------
Transaction Expenses payable by it.
9.18 Conversion of Preferred Stock. All Kendara Preferred Stock shall
-----------------------------
have been converted into Kendara Common Stock.
9.19 Kendara Closing Balance Sheet. Kendara will have provided to
-----------------------------
Excite@Home evidence satisfactory to Excite@Home that, as of the Closing Date,
(a) Kendara's Current Assets exceed its Total Liabilities, and (b) Kendara holds
cash and cash equivalent equal to or greater than (i) $3,600,000 if the Closing
occurs on or prior to February 11, 2000; and (ii) $2,600,000 if the closing
occurs after February 11, 2000 but on or before the Termination Date.
9.22 Right of First Refusal and Registration Rights. Kendara shall have
----------------------------------------------
amended Kendara's Bylaws to repeal Article IX of such Bylaws relating to
Kendara's and the Kendara Stockholders' right of first refusal, and Kendara and
the holders of Kendara Preferred Stock shall
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have amended the Investors' Rights Agreement dated as of May 26, 1999 between
Kendara and such holders to terminate the registration rights of such holder.
ARTICLE 10
Termination of Agreement
10.1 Termination by Mutual Consent. This Agreement may be terminated at
-----------------------------
any time prior to the Effective Time by the mutual written consent of
Excite@Home and Kendara.
10.2 Unilateral Termination.
----------------------
10.2.1 Either Excite@Home or Kendara, by giving written notice to
the other, may terminate this Agreement if a court of competent jurisdiction or
other Governmental Authority shall have issued a nonappealable final order,
decree or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger.
10.2.2 Either Excite@Home or Kendara, by giving written notice to
the other, may terminate this Agreement if the Merger shall not have been
consummated by midnight Pacific Time on the Termination Date; provided, however,
that the right to terminate this Agreement pursuant to this Section 10.2.2 shall
not be available to any party whose failure to perform in any material respect
any of its obligations or covenants under this Agreement results in the failure
of any condition set forth in Article 8 or Article 9 or if the failure of such
condition results from facts or circumstances that constitute a material breach
of a representation or warranty or covenant made under this Agreement by such
party.
10.2.3 Either Excite@Home or Kendara may terminate this Agreement
at any time prior to the Effective Time if the other has committed (or, in the
case of a termination by Kendara, Sub has committed) a material breach of (a)
any of its representations and warranties under Article 3 or Article 4 of this
Agreement, as applicable; or (b) any of its covenants under Article 5 or Article
6 of this Agreement, as applicable, and has not cured such material breach
within ten days after the party seeking to terminate this Agreement has given
the other party written notice of the material breach and its intention to
terminate this Agreement pursuant to this Section 10.2.3.
10.2.4 No Liability for Termination. Termination of this Agreement
----------------------------
by a party (the "Terminating Party") in accordance with the provisions of this
Section 10 will not give rise to any obligation or liability on the part of the
Terminating Party on account of such termination; provided, however, that
nothing herein shall relieve a party from liability for a willful breach of this
Agreement. The provisions of Article 10 and Article 13 shall survive any
termination of this Agreement.
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ARTICLE 11
Survival of Representations, Indemnification
and Remedies, Continuing Covenants
11.1 Survival of Representations. All representations, warranties and
---------------------------
covenants of the parties to this Agreement contained in this Agreement will
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of any of the parties to this Agreement, until that date
(the "Release Date") which is the earlier of (a) the termination of this
Agreement in accordance with its terms or (b) the first anniversary of the
Effective Time; provided, however, that notwithstanding the foregoing,
Excite@Home may seek recovery of Founder Special Damages (as defined in Section
11.2(c)), Non-Founder Special Damages (as defined in Section 11.2(d)) or
Stockholder Damages (as defined in Section 11.2(b)) at any time prior to the
expiration of the applicable statute of limitations at any time prior to the
expiration of the applicable statute of limitations for the claim which seeks
recovery of such Special Damages or Stockholder Damages.
11.2 Agreement to Indemnify.
----------------------
(a) (i) The Kendara Stockholders will severally, but not jointly, on
a pro rata basis based upon their respective ownership interests in Kendara
Common Stock set forth besides their names on Schedule 3.4.1(a) to this
Agreement, indemnify and hold harmless, Excite@Home and the Surviving
Corporation and their respective officers, directors, agents, representatives,
stockholders and employees, and each person, if any, who controls or may control
Excite@Home or the Surviving Corporation within the meaning of the Securities
Act or the Exchange Act (each hereinafter referred to individually as a
"Excite@Home Indemnified Person" and collectively as "Excite@Home Indemnified
Persons") from and against any and all claims, demands, suits, actions, causes
of actions, losses, costs, damages, liabilities and expenses including, without
limitation, reasonable attorneys' fees, other professionals' and experts'
reasonable fees and court or arbitration costs (hereinafter collectively
referred to as "Damages") directly or indirectly incurred, resulting or and
arising out of: (a) any inaccuracy, misrepresentation, breach of, or default in,
any of the representations, warranties or covenants given or made by Kendara in
this Agreement or in the Kendara Disclosure Letter or in any certificate
delivered by or on behalf of Kendara or an officer of Kendara pursuant hereto;
or (b) any Excess Transaction Expenses (as defined in Section 13.7). Except with
respect to claims arising from Founder Special Damages, Non-Founder Special
Damages or Stockholder Damages, which may be raised after the Release Date, any
claim of indemnity made by an Excite@Home Indemnified Person under this Section
11.2(a) must be raised in a writing delivered to the Representative (as defined
below) by no later than the Release Date and, if raised by such date, such claim
shall survive the Release Date until final resolution thereof. Escrow Shares,
other than Escrow Shares having a value (calculated pursuant to Section 11.3(a))
equal to the amount of Damages asserted in any claim (as defined in Section
11.5) which has not been resolved pursuant to the terms hereof prior to the
Release Date, shall be released to the Kendara Stockholders on the Release Date
or, in the case of any such withheld shares, upon the resolution of such
Claim(s).
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(b) Each Kendara Stockholder severally (and not jointly) indemnifies
and holds harmless Excite@Home Indemnified Persons from and against all Damages
incurred or suffered by any such persons or arising from, by reason of or in
connection with (i) any misrepresentation or breach of or default in connection
with any of the representations, warranties, covenants or agreements given or
made by such Kendara Stockholder in the Investment Representation Letter
executed by such Kendara Stockholder pursuant to this Agreement, (ii) the
failure of any Kendara Stockholder to have full right, capacity and authority to
vote such Kendara Common Stock in favor of the Merger and the other transactions
contemplated by this Agreement, (iii) any fraudulent misrepresentation made by
such Kendara Stockholder in the Investment Representation Letter, or (iv), if
such Kendara Stockholder is a Kendara Founder, any fraudulent conduct or
fraudulent misrepresentation in this Agreement or in any Kendara Ancillary
Agreement on the part of such Kendara Founder (collectively "Stockholder
Damages").
(c) The Kendara Founders will severally and jointly indemnify and
hold harmless Excite@Home Indemnified Persons from and against Damages incurred
or suffered by any such persons or arising from, by reason of or in connection
with (i) any fraudulent conduct or fraudulent misrepresentation in this
Agreement or in any Kendara Ancillary Agreement on the part of Kendara, or (ii)
any inaccuracy, misrepresentation, breach of or default in, of the
representations and warranties of Kendara set forth in Section 3.4
(Capitalization) or Section 3.7 (Taxes) of this Agreement (collectively "Founder
Special Damages").
(d) The Kendara Stockholders (other than the Kendara Founders) will
severally, but not jointly, indemnify and hold harmless Excite@Home Indemnified
Persons from and against all Damages incurred or suffered by any such persons or
arising from, by reasons of or in connection with any fraudulent conduct or
fraudulent misrepresentation made by Kendara in this Agreement or in any Kendara
Ancillary Agreement ("Non-Founder Special Damages").
11.3 Limitation.
----------
(a) Cap On Indemnity Obligation. Except with respect to claims for
---------------------------
indemnification for Founder Special Damages, Non-Founder Special Damages and
Stockholder Damages, the Escrow Shares shall constitute the sole and exclusive
remedy of Excite@Home and the Surviving Corporation with respect to Damages. In
seeking indemnification for Damages under Section 11.2, the Excite@Home
Indemnified Persons shall first exercise their remedies with respect to the
Escrow Shares and any other assets deposited in escrow pursuant to the terms of
Section 2.5 and Article 11 hereof (including any shares of Excite@Home capital
stock or other securities into which Excite@Home Preferred Stock is converted or
exchanged or which is received in respect of such shares of Excite@Home
Preferred Stock or other capital stock and securities), and then, solely with
respect to Founder Special Damages, Non-Founder Special Damages and Stockholder
Damages, may seek recovery of such Damages against any other assets of the
Kendara Stockholder or the Kendara Founders (as the case may be). The value of
each share of Excite@Home Preferred Stock shall, for such purposes of satisfying
claims for Damages, be deemed to equal 1,000 times the Excite@Home Average Price
Per Share, regardless of its actual fair market value as of the time that a
claim for indemnification
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may be made against such share. Each Kendara Stockholder agrees that claims for
indemnification against such person under this Article 11 may be satisfied by
the forfeiture of such person's shares of Excite@Home Preferred Stock (including
fractions of a share thereof) as provided for in this Article 11 and that no
Excite@Home Indemnified Person shall have any obligation to exercise its
remedies against any other assets of such Kendara Stockholder prior to
exercising them against such shares of Excite@Home Preferred Stock. In the event
of a Capital Change after the Effective Time, the Excite@Home Average Price Per
Share will, for purposes of this Section 11.3, be proportionally and equitably
adjusted. Notwithstanding the foregoing, in no event shall any claim for Founder
Special Damages, Non-Founder Special Damages and Stockholder Damages against any
Kendara Stockholder exceed the value of the Excite@Home securities received by
such Kendara Stockholder in the Merger.
(b) Basket. The indemnification provided for in Section 11.2(a)
------
shall not apply unless and until the aggregate Damages for which one or more
Excite@Home Indemnified Persons seeks or has sought indemnification hereunder
exceeds a cumulative aggregate of $100,000 (the "Basket"), in which event
Kendara Stockholders shall, subject to the other limitations herein, be liable
to indemnify the Excite@Home Indemnified Persons for all Damages; provided,
however, that the Basket and the foregoing provisions of this sentence shall not
apply to any indemnification claim for fraudulent conduct or fraudulent
misrepresentation on the part of Kendara or a Kendara Stockholder.
11.4 Appointment of Representative. By voting in favor of the Merger,
-----------------------------
each of the Kendara Stockholders approves the designation of and designates
Timothy M. Haley as the Representative of the Kendara Stockholders and as the
attorney-in-fact and agent for and on behalf of each Kendara Stockholder with
respect to claims for indemnification under Article 11 and the taking by the
Representative of any and all actions and the making of any decisions required
or permitted to be taken by the Representative under this Agreement, including,
without limitation, the exercise of the power to: (a) authorize the release or
delivery to Excite@Home of shares of Excite@Home Preferred Stock and any other
assets deposited in escrow pursuant to the terms of Section 2.5 and Article 11
hereof (including any shares of Excite@Home capital stock or other securities
into which Excite@Home Preferred Stock is converted or exchanged or which is
received in respect of such shares of Excite@Home Preferred Stock or other
capital stock and securities) in satisfaction of indemnity claims by Excite@Home
or any other Excite@Home Indemnified Person (as defined herein) pursuant to
Article 11; (b) agree to, negotiate, enter into settlements and compromises of,
demand arbitration of, and comply with orders of courts and awards of
arbitrators with respect to, such claims; (c) arbitrate, resolve, settle or
compromise any claim for indemnity made pursuant to Article 11; and (d) take all
actions necessary in the judgment of the Representative for the accomplishment
of the foregoing. The Representative will have authority and power to act on
behalf of each Kendara Stockholder with respect to the disposition, settlement
or other handling of all claims under Article 11 hereof and all rights or
obligations arising under Article 11. The Kendara Stockholders will be bound by
all actions taken and documents executed by the Representative in connection
with Article 11, and Excite@Home will be entitled to rely on any action or
decision of the Representative. In performing the functions specified in this
Agreement, the Representative will not be liable to any Kendara Stockholder in
the absence of gross negligence or willful misconduct on the part of the
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Representative. The Kendara Stockholders shall severally indemnify the
Representative and hold him harmless against any loss, liability or expense
incurred without gross negligence or willful misconduct on the part of the
Representative and arising out of or in connection with the acceptance or
administration of his duties hereunder. Any out-of-pocket costs and expenses
reasonably incurred by the Representative in connection with actions taken by
the Representative pursuant to the terms of Article 11 (including without
limitation the hiring of legal counsel and the incurring of legal fees and
costs) will be paid by the Kendara Stockholders to the Representative pro rata
in proportion to their respective percentage equity interests as reflected in
Schedule 3.4.1(a) to this Agreement, which Kendara Stockholders shall be
entitled to reimbursement by Excite@Home if Excite@Home is determined to be a
Non-Prevailing Party pursuant to Section 11.8(c)(i) below.
11.5 Notice of Claim. As used herein, the term "Claim" means a claim for
---------------
indemnification of Excite@Home or any other Excite@Home Indemnified Person for
Damages under Article 11. Excite@Home (and only Excite@Home) may give notice of
a Claim under this Agreement whether for its own Damages or for Damages incurred
by any other Excite@Home Indemnified Person, and Excite@Home will give written
notice of a Claim executed by an officer of Excite@Home (a "Notice of Claim") to
the Representative promptly after Excite@Home becomes aware of the existence of
any potential claim by an Excite@Home Indemnified Person for indemnity from the
Kendara Stockholders or a Kendara Stockholder under Article 11, but in any event
before the Release Date arising from or relating to:
(a) (i) any inaccuracy, misrepresentation, breach of, or default in,
any of the representations, warranties or covenants given or made by Kendara in
this Agreement or in the Kendara Disclosure Letter or in any certificate
delivered by Kendara or an officer of Kendara pursuant hereto, (ii) the
incurring of any Excess Transaction Expenses, or (iii) any Stockholder Damages;
or
(b) the assertion, whether orally or in writing, against Excite@Home
or against any other Excite@Home Indemnified Person of a claim, demand, suit,
action, arbitration, investigation, inquiry or proceeding brought by a third
party against such Indemnified Person that is based upon, or includes assertions
that would, if true, constitute (in each such case, a "Third-Party Claim"): (i)
any inaccuracy, misrepresentation, breach of, or default in, any of the
representations, warranties or covenants given or made by Kendara in this
Agreement or in the Kendara Disclosure Letter or in any certificate delivered by
or on behalf of Kendara or an officer of Kendara pursuant hereto (if such
inaccuracy, misrepresentation, breach or default existed at the Closing Date),
(ii) any Excess Transaction Expenses, or (iii) any Stockholder Damages.
Until the Release Date, no delay on the part of Excite@Home in giving the
Representative a Notice of Claim will relieve the Representative or any Kendara
Stockholder from any of its obligations under Article 11 unless (and then only
to the extent) that the Representative or the Kendara Stockholders are
materially prejudiced thereby.
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11.6 Defense of Third-Party Claims.
-----------------------------
(a) Excite@Home shall defend any Third-Party Claim, and the costs and
expenses incurred by Excite@Home in connection with such defense (including but
not limited to reasonable attorneys' fees, other professionals' and experts'
fees and court or arbitration costs) shall be included in the Damages for which
Excite@Home may seek indemnity pursuant to a Claim made by any Excite@Home
Indemnified Person hereunder.
(b) The Representative shall have the right to receive copies of all
pleadings, notices and communications with respect to the Third-Party Claim to
the extent that receipt of such documents by the Representative does not affect
any privilege relating to the Excite@Home Indemnified Person, and may
participate in settlement negotiations with respect to the Third-Party Claim. No
Excite@Home Indemnified Person shall enter into any settlement of a Third-Party
Claim without the prior written consent of the Representative (which consent
shall not be unreasonably withheld), provided, that if the Representative shall
have consented in writing to any such settlement, then the Representative shall
have no power or authority to object to any Claim by any Excite@Home Indemnified
Person for indemnity under Section 11.2 hereof for the amount of such
settlement; and the Kendara Stockholders will remain responsible to indemnify
the Excite@Home Indemnified Persons for all Damages they may incur arising out
of, resulting from or caused by the Third-Party Claim to the fullest extent
provided in Article 11 hereof.
11.7 Contents of Notice of Claim. Each Notice of Claim by Excite@Home
---------------------------
given pursuant to Section 11.5 will contain the following information:
(a) that Excite@Home has incurred, paid or properly accrued (in
accordance with GAAP) or, in good faith, believes it will have to incur, pay or
accrue (in accordance with GAAP), Damages in an aggregate stated amount arising
from such Claim (which amount may be the amount of damages claimed by a third
party in an action brought against any Excite@Home Indemnified Person based on
alleged facts, which if true, would give rise to liability for Damages to such
Excite@Home Indemnified Person under Article 11); and
(b) a brief description, in reasonable detail (to the extent
reasonably available to Excite@Home), of the facts, circumstances or events
giving rise to the alleged Damages based on Excite@Home's good faith belief
thereof, including, without limitation, the identity and address of any third-
party claimant (to the extent reasonably available to Excite@Home) and copies of
any formal demand or complaint, the amount of Damages, the date each such item
was incurred, paid or properly accrued, or the basis for such anticipated
liability, and the specific nature of the breach to which such item is related.
11.8 Resolution of Notice of Claim. Any Notice of Claim received by the
-----------------------------
Representative pursuant to Section 11.5 and Section 11.7 above will be resolved
as follows:
(a) Uncontested Claims. In the event that, within forty-five calendar
------------------
days after a Notice of Claim is received by the Representative pursuant to
Section 11.5 and Section 11.7, the Representative does not contest such Notice
of Claim in writing to Excite@Home as provided in Section 11.8(b) (an
"Uncontested Claim"), the Representative will be conclusively
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deemed to have consented, on behalf of all Kendara Stockholders or a Kendara
Stockholder (in the case of a claim for Stockholder Damages), to the recovery by
the Excite@Home Indemnified Person of the full amount of Damages specified in
the Notice of Claim in accordance with this Article 11, including the forfeiture
of shares of Excite@Home Preferred Stock and any other assets deposited in
escrow pursuant to the terms of Section 2.5 and Article 11 hereof (including any
shares of Excite@Home capital stock or other securities into which Excite@Home
Preferred Stock is converted or exchanged or which is received in respect of
such shares of Excite@Home Preferred Stock or other capital stock and
securities), in accordance with Section 11.3(a) and, without further notice, to
have stipulated to the entry of a final judgment for damages against the Kendara
Stockholders or a Kendara Stockholder (in the case of a claim for Stockholder
Damages) for such amount in any court having jurisdiction over the matter where
venue is proper.
(b) Contested Claims. In the event that the Representative gives
----------------
Excite@Home written notice contesting all or any portion of a Notice of Claim (a
"Contested Claim") within the forty-five day period specified in Section
11.8(a), then: (i) such Contested Claim will be resolved by either (A) a written
settlement agreement executed by Excite@Home and the Representative or (B) in
the absence of such a written settlement agreement, by binding arbitration
between Excite@Home and the Representative in accordance with the terms and
provisions of Section 11.8(c).
(c) Arbitration of Contested Claims. Each of Excite@Home, Kendara and
-------------------------------
the Kendara Stockholders agree that any Contested Claim will be submitted to
mandatory, final and binding arbitration before J.A.M.S./ENDISPUTE or its
successor ("J.A.M.S."), pursuant to the United States Arbitration Act, 9 U.S.C.,
Section 1 et seq. and that any such arbitration will be conducted in San Mateo
County, California. Either Excite@Home or the Representative may commence the
arbitration process called for by this Agreement by filing a written demand for
arbitration with J.A.M.S. and giving a copy of such demand to each of the other
parties to this Agreement. The arbitration will be conducted in accordance with
the provisions of J.A.M.S' Streamlined Arbitration Rules and Procedures in
effect at the time of filing of the demand for arbitration, subject to the
provisions of Section 11.8(c) of this Agreement. The parties will cooperate with
J.A.M.S. and with each other in promptly selecting an arbitrator from J.A.M.S.'
panel of neutrals, and in scheduling the arbitration proceedings in order to
fulfill the provisions, purposes and intent of this Agreement. The parties
covenant that they will participate in the arbitration in good faith, and that
they will share in its costs in accordance with subparagraph (i) below. The
provisions of this Section 11.8(c) may be enforced by any court of competent
jurisdiction, and the party seeking enforcement will be entitled to an award of
all costs, fees and expenses, including attorneys' fees, to be paid by the party
against whom enforcement is ordered. Subject to the provisions of subparagraph
(vii) below, judgment upon the award rendered by the arbitrator may be entered
in any court having competent jurisdiction.
(i) Payment of Costs. Excite@Home on the one hand,
----------------
and Kendara Stockholders or a Kendara Stockholder (in the case of a claim for
Stockholder Damages) (through the Representative), on the other hand, will bear
the expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such
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amounts, subject to recovery as an addition or offset to any award. The
arbitrator shall determine the party who is the Prevailing Party and the party
who is the Non-Prevailing Party. The Non-Prevailing Party shall pay all
reasonable costs, fees and expenses related to the arbitration, including
reasonable fees and expenses of attorneys, accountants and other professionals
incurred by the prevailing party, the fees of each arbitrator and the
administrative fee of the arbitration proceedings. If such an award would result
in manifest injustice, however, the arbitrator may apportion such costs, fees
and expenses between the parties in such a manner as the arbitrator deems just
and equitable.
(ii) Burden of Proof. Except as may be otherwise
---------------
expressly provided herein, for any Contested Claim submitted to arbitration, the
burden of proof will be as it would be if the claim were litigated in a judicial
proceeding governed by California law exclusively.
(iii) Award. Upon the conclusion of any arbitration
-----
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a final written arbitration award setting forth the basis
and reasons for any decision reached (the "Final Award") and will deliver such
documents to the Representative and Excite@Home, together with a signed copy of
the Final Award. Subject to the provisions of subparagraph (vii) below, the
Final Award will constitute a conclusive determination of all issues in
question, binding upon the Kendara Stockholders or a Kendara Stockholder (in the
case of a claim for Stockholder Damages), the Representative and Excite@Home,
and will include an affirmative statement to such effect.
(iv) Timing. The Representative, Excite@Home and the
------
arbitrator will conclude each arbitration pursuant to this Section 11.8 as
promptly as possible for the Contested Claim being arbitrated.
(v) Terms of Arbitration. The arbitrator chosen in
--------------------
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
(vi) Exclusive Remedy. Following the Effective Time,
----------------
except as specifically otherwise provided in this Agreement, arbitration
conducted in accordance with this Agreement will be the sole and exclusive
remedy of the parties for any Claim made pursuant to Article 11.
11.9 Distribution Upon Termination of Escrow Period Within ten business
----------------------------------------------
days following the Release Date, Excite@Home shall deliver to the Kendara
Stockholders all of the Escrow Shares in excess of any amount of Escrow Shares
necessary to satisfy any unsatisfied or disputed claims for Damages specified in
any Notice of Claim delivered to the Representative before the Release Date. As
soon as all such claims have been resolved, Excite@Home shall deliver to the
Kendara Stockholders all remaining Escrow Shares not required to satisfy such
claims.
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ARTICLE 12
Registration Rights
12.1 Certain Definitions. For purposes of this Article 12:
-------------------
(a) Registration. The terms "register," "registered" and
------------
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
(b) Registrable Securities. The term "Registrable Securities" means
----------------------
(i) the shares of Excite@Home Common Stock that are issued to the Kendara
Stockholders in the Merger pursuant to Section 2.1.2 hereof (which shares are
not Escrow Shares), (ii) the shares of Excite@Home Common Stock issuable upon
conversion during the one year period commencing at the Effective Time of
Excite@Home Series C Preferred Stock (other than Escrow Excite@Home Series C
Preferred Stock), (iii) the shares of Excite@Home Common Stock that are issued
to holders of the Kendara Warrants upon exercise of such Kendara Warrants, and
(iv) any shares of Excite@Home Common Stock that may be issued as a dividend or
other distribution (including shares of Excite@Home Common Stock issued in a
subdivision and split of Excite@Home's outstanding Common Stock) with respect
to, or in exchange for, or in replacement of, shares of Excite@Home Common Stock
described in clauses (i), (ii) or (iii) of this Section 12.1(b) or in this
clause (iv); excluding in all cases, however, from the definition of
---------
"Registrable Securities" any such shares that are: (w) registered under the
Securities Act other than pursuant to a registration statement filed pursuant to
this Agreement; (x) sold by a person in a transaction in which rights under this
Agreement with respect to such shares are not assigned in accordance with the
terms of this Agreement; (y) sold pursuant to a registration statement filed
pursuant to this Agreement; or (z) sold pursuant to Rule 144 promulgated under
the Securities Act or otherwise sold to the public. Only shares of Excite@Home
Common Stock shall be Registrable Securities. Except as provided in clauses
(iii) and (iv) of the first sentence of this Section 12.1(b), without
limitation, the term "Registrable Securities" does not include any shares of
Excite@Home Common Stock that were not issued in connection with the Merger.
(c) Holder. The term "Holder" means a Kendara Stockholder who is the
------
original holder of any Registrable Securities or any assignee of record of any
Registrable Securities to whom rights under this Agreement have been duly
assigned in accordance with the provisions of this Agreement.
(d) Form S-3. The term "Form S-3" means a registration statement
--------
filed under Form S-3 under the Securities Act, as such is in effect at the
Effective Time, or any successor form of registration statement under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of a substantial amount of information by reference to other
documents filed by Excite@Home with the SEC.
(e) Rule 415. The term "Rule 415" means Rule 415 promulgated under
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar or successor rule or regulation hereafter adopted by the SEC.
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12.2 Form S-3 Shelf Registration.
---------------------------
(a) Filing and Registration Period. Subject to the terms and
------------------------------
conditions of this Agreement, as promptly as practicable following the Effective
Time of the Merger but no later than fifteen whole business days thereafter, and
consistent with the requirements of applicable law, Excite@Home shall prepare
and file with the SEC a registration statement on Form S-3 for an offering to be
made on a continuous basis pursuant to Rule 415 covering all of the then
outstanding Registrable Securities (the "Shelf Registration"). Excite@Home shall
use commercially reasonable efforts to have such Shelf Registration declared
effective as soon as practicable after its filing and to keep the Shelf
Registration continuously effective under the Securities Act for a continuous
period of time (such period of time being hereinafter called the "Registration
Period") commencing on the date the Shelf Registration is declared effective
under the Securities Act by the SEC (the "Date of Effectiveness") and ending on
the date that is the first anniversary of the Effective Time of the Merger.
Excite@Home shall have no duty or obligation to keep the Shelf Registration (or
any Subsequent Registration, as defined below) effective after the expiration of
the Registration Period. Excite@Home shall have no duty or obligation to keep
the Shelf Registration effective after the expiration of the Shelf Registration
Period.
(b) Subsequent Registration. If the Shelf Registration is filed with
-----------------------
the SEC and becomes effective under the Securities Act, and the Shelf
Registration or a Subsequent Registration (as defined below) thereafter ceases
to be effective for any reason at any time during the Registration Period, then
Excite@Home shall use all reasonable efforts to obtain the prompt withdrawal of
any order suspending the effectiveness thereof, and in any event shall, within
thirty days of such cessation of effectiveness, file an amendment to the Shelf
Registration seeking to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" registration statement
pursuant to Rule 415 covering all of the then outstanding Registrable Securities
(a "Subsequent Registration"). If a Subsequent Registration is filed,
Excite@Home shall use its best efforts to cause the Subsequent Registration to
be declared effective as soon as practicable after such filing and to keep such
registration statement continuously effective until the end of the Registration
Period.
(c) Supplements and Amendments. Subject to the provisions of Section
--------------------------
12.2(g), during the Registration Period Excite@Home shall supplement and amend
the Shelf Registration or Subsequent Registration, as applicable, if, as and
when required by the Securities Act, the rules and regulations promulgated
thereunder or the rules, regulations or instructions applicable to the
registration form used by Excite@Home for such Shelf Registration.
(d) Timing and Manner of Sales. Any sale of Registrable Securities
--------------------------
pursuant to a Shelf Registration or a Subsequent Registration under this Section
12.2 may be made only during a "Permitted Window" (as defined in Section 12.2(g)
below). In addition, any sale of Registrable Securities pursuant to a Shelf
Registration or a Subsequent Registration under this Section 12.2 may only be
made in accordance with the method or methods of distribution of such
Registrable Securities that are described in the registration statement for the
Shelf Registration (or Subsequent Registration, as applicable) and permitted by
such form of registration statement,
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which methods of distribution will be specified by the Holders in their Notice
of Resale (as defined below). Subject to any other agreements between the Holder
and Excite@Home or Surviving Corporation, notwithstanding the terms and
conditions of this Section 12, a Holder may also sell Registrable Securities in
a bona fide private offering if the selling Holder provides Excite@Home with a
written opinion of counsel, satisfactory to counsel to Excite@Home acting in a
reasonable manner, that such offer and sale is an exempt transaction under the
Securities Act and applicable state securities laws, complies with all
requirements for such exemptions and is not made with use of the prospectus for
the Shelf Registration (or Subsequent Registration, if applicable).
(e) No Underwritings. No sale of Registrable Securities under any
----------------
Shelf Registration (or Subsequent Registration) effected pursuant to this
Section 12.2 may be effected pursuant to any underwritten offering without
Excite@Home's prior written consent, which may be withheld in its sole and
absolute discretion.
(f) Notice of Resale. Before any Holder may make any sale, transfer
----------------
or other disposition of any Registrable Securities under the Shelf Registration
(or a Subsequent Registration) during the Registration Period, a Holder who own
at least five percent of the Registrable Securities then outstanding must first
give written notice to Excite@Home (a "Notice of Resale") of such Holder's
present intention to so sell, transfer or otherwise dispose of some or all of
such Holder's Registrable Securities, and the number of Registrable Securities
such Holder propose(s) to so sell, transfer or otherwise dispose of. In
addition, a Notice of Resale shall contain the information required to be
included therein under Section 12.2(g).
(g) Permitted Window; Sale Procedures.
---------------------------------
(i) A "Permitted Window" is a period of thirty consecutive
trading days commencing upon Excite@Home's written notification to the Kendara
Stockholders in response to a Notice of Resale that the prospectus contained in
the Form S-3 registration statement filed pursuant to Section 12.2 of this
Agreement is available to be used for resales of Registrable Securities pursuant
to the Shelf Registration (or a Subsequent Registration, as applicable).
(ii) Before a Holder can make a sale of any Registrable
Securities pursuant to the Shelf Registration (or a Subsequent Registration),
and in order to cause a Permitted Window to commence, such Holder must first
give Excite@Home a Notice of Resale indicating such Holder's intention to sell
Registrable Securities pursuant to the Shelf Registration (or Subsequent
Registration, as applicable) and such Holder's intended plan of distribution of
such Registrable Securities (which must conform to the plan of distribution
contained in the prospectus for the Shelf Registration (or Subsequent
Registration, as applicable)).
(iii) Upon receipt of such Notice of Resale (unless a certificate
of Excite@Home is delivered as provided in Section 12.3(b) below), Excite@Home
will give written notice to all Holders as soon as practicable, but in no event
more than three business days after Excite@Home's receipt of such Notice of
Resale that either: (A) the prospectus contained in the registration statement
for the Shelf Registration (or Subsequent Registration, if applicable)
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is current (it being acknowledged that it may be necessary for Excite@Home to
supplement the prospectus or make an appropriate filing under the Exchange Act
so as to cause the prospectus to become current) and that (as applicable) the
Permitted Window will commence on the date of such notice by Excite@Home; or (B)
Excite@Home is required under the Securities Act and the regulations thereunder
to amend the registration statement for the Shelf Registration (or Subsequent
Registration, as applicable) in order to cause the prospectus to be current. In
the event that Excite@Home determines that an amendment to the registration
statement is necessary as provided above, it will use all commercially
reasonable efforts to file and cause such amendment to become effective as soon
as practicable; whereupon it will notify the Holders that the Permitted Window
will then commence.
(iv) Excite@Home shall not be obligated to keep the
registration statement for the Shelf Registration (or any Subsequent
Registration) current during any period other than a Permitted Window. The
Holders may elect to withdraw a request for registration pursuant to a Notice of
Resale; provided however, that if Excite@Home has commenced preparation of any
supplement or amendment to the registration statement or any part thereof in
response to such Notice of Resale prior to receiving written notice from the
Holders' of the withdrawal of their request for registration, then the Holders
who originally gave Excite@Home such Notice of Resale will promptly reimburse
Excite@Home for its actual costs and expenses incurred in preparing and/or
filing such supplement and/or amendment.
(h) Trading Window Compliance. The Holders acknowledge that the
-------------------------
Excite@Home Insider Trading Compliance Program and Insider Trading Policy, as
such may be amended from time to time, a current copy of which has been provided
to Kendara prior to the Closing (the "Excite@Home Trading Policy") requires that
those directors, officers and employees of Excite@Home and its subsidiaries and
those other persons whom Excite@Home determines to be "Access Personnel" or
otherwise subject to the "trading window" and pre-clearance requirements of the
Excite@Home Trading Policy (and members of their immediate families and
households) are permitted to effect trades in Excite@Home securities: (i) only
during those specified time periods ("trading windows") in which such persons
are permitted to make sales, purchases or other trades in Excite@Home's
securities under the "trading window" provisions of the Excite@Home Trading
Policy; and (ii) only after pre-clearance of such sales, purchases or other
trades with Excite@Home's Insider Trading Compliance Officer. If a Holder is or
becomes subject to the "trading window" and/or "pre-clearance" provisions of the
Excite@Home Trading Policy described above, then, notwithstanding anything
herein to the contrary, such Holder may sell, transfer and dispose of
Registrable Securities only during those trading windows during which such
Excite@Home Access Personnel are permitted to effect trades in Excite@Home stock
under the Excite@Home Trading Policy and only after pre-clearing such trades
with Excite@Home's Insider Trading Compliance Officer as provided in the
Excite@Home Trading Policy.
12.3 Limitations. Notwithstanding the provisions of Section 12.2 above,
-----------
Excite@Home shall not be obligated to effect any registration, qualification or
compliance of Registrable Securities pursuant to Section 12.2 of this Agreement,
and the Holders shall not be
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entitled to sell Registrable Securities pursuant to any registration statement
filed under Section 12.2 of this Agreement, as applicable:
(a) if Form S-3 is not then available for such offering by the
Holders;
(b) if Excite@Home shall furnish to the Holders (and all other
holders of Excite@Home's registrable securities) a certificate signed by an
officer of Excite@Home stating that, in the good faith judgment of such officer,
it would be detrimental to Excite@Home and its stockholders for such Permitted
Window to be in effect at such time, due, for example, to the existence of a
material development or potential material development involving Excite@Home
which Excite@Home would be obligated to disclose in the prospectus contained in
the Shelf Registration (or Subsequent Registration, as applicable), which
disclosure would, in the good faith judgment of such officer, be premature or
otherwise inadvisable at such time or would have a material adverse affect upon
Excite@Home and its stockholders, in which event Excite@Home will have the right
to defer a Permitted Window for a period of not more than forty days after
receipt of a Notice of Resale from the Holder or Holders pursuant to this
Section 12.3(b), provided that in the event that a Permitted Window is deferred
by Excite@Home pursuant to this Section 12.3(b) then Excite@Home shall extend
the Registration Period hereunder by the number of days that such Permitted
Window was so deferred;
(c) if Excite@Home is acquired and Excite@Home Common Stock ceases to
be publicly traded;
(d) in any particular jurisdiction in which Excite@Home would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance, unless
Excite@Home is already subject to service of process in such jurisdiction; or
(e) if the SEC refuses to declare such registration effective due to
the participation of any particular Holder in such registration (unless such
Holder withdraws all such Holder's Registrable Securities from such registration
statement); or if the manner in which any Registrable Securities are disposed of
pursuant to the Shelf Registration (or Subsequent Registration, as applicable)
is not included within the plan of distribution set forth in the prospectus for
the Shelf Registration (or Subsequent Registration, as applicable).
12.4 Shares Otherwise Eligible for Resale. Notwithstanding anything herein
------------------------------------
to the contrary, Excite@Home shall not be obligated to effect or continue to
keep effective any such registration, registration statement, qualification or
compliance with respect to the Registrable Securities held by any particular
Holder:
(a) if Excite@Home or its legal counsel shall have received a "no-
action" letter or similar written confirmation from the SEC that all the
Registrable Securities then held by such Holder may be resold by such Holder
within a three month period without registration under the Securities Act
pursuant to the provisions of Rule 144 promulgated under the Securities Act (or
successor provisions), or otherwise;
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(b) if legal counsel to Excite@Home shall deliver a written opinion
to Excite@Home, its transfer agent and the Holders, in form and substance
reasonably acceptable to Excite@Home to the effect that all the Registrable
Securities then held by such Holder may be resold by such Holder within a three
month period without registration under the Securities Act pursuant to the
provisions of Rule 144 promulgated under the Securities Act, or otherwise; or
(c) after expiration or termination of the Registration Period.
12.5 Expenses. Excite@Home shall pay all expenses incurred in connection
--------
with any registration effected by Excite@Home pursuant to this Agreement
(excluding brokers' discounts and commissions), including, without limitation,
all filing, registration and qualification, printers', legal (including, the
reasonable fees and expenses of one counsel for the Holders as a group) and
accounting fees.
12.6 Obligations of Excite@Home. Subject to Sections 12.2, 12.3 and 12.4
--------------------------
above, when required to effect the registration of any Registrable Securities
under the terms of this Agreement, Excite@Home will, as expeditiously as
reasonably possible:
(a) furnish to the Holders such number of copies of the prospectus
for the Shelf Registration (or Subsequent Registration, as applicable),
including a preliminary prospectus (and amendments or supplements thereto), in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by them;
(b) notify each Holder of Registrable Securities promptly and, if
requested by such Holder, confirm such notification in writing promptly (i) when
a registration statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request the SEC
or any state securities authority for post-effective amendments and supplements
to a registration statement has become effective, (iii) of the issuance by the
SEC or any state securities authority of any stop order suspending the
effectiveness of a registration statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by Excite@Home of any notification with
respect to the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, and (v) of any determination by Excite@Home that a post-effective
amendment to a registration statement would be appropriate;
(c) use all reasonable efforts to (i) register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions in the United States as will be reasonably
requested by the Holders; provided that Excite@Home will not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such state or jurisdiction
unless Excite@Home is already so qualified or subject to service of process,
respectively, in such jurisdiction; and (ii) cause such Registrable Securities
to be registered with or approved by such other governmental agencies or
authorities, including the National Association of Securities Dealers as may be
necessary by virtue of the business and operations of Excite@Home; provided that
Excite@Home will not be required to (A) qualify generally to do business in any
jurisdiction
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where it would not otherwise be required to qualify but for this paragraph (c),
(B) subject itself to taxation in any jurisdiction, or (C) consent to general
service of process in any such jurisdiction except as may be required by the
Securities Act;
(d) promptly notify each Holder of Registrable Securities covered by
such registration statement, at any time during a Permitted Window when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing and, subject to the provisions of this
Agreement, at the request of any Holder, prepare and furnish to each Holder of
Registrable Securities then outstanding a reasonable number of copies of a
supplement to or an amendment of the prospectus as may be necessary to correct
the untrue statement or omission;
(e) make available for inspection by any Holder of Registrable
Securities and any attorney, accountant or other professional retained by any
such Holder (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of Excite@Home (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause Excite@Home's officers, directors and
employees to supply all information reasonably requested by any Inspectors in
connection with such registration statement; provided, that prior to any such
disclosure, such Inspector executes a non-disclosure agreement in form and
substance acceptable to Excite@Home. Records which Excite@Home determines, in
good faith, to be confidential and which it notifies the Inspectors in writing
are confidential shall not be disclosed to the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in such registration statement or (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction. Each Holder of Registrable Securities agrees that information
obtained by it as a result of such inspections shall be deemed confidential and
shall not be used by it as the basis for any market transactions in the
securities of Excite@Home or its affiliates or otherwise disclosed by it unless
and until such is made generally available to the public. Each Holder of such
Registrable Securities further agrees that it will, upon leaning that disclosure
of such Records is sought in a court of competent jurisdiction, give written
notice to Excite@Home and allow Excite@Home, at its expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential;
(f) use its commercially reasonable efforts to cause all such
Registrable Securities to be listed on the Nasdaq National Market and each
securities exchange on which similar securities issued by Excite@Home are then
listed; and
(g) upon the request of any Holder, promptly provide the name,
address and other contract information regarding Excite@Home's transfer agent
for the Registrable Securities and the CUSIP number for the Registrable
Securities.
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12.7 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of Excite@Home to take any action pursuant to this Article 12 that
the selling Holders will furnish to Excite@Home such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition and plan of distribution of such Registrable Securities as shall be
required to timely effect the registration of their Registrable Securities.
12.8 Delay of Registration. No Holder will have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any registration that is
the subject of this Agreement as the result of any controversy that might arise
with respect to the interpretation or implementation of this Agreement.
12.9 Indemnification.
---------------
(a) By Excite@Home. To the extent permitted by law, Excite@Home
--------------
will indemnify, defend and hold harmless each Holder against any losses, claims,
damages, or liabilities (joint or several) to which such Holder may become
subject under the Securities Act, the Exchange Act or other U.S. federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively, a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in a registration statement filed by Excite@Home
pursuant to this Agreement pursuant to which Registrable Securities are sold,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto;
(ii) the omission or alleged omission to state in such
registration statement, preliminary prospectus or final prospectus or any
amendments or supplements thereto, a material fact required to be stated
therein, or necessary to make the statements therein not misleading; or
(iii) any violation or alleged violation by Excite@Home of the
Securities Act, the Exchange Act, any U.S. federal or state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act or
any U.S. federal or state securities law in connection with the offering of
Registrable Securities covered by such registration statement;
provided however, that the indemnity agreement contained in this subsection
12.9(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the written
consent of Excite@Home (which consent shall not be unreasonably withheld), nor
shall Excite@Home be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder.
(b) By Selling Holders. To the extent permitted by law, (i) each
------------------
selling Holder will indemnify and hold harmless Excite@Home, each of its
directors, each of its officers
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who have signed the registration statement, each Person, if any, who controls
Excite@Home within the meaning of the Securities Act, any underwriter and any
other Holder selling securities under such registration statement, against any
losses, claims, damages or liabilities (joint or several) to which Excite@Home
or any such director, officer, controlling person, underwriter or other such
Holder may become subject under the Securities, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; (ii) and each
such Holder will indemnify and reimburse Excite@Home or any such director,
officer, controlling person, underwriter or other Holder for any reasonable
attorneys' fees and other expenses reasonably incurred by Excite@Home or any
such director, officer, controlling person, underwriter or other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action, as incurred. Each selling Holder's liability pursuant to
this Section 12.9(b) shall be limited to an amount equal to the net proceeds
received by such selling Holder pursuant to sales under the registration
statement.
(c) Notice. Promptly after receipt by an indemnified party under
------
this Section 12.9 of notice of the commencement of any action (including any
governmental action) against such indemnified party, such indemnified party
will, if a claim for indemnification or contribution in respect thereof is to be
made against any indemnifying party under this Section 12.9, deliver to the
indemnifying party a written notice of the commencement thereof and, if the
indemnifying party is Excite@Home, Excite@Home shall have the right and
obligation to control the defense of such action, and if Excite@Home fails to
defend such action it shall indemnify and reimburse the selling Holders for any
reasonable attorneys' fees and other expenses reasonably incurred by them in
connection with investigating or defending such action; provided, however, that:
(i) Excite@Home shall also have the right, at its option, to assume and control
the defense of any action with respect to which Excite@Home or any person
entitled to be indemnified by the selling Holders under Section 12.9(b) is
entitled to indemnification from the selling Holders; (ii) the indemnified party
or parties shall have the right to participate at its own expense in the defense
of such action and (but only to the extent agreed in writing with Excite@Home
and any other indemnifying party similarly noticed) to assume the defense
thereof with counsel mutually satisfactory to the parties; and (iii) an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses of such counsel to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to an actual or potential conflict
of interests between such indemnified party and any other party represented by
such counsel in such proceeding. The failure of an indemnified party to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to the ability of the
indemnifying party to defend such action, shall relieve such indemnifying party
of any liability to the indemnified party under this Section 12.9, but the
omission so to deliver written notice to the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party otherwise than under this Section 12.9.
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(d) Defect Eliminated in Final Prospectus. The foregoing indemnity
-------------------------------------
agreements of Excite@Home and the Holders are subject to the condition that,
insofar as they relate to any Violation made in a preliminary prospectus but
eliminated or remedied in the amended or supplemented prospectus on file with
the SEC and effective at the time the sale of Registrable Securities under such
registration statement occurs (the "Amended Prospectus"), such indemnity
agreement shall not inure to the benefit of any person if a copy of the Amended
Prospectus was furnished to the indemnified party and was not furnished to the
person asserting the loss, liability, claim or damage in the action giving rise
to indemnity claims under this Section 12.9, at or prior to the time such action
is required by the Securities Act.
(e) Survival. The obligations of Excite@Home and Holders under this
--------
Section 12.9 shall survive the completion of any offering of Registrable
Securities in a registration statement pursuant to this Agreement, and
otherwise.
12.10 Duration and Termination of Excite@Home's Obligations. Excite@Home
-----------------------------------------------------
will have no obligations pursuant to Section 12.2 of this Agreement with respect
to any Notice of Resale or other request or requests for registration (or
inclusion in a registration) made by any Holder or to maintain or continue to
keep effective any registration or registration statement pursuant hereto: (a)
after the expiration or termination of the Registration Period; (b) with respect
to a particular Holder if, in the opinion of counsel to Excite@Home, all such
Registrable Securities proposed to be sold by such Holder may be sold in a three
(3) month period without registration under the Securities pursuant to Rule 144
promulgated under the Securities or otherwise; or (c) if all Registrable
Securities have been registered and sold pursuant to a registration effected
pursuant to this Agreement and/or have been transferred in transactions in which
registration rights hereunder have not been assigned in accordance with this
Agreement.
12.11 Acknowledgment of Other Agreements. The Holders acknowledge that
----------------------------------
they have been informed by Excite@Home that other stockholders of Excite@Home
currently hold certain Form S-3 and other registration rights that may enable
such other stockholders to sell shares of Excite@Home during one or more
Permitted Windows or at other times (thus potentially adversely affecting the
receptivity of the market to the sale of the Registrable Securities pursuant to
a registration effected pursuant to this Agreement). The Holders further
acknowledge (a) that Excite@Home has agreed not to effect any public sale or
distribution of any of its equity securities or of any security convertible into
or exchangeable or exercisable for any equity security of Excite@Home during the
fourteen days prior to, and during the sixty day period beginning on, the
effective date of any "Demand Registration" (as such term is defined in that
certain Third Amended and Restated Registration Rights Agreement dated as of
April 11, 1997, among Excite@Home and certain holders of Excite@Home capital
stock and attached as Exhibit 4.01 to Excite@Home's Form S-1 filed with the SEC
on May 16, 1997, except as part of such registration, and (b) hereby agree not
to effect any public sale or distribution of any Excite@Home capital stock
during the periods described in clause (a) above, in each case including a sale
pursuant to Rule 144 promulgated under the Securities; provided, that as to each
Holder, Excite@Home shall extend the Registration Period for that number of days
which such Holder of Registrable Securities could have otherwise sold such
securities during a Permitted Window but for the foregoing agreement of the
Holders.
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12.12 Assignment. Notwithstanding anything herein to the contrary, the
----------
rights of a Holder under Article 12 may be assigned only with Excite@Home's
express prior written consent, which may be withheld in Excite@Home's sole
discretion; provided, however, that the rights of a Holder under Article 12 may
be assigned without Excite@Home's express prior written consent: (a) to a
Permitted Assignee (as defined below); or (b) (if applicable) by will or by the
laws of intestacy, descent or distribution, provided that the assignee first
agrees in writing to be bound by all the obligations of the Holders under this
Article 12. Any attempt to assign any rights of a Holder under Article 12
without Excite@Home's express prior written consent in a situation in which such
consent is required by this Section shall be null and void and without effect.
Subject to the foregoing restrictions, all rights, covenants and agreements in
Article 12 by or on behalf of the parties hereto will bind and inure to the
benefit of the respective permitted successors and assigns of the parties
hereto. Each of the following parties are "Permitted Assignees" for purposes of
this Section 12.12: (a) a trust whose beneficiaries consist solely of a Holder
and such Holder's immediate family; (b) the personal representative (such as an
executor of a Holder's will), custodian or conservator of a Holder, in the case
of the death, bankruptcy or adjudication of incompetency of that Holder; (c)
immediate family members of a Holder; (d) partners of a Holder that is a
partnership; or (e) members of a Holder that is a limited liability company.
ARTICLE 13
Miscellaneous
13.1 Governing Law. The internal laws of the State of California,
-------------
irrespective of its choice of law principles, will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto; provided, however, that issues
involving the consummation and effects of the Merger shall be governed by the
laws of the State of Delaware.
13.2 Assignment; Binding Upon Successors and Assigns. Except as set forth
-----------------------------------------------
in Section 12.12, neither party hereto may assign any of its rights or
obligations hereunder without the prior written consent of the other party
hereto. This Agreement will be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Any
assignment in violation of this provision shall be void.
13.3 Severability. If any provision of this Agreement, or the application
------------
thereof, will for any reason and to any extent be invalid or unenforceable, then
the remainder of this Agreement 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 the void or unenforceable provision.
13.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become
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binding when one or more counterparts hereof, individually or taken together,
will bear the signatures of all parties reflected hereon as signatories.
13.5 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party hereunder will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other. Excite@Home and Kendara agree that the indemnification and
arbitration provisions set forth in Article 11 shall be each such person's sole
and exclusive remedy with respect to any inaccuracy, misrepresentation, breach
of, or default in, any of the representations, warranties, covenants or
agreements of any such party in this Agreement, other than claims for Founder
Special Damages, Non-Founder Special Damages and Stockholder Damages; provided,
that the foregoing shall not limit the parties' respective rights to seek
specific performance or other injunctive relief. 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.
13.6 Amendment and Waivers. Any term or provision of this Agreement may
---------------------
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default. This Agreement may be amended by the parties hereto as
provided in this Section at any time before or after approval of this Agreement
by the Kendara Stockholders, but, after such approval, no amendment will be made
which by applicable law requires the further approval of the Kendara
Stockholders without obtaining such further approval. At any time prior to the
Effective Time, each of Kendara and Excite@Home, by action taken by its Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other; (ii) waive any
inaccuracies in the representations and warranties made to it contained herein
or in any document delivered pursuant hereto; and (iii) waive compliance with
any of the agreements or conditions for its benefit contained herein. No such
waiver or extension will be effective unless signed in writing by the party
against whom such waiver or extension is asserted. The failure of any party to
enforce any of the provisions hereof will not be construed to be a waiver of the
right of such party thereafter to enforce such provisions.
13.7 Expenses. Each party will bear its respective legal, auditors',
--------
investment bankers' and financial advisors' fees and other expenses incurred
with respect to this Agreement, the Merger and the transactions contemplated
hereby ("Transaction Expenses"), except that Kendara shall pay any Transaction
Expenses of the Kendara Stockholders. Notwithstanding the foregoing, if the
Merger is successfully consummated, then any Transaction Expenses of Kendara not
paid on or prior to the Closing may be paid by Excite@Home and Excite@Home will
thereafter be entitled to indemnification from the Escrow Shares in accordance
with Section
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11.2 for an amount equal to the amount of such Transaction Expenses (such
amount, "Excess Transaction Expenses"), and such indemnification shall not be
subject to the Basket.
13.8 Attorneys' Fees. Should suit be brought to enforce or interpret any
---------------
part of this Agreement, the prevailing party will be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including without limitation, costs, expenses and fees on
any appeal). The prevailing party will be entitled to recover its costs of suit,
regardless of whether such suit proceeds to final judgment.
13.9 Notices. All notices and other communications required or permitted
-------
under this Agreement will be in writing and will be either hand delivered in
person, sent by facsimile, sent by certified or registered first class mail,
postage pre-paid, or sent by nationally recognized express courier service. Such
notices and other communications will be effective upon receipt if hand
delivered or sent by facsimile, five days after mailing if sent by mail, and one
day after dispatch if sent by express courier, to the following addresses, or
such other addresses as any party may notify the other parties in accordance
with this Section:
If to Excite@Home:
At Home Corporation
450 Broadway
Redwood City, CA 94063
Attention: General Counsel
Fax Number: (650) 556-5549
with copies to:
Fenwick & West LLP
275 Battery Street, Suite 1500
San Francisco, CA 94111
Attention: Douglas N. Cogen
Fax Number: (415) 281-1350
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<PAGE>
If to Kendara:
Kendara, Inc.
2450 El Camino Real, Suite 200
Palo Alto, CA 94301
Attention: President
Fax Number: (650) 496-1990
with a copy to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP
155 Constitution Drive
Menlo Park, CA 94025
Attention: Scott Dettmer
Fax Number: (650) 321-2800
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 13.9.
13.10 Construction of Agreement. This Agreement has been negotiated by the
-------------------------
respective parties hereto and their attorneys and the language hereof will not
be construed for or against either party. A reference to a Section or an
exhibit will mean a Section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole. 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." Each reference herein to a law,
statute, regulation, document or agreement shall be deemed in each case to
include all amendments thereto.
13.11 No Joint Venture. Nothing contained in this Agreement will be deemed
----------------
or construed as creating a joint venture or partnership between any of the
parties hereto. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party will have the
power to control the activities and operations of any other and their status is,
and at all times will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other party. No party will hold itself out as having any authority or
relationship in contravention of this Section.
13.12 Further Assurances. Each party agrees to cooperate fully with the
------------------
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
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<PAGE>
13.13 Third Party Beneficiary Rights. No provisions of this Agreement are
------------------------------
intended, nor will be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, stockholder, partner or any party hereto or any other person or
entity unless specifically provided otherwise herein and, except as so provided,
all provisions hereof will be personal solely between the parties to this
Agreement; except that the provisions of Article 12 are intended to create third
party beneficiary rights for the Kendara Stockholders.
13.14 Public Announcement. Upon execution of this Agreement, Excite@Home
-------------------
and Kendara will issue a press release approved by both parties announcing the
Merger. Thereafter, Excite@Home may issue such press releases, and make such
other disclosures regarding the Merger, as it determines are required under
applicable securities laws or regulatory rules. Prior to the publication of such
initial and mutually agreed press release, neither party will make any public
announcement relating to this Agreement or the transactions contemplated hereby
(except as may be required by law) and Kendara will use its reasonable efforts
to prevent any trading in Excite@Home Common Stock by its officers, directors,
employees, stockholders and agents. Neither Excite@Home nor Kendara will make
any disclosures regarding this Agreement or the Merger that would jeopardize
Excite@Home's ability to timely and lawfully issue the shares of Excite@Home
Common Stock and Excite@Home Preferred Stock in the Merger pursuant to the
exemptions described in Section 2.7.
13.15 Disclosure Letter. The Kendara Disclosure Letter shall be arranged
-----------------
in separate parts corresponding to the numbered and lettered sections contained
in Article 3, and the information disclosed in any numbered or lettered part
shall be deemed to relate to and to qualify only the particular representation
or warranty set forth in the corresponding numbered or lettered section in
Article 3, and shall not be deemed to relate to or to qualify any other
representation or warranty.
13.16 Confidentiality. Kendara and Excite@Home each confirm that they
---------------
have entered into the Confidentiality Agreement and that they are each bound by,
and will abide by, the provisions of such Confidentiality Agreement (except that
Excite@Home will cease to be bound by the Confidentiality Agreement after the
Merger becomes effective). If this Agreement is terminated, the Confidentiality
Agreement shall remain in full force and effect and all copies of documents
containing confidential information of a disclosing party will be returned by
the receiving party to the disclosing party or be destroyed, as provided in the
Confidentiality Agreement.
13.17 Entire Agreement. This Agreement and the exhibits hereto constitute
----------------
the entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto other than the Confidentiality
Agreement. The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
At Home Corporation Kendara, Inc.
By: /s/ David Pine By: /s/ Bret Comolli
------------------------------ --------------------------
Name: David Pine Name: Bret Comolli
---------------------------- ------------------------
Title: SVP, General Counsel Title: CEO
--------------------------- -----------------------
Grisham Acquisition Corporation
By: /s/ David Pine
------------------------------
Name: David Pine
----------------------------
Title: President
---------------------------
Representative
/s/ Timothy M. Haley
- ----------------------------------
Timothy M. Haley
[Signature Page to Agreement and Plan of Reorganization]
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<PAGE>
List of Exhibits and Schedules
Exhibits:
- --------
Exhibit A List of Kendara Founders
Exhibit B Form of Investment Representation Letter
Exhibit C Form of Certificate of Designation of Series B Preferred Stock
Exhibit D Form of Certificate of Designation of Series C Preferred Stock
Exhibit E Form of Certificate of Merger
Exhibit F Form of Amended Restricted Stock Purchase Agreement
Exhibit G Matters to be Covered in the Opinion of Fenwick & West LLP
Exhibit H Matters to be Covered in the Opinion of Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian LLP
Exhibit I Form of Employment Agreement
Schedules:
- ---------
Schedule 2.1.5 List of Holders of Advisor Unvested Kendara Shares
Schedule 3.4.1(a) List of Holders of Kendara Common Stock
Schedule 3.4.1(b) List of Holders of Kendara Options
Schedule 5.11 List of Holders of Amended Kendara Options
Schedule 9.11 List of Kendara Employees Signing Employment Agreements
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<PAGE>
- --------------------------------------------------------------------------------
Exhibit 4.08
Agreement and Plan of Reorganization
by and among
At Home Corporation,
Walter Acquisition Corporation,
Worldprints.com International, Inc.
and
The Founding Shareholders of Worldprints.com International, Inc.
April 5, 2000
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made and
entered into as of April 5, 2000 (the "Agreement Date") by and among At Home
Corporation, a Delaware corporation ("Excite@Home"), Walter Acquisition
Corporation, a Colorado corporation that is a wholly-owned subsidiary of
Excite@Home ("Sub"), and Worldprints.com International, Inc., a Colorado
corporation ("Worldprints"), and the founding shareholders of Worldprints listed
on the List of Founders attached as Exhibit A hereto (collectively, the
---------
"Worldprints Founders," and each individually, a "Worldprints Founder") each of
whom, immediately prior to the consummation of the Merger (as defined below)
will be a shareholder of Worldprints.
Recitals
A. The parties intend that, subject to the terms and conditions of this
Agreement, Worldprints will be merged with and into Sub in a forward triangular
merger, with Sub to be the surviving corporation of such merger, all pursuant to
the terms and conditions of this Agreement and applicable law. The parties also
intend for such merger to be treated as a "reorganization" under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and to be treated
as a "purchase" transaction for accounting purposes.
B. Concurrently with the execution and delivery of this Agreement,
Worldprints Shareholders who collectively own at least 96% of the issued and
outstanding capital stock of Worldprints have approved the Merger, this
Agreement, the Plan of Merger and the transactions provided for herein and
therein, in accordance with Worldprints' charter documents and applicable law,
and will execute and deliver to Excite@Home an Investment Representation Letter
in the form and substance of Exhibit B attached hereto, pursuant to which each
---------
such shareholder will provide certain representations and warranties to
Excite@Home and will agree not to sell or otherwise transfer any of the shares
of Excite@Home Series B Non-Voting Convertible Preferred Stock received by such
shareholder in the Merger (the "Investment Representation Letter").
C. Upon the effectiveness of the Merger, and subject to the terms hereof,
(i) the shares of capital stock of Worldprints that are outstanding immediately
prior to the effectiveness of the Merger will be converted into shares of the
Series A Common Stock of Excite@Home and Series B Non-Voting Convertible
Preferred Stock of Excite@Home, (ii) options, warrants and other rights to
purchase Worldprints capital stock that are outstanding immediately prior to the
effectiveness of the Merger will be converted into options, warrants and other
rights to purchase Series A Common Stock of Excite@Home, and (iii) Worldprints
will be merged with and into Sub, in each case, as provided in this Agreement.
Now, therefore, in consideration of the foregoing and the mutual promises,
covenants and conditions contained herein, the parties hereby agree as follows:
<PAGE>
Article 1
Certain Definitions
As used in this Agreement, the following terms will have the meanings
set forth below:
1.1 "Excite@Home Ancillary Agreements" means, collectively, each
certificate to be delivered by Excite@Home or an officer or officers of
Excite@Home at the Closing pursuant to Article 9 of this Agreement and each
agreement (other than this Agreement) which Excite@Home is to enter into as a
party thereto pursuant to this Agreement.
1.2 "Excite@Home Average Price Per Share" means $45.3125.
1.3 "Excite@Home Common Stock" means Excite@Home Series A Common Stock,
par value $0.01 per share.
1.4 "Excite@Home Preferred Stock" means Excite@Home Series B Non-Voting
Convertible Preferred Stock, par value $0.01 per share, having the rights,
preferences, limitations and terms set forth in the Certificate of Designation
and the Certificate of Correction of Certificate of Designation each
substantially in the forms attached hereto as Exhibit C (the "Certificate of
---------
Designation").
1.5 "Common Stock Conversion Number" means the product (calculated to the
sixth decimal place (with the sixth decimal place rounded up if the seventh
decimal place is 5 or greater)) of (a) the quotient (calculated to the sixth
decimal place (with the sixth decimal place rounded up if the seventh decimal
place is 5 or greater)) obtained by dividing (i) the Worldprints Common Stock
Amount Per Share by (ii) the Excite@Home Average Price Per Share; and (b) one-
half (0.5).
1.6 "Debt" of any person means, at any date, without duplication, (i) all
obligations of such person for borrowed money, (ii) all obligations of such
person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such person to pay the deferred purchase price of property or
services, (iv) all obligations of such person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all obligations of
such person to purchase securities (or other property) which arise out of or in
connection with the sale of the same or substantially similar securities or
property, (vi) all non-contingent obligations of such person to reimburse any
bank or other person in respect of amounts paid under a letter of credit or
similar instrument, (vii) all Debt of others secured by an Encumbrance on any
asset of such person, whether or not such Debt is assumed by such person, and
(viii) all Debt of others Guaranteed by such person.
1.7 The "Effective Time" means the date and time on which the Merger first
becomes legally effective under the laws of the State of Colorado as a result of
the filing with the Colorado Secretary of State of a Plan of Merger and Articles
of Merger in substantially the forms attached hereto as Exhibit D (the "Plan of
---------
Merger") and any required related certificates pursuant to, and in conformity
with, the requirements of Section 7-111-105 of the Colorado Business
Corporations Act (the "CBCA").
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<PAGE>
1.8 "Encumbrance" means, with respect to any asset, any mortgage, deed of
trust, lien, pledge, charge, security interest, title retention devices,
collateral assignments, claims, charges, restrictions or other encumbrances of
any kind in respect of such asset.
1.9 "Guarantee" by any person means any obligation, contingent or
otherwise, of such person directly or indirectly guaranteeing any Debt or other
obligation of any other person.
1.10 "knowledge," when used with reference to (i) an individual, means the
actual knowledge, after due inquiry, of such individual with respect to a
representation or warranty of such individual contained in this Agreement, or
any other certificate or agreement required to be entered into or delivered at
the Closing by such individual in connection with the Merger, or (ii) a person
that is not an individual, means the collective actual knowledge, after due
inquiry, of the directors and officers of such person and its subsidiaries, and
any other employees of such person and its subsidiaries having managerial
responsibility for the portion of the operations, assets or liabilities of such
person and its subsidiaries with respect to which such knowledge of such person
is being represented.
1.11 "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 Authority.
1.12 "Material Adverse Change" or "Material Adverse Effect," when used
with reference to any entity or group of related entities, means any event,
change, violation, inaccuracy, circumstance or effect that is or is reasonably
likely to be, individually or in the aggregate, materially adverse to the
condition (financial or otherwise), capitalization, properties, employees,
assets (including intangible assets), business, operations, results of
operations or prospects of such entity and its subsidiaries, taken as a whole;
provided, that in no event shall (x) a change in the price of the publicly
traded stock of a Excite@Home constitute, in and of itself, a "Material Adverse
Change" or "Material Adverse Effect" in Excite@Home, and (y) individually or
collectively, any controversy, dispute or related judicial or arbitral
mediation, settlement, proceeding or judgment related to the World Notes
constitute, in and of itself or themselves, a "Material Adverse Change" or
"Material Adverse Effect" in Worldprints.
1.13 "Merger" means the statutory merger of Worldprints with and into Sub
to be effected pursuant to this Agreement.
1.14 "Merger Adjustment" shall mean any Debt of Worldprints existing
immediately prior to the Effective Time, other than (i) principal in an
aggregate amount not to exceed $4,000,000 and accrued interest under the World
Notes and any Replacement Notes, (ii) any outstanding amounts loaned by
Excite@Home to Worldprints, and (iii) outstanding trade payables of Worldprints
incurred in the ordinary course of its business consistent with past practice,
all of which amounts are set forth on Schedule 1.14 to this Agreement and which
-------------
will be updated as of the Closing (the "Closing Debt Schedule").
1.15 "New Worldprints Options" means options that vest and become
exercisable no faster than as to 1/4th of the shares subject to such option on
the first anniversary of the date of their
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<PAGE>
grant and as to 1/48/th/ of the shares subject to such option at the end of each
month thereafter to purchase up to that number of shares of Worldprints Common
Stock which are reserved for issuance under the Worldprints Plan, but which are
not yet subject to outstanding Worldprints Options as of the Agreement Date.
1.16 "person" means any individual, corporation (including any not-for-
profit corporation), partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), association, organization, entity or Governmental Authority.
1.17 "Preferred Stock Conversion Number" means the product (calculated to
the ninth decimal place (with the ninth decimal place rounded up if the tenth
decimal place is 5 or greater)) of (a) the quotient (calculated to the sixth
decimal place (with the sixth decimal place rounded up if the seventh decimal
place is 5 or greater)) obtained by dividing (i) the Worldprints Common Stock
Amount Per Share, by (ii) the Excite@Home Average Price Per Share, by (iii) one
thousand (1000); and (b) one-half (0.5).
1.18 "Replacement Notes" shall mean any promissory note(s) or other
instrument evidencing Debt with a maturity date no earlier than April 14, 2000,
issued by Worldprints, the proceeds of which are used as repayment for or in
replacement of the World Notes.
1.19 "Sub Ancillary Agreements" means, collectively, the Plan of Merger,
each certificate to be delivered by Sub or an officer or officers of Sub at the
Closing pursuant to Article 8 of this Agreement and each agreement (other than
this Agreement) which Sub is to enter into as a party thereto pursuant to this
Agreement.
1.20 "Termination Date" means April 14, 2000.
1.21 "Total Merger Consideration" means an amount that equals the
difference of (i) Ninety-Six Million Dollars ($96,000,000) and (ii) any Merger
Adjustment.
1.22 "Worldprints Ancillary Agreements" means, collectively, the Plan of
Merger, each certificate to be delivered by Worldprints or an officer or
officers of Worldprints at the Closing pursuant to Article 9 of this Agreement,
and each other agreement (other than this Agreement) which Worldprints is to
enter into as a party thereto pursuant to this Agreement.
1.23 "Worldprints Common Stock" means common stock, no par value per
share, of Worldprints.
1.24 "Worldprints Common Stock Amount Per Share" means the quotient
(calculated to the sixth decimal place (with the sixth decimal place rounded up
if the seventh decimal place is 5 or greater)) obtained by dividing (i) the
Total Merger Consideration by (ii) the Worldprints Fully Diluted Share Number.
1.25 "Worldprints Fully Diluted Share Number" means the number of shares
of Worldprints Common Stock, Worldprints Options and Worldprints Warrants (on a
fully exercised and converted to Common Stock basis) that are issued and
outstanding immediately prior to the Effective Time.
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<PAGE>
1.26 "Worldprints Options" shall have the meaning given in Section 2.3 of
this Agreement.
1.27 "Worldprints Warrants" shall have the meaning given in Section 2.4 of
this Agreement.
1.28 "Worldprints Preferred Stock" means preferred stock, no par value per
share, of Worldprints.
1.29 "Worldprints Shareholders" means the record holders of issued and
outstanding Worldprints Common Stock immediately prior to the Effective Time.
1.30 "Worldprints Websites" means all websites or other sites accessed via
the internet or any other electronic network, including, without limitation, any
cable-based network or private network, owned or operated by Worldprints and/or
any of its subsidiaries (either alone or jointly with others), either as of the
Agreement Date or in the past, including those certain websites currently
accessible at the following URL addresses (each of which is proceeded by
http://www.): cpgimages.com; myprints.com; worldprints.com; goprints.com;
worldprints.net; artposters.net; artetc.org; artgreetings.net; artcards.org;
artcard.org; artposter.org; artwallpaper.net; artcards.net; artposters.org;
divine3d.com; divine3d.net; worldprint3d.com; worldprint3d.net;
worldprints3d.com; worldprints3d.net; getclickie.com; getclickywithit.com;
getinclicky.com; getinclickie.com; vusoft.com; oneworldonesource.com;
artextreme.com; freewallpaper.com.
1.31 "World Notes" shall mean (i) that certain Worldprints Convertible
Bridge Note dated September 1, 1999 in a principal amount of $2,000,000 issued
by Worldprints to World Venture Partners, Inc., and (ii) that certain
Worldprints Convertible Bridge Note dated September 30, 1999 in a principal
amount of $4,000,000 issued by Worldprints to World Venture Partners, Inc.
1.32 "World Warrant" shall mean (i) any warrant to purchase Worldprints
Common Stock issued by Worldprints to the holder(s) of the Replacement Notes in
consideration for the making of the loan(s) represented by the Replacement
Notes; and (ii) any warrant to purchase Worldprints capital stock issued by
Worldprints to World Venture Partners, Inc. or any subsequent holder of the
World Notes in exchange for World Venture Partners' or such holder's binding
consent to waive any default under the World Notes and such party's agreement to
extend the maturity date of the World Notes until a date no earlier than April
14, 2000.
Other capitalized terms defined elsewhere in this Agreement and not defined
in this Article 1 will have the meanings assigned to such terms in this
Agreement.
Article 2
Plan of Reorganization
2.1 Conversion of Shares.
--------------------
2.1.1 Conversion of Sub Stock. At the Effective Time, each share of
-----------------------
Sub common stock that is issued and outstanding immediately prior to the
Effective Time will continue after the Effective Time to be an identical
outstanding share of the Surviving Corporation (as defined below).
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<PAGE>
2.1.2 Conversion of Worldprints Common Stock. Subject to the terms
--------------------------------------
and conditions of this Agreement, at the Effective Time, each share of
Worldprints Common Stock that is issued and outstanding immediately prior to the
Effective Time will, by virtue of the Merger and without the need for any
further action on the part of the holder thereof (except as expressly provided
herein), be converted into and represent the right to receive (i) the number of
shares of Excite@Home Common Stock that is equal to the Common Stock Conversion
Number, and (ii) the number of shares of Excite@Home Preferred Stock that is
equal to the Preferred Stock Conversion Number, all subject to the provisions of
Section 2.1.3 (regarding rights of holders of Dissenting Shares), Section 2.1.4
(regarding the elimination of fractional shares of Excite@Home Common Stock) and
Section 2.5 (regarding the withholding of Escrow Shares).
2.1.3 Dissenting Shares. Holders of shares of Worldprints Common
-----------------
Stock who have complied with all requirements for perfecting stockholders'
rights of dissent, as set forth in Article 113 of the CBCA, shall be entitled to
their rights under Colorado law with respect to such shares ("Dissenting
Shares").
2.1.4 Fractional Shares. No fractional shares of Excite@Home Common
-----------------
Stock will be issued in connection with the Merger. In lieu thereof, each holder
of Worldprints Common Stock who would otherwise be entitled to receive a
fraction of a share of Excite@Home Common Stock pursuant to Section 2.1.2,
computed after aggregating all shares of Excite@Home Common Stock to be received
by such holder pursuant to Section 2.1.2, will instead receive from Excite@Home,
in accordance with Article 7 hereof, an amount of cash (rounded to the nearest
cent) equal to the product obtained by multiplying (i) the Excite@Home Average
Price Per Share (as adjusted to reflect any Capital Change (as defined in
Section 2.2 below) of Excite@Home) by (ii) the fraction of a share of
Excite@Home Common Stock that such holder would otherwise have been entitled to
receive. Excite@Home Preferred Stock will be issued in fractional shares to the
extent conversion of Worldprints Common Stock into Excite@Home Preferred Stock
pursuant to Section 2.1.2 results in fractional shares of Excite@Home Preferred
Stock.
2.1.5 Continuation of Vesting and Repurchase Rights. If any shares
---------------------------------------------
of Worldprints Common Stock that are outstanding immediately prior to the
Effective Time are (a) unvested or are subject to a repurchase option (other
than a right of first refusal), risk of forfeiture, or other condition providing
that such shares may be forfeited or repurchased by Worldprints upon any
termination of the shareholder's employment, directorship or other relationship
with Worldprints (and/or any affiliate of Worldprints) under the terms of any
restricted stock purchase agreement or other agreement with Worldprints that
does not by its terms provide that such repurchase option, risk of forfeiture or
other condition lapses automatically upon consummation of the Merger ("Unvested
Worldprints Shares") or (b) subject to a contractual restriction on the transfer
of such shares, other than a right of first refusal ("Restricted Worldprints
Shares"), then the shares of Excite@Home Common Stock and Excite@Home Preferred
Stock issued upon the conversion of such Unvested Worldprints Shares or
Restricted Worldprints Shares in the Merger will continue to be unvested and
will continue to be subject to the same repurchase options, risks of forfeiture,
restrictions on transfer (other than a right of first refusal) or other
conditions, as applicable, immediately following the Effective Time as they were
subject to immediately prior to the Effective Time, and the certificates
representing such shares of Excite@Home Common Stock and Excite@Home Preferred
Stock shall accordingly be marked with appropriate legends noting such
repurchase options, risks of forfeiture, restrictions on transfer or other
conditions. Worldprints shall
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<PAGE>
use reasonable efforts to take all actions that may be necessary to ensure that,
from and after the Effective Time, Excite@Home is entitled to exercise any such
repurchase option or other right set forth in any such restricted stock purchase
agreement or other agreement and to enforce any such contractual restriction on
transfer (other than a right of first refusal).
2.2 Adjustments for Capital Changes. Notwithstanding the provisions of
-------------------------------
Section 2.1, if Excite@Home recapitalizes, either through a subdivision (or
stock split) of any of its outstanding shares of Excite@Home Common Stock into a
greater number of such shares, or a combination (or reverse stock split) of any
of its outstanding shares of Excite@Home Common Stock into a lesser number of
such shares, or reorganizes, reclassifies or otherwise changes its outstanding
shares of Excite@Home Common Stock into the same or a different number of shares
of other classes or series of Excite@Home stock (other than through a
subdivision or combination of shares provided for in the preceding clause), or
declares a dividend or other distribution on its outstanding shares payable in
shares of Excite@Home Common Stock or in shares or securities convertible into
shares of Excite@Home capital stock (each, a "Capital Change") at any time after
the Agreement Date and prior to the Effective Time, then the Excite@Home Average
Price Per Share and the Common Stock Conversion Number and the Preferred Stock
Conversion Number will each be proportionally and equitably adjusted.
2.3 Worldprints Options. At the Effective Time, all outstanding options
-------------------
(collectively, "Worldprints Options") to purchase Worldprints Common Stock,
including all Worldprints Options granted under Worldprints' 1999 Stock
Incentive Plan, as amended (the "Worldprints Plan") will be assumed by
Excite@Home. Each Worldprints Option so assumed by Excite@Home shall be
entitled, in accordance with the terms of such option, to purchase after the
Effective Time that number of shares of Excite@Home Common Stock, determined by
multiplying (i) the number of shares of Worldprints Common Stock subject to such
Worldprints Option at the Effective Time, by (ii) two times the Common Stock
Conversion Number, and the exercise price per share for each such assumed Option
will equal (i) the exercise price of the Worldprints Option immediately prior to
the Effective Time divided by (ii) two times the Common Stock Conversion Number.
If the foregoing calculation results in an assumed option being exercisable for
a fraction of a share, then the number of shares of Excite@Home Common Stock
subject to such option will be rounded down to the nearest whole number, with no
cash being payable for such fractional share. The term, exercisability, vesting
schedule, status as an "incentive stock option" under Section 422 of the Code,
if applicable, and all other terms of the Worldprints Options will otherwise be
unchanged. Continuous employment with Worldprints will be credited to an
optionee for purposes of determining the number of shares subject to exercise
after the Effective Time. Excite@Home will cause the Excite@Home Common Stock
issued upon exercise of the assumed Worldprints Options to be registered on Form
S-8 of the Securities and Exchange Commission ("SEC") as soon as is practicable
after the Effective Time (but no later than two whole business days after the
Effective Time), will exercise reasonable commercial efforts to maintain the
effectiveness of such registration statement for so long as such assumed
Worldprints Options remain outstanding, will reserve a sufficient number of
shares of Excite@Home Common Stock for issuance upon exercise thereof and will
have caused the shares of Excite@Home Common Stock to be issued upon the
exercise of assumed Worldprints Options to be approved for listing on the Nasdaq
National Stock Market, subject only to official notice of issuance. Excite@Home
will administer the Worldprints Plan assumed pursuant to this Section 2.3 in a
manner that complies with Rule 16b-3 promulgated by the SEC under the Securities
Exchange Act of 1934, as amended ("Exchange Act").
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<PAGE>
2.4 Worldprints Warrants. At the Effective Time, each of the then
--------------------
outstanding warrants, exchangeable or convertible securities or rights to
purchase or otherwise acquire, that are exercisable or convertible, ultimately
or potentially, into any Worldprints Common Stock (each, a "Worldprints
Warrant") shall, by virtue of the Merger, and without any further action on the
part of any holder thereof, be assumed by Excite@Home and converted into a
warrant or like security (each, an "Excite@Home Warrant") to purchase that
number of shares of Excite@Home Common Stock determined by (i) multiplying the
number of shares of Worldprints Common Stock that are subject to such
Worldprints Warrant immediately prior to the Effective Time, by (ii) two times
the Common Stock Conversion Number, at an exercise price per share of such
Excite@Home Common Stock equal to (i) the exercise price per share of
Worldprints Common Stock that was in effect for such Worldprints Warrant
immediately prior to the Effective Time divided by (ii) two times the Common
Stock Conversion Number. If the foregoing calculation would result in an assumed
and converted Worldprints Warrant being converted into an Excite@Home Warrant
that, after aggregating all the shares of Excite@Home Common Stock issuable upon
the exercise of such Excite@Home Warrant, would be exercisable for a fraction of
a share of Excite@Home Common Stock, then the number of shares of Excite@Home
Common Stock subject to such Excite@Home Warrant will be rounded down to the
nearest whole number of shares of Excite@Home Common Stock. The exercisability
period and other terms and conditions of the Worldprints Warrants will remain
unchanged.
2.5 Escrow of Shares. At the Effective Time, Excite@Home will withhold
----------------
from the shares of Excite@Home Common Stock and Excite@Home Preferred Stock to
be issued to Worldprints Shareholders in the Merger upon conversion of their
Worldprints Common Stock pursuant to Section 2.1.2 above, forty percent of the
shares of Excite@Home Preferred Stock (including any fractions of a share
thereof) issued to such Worldprints Shareholders pursuant to Section 2.1.2 (such
withheld shares of Excite@Home Preferred Stock, any shares of Excite@Home
capital stock or other securities into which such shares of Excite@Home
Preferred Stock are converted or exchanged and any dividends or distributions in
the form of Excite@Home capital stock or other securities of Excite@Home
received in respect of such shares of Excite@Home Preferred Stock or other stock
or securities to which such shares of Excite@Home Preferred Stock are converted
or exchanged, being hereinafter referred to as the "Escrow Shares"), and will
hold the certificates representing such Escrow Shares as security for the
Worldprints Shareholders' indemnification obligations for Damages (as defined in
Section 11.2) under Article 11 hereof. The Escrow Shares will be represented by
a certificate or certificates issued in the names of each Worldprints
Shareholder in proportion to each such shareholder's interest therein and will
be held by Excite@Home, subject to the terms and conditions of this Section 2.5
and Article 11 hereof, until the Release Date (as defined in Section 11.1
hereof). Any dividend or distribution (other than a non-taxable dividend or
distribution in the form of Excite@Home capital stock or other securities of
Excite@Home) with respect to the Escrow Shares shall be promptly paid to the
Worldprints Shareholders (in proportion to each such shareholder's interest in
the Escrow Shares) and shall not be withheld in the escrow. To the extent that
any dividend or distribution made with respect to the Escrow Shares prior to the
Release Date (as defined in Section 11.1 hereof) or, in the case of Escrow
Shares in escrow after the Release Date pursuant to the last sentence of this
Section 2.5, the date on which such Escrow Shares are released from escrow,
results in a liability for tax (as defined in Section 3.7.2 hereof), such tax
liability shall be that of the Worldprints Shareholders (in proportion to each
such shareholder's interest in the Escrow Shares), and not of Excite@Home or
Sub. Any and all voting rights with respect to the Escrow Shares shall be
exercisable by the
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Worldprints Shareholders or their authorized agent as of the Effective Time.
Excite@Home, Sub and the Worldprints Shareholders hereby agree and acknowledge
that the Escrow Shares shall be treated as transferred to and owned by the
Worldprints Shareholders as of the Effective Time and all times thereafter for
all tax (as defined in Section 3.7.2 hereof) purposes. Escrow Shares, other than
Escrow Shares having a value (calculated pursuant to Section 11.3(a)) equal to
the amount of Damages asserted in any claim which has not been resolved pursuant
to the terms hereof prior to the Release Date, shall be released to the
Worldprints Shareholders on the Release Date, and, in the case of any such
withheld shares, upon the final resolution of such claim(s).
2.6 Effects of the Merger. At and upon the Effective Time:
---------------------
(a) the separate existence of Worldprints will cease and
Worldprints will be merged with and into Sub, and Sub will be the surviving
corporation of the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") pursuant to the terms of this Agreement and the Plan of Merger;
(b) the Articles of Incorporation of Sub will continue
unchanged and be the Articles of Incorporation of the Surviving Corporation
immediately after the Effective Time;
(c) the Bylaws of Sub will continue unchanged and be the
Bylaws of the Surviving Corporation immediately after the Effective Time;
(d) each share of Worldprints Common Stock that is
outstanding immediately prior to the Effective Time will be converted as
provided in this Article 2;
(e) each Worldprints Option and Worldprints Warrant that is
outstanding immediately prior to the Effective Time will be assumed as provided
in this Article 2;
(f) each share of Sub Common Stock that is outstanding
immediately prior to the Effective Time will continue to be an identical share
of the Surviving Corporation as provided in Section 2.1.1;
(g) the officers of the Surviving Corporation immediately
after the Effective Time will be those individuals who were the officers of Sub
immediately prior to the Effective Time, and each such individual shall,
immediately after the Effective Time, hold the same office or offices of the
Surviving Corporation as the office or offices that such individual held with
Sub immediately prior to the Effective Time;
(h) the members of the Board of Directors of the Surviving
Corporation immediately after the Effective Time will be the members of the
Board of Directors of Sub immediately prior to the Effective Time; and
(i) the Merger will, from and after the Effective Time,
have all of the effects provided by applicable law.
2.7 Securities Law Issues; Registration Rights. Excite@Home shall issue
------------------------------------------
the shares of Excite@Home Common Stock and Excite@Home Preferred Stock to be
issued to the Worldprints Shareholders in the Merger pursuant to Section 2.1.2
pursuant to an exemption or exemptions from
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registration under Section 4(2) of the Securities Act of 1933, as amended (the
"1933 Act"), and/or Regulation D promulgated under the 1933 Act and the
exemption from qualification under the laws of the State of Colorado and other
applicable state securities laws. Excite@Home and Worldprints shall comply with
all applicable provisions of, and rules under, the 1933 Act in connection with
offering and issuance of shares of Excite@Home Common Stock and Excite@Home
Preferred Stock in the Merger. Within two whole business days following the
Effective Time, Excite@Home will cause to be filed with the SEC and use
commercially reasonable efforts to cause to become effective as soon as
practicable, a shelf registration statement on Form S-3 providing for the resale
by (i) the Worldprints Shareholders of the shares of Excite@Home Common Stock
issued to them in the Merger pursuant to Section 2.1.2 hereof, and (ii) the
holders of Worldprints Warrants set forth on Schedule 2.7 to this Agreement, of
------------
the shares of Excite@Home Common Stock to be issued to them upon exercise of
their Worldprints Warrants, all pursuant to the terms and conditions of Article
12 hereof.
2.8 Tax-Free Reorganization; No Representations by Excite@Home.
----------------------------------------------------------
(a) The parties intend to adopt this Agreement as a tax-
free plan of reorganization and to consummate the Merger in accordance with the
provisions of Section 368(a)(1)(A) of the Code by virtue of the provisions of
Section 368(a)(2)(D) of the Code. However, Excite@Home makes no representations
or warranty to Worldprints or to any Worldprints Shareholder or other holder of
Worldprints securities regarding the tax treatment of the Merger, whether the
Merger will qualify as a tax-free plan of reorganization under the Code, or any
of the tax consequences to any Worldprints Shareholder or such holder of this
Agreement, the Plan of Merger, the Merger or any of the other transactions or
agreements contemplated hereby, and Worldprints and the Worldprints Shareholders
acknowledge that Worldprints and the Worldprints Shareholders are relying solely
on their own tax advisors in connection with this Agreement, the Merger and the
other transactions contemplated by this Agreement.
(b) Worldprints and the Worldprints Shareholders make no
representations or warranty to Excite@Home or to Sub regarding the tax treatment
of the Merger, whether the Merger will qualify as a tax-free plan of
reorganization under the Code, or any of the tax consequences to Excite@Home or
Sub or such holder of this Agreement, the Plan of Merger, the Merger or any of
the other transactions or agreements contemplated hereby, and Excite@Home and
Sub acknowledge that Excite@Home and Sub are relying solely on their own tax
advisors in connection with this Agreement, the Merger and the other
transactions contemplated by this Agreement.
(c) After the Merger, Excite@Home and Sub shall: (i) report
on their respective tax returns and tax filings the transactions contemplated by
this Agreement as a tax-free reorganization (except for cash paid in lieu of
fractional shares) under Section 368(a)(1) of the Code; (ii) keep their records
and file in connection with their federal and state income tax returns all such
information as may be required by Section 1.368-3 of the Treasury Regulations
(and corresponding state rules and regulations) with respect to the transactions
contemplated by this Agreement; and (iii) refrain from taking any position in
connection with their federal or state income tax returns that would be
inconsistent with such qualification of the transactions contemplated hereunder
as a tax-free reorganization (except for cash paid in lieu of fractional shares)
under Section 368(a)(1) of the Code.
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2.9 Further Assurances. If, at any time after the Effective Time,
------------------
Excite@Home believes or is advised that any further instruments, deeds,
assignments or assurances are reasonably necessary or desirable to consummate
the Merger or to carry out the purposes and intent of this Agreement at or after
the Effective Time, then Excite@Home, the Surviving Corporation and their
respective officers and directors will execute and deliver all such proper
deeds, assignments, instruments and assurances and do all other things necessary
or desirable to consummate the Merger and to carry out the purposes and intent
of this Agreement, in the name of Worldprints or otherwise.
Article 3
Representations and Warranties of Worldprints and the Founders
Worldprints and each Worldprints Founder represents and warrants to
Excite@Home that, except as set forth in the letter addressed to Excite@Home
from Worldprints and dated as of the Agreement Date (including all schedules
thereto) which has been delivered by Worldprints to Excite@Home concurrently
with the parties' execution of this Agreement (the "Worldprints Disclosure
Letter"), each of the representations, warranties and statements contained in
the following sections of this Article 3 is true and correct as of the Agreement
Date and will be true and correct on and as of the Closing Date (as defined in
Section 7.1 hereof). For all purposes of this Agreement, the statements
contained in the Worldprints Disclosure Letter and its schedules shall also be
deemed to be representations and warranties made and given by Worldprints and
each Worldprints Founder under Article 3 of this Agreement.
The receipt by Excite@Home of information pursuant to Section 5.1 or
otherwise on or before the Closing, shall not limit the right of Excite@Home
under Article 9 to require as a condition precedent to the performance of its
obligations under this Agreement on such Closing Date the accuracy in all
material respects of the representations and warranties made by the representing
party in this Agreement (as provided in Article 9) and the performance in all
material respects of the covenants of Worldprints made in this Agreement
(without regard to such information) and to receive a certificate with respect
to the same.
3.1 Organization and Good Standing. Worldprints is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Colorado. Worldprints and each of its subsidiaries has the corporate power and
authority to own, operate and lease its properties and to carry on its business
as now conducted and as proposed to be conducted, and is qualified to transact
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
make such qualification necessary, except in any jurisdiction in which the
failure to so qualify or be in good standing would not be reasonably expected to
have a Material Adverse Effect on Worldprints. Worldprints has delivered to
Excite@Home true and correct copies of the currently effective Articles of
Incorporation and Bylaws or other charter documents, as applicable, of
Worldprints and each of its subsidiaries, each as amended to date. Neither
Worldprints nor any of its subsidiaries is in violation of its Articles of
Incorporation, Bylaws or other charter documents. Chautauqua Publishing Group,
LLC is a wholly-owned subsidiary of Worldprints, and is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Colorado.
3.2 Subsidiaries. Except for Chautauqua Publishing Group, LLC,
------------
Worldprints does not have any subsidiary or any equity or ownership interest,
whether direct or indirect, in any
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corporation, partnership, limited liability company, joint venture or other
business entity. Worldprints owns all the issued and outstanding membership
interests of Chautauqua Publishing Group, LLC, free and clear of all
Encumbrances. Worldprints is not obligated to make and is not bound by any
agreement or obligation to make any investment in or capital contribution in or
on behalf of any other entity.
3.3 Power, Authorization and Validity.
---------------------------------
3.3.1 Power and Authority. Worldprints has all requisite corporate
-------------------
power and authority to enter into, execute, deliver, and perform its obligations
under, this Agreement and all Worldprints Ancillary Agreements and to consummate
the Merger. The Merger and the execution, delivery and performance by
Worldprints of this Agreement and each of the Worldprints Ancillary Agreements
have been duly and validly approved and authorized by Worldprints' Board of
Directors, and, to the extent shareholder approval is required under
Worldprints' Articles of Incorporation or Bylaws or under applicable law or
regulation, have been duly and validly approved and adopted by Worldprints'
shareholders in full compliance with applicable law and Worldprints' Articles of
Incorporation and Bylaws, each as amended.
3.3.2 No Consents. No consent, approval, order or authorization of,
-----------
or registration, declaration or filing with, any court, administrative agency,
commission or other governmental authority (each, a "Governmental Authority"),
or any other person or entity, governmental or otherwise (including, without
limitation, any consent, approval, order, authorization, registration,
declaration or filing pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act (the "HSR Act")), is necessary or required to be made or obtained by
Worldprints to enable Worldprints to lawfully execute and deliver, enter into,
and to perform its obligations under, this Agreement and each of the Worldprints
Ancillary Agreements, or to consummate the Merger, except for the filing of the
Plan of Merger with the Colorado Secretary of State as required under Colorado
law. The aggregate HSR Assets of Worldprints, do not, and will not immediately
prior to Closing of the Merger, equal or exceed $10,000,000, and, to
Worldprints' knowledge, there is no person, or group of persons under Common
Control, who Control(s) Worldprints. For purposes of this Section the term "HSR
Assets" means the total assets (as set forth on the most recent regularly
prepared balance sheet) of Worldprints, and, to the extent they are not
consolidated in such balance sheet, the total assets (as set forth on the most
recent regularly prepared balance sheet(s)) of all entities Controlled by
Worldprints. For the purposes of this Section, the term "Control," or
"Controlling" means either: (i) holding beneficial ownership, whether direct, or
indirect through fiduciaries, agents, controlled entities or other means, of
fifty percent or more of the outstanding voting securities of an issuer; or (ii)
in the case of an entity that has no outstanding voting securities, having the
right to fifty percent or more of the profits of the entity, or having the right
in the event of dissolution to fifty percent or more of the assets of the
entity; or (iii) having the contractual power presently to designate fifty
percent or more of the directors of a corporation, or in the case of
unincorporated entities, of individuals exercising similar functions. For the
purposes of this Section, "Common Control" means sharing an Ultimate Parent. For
the purposes of this Section, "Ultimate Parent" means a person who is not
Controlled by any other entity.
3.3.3 Enforceability. This Agreement and each of the Worldprints
--------------
Ancillary Agreements are, or when executed by Worldprints and the Worldprints
Founders will be, valid and
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binding obligations of Worldprints and the Worldprints Founders, enforceable
against Worldprints and the Worldprints Founders in accordance with their
respective terms, subject to the effect of (a) applicable bankruptcy and other
similar laws affecting the rights of creditors generally and (b) rules of law
and equity governing specific performance, injunctive relief and other equitable
remedies. Notwithstanding the foregoing, Worldprints makes no representation or
warranty in this Section 3.3.3 with regard to the Worldprints Founders.
3.4 Capitalization of Worldprints.
-----------------------------
3.4.1 Outstanding Securities. The authorized capital stock of
----------------------
Worldprints consists entirely of: (i) 10,000,000 shares of Worldprints Common
Stock, of which a total of 1,896,067 shares are issued and outstanding and
5,000,000 shares of Worldprints Preferred Stock, none of which are issued and
outstanding. The number of issued and outstanding shares of Worldprints Common
Stock issued by Worldprints to each of the Worldprints Shareholders are set
forth in Schedule 3.4.1(a) to this Agreement. No other shares of Worldprints
-----------------
Common Stock are issued or outstanding. Worldprints holds no treasury shares. To
Worldprints' and each of the Worldprints Founders' knowledge (such knowledge, in
this instance, being based solely upon a review of Worldprints' written
corporate records), each of the Worldprints Shareholders has good and marketable
title to that number of shares of Worldprints Common Stock as set forth beside
such person's name on Schedule 3.4.1(a), free and clear of all Encumbrances or
any restrictions on voting, except as set forth in Item 3.4.1 to the Worldprints
Disclosure Letter. An aggregate of 400,000 shares of Worldprints Common Stock
are reserved and authorized for issuance pursuant to the Worldprints Plan, of
which options (including New Worldprints Options) to purchase a total of 323,559
shares of Worldprints Common Stock are outstanding, and there are outstanding
additional options granted outside of the Worldprints Plan to purchase a total
of 4,508 shares of Worldprints Common Stock. Additionally, there are Worldprints
Warrants to acquire an aggregate of 274,071 shares of Worldprints Common Stock.
Schedule 3.4.1(b) of this Agreement lists for each Person to whom Worldprints
- -----------------
has issued Worldprints Options and Worldprints Warrants, the name of the person
to whom each such Worldprints Option or Worldprints Warrant was issued, the
exercise price for each such Worldprints Option and Worldprints Warrant, the
number of shares or other securities covered by each such Worldprints Option and
Worldprints Warrant, and the vesting schedule and the extent each such
Worldprints Option and Worldprints Warrant are vested as of the Agreement Date.
True and complete copies of each Worldprints Option and Worldprints Warrant have
been delivered by Worldprints to Excite@Home. Except as set forth in Item
3.4.1(c) to the Worldprints Disclosure Letter, the vesting or exercisablility
(or any other material terms) of any Worldprints Option or Worldprints Warrant
will not accelerate or otherwise change (except as expressly contemplated by
Sections 2.3 and 2.4 of this Agreement) as a result of the execution and
delivery of this Agreement or the consummation of the Merger or the transactions
contemplated thereby.
As of the Closing Date, there will have been no change in the
authorized or outstanding capital stock of Worldprints as represented in the
foregoing sentences of this Section 3.4.1. All issued and outstanding shares of
Worldprints' Common Stock and all of the issued and outstanding membership
interests of Chautauqua Publishing Group, LLC have been duly authorized and
validly issued, are fully paid and nonassessable, and except as set forth in
certain Worldprints shareholder agreements, copies of which have been delivered
to Excite@Home and each of which are listed on Item 3.4.1(c) to the Worldprints
Disclosure Letter, are not subject to any preemptive right, right of
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first refusal, right of first offer or right of rescission, and have been
offered, issued, sold and delivered by Worldprints in compliance with (i) all
registration or qualification requirements (or applicable exemptions therefrom)
of all applicable securities laws and, to the knowledge of Worldprints and each
of the Worldprints Founders, other applicable Legal Requirements and (ii) all
requirements set forth in applicable agreements or instruments. All shares of
Worldprints Common Stock subject to issuance under Worldprints Options and
Worldprints Warrants, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. All outstanding Worldprints
Options and Worldprints Warrants have been issued and granted in compliance with
(i) all registration or qualification requirements (or applicable exemptions
therefrom) of all applicable securities laws and, to the knowledge of
Worldprints and each of the Worldprints Founders, other applicable Legal
Requirements and (ii) all requirements set forth in applicable agreements or
instruments.
3.4.2 No Other Options, Warrants or Rights. Other than as set forth
------------------------------------
in Section 3.4.1 above, there are no options, warrants, convertible securities
or other securities, calls, commitments, conversion privileges, preemptive
rights, rights of first refusal, rights of first offer or other rights or
agreements outstanding to purchase or otherwise acquire (whether directly or
indirectly) any shares of Worldprints' authorized but unissued capital stock or
any securities convertible into or exchangeable for any shares of Worldprints'
capital stock or obligating Worldprints to grant, issue, extend, or enter into
any such option, warrant, convertible security or other security, call,
commitment, conversion privilege, preemptive right, right of first refusal,
right of first offer or other right or agreement, and there is no liability for
dividends accrued but unpaid.
3.4.3 No Voting Arrangements or Registration Rights. Except as set
---------------------------------------------
forth in Item 3.4.3 to the Worldprints Disclosure Letter, there are no voting
agreements, voting trusts, proxies, preemptive rights, rights of first refusal,
rights of first offer or other restrictions (other than normal restrictions on
transfer under applicable federal and state securities laws) applicable to any
of Worldprints' outstanding capital stock or any Worldprints Options or
Worldprints Warrants or to the conversion of any shares of Worldprints' capital
stock in the Merger pursuant to any agreement or obligation to which Worldprints
is a party or, to Worldprints' or any Worldprints Founder's knowledge, pursuant
to any other agreement or obligation. Worldprints is not under any obligation to
register under the 1933 Act any of its presently outstanding shares of stock or
other securities or any stock or other securities that may be subsequently
issued except as set forth in Item 3.4.3 to the Worldprints Disclosure Letter.
3.5 No Conflict. Except as set forth in Item 3.5 to the Worldprints
-----------
Disclosure Letter, neither the execution and delivery of this Agreement nor any
of the Worldprints Ancillary Agreements by Worldprints or the Worldprints
Founders, nor the consummation of the Merger or any of the other transactions
contemplated hereby or thereby, will conflict with, or (with or without notice
or lapse of time, or both) result in a termination, breach, impairment or
violation of, or constitute a default under: (i) any provision of the Articles
of Incorporation or Bylaws or other charter documents of Worldprints or any of
its subsidiaries as currently in effect; (ii) any federal, state, local or
foreign judgment, writ, decree, order, statute, rule or regulation applicable to
Worldprints or any of its subsidiaries or any of their respective assets or
properties, except where such breach or violation would not have a Material
Adverse Effect on Worldprints; or (iii) any material instrument, agreement,
contract, undertaking, understanding, letter of intent, memorandum of
understanding or commitment (whether verbal or in writing) to which Worldprints
or any of its
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subsidiaries is a party or by which Worldprints or any of its subsidiaries or
any of their respective material assets or properties are bound. Neither
Worldprints' entering into this Agreement nor the consummation of the Merger or
the transactions contemplated thereby will give rise to, or trigger the
application of, any rights of any third party that would come into effect upon
the effectiveness of the Merger. The consummation of the Merger by Worldprints
will not require the consent, release, waiver or approval of any third party
(including, without limitation, the consent of any party required to be obtained
in order to keep any agreement or contract between such party and Worldprints
(or any of its subsidiaries) in effect following the Merger or to provide that
Worldprints (and/or any of its subsidiaries) is not in breach or violation of
any such contract or agreement following the Merger), other than the required
approval of Worldprints' shareholders.
3.6 Litigation. There is no action, claim, suit, arbitration, mediation,
----------
proceeding, claim or investigation (each, an "Action") pending against
Worldprints or any of its subsidiaries (or against any officer, director,
employee or agent of Worldprints or any of its subsidiaries in their capacity as
such or relating to their employment, services or relationship with Worldprints
or such subsidiary) before any court, administrative agency or arbitrator, nor,
to Worldprints' or any Worldprints Founder's knowledge, except as set forth in
Item 3.6 to the Worldprints Disclosure Letter, has any Action been threatened.
There is no judgment, decree, injunction, rule or order of any governmental
entity or agency, court or arbitrator outstanding against Worldprints. Except as
set forth in Item 3.6 to the Worldprints Disclosure Letter, there is no basis
for any person, firm, corporation or other entity to assert a claim against
Worldprints based upon: (a) Worldprints' entering into this Agreement or any
Worldprints Ancillary Agreement or consummating the Merger or any of the
transactions contemplated by this Agreement or any Worldprints Ancillary
Agreement; (b) a claim of ownership of, or options, warrants or other rights to
acquire ownership of, any shares of the capital stock of Worldprints or any
rights as a Worldprints shareholder, including any option, warrant or preemptive
rights or rights to notice or to vote, other than for the normal rights of the
Worldprints Shareholders with respect to the Worldprints Common Stock shown as
being owned by such persons on Schedule 3.4.1(a) hereof and the normal rights of
holders of Worldprints Options and Worldprints Warrants shown as being owned by
such holders on Schedule 3.4.1(b) hereof.
3.7 Taxes.
-----
3.7.1 Worldprints and its predecessor have timely filed all federal,
state, local and foreign tax and information returns required to be filed by it,
has timely paid all taxes required to be paid by it for which payment is due,
has established an adequate accrual or reserve for the payment of all taxes
payable in respect of the periods subsequent to the periods covered by its most
recent applicable tax returns (which accrual or reserve as of the Balance Sheet
Date (as defined in Section 3.8 below) is fully reflected on the Balance Sheet
(as defined in Section 3.8 below) and in any more recent balance sheet of
Worldprints provided by Worldprints to Excite@Home on or before the Agreement
Date), has made all necessary estimated tax payments, and has no liability for
taxes in excess of the amount so paid or accruals or reserves so established.
All such returns and reports are true, correct and complete, and Worldprints has
provided Excite@Home with true and correct copies of such returns and reports.
Worldprints is not delinquent in the payment of any tax or in the filing of any
tax returns, and no deficiencies for any tax have been threatened, claimed,
proposed or assessed against Worldprints, any of its subsidiaries, or any of the
officers, employees or agents of Worldprints or any of its subsidiaries in their
capacity as such. Worldprints has not
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received any notification from the Internal Revenue Service or any other taxing
authority regarding any material issues that: (a) are currently pending before
the Internal Revenue Service or any other taxing authority (including, but not
limited to, any sales or use tax authority) regarding Worldprints or any of its
subsidiaries or (b) have been raised by the Internal Revenue Service or other
taxing authority and not yet finally resolved. No tax return of Worldprints, its
predecessor or any of its subsidiaries is under audit by the Internal Revenue
Service or any state or local taxing agency or authority and any such past
audits (if any) have been completed and fully resolved to the satisfaction of
the applicable tax authority conducting such audit and all taxes and any
penalties or interest determined by such audit to be due from Worldprints or any
of its subsidiaries have been paid in full to the applicable taxing authorities.
No tax liens are currently in effect against any assets of Worldprints or any of
its subsidiaries or other liens which arise by operation of law for taxes not
yet due and payable. There is not in effect any waiver by Worldprints of any
statute of limitations with respect to any taxes to any extension of time for
filing any tax return which has not been filed; and Worldprints has not
consented to extend to a date later than the date hereof the period in which any
tax may be assessed or collected by any taxing authority. Worldprints is not a
"personal holding company" within the meaning of the Code. Worldprints has not
filed any election under Section 341(f) of the Code. Worldprints and its
subsidiaries have each withheld with respect to each of its employees and
independent contractors all taxes, including, but not limited to, federal and
state income taxes, FICA, Medicare, FUTA and other taxes, required to be
withheld, and paid such withheld amounts to the appropriate tax authority within
the time prescribed by law. Since its inception, Worldprints has not been a
"United States real property holding corporation", as defined in Section
897(c)(2) of the U.S. Internal Revenue Code of 1986, as amended, and in Section
1.897-2(b) of the Treasury Regulations issued thereunder (the "Regulations"),
and Worldprints has filed with the Internal Revenue Service all statements, if
any, with its United States income tax returns which are required under Section
1.897-2(h) of the Regulations.
3.7.2 For the purposes of this Section, the terms "tax" and "taxes"
include all federal, state, local and foreign income, alternative or add-on
minimum income, gains, franchise, excise, property, property transfer, sales,
use, employment, license, payroll, ad valorem, documentary, stamp, withholding,
occupation, recording, value added or transfer taxes, governmental charges,
fees, customs duties, levies or assessments (whether payable directly or by
withholding), and, with respect to any such taxes, any estimated tax, interest,
fines and penalties or additions to tax and interest on such fines, penalties
and additions to tax.
3.8 Worldprints Financial Statements. Worldprints has delivered to
--------------------------------
Excite@Home as an attachment to the Worldprints Disclosure Letter the unaudited
consolidated balance sheets of Worldprints or its predecessor dated as of
December 31, 1998, December 31, 1999 and February 29, 2000, respectively, and
Worldprints' or its predecessor's unaudited consolidated statements of
operations, statements of cash flows and statements of changes in shareholders'
equity (or, as applicable, statement of changes in members' interests) for the
years ended December 31, 1998 and December 31, 1999, and for the two-month
period ended February 29, 2000 (all such financial statements of Worldprints and
any notes thereto are hereinafter collectively referred to as the "Worldprints
Financial Statements"). The Worldprints Financial Statements (a) are derived
from and in accordance with the books and records of Worldprints, (b) fairly
present the financial condition of Worldprints at the dates therein indicated
and the results of operations for the periods therein specified (subject to
normal year-end adjustments which are not material in amount) and (c) have been
prepared in accordance with United States generally accepted accounting
principles
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("GAAP") applied on a basis consistent with prior periods except for any absence
of notes thereto. Worldprints has no material debt, liability or obligation of
any nature, whether accrued, absolute, contingent or otherwise, and whether due
or to become due, except for (i) those shown on Worldprints' unaudited balance
sheet as of February 29, 2000 included in the Worldprints Financial Statements
(the "Balance Sheet"), and (ii) those that may have been incurred after February
29, 2000 (the "Balance Sheet Date") in the ordinary course of Worldprints'
business consistent with its past practices, and that are not material in
amount, either individually or collectively, and are not required to be set
forth in the Balance Sheet under GAAP. All reserves established by Worldprints
that are set forth in or reflected in the Balance Sheet are reasonably adequate.
At the Balance Sheet Date, there were no material loss contingencies (as such
term is used in Statement of Financial Accounting Standards No. 5 issued by the
Financial Accounting Standards Board in March 1975) which are not adequately
provided for in the Balance Sheet as required by said Statement No. 5.
3.9 Title to Properties. Worldprints and each of its subsidiaries have
-------------------
good and marketable title to all of their respective assets and properties
(including, but not limited to, those shown on the Balance Sheet), free and
clear of all Encumbrances, other than liens for current taxes that are not yet
due and payable. All machinery, vehicles, equipment and other tangible personal
property owned or leased by Worldprints and its subsidiaries or used in its
business are in good condition and repair, normal wear and tear excepted, and
all leases of real or personal property to which Worldprints or any of its
subsidiaries is a party are fully effective and afford Worldprints or its
subsidiary, as applicable, peaceful and undisturbed leasehold possession of the
real or personal property that is the subject of the lease. Neither Worldprints
nor any of its subsidiaries owns any real property. Neither Worldprints nor any
of its subsidiaries is in violation of any zoning, building, safety or
environmental ordinance, regulation or requirement or other law or regulation
applicable to the operation of its owned or leased properties, the violation of
which would have a Material Adverse Effect, nor has Worldprints received any
notice of violation of law with which it has not complied. Item 3.9 to the
--------
Worldprints Disclosure Letter sets forth a complete and accurate list of all
personal property owned or leased by Worldprints or any of its subsidiaries with
an individual value of $1,000 or greater.
3.10 Absence of Certain Changes. Except as set forth in Item 3.10 to the
--------------------------
Worldprints Disclosure Letter, since the Balance Sheet Date, Worldprints has
operated its business in the ordinary course consistent with its past practice
and, since such date, there has not been with respect to Worldprints or any of
its subsidiaries any:
(a) Material Adverse Change;
(b) amendment or change in the Articles of Incorporation or
Bylaws of Worldprints;
(c) incurrence, creation or assumption by Worldprints or
any of its subsidiaries of (i) any Encumbrance on any of the assets or
properties of Worldprints or any of its subsidiaries; (ii) any obligation or
liability or any indebtedness for borrowed money, or (iii) any contingent
liability as a guarantor or surety with respect to the obligations of others;
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(d) grant or issuance of any options, warrants or other
rights to acquire from Worldprints or any of its subsidiaries, directly or
indirectly, or any offer, issuance or sale by Worldprints of any debt or equity
securities of Worldprints or any of its subsidiaries;
(e) any acceleration or release of any vesting condition to
the right to exercise any option, warrant or other right to purchase or
otherwise acquire any shares of Worldprints' capital stock, or any acceleration
or release of any right to repurchase shares of Worldprints' capital stock upon
the shareholder's termination of employment or services with Worldprints or any
subsidiary of Worldprints or pursuant to any right of first refusal;
(f) payment or discharge by Worldprints or any of its
subsidiaries of any Encumbrance on any asset or property of Worldprints or any
of its subsidiaries, or the payment or discharge of any liability that was not
either shown on the Balance Sheet or incurred in the ordinary course of
Worldprints' business after the Balance Sheet Date in an amount not in excess of
$10,000 for any single liability to a particular creditor;
(g) purchase, license, sale, assignment or other
disposition or transfer, or any agreement or other arrangement for the purchase,
license, sale, assignment or other disposition or transfer, of any of the
assets, properties or goodwill of Worldprints other than a license of any
product or products of Worldprints or any of its subsidiaries made in the
ordinary course of Worldprints' business consistent with its past practice;
(h) damage, destruction or loss of any property or asset,
whether or not covered by insurance, having (or reasonably likely with the
passage of time to have) a Material Adverse Effect on Worldprints;
(i) declaration, setting aside or payment of any dividend
on, or the making of any other distribution in respect of, the capital stock of
Worldprints, any split, combination or recapitalization of the capital stock of
Worldprints or any direct or indirect redemption, purchase or other acquisition
of any capital stock of Worldprints or any change in any rights, preferences,
privileges or restrictions of any outstanding security of Worldprints;
(j) change or increase in the compensation payable or to
become payable to any of the officers, directors, or employees of Worldprints or
any of its subsidiaries, or any bonus or pension, insurance or other benefit
payment or arrangement (including, without limitation, stock awards, stock
option grants, stock appreciation rights or stock option grants) made to or with
any of such officers, employees or agents except in connection with normal
employee salary or performance reviews or otherwise in the ordinary course of
Worldprints' business consistent with its past practice;
(k) change with respect to the management, supervisory or
other key personnel of Worldprints;
(l) obligation or liability incurred by Worldprints or any
of its subsidiaries to any of its officers, directors or shareholders, except
for normal and customary compensation and expense allowances payable to officers
in the ordinary course of Worldprints' business consistent with its past
practice;
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(m) making by Worldprints or any of its subsidiaries of any
loan, advance or capital contribution to, or any investment in, any officer,
director or shareholder of Worldprints or any firm or business enterprise in
which any such person had a direct or indirect material interest at the time of
such loan, advance, capital contribution or investment;
(n) entering into, amendment of, relinquishment,
termination or non-renewal by Worldprints of any contract, lease, transaction,
commitment or other right or obligation other than in the ordinary course of its
business consistent with its past practice or any written or oral indication or
assertion by the other party thereto of any material problems with Worldprints'
(or any of its subsidiaries') services or performance under such contract,
lease, transaction, commitment or other right or obligation or its desire to so
amend, relinquish, terminate or not renew any such contract, lease, transaction,
commitment or other right or obligation;
(o) material change in the manner in which Worldprints or
any of its subsidiaries extends discounts, credits or warranties to customers or
otherwise deals with its customers;
(p) entering into by Worldprints or any of its subsidiaries
of any transaction, contract or agreement that by its terms requires or
contemplates a current and/or future financial commitment, expense (inclusive of
overhead expense) or obligation on the part of Worldprints or any of its
subsidiaries involving in excess of $25,000 or that is not entered into in the
ordinary course of Worldprints' business, or the conduct of any business or
operations other than in the ordinary course of Worldprints' business;
(q) any license, transfer or grant of a right under any
Worldprints IP Rights (as defined in Section 3.13 below), other than those
licensed, transferred or granted in the ordinary course of Worldprints'
business; or
(r) any agreement or arrangement made by Worldprints or any
of its subsidiaries to take any action which, if taken prior to the Agreement
Date, would have made any representation or warranty of Worldprints set forth in
Article 3 of this Agreement untrue or incorrect as of the date when made.
3.11 Contracts and Commitments/Licenses and Permits. Item 3.11 to
---------------------------------------------- ---------
the Worldprints Disclosure Letter sets forth a list of each of the following (i)
written or oral contracts, agreements, commitments or other instruments to which
Worldprints or any of its subsidiaries is a party or to which Worldprints or any
of its subsidiaries or any of their respective assets or properties is bound and
(ii) licenses and permits held by Worldprints:
(a) any website hosting, website linking, content or data
sharing, data feed, information exchange, advertising, fee sharing, lead or
customer referral, commerce, co-branding, framing, service, order or transaction
processing or similar agreement relating to any aspect or element of any of the
Worldprints Websites or any other website;
(b) any distributor, OEM (Original Equipment Manufacturer),
VAR (Value Added Reseller), sales representative or similar agreement under
which any third party is authorized to sell, sublicense, lease, distribute,
market or take orders for, any product, service or technology of Worldprints or
any of its subsidiaries;
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(c) any continuing contract for the future purchase, sale,
license, provision or manufacture of products, material, supplies, equipment or
services requiring payment to or from Worldprints or any of its subsidiaries in
an amount in excess of $25,000 per annum which is not terminable on ninety or
fewer days' notice without cost or other liability to Worldprints;
(d) any contract or commitment in which Worldprints or any
of its subsidiaries has granted or received most favored customer pricing
provisions or exclusive marketing, on-line distribution or other rights relating
to any product or service, group of products or services, market or geographic
territory;
(e) any contract providing for the development of any
software, content (including, without limitation, textual content and visual,
photographic or graphics content), technology or intellectual property for (or
for the benefit or use of) Worldprints and/or any of its subsidiaries, or
providing for the purchase or license of any software, content (including,
without limitation, textual content and visual or graphics content), technology
or intellectual property to (or for the benefit or use of) Worldprints and/or
any of its subsidiaries, which software, content, technology or intellectual
property is in any manner used or incorporated (or is contemplated by
Worldprints to be used or incorporated) (i) in connection with any aspect or
element of any of the Worldprints Websites; (ii) in any product or service
currently sold, licensed, provided, leased, distributed or marketed by
Worldprints or any of its subsidiaries (other than software generally available
to the public at a per copy license fee of less than $500 per copy);
(f) any joint venture or partnership contract or agreement
or other agreement which has involved, or is reasonably expected to involve, a
sharing of profits, expenses or losses with any other party;
(g) any contract or commitment for or relating to the
employment of any officer, employee or consultant of Worldprints or any of its
subsidiaries or any other type of contract or understanding with any officer,
employee or consultant of Worldprints or any of its subsidiaries that is not
immediately terminable by Worldprints or the applicable Worldprints subsidiary
without cost or other liability;
(h) any indenture, mortgage, trust deed, promissory note,
loan agreement, security agreement, guarantee or other agreement or commitment
for the borrowing of money, for a line of credit or for a leasing transaction of
a type required to be capitalized in accordance with Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board;
(i) any lease or other agreement under which Worldprints or
any of its subsidiaries is lessee of or holds or operates any items of tangible
personal property or real property owned by any third party and under which
payments to such third party exceed $10,000 per annum;
(j) any agreement or arrangement for the sale, licensing or
leasing of any assets, properties, products, services or rights having a value
in excess of $10,000;
(k) any agreement that restricts Worldprints or any of its
subsidiaries from engaging in any aspect of its business, from participating or
competing in any line of business
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or market or that restricts Worldprints or any of its subsidiaries from engaging
in any business in any market or geographic area;
(l) any Worldprints IP Rights Agreement (as defined in
Section 3.13);
(m) any agreement relating to the sale, issuance, grant,
exercise, award, purchase, repurchase or redemption of any shares of capital
stock or other securities of Worldprints or any of its subsidiaries or any
options, warrants or other rights to purchase or otherwise acquire any such
shares of capital stock, other securities or options, warrants or other rights
therefor;
(n) any consulting or similar agreement under which
Worldprints or any of its subsidiaries provides any advice or services to a
third party for an annual compensation to Worldprints of $20,000 per year or
more;
(o) any contract with or commitment to any labor union;
(p) any contract or arrangement under which Worldprints or
any of its subsidiaries has made any commitment to develop any new technology,
to deliver any software currently under development or to enhance or customize
any software;
(q) any other agreement, contract, commitment or instrument
that is material to the business of Worldprints or any of its subsidiaries or
that involves a future commitment by Worldprints or any of its subsidiaries in
excess of $25,000; and
(r) any Governmental Permit (as defined in Section 3.14.4).
A true and complete copy of each agreement or document required by this
subsections (a) through (q) of this Section to be listed on Item 3.11 to the
---------
Worldprints Disclosure Letter (such agreements and documents being hereinafter
collectively referred to as the "Worldprints Material Agreements") and a copy of
each Governmental Permit required by subsection (r) of this Section to be listed
on Item 3.11 to the Worldprints Disclosure Letter has been delivered to
Excite@Home.
3.12 No Default; No Consent Required; No Restrictions. Neither Worldprints
------------------------------------------------
nor any of its subsidiaries is in material breach or default under any
Worldprints Material Agreement. Neither Worldprints nor any of its subsidiaries
has any material liability for renegotiation of government contracts or
subcontracts, if any. Except as set forth in Item 3.12 to the Worldprints
---------
Disclosure Letter, no consent, notice or approval of any third party is required
to ensure that, following the Effective Time, any Worldprints Material Agreement
will continue to be in full force and effect without any breach or violation
thereof caused by virtue of the Merger or by any other transaction called for by
this Agreement or any Worldprints Ancillary Agreement. Except as set forth in
Item 3.12 to the Worldprints Disclosure Letter, neither Worldprints nor any of
- ---------
its subsidiaries is a party to, and no asset or property of Worldprints or any
of its subsidiaries is bound or affected by, any judgment, injunction, order,
decree, contract, covenant or agreement (noncompete or otherwise) that restricts
or prohibits, purports to restrict or prohibit, Worldprints or any of its
subsidiaries or, following the Effective Time, the Surviving Corporation or
Excite@Home, from freely engaging in any business now conducted by any of them
or from competing anywhere in the world (including, without limitation, any
contracts, covenants or agreements restricting the geographic area in which
Worldprints or any of its subsidiaries may sell, license, market, distribute or
support any products or
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<PAGE>
technology or provide services, or restricting the markets, customers or
industries that Worldprints or any of its subsidiaries may address in operating
their respective businesses), or includes any grants by Worldprints of exclusive
rights or licenses. Except as set forth in Item 3.12 to the Worldprints
---------
Disclosure Letter, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or would reasonably
be expected to, (a) result in a violation or breach of any of the provisions of
any Worldprints Material Agreement, (b) give any third party (i) the right to
declare a default or exercise any remedy under any Worldprints Material
Agreement, (ii) the right to a rebate, chargeback, penalty or change in delivery
schedule under any Worldprints Material Agreement, (iii) the right to accelerate
the maturity or performance of any obligation of Worldprints or any of its
subsidiaries under any Worldprints Material Agreement, or (iv) the right to
cancel, terminate or modify any Worldprints Material Agreement, except in each
such case for such defaults, acceleration rights, termination rights and other
rights that have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Worldprints.
Except as set forth in Item 3.12 to the Worldprints Disclosure Letter, neither
---------
Worldprints nor any subsidiary of Worldprints has received any notice or other
communication regarding any actual or possible violation or breach of, or
default under, any Worldprints Material Agreement.
3.13 Intellectual Property.
---------------------
3.13.1 Worldprints and its subsidiaries own, or have the valid right
or license to use, possess, sell, license, copy, distribute, market, advertise
and/or dispose of all Intellectual Property Rights (as defined below) and
Worldprints Materials (as defined below) necessary or required for the conduct
of the business of Worldprints and its subsidiaries as presently conducted,
including, without limitation, the operation of each of the Worldprints Websites
(such Intellectual Property Rights together with the Worldprints Materials being
hereinafter collectively referred to as the "Worldprints IP Rights"). As used
herein, the term "Intellectual Property Rights" means, collectively, all
worldwide industrial and intellectual property rights, including, without
limitation, patents, patent applications, patent rights, trademarks, trademark
registrations and applications therefor, trade dress rights, trade names,
service marks, service mark registrations and applications therefor, Internet
domain names, Internet and World Wide Web URLs or addresses, copyrights,
copyright registrations and applications therefor, moral and economic rights of
authors and inventors, however denominated, throughout the world, rights of
privacy and publicity, mask work rights, mask work registrations and
applications therefor, inventions, trade secrets and know-how. As used herein,
the term "Worldprints Materials" means, collectively, all user data, databases,
data collection, datamarks, database architectures and all rights therein,
franchises, licenses, customer lists, supplier lists, proprietary processes and
formulae, software source code and object code, algorithms, net lists,
architectures, structures, screen displays, photographs, images, layouts,
inventions, development tools, designs, blueprints, specifications, technical
drawings (or similar information in electronic format) and all documentation and
media constituting, describing or relating to the foregoing, including, without
limitation, manuals, programmers' notes, memoranda and records.
3.13.2 Neither the execution, delivery and performance of this
Agreement, the Plan of Merger, or the consummation of the Merger and the other
transactions contemplated hereby and/or by Worldprints Ancillary Agreements
will: (a) constitute a material breach of or default under any instrument,
contract, license or other agreement governing any Worldprints IP Right to
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which Worldprints or any of its subsidiaries is a party (collectively, the
"Worldprints IP Rights Agreements"); (b) cause the forfeiture or termination of,
or give rise to a right of forfeiture or termination of, any Worldprints IP
Right; or (c) materially impair the right of Worldprints or the Surviving
Corporation to use, possess, sell or license any Worldprints IP Right or portion
thereof. Except as set forth in Item 3.13.2 to the Worldprints Disclosure
-----------
Letter, there are no royalties, honoraria, fees or other payments payable by
Worldprints or any of its subsidiaries to any third person by reason of the
ownership, use, possession, license, sale, marketing, advertising or disposition
of any Worldprints IP Rights by Worldprints or any of its subsidiaries.
3.13.3 Neither the manufacture, marketing, license, sale, furnishing
or intended use of any product or service (including, without limitation, any
product or service offered to users of any of the Worldprints Websites)
currently licensed, utilized, sold, provided or furnished by Worldprints or any
of its subsidiaries violates any license or agreement between Worldprints and
any third party or infringes or misappropriates any Intellectual Property Right
of any other party; and, except as set forth in Item 3.13.3 to the Worldprints
-----------
Disclosure Letter, there is not pending or, to the knowledge of Worldprints or
any Worldprints Founder, threatened, any claim or litigation contesting the
validity, ownership or right of Worldprints or any of its subsidiaries to use,
possess, sell, market, advertise, license or dispose of any Worldprints IP Right
nor, to the knowledge of Worldprints or any Worldprints Founder, is there any
basis for any such claim nor, except as set forth in Item 3.13.3 to the
-----------
Worldprints Disclosure Letter, has Worldprints received any notice asserting
that any Worldprints IP Right or the proposed use, sale, license or disposition
thereof conflicts or will conflict with the rights of any other party, nor, to
the knowledge of Worldprints or any of the Worldprints Founders, is there any
basis for any such assertion.
3.13.4 To Worldprints' and each of the Worldprints Founders'
knowledge, no employee, consultant or independent contractor of Worldprints or
any subsidiary of Worldprints: (a) is in material violation of any term or
covenant of any employment contract, patent disclosure agreement, invention
assignment agreement, non-disclosure agreement, noncompetition agreement or any
other contract or agreement with Worldprints; or (b) has developed any
technology, software or other copyrightable, patentable, or otherwise
proprietary work for Worldprints or any of its subsidiaries that is subject to
any agreement under which such employee, consultant or independent contractor
has assigned or otherwise granted to any third party any rights (including,
without limitation, Intellectual Property) in or to such technology, software or
other copyrightable, patentable or otherwise proprietary work or any
Intellectual Property related thereto. To Worldprints' and each of the
Worldprints Founders' knowledge, the employment of any employee of Worldprints
or any subsidiary of Worldprints or the use by Worldprints or any subsidiary of
Worldprints of the services of any consultant or independent contractor does not
subject Worldprints or any such subsidiary to any liability to any third party.
3.13.5 To Worldprints' and each of the Worldprints Founders'
knowledge, except as set forth on Item 3.13.5 to the Worldprints Disclosure
-----------
Letter, there are no and will be no royalties, honoraria, fees or other payments
(other than salaries payable to employees and amounts payable to independent
contractors not contingent on or related to use of their work product) pursuant
to agreements in effect as of the Effective Time payable by Worldprints or any
of its subsidiaries to any third person by reason of the ownership, use,
possession, license, copying, modifying, making derivative works of, sale,
marketing, advertising and/or disposition of any Worldprints IP Rights by
Worldprints or any of its subsidiaries before or after the Closing Date.
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3.13.6 Worldprints has taken commercially reasonable and adequate
precautions to protect, preserve and maintain the secrecy and confidentiality of
the Worldprints IP Rights and all Worldprints' ownership interests and
proprietary rights therein. All officers, employees and consultants of
Worldprints and its subsidiaries having access to proprietary information of
Worldprints or its subsidiaries, its customers or business partners, have
executed and delivered to Worldprints an agreement regarding the protection of
such proprietary information and the assignment of inventions to Worldprints;
and copies of the form of all such agreements have been delivered to
Excite@Home. Worldprints has secured valid written assignments from all
consultants, contractors and employees who were involved in, or who contributed
to, the creation or development of any Worldprints IP Rights, of the rights to
such contributions that may be owned by such persons or that Worldprints does
not already own by operation of law. No current or former employee, officer,
director, consultant or independent contractor of Worldprints or of any
subsidiary of Worldprints has any right, license, claim or interest whatsoever
in or with respect to any Worldprints IP Rights.
3.13.7 Item 3.13.7 to the Worldprints Disclosure Letter contains a
-----------
true and complete list of (i) all worldwide registrations by Worldprints or its
subsidiaries of any patents, copyrights, mask works, trademarks, service marks,
Internet domain names or Internet or World Wide Web URLs or addresses with any
governmental or quasi-governmental authority; (ii) all applications,
registrations, filings and other formal actions made or taken pursuant to
federal, state and foreign laws by Worldprints or its subsidiaries to secure,
perfect or protect its interest in Worldprints IP Rights, including, without
limitation, all patent applications, copyright applications, and applications
for registration of trademarks and service marks, (iii) all unregistered
copyrights, trademarks and service marks of Worldprints or its subsidiaries. All
patents, and all registered trademarks, service marks, Internet domain names,
Internet or World Wide Web URLs or addresses and copyrights held by Worldprints
or its subsidiaries are valid, enforceable and subsisting. Each material
registered item of Worldprints Intellectual Property is valid and subsisting,
and, to Worldprints' and each of the Worldprints Founders' knowledge, all
necessary registration maintenance and renewal fees currently due in connection
with such registered item of Worldprints Intellectual Property have been paid
and filed with the appropriate patent, copyright, trademark or other
Governmental Authority in the Untied States or in applicable foreign
jurisdictions, as the case may be, for the purposes of maintaining and
preserving such item of Worldprints Intellectual Property.
3.13.8 Item 3.13.8 to the Worldprints Disclosure Letter contains a
-----------
true and complete list of (i) all licenses, sublicenses and other agreements as
to which Worldprints or any of its subsidiaries is a party and pursuant to which
any person or entity is authorized to use any Worldprints IP Rights, and (ii)
all licenses, sublicenses and other agreements as to which Worldprints or any of
its subsidiaries is a party and pursuant to which Worldprints or any of its
subsidiaries is authorized to use any third-party patents, trademarks, Internet
domain names, Internet or World Wide Web URLs or addresses, or copyrights,
including, but not limited to, software ("Third Party IP Rights") which would be
infringed by, or are incorporated in, or form a part of, any product or service
sold, licensed, distributed, provided or marketed by Worldprints or any of its
subsidiaries.
3.13.9 Except as set forth in Item 3.13.9 to the Worldprints
-----------
Disclosure Letter, neither Worldprints nor any of its subsidiaries, nor any
other party acting on its or their behalf, has
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<PAGE>
disclosed or delivered to any party, or permitted the disclosure or delivery to
any escrow agent or other party, of any Worldprints Source Code (as defined
below). No event has occurred, and no circumstance or condition exists, that
(with or without notice or lapse of time) will, or would reasonably be expected
to, result in the disclosure or delivery to any party of any Worldprints Source
Code (as defined below). Item 3.13.9 to the Worldprints Disclosure Letter
-----------
identifies each contract, agreement and instrument (whether written or oral)
pursuant to which Worldprints has deposited, or is or may be required to
deposit, with an escrowholder or any other party, any Worldprints Source Code
and further describes whether the execution of this Agreement or the
consummation of the Merger or any of the other transactions contemplated hereby,
in and of itself, would reasonably be expected to result in the release from
escrow of any Worldprints Source Code. As used in this Section 3.13.9,
"Worldprints Source Code" means, collectively, any software source code, or any
material portion or aspect of the software source code of the Image Catcher
Wallpaper/Screensaver software currently made available on the Worldprints
Websites.
3.13.10 Except as set forth in Item 3.13.10 to the Worldprints
------------
Disclosure Letter, to Worldprints' and each of the Worldprints Founders'
knowledge, there is no unauthorized use, disclosure, infringement or
misappropriation of any Worldprints IP Rights or any of its subsidiaries by any
third party, including any employee or former employee of Worldprints or any of
its subsidiaries. Except as set forth in Item 3.13.10 to the Worldprints
------------
Disclosure Letter, neither Worldprints nor any of its subsidiaries has agreed to
indemnify any person for any infringement of any Intellectual Property of any
third party by any product or service that has been sold, licensed, leased,
supplied, marketed, distributed, or provided by Worldprints.
3.13.11 To Worldprints' and each of the Worldprints Founders'
knowledge, all software developed by Worldprints and licensed by Worldprints or
any of its subsidiaries to customers and all other products manufactured, sold,
licensed, leased or delivered by Worldprints or any of its subsidiaries to
customers and all services provided by Worldprints or any of its subsidiaries to
customers on or prior to the Closing Date conform in all material respects to
applicable contractual commitments, express and implied warranties, product
specifications and product documentation and to any representations provided to
customers and neither Worldprints nor any of its subsidiaries has any material
liability (and, to Worldprints' and each of the Worldprints Founders' knowledge,
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against Worldprints or any of
its subsidiaries giving rise to any liability that could have a Material Adverse
Effect on Worldprints) for replacement or repair thereof or other damages in
connection therewith in excess of any reserves therefor reflected on the Balance
Sheet.
3.13.12 All of the software and other technology developed by
Worldprints or any of its subsidiaries is Year 2000 Compliant. To Worldprints'
and each of the Worldprints Founders' knowledge, all software, hardware and
other technology utilized by Worldprints in connection with any of the
Worldprints Websites or otherwise used in connection with the Worldprints
business as presently conducted are Year 2000 Compliant. "Year 2000 Compliant"
means, as applied to software or other technology, that: (i) such software or
other technology will operate and correctly store, represent and process
(including sort) all dates (including single and multi-century formulas and leap
year calculations), such that errors will not occur when the date being used is
in the Year 2000, or in a year preceding or following the Year 2000; (ii) such
software or other technology has been written and tested to support numeric and
date transitions from the twentieth century to the
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twenty-first century, and back (including without limitation all calculations,
aging, reporting, printing, displays, reversals, disaster and vital records
recoveries) without error, corruption or impact to current and/or future
operations; and (iii) such software or other technology will function without
error or interruption related to any date information, specifically including
errors or interruptions from functions which may involve date information from
more than one century. This warranty does not apply to any failure or error to
the extent caused by third-party owned software or other technology that was not
developed by Worldprints or any of its subsidiaries or which is not utilized by
Worldprints in connection with any of the Worldprints Websites or otherwise used
in connection with the Worldprints business as currently conducted.
3.14 Compliance with Laws.
--------------------
3.14.1 Worldprints and each of its subsidiaries has complied, and
is now and at the Closing Date will be in material compliance with, all
applicable federal, state, local or foreign laws, ordinances, regulations, and
rules, and all orders, writs, injunctions, awards, judgments, and decrees
applicable to it or to its material assets, properties, and business (and any
regulations promulgated thereunder) (collectively, "Applicable Law").
Worldprints and each of its subsidiaries hold all valid licenses and other
governmental permits that are necessary and/or legally required to be held by
them to conduct their respective businesses as presently conducted, except where
the failure to hold such licenses or permits, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on
Worldprints.
3.14.2 Each of the Worldprints Websites and all materials and
products distributed or marketed by Worldprints have at all times made all
disclosures to users or customers required by Applicable Law and none of such
disclosures made or contained in any Worldprints Website or in any such
materials have been inaccurate, misleading or deceptive, except where the
failure to make such disclosures, or where such inaccurate, misleading or
deceptive disclosures, individually or in the aggregate, would not have a
Material Adverse Effect on Worldprints.
3.14.3 Worldprints and each of its subsidiaries has at all times
been in compliance with Applicable Laws relating to the privacy of users of each
of the Worldprints Websites, except where the failure to so be in compliance,
individually or in the aggregate, would not have a Material Adverse Effect on
Worldprints.
3.14.4 Worldprints and each of its subsidiaries holds all permits,
licenses and approvals from, and has made all filings with, government (and
quasi-governmental) agencies and authorities, that are necessary for Worldprints
to conduct its present business without any violation of Applicable Law
("Governmental Permits") and all such Governmental Permits are in full force and
effect, except where the failure to hold such licenses or permits, or make such
filings, or maintain such Governmental Permits in full force and effect,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Worldprints. Neither Worldprints nor any of its
subsidiaries has received any notice or other communication from any
Governmental Authority (or quasi-governmental authority) regarding (a) any
actual or possible violation of law or any Governmental Permit or any failure to
comply with any term or requirement of any Governmental Permit, or (b) any
actual or possible revocation, withdrawal, suspension, cancellation, termination
or modification of any Governmental Permit.
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3.14.5 Neither Worldprints nor any of its subsidiaries, nor any
director, officer, agent or employee of Worldprints and/or any of its
subsidiaries, has, for or on behalf of Worldprints or any of its subsidiaries,
(i) used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
payment.
3.15 Certain Transactions and Agreements. Except as set forth in Item
-----------------------------------
3.15 to the Worldprints Disclosure Letter, none of the officers or directors of
Worldprints, the Worldprints Founders, or, to Worldprints' or the Worldprints
Founders' knowledge, the Worldprints Shareholders or employees of Worldprints,
nor to Worldprints' or the Worldprints Founders' knowledge, any member of their
immediate families, has any direct or indirect ownership interest in any firm or
corporation that competes with, or does business with, or has any contractual
arrangement with, Worldprints (except with respect to any interest in less than
five percent of the stock of any corporation whose stock is publicly traded).
Except as set forth in Item 3.15 to the Worldprints Disclosure Letter, none of
said officers or directors, or the Worldprints Founders, nor to Worldprints' or
the Worldprints Founders' knowledge, any of the Worldprints Shareholders or
Worldprints employees, nor any member of their immediate families, is a party
to, or otherwise directly or indirectly interested in, any contract or informal
arrangement with Worldprints, except for normal compensation for services as an
officer, director or employee thereof that have been disclosed to Excite@Home
and except for agreements related to the purchase of the stock of Worldprints by
such persons. None of said officers or directors, or the Worldprints Founders,
nor to Worldprints' or the Worldprints Founders' knowledge, any of the
Worldprints Shareholders or Worldprints employees, nor their family members has
any interest in any property, real or personal, tangible or intangible
(including but not limited to any Worldprints IP Rights or any other
Intellectual Property) that is used in, or that pertains to, the business of
Worldprints, except for the normal rights of a shareholder.
3.16 Employees, ERISA and Other Compliance.
-------------------------------------
3.16.1 Worldprints and its subsidiaries are in compliance in all
material respects with all applicable laws, agreements and contracts relating to
employment, employment practices, immigration, wages, hours, and terms and
conditions of employment, including, but not limited to, employee compensation
matters. A list of all employees, officers and consultants of Worldprints and
its subsidiaries and their current title and/or job description and compensation
is set forth on Item 3.16.1 to Worldprints Disclosure Letter. Worldprints and
-----------
its subsidiaries do not have any employment contracts or consulting agreements
currently in effect that are not terminable at will (other than agreements with
the sole purpose of providing for the confidentiality of proprietary information
or assignment of inventions).
3.16.2 Neither Worldprints nor any of its subsidiaries (i) now is,
nor has ever been, subject to a union organizing effort, (ii) is subject to any
collective bargaining agreement with respect to any of its employees, (iii) is
subject to any other contract, written or oral, with any trade or labor union,
employees' association or similar organization or (iv) has any current labor
disputes. Worldprints and its subsidiaries have good labor relations, and
Worldprints and the Worldprints Founders have no knowledge of any facts
indicating that the consummation of the Merger or any of
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the other transactions contemplated hereby will have a Material Adverse Effect
on such labor relations, and have no knowledge that any of their key employees
intends to leave their employ. Except as provided in Item 3.16.2 to the
Worldprints Disclosure Letter, all of the employees of Worldprints and its
subsidiaries are legally permitted to be employed by Worldprints or its
subsidiaries in the United States of America in their current job capacities.
3.16.3 Neither Worldprints nor any of its subsidiaries has any
pension plan which constitutes, or has since the enactment of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") constituted, a
"multiemployer plan" as defined in Section 3(37) of ERISA. No pension plan of
Worldprints or any of its subsidiaries is subject to Title IV of ERISA.
3.16.4 (a) Item 3.16.4 to the Worldprints Disclosure Letter lists
-----------
each employment, severance or other similar contract, arrangement or policy,
each "employee benefit plan" as defined in Section 3(3) of ERISA and each plan
or arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' benefits, vacation benefits, severance
benefits, disability benefits, death benefits, hospitalization benefits,
retirement benefits, deferred compensation, profit-sharing, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
for employees, consultants or directors which is entered into, maintained or
contributed to by Worldprints or any of its subsidiaries and covers any employee
or former employee of Worldprints or any of its subsidiaries. Such contracts,
plans and arrangements as are described in this Section 3.16.4 are hereinafter
collectively referred to as "Worldprints Benefit Arrangements."
(b) Each Worldprints Benefit Arrangement has been
maintained in compliance in all material respects with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Worldprints Benefit Arrangement, and each such
Worldprints Benefit Arrangement that is an "employee pension benefit plan" as
defined in Section 3(2) of ERISA which is intended to qualify under Section
401(a) of the Code has received a favorable determination letter that such plan
satisfied the requirements of the Tax Reform Act of 1986 (a copy of which
letter(s) have been delivered to Excite@Home).
(c) Worldprints has delivered to Excite@Home a complete and
correct copy and description of each Worldprints Benefit Arrangement.
(d) Worldprints (and/or its subsidiary, if applicable) has
timely filed and delivered to Excite@Home and its counsel the most recent annual
report (Form 5500) for each Worldprints Benefit Arrangement that is an "employee
benefit plan" as defined under ERISA.
(e) Neither Worldprints nor any of its subsidiaries has
ever been a participant in any "prohibited transaction", within the meaning of
Section 406 of ERISA with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA) which Worldprints or any of its subsidiaries
sponsors as employer or in which Worldprints or any of its subsidiaries
participates as an employer, which was not otherwise exempt pursuant to Section
408 of ERISA (including any individual exemption granted under Section 408(a) of
ERISA), or which could result in an excise tax under the Code.
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(f) All contributions due from Worldprints or any of its
subsidiaries with respect to any of Worldprints Benefit Arrangements have been
made or have been accrued on Worldprints' financial statements (including,
without limitation, the Worldprints Financial Statements), and no further
contributions will be due or will have accrued thereunder as of the Closing
Date.
(g) All individuals who, pursuant to the terms of any
Worldprints Benefit Arrangement, are entitled to participate in any such
Worldprints Benefit Arrangement, are currently participating in such Worldprints
Benefit Arrangement or have been offered an opportunity to do so and have
declined in writing.
3.16.5 Except as provided in Item 3.16.5 to the Worldprints
Disclosure Letter, there has been no amendment to, written interpretation or
announcement (whether or not written) by Worldprints relating to, or change in
employee participation or coverage under, any Worldprints Benefit Arrangement
that would increase materially the expense of maintaining such Worldprints
Benefit Arrangement above the level of the expense incurred in Worldprints'
fiscal year ended December 31, 1999.
3.16.6 The group health plans (as defined in Section 4980B(g) of
the Code) that benefit employees of Worldprints are in compliance, in all
material respects, with the continuation coverage requirements of Section 4980B
of the Code as such requirements affect Worldprints, its subsidiaries and their
employees. As of the Closing Date, there will be no material outstanding,
uncorrected violations under the Consolidation Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), with respect to any of Worldprints Benefit
Arrangements, covered employees, or qualified beneficiaries that could
reasonably be expected to result in a Material Adverse Effect on Worldprints, or
in a Material Adverse Effect on Excite@Home after the Effective Time.
3.16.7 No benefit payable or which may become payable by
Worldprints or any of its subsidiaries pursuant to any Worldprints Benefit
Arrangement or as a result of or arising under this Agreement or the Plan of
Merger will constitute an "excess parachute payment" (as defined in Section
280G(b)(1) of the Code) which is subject to the imposition of an excise Tax
under Section 4999 of the Code or which would not be deductible by reason of
Section 280G of the Code. Except as provided in Item 3.16.7 to the Worldprints
Disclosure Letter, neither Worldprints nor any subsidiary of Worldprints is a
party to any: (a) agreement with any executive officer or other key employee
thereof (i) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Worldprints
or such Worldprints subsidiary in the nature of the Merger or any of the other
transactions contemplated by this Agreement or any Worldprints Ancillary
Agreement, (ii) providing any term of employment or compensation guarantee, or
(iii) providing severance benefits or other benefits after the termination of
employment of such employee regardless of the reason for such termination of
employment; or (b) agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights 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 the Merger or any of the other transactions
contemplated by this Agreement or any Worldprints Ancillary 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 or any Worldprints Ancillary
Agreement.
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3.17 Corporate Documents. Worldprints has made available to Excite@Home
-------------------
for examination all documents and information listed in the Worldprints
Disclosure Letter or in any schedule thereto or in any other exhibit or schedule
called for by this Agreement which have been requested by Excite@Home, including
the following: (a) copies of Worldprints' Articles of Incorporation and Bylaws
as currently in effect; (b) Worldprints' minute book containing all records of
all proceedings, consents, actions, and meetings of Worldprints' shareholders,
board of directors and any committees thereof (other than any records of
proceedings concerning the deliberations of the shareholders, directors or
members of committees of Worldprints regarding the Merger or this Agreement,
deliberations regarding contractual or other relationships between Worldprints
and Excite@Home or any other party related to Excite@Home, or deliberations
regarding World Venture Partners, Inc. (collectively, the "Excluded
Materials")); (c) Worldprints' stock ledger, option ledger, and warrant ledger
and journal reflecting all stock issuances and transfers, and all grants of
options and warrants to purchase Worldprints capital stock and other Worldprints
securities; (d) all permits, orders, and consents issued by, and filings by
Worldprints with, any regulatory agency with respect to Worldprints, or any
securities of Worldprints, and all applications for such permits, orders, and
consents; and (e) all the Worldprints Material Agreements; provided, that the
--------
Excluded Materials will be provided to Excite@Home immediately following the
Closing.
3.18 No Brokers. Neither Worldprints, any subsidiary of Worldprints nor
----------
any affiliate of Worldprints or any of its subsidiaries is obligated for the
payment of any fees or expenses of any investment banker, broker, finder or
similar party in connection with the origin, negotiation or execution of this
Agreement or in connection with the Merger or any other transaction contemplated
by this Agreement, and Excite@Home will not incur any liability, either directly
or indirectly, to any such investment banker, broker, finder or similar party as
a result of, this Agreement, the Merger or any act or omission of Worldprints,
any of its employees, officers, directors, shareholders, agents, subsidiaries or
affiliates.
3.19 Books and Records.
-----------------
3.19.1 The books, records and accounts of Worldprints (a) are in all
material respects true, complete and correct, (b) have been maintained in
accordance with good business practices, (c) are stated in reasonable detail and
accurately and fairly reflect the transactions and dispositions of the assets of
Worldprints, and (d) accurately and fairly reflect the basis for the Worldprints
Financial Statements.
3.19.2 Worldprints has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that: (a)
transactions are executed in accordance with management's general or specific
authorization; (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such statements, and
(ii) to maintain accountability for assets; and (c) the amount recorded for
assets on the books and records of Worldprints is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
3.20 Insurance. Except as set forth in Item 3.20 to the Worldprints
---------
Disclosure Letter, during the prior two years, Worldprints (including its
predecessor) and its subsidiaries have maintained, and now maintain, policies of
insurance and bonds of the type and in amounts
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customarily carried by persons conducting businesses or owning assets similar in
type and size to those of Worldprints and its subsidiaries, including, without
limitation, all legally required workers' compensation insurance and errors and
omissions, casualty, fire and general liability insurance. 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.
All premiums due and payable under all such policies and bonds have been timely
paid, and Worldprints and its subsidiaries are otherwise in compliance with the
terms of such policies and bonds. Worldprints and the Worldprints Founders have
no knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies. All policies of insurance now held by
Worldprints or any of its subsidiaries are set forth in Item 3.20 to the
---------
Worldprints Disclosure Letter, together with the name of the insurer under each
policy, the type of policy, the policy coverage amount and any applicable
deductible.
3.21 Environmental Matters.
---------------------
3.21.1 Worldprints and its subsidiaries are in compliance with all
applicable Environmental Laws (as defined below), which compliance includes the
possession by Worldprints and its subsidiaries of all permits and other
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof, except where the failure to so
be in compliance, individually or in the aggregate, would not have a Material
Adverse Effect on Worldprints. Neither Worldprints nor any of its subsidiaries
has received any notice or other communication (in writing or otherwise),
whether from a governmental body, citizens-group, employee or otherwise, that
alleges that Worldprints or any of its subsidiaries is not in compliance with
any Environmental Law, and, to Worldprints' and each of the Worldprints
Founders' knowledge, there are no circumstances that may prevent or interfere
with the compliance by Worldprints or any of its subsidiaries with any current
Environmental Law in the future. To Worldprints' and each of the Worldprints
Founders' knowledge, no current or prior owner of any property leased or
possessed by Worldprints or any of its subsidiaries has received any notice or
other communication (in writing or otherwise), whether from a government body,
citizens-group, employee or otherwise, that alleges that such current or prior
owner or Worldprints or any of its subsidiaries is not in compliance with any
Environmental Law. All governmental authorizations currently held by
Worldprints or any of its subsidiaries pursuant to any Environmental Law (if
any) are identified in Item 3.21 to the Worldprints Disclosure Letter.
---------
3.21.2 For purposes of this Section 3.21: (i) "Environmental Law"
means any federal, state, local or foreign statute, law regulation or other
legal requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; and (ii) "Material of Environmental Concern" include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is currently regulated by an
Environmental Law or that is otherwise generally recognized to be a danger to
health, reproduction or the environment.
3.22 Board Approval. The Board of Directors of Worldprints has
--------------
unanimously (other than any director who has recused himself from such actions)
(i) approved this Agreement, the Plan
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of Merger and the Merger and all the agreements, transactions and actions
contemplated hereby that require board of directors approval under applicable
law and Worldprints' Articles of Incorporation and Bylaws, (ii) determined that
the Merger is in the best interests of the shareholders of Worldprints and is on
terms that are fair to such shareholders, and has recommended the Merger to the
Worldprints Shareholders, and (iii) submitted this Agreement, the Merger and the
other transactions and agreements contemplated by this Agreement that require
shareholder approval under applicable law and Worldprints' Articles of
Incorporation and Bylaws to the vote and approval of Worldprints' shareholders.
3.23 Shareholder Approval. Concurrently with the execution of this
--------------------
Agreement, Worldprints Shareholders who collectively own at least 96% of the
issued and outstanding capital stock of Worldprints will have voted or given
written consents approving the Merger, this Agreement and the other transactions
contemplated thereby that require shareholder approval under applicable law and
Worldprints' Articles of Incorporation and Bylaws in conformance with applicable
law and Worldprints' charter documents.
3.24 Disclosure. Neither this Agreement, its exhibits and schedules and
----------
the Worldprints Disclosure Letter, nor any of the certificates or documents to
be delivered by Worldprints to Excite@Home under this Agreement, taken together,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein and therein, in
light of the circumstances under which such statements were made, not
misleading.
3.25 Tax Matters. The representations of Worldprints set forth in
-----------
Schedule 3.25 are true and correct in all respects.
Article 4
Representations and Warranties of Excite@Home and Sub
Excite@Home and Sub hereby represent and warrant to Worldprints that, except
as set forth in the letter addressed to Worldprints from Excite@Home and dated
as of the Agreement Date which has been delivered by Excite@Home to Worldprints
concurrently herewith (the "Excite@Home Disclosure Letter"), each of the
following representations, warranties and statements contained in the following
Sections of this Article 4 are true and correct as of the Agreement Date and
will be true and correct on and as of the Closing Date. For all purposes of this
Agreement, the statements contained in the Excite@Home Disclosure Letter and its
schedules shall also be deemed to be representations and warranties made and
given by Excite@Home and Sub under Article 4 of this Agreement.
The receipt by Worldprints of information pursuant to Section 6.1 or
otherwise on or before the Closing, shall not limit the right of Worldprints
under Article 8 to require as a condition precedent to the performance of its
obligations under this Agreement on such Closing Date the accuracy in all
material respects of the representations and warranties made by the representing
party in this Agreement (as provided in Article 8) and the performance in all
material respects of the covenants of Excite@Home made in this Agreement
(without regard to such information) and to receive a certificate with respect
to the same.
4.1 Organization and Good Standing. Excite@Home is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and authority to own, operate and lease
its properties and to carry on its business as now
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conducted and as proposed to be conducted, and is qualified to transact
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
make such qualification necessary, except in any jurisdiction in which the
failure to so qualify or be in good standing would not be reasonably expected to
have a Material Adverse Effect on Excite@Home. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, and has the corporate power and authority to own, operate and lease
its properties and to carry on its business. Sub was formed solely to consummate
the Merger and has not carried on any business since the date of its
organization. Excite@Home owns all of the issued and outstanding capital stock
of Sub.
4.2 Power, Authorization and Validity.
---------------------------------
4.2.1 Power and Authority. Excite@Home has all requisite corporate
-------------------
power and authority to enter into, execute, deliver and perform its obligations
under, this Agreement and all the Excite@Home Ancillary Agreements. The
execution, delivery and performance of this Agreement and each of the
Excite@Home Ancillary Agreements by Excite@Home have been duly and validly
approved and authorized by Excite@Home's Board of Directors in compliance with
applicable law (including the Delaware General Corporation Law) and
Excite@Home's Certificate of Incorporation and Bylaws, each as amended. Sub has
all requisite corporate power, capacity and authority to execute, deliver and
perform its obligations under, this Agreement and all the Sub Ancillary
Agreements and to consummate the Merger. The execution, delivery and performance
of this Agreement and each of the Sub Ancillary Agreements by Sub have been duly
and validly approved and authorized by Sub's Board of Directors and its sole
stockholder in compliance with applicable law (including Colorado law) and Sub's
Articles of Incorporation and bylaws, each as amended.
4.2.2 No Consents. No consent, approval, order or authorization
-----------
of, or registration, declaration or filing with, any court, administrative
agency, commission, other Governmental Authority or other person is necessary or
required to be made or obtained by Excite@Home or Sub to enable Excite@Home and
Sub to enter into, and to perform their respective obligations under, this
Agreement, the Excite@Home Ancillary Agreements or the Sub Ancillary Agreements,
respectively, and for Sub to consummate the Merger, except for: (a) the filing
of the Plan of Merger with the Colorado Secretary of State as required under
Colorado law to effect the Merger (if any filing thereof is required by
Excite@Home or Sub); (b) the filing by Excite@Home with the Securities and
Exchange Commission ("SEC") or any state securities law authorities of any
notices or filings required in connection with the exemptions from the
registration or qualification requirements of the 1933 Act and/or applicable
state securities laws which Excite@Home relies on in issuing shares of
Excite@Home Common Stock pursuant to this Agreement; (c) the filing by
Excite@Home of such reports and information with the SEC under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the rules and regulations
promulgated by the SEC thereunder, as may be required in connection with this
Agreement, the Merger and the other transactions contemplated by this Agreement;
(d) the filing by Excite@Home with the SEC of the Form S-3 registration
statement to be filed by Excite@Home pursuant to this Agreement; (e) the filing
by Excite@Home with the SEC of the Form S-8 registration statement to be filed
by Excite@Home pursuant to this Agreement; (f) the filing by Excite@Home with
the Delaware Secretary of State of the Certificate of Designation to be filed by
Excite@Home pursuant to this Agreement (g) such other filings as may be required
by the Nasdaq Stock Market with respect to the
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Merger and the other transactions contemplated by this Agreement, and the
issuance of the shares of Excite@Home Common Stock and the assumption of
Worldprints Options and Worldprints Warrants by Excite@Home in the Merger; and
(h) such other filings, if any, as may be required in order for Excite@Home to
comply with applicable federal and state securities laws.
4.2.3 Enforceability. This Agreement and the Excite@Home Ancillary
--------------
Agreements are, or when executed by Excite@Home will be, valid and binding
obligations of Excite@Home, enforceable against Excite@Home in accordance with
their respective terms, subject to the effect of (a) applicable bankruptcy and
other similar laws affecting the rights of creditors generally and (b) rules of
law and equity governing specific performance, injunctive relief and other
equitable remedies. This Agreement and the Sub Ancillary Agreements are, or when
executed by Sub will be, valid and binding obligations of Sub, enforceable
against Sub in accordance with their respective terms, subject to the effect of
(a) applicable bankruptcy and other similar laws affecting the rights of
creditors generally and (b) rules of law and equity governing specific
performance, injunctive relief and other equitable remedies.
4.3 Excite@Home and Sub Capital Structure.
-------------------------------------
(a) The authorized capital stock of Excite@Home 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 Excite@Home
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
361,800,891 shares of Series A Common Stock, 30,800,000 shares of Series B
Common Stock and 2,000,000 shares of Series K Common Stock issued and
outstanding as of March 8, 2000, and 9,650,000 shares of Preferred Stock, par
value $0.01 per share, of which (i) 10,143.549 shares designated as Series A
Non-Voting Convertible Preferred Stock were issued and outstanding as of March
8, 2000, (ii) 1,008 shares designated as Series B Non-Voting Convertible
Preferred Stock were authorized for issuance, of which 202.310 shares were
issued and outstanding as of March 8, 2000 and up to 804 shares were reserved
for issuance pursuant to this Agreement, and (iii) 1,279.065 shares designated
as Series C Non-Voting Convertible Preferred Stock were issued and outstanding
as of March 8, 2000. As of the Effective Time, Excite@Home will have reserved
for issuance a sufficient number of shares of Excite@Home Common Stock to allow
for the conversion of the Series B Non-Voting Convertible Preferred Stock issued
in the Merger and the exercise of all assumed and converted Worldprints Warrants
and Worldprints Options. All outstanding shares of Excite@Home capital stock are
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights and have been offered, issued, sold and delivered by
Excite@Home in compliance with (i) all registration or qualification
requirements (or applicable exemptions therefrom) of all applicable securities
laws and, to the knowledge of Excite@Home, other applicable Legal Requirements
and (ii) all requirements set forth in applicable agreements or instruments. As
of March 8, 2000: (i) there were options outstanding to purchase an aggregate of
59,167,606 shares of Excite@Home Common Stock pursuant to Excite@Home's stock
option plans; and (ii) 1,422,310 shares of Excite@Home Common Stock reserved for
future issuance under Excite@Home's 1997 Employee Stock Purchase Plan. All
shares of Excite@Home Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights.
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(b) The authorized capital stock of 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 Excite@Home. All of the outstanding
shares of Sub's common stock have been duly authorized and validly issued, and
are fully paid and nonassessable. Sub was formed for the purpose of consummating
the Merger and has no material assets or liabilities except as necessary for
such purpose.
(c) The Excite@Home Common Stock and Excite@Home Preferred
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, and not
subject to any preemptive rights.
4.4 No Conflict. Neither the execution and delivery of this Agreement nor
-----------
any of the Excite@Home Ancillary Agreements or Sub Ancillary Agreements by
Excite@Home or Sub, nor the consummation of the transactions contemplated hereby
or thereby, will conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, impairment or violation of, or constitute
a default under: (i) any provision of the Certificate of Incorporation or Bylaws
or other charter documents of Excite@Home or Sub as currently in effect; (ii)
any federal, state, local or foreign judgment, writ, decree, order, statute,
rule or regulation applicable to Excite@Home or Sub or any of their respective
material assets or properties; or (iii) any material instrument, agreement or
contract to which Excite@Home or any of its subsidiaries is a party or by which
Excite@Home or any of its subsidiaries or any of their respective material
assets or properties are bound.
4.5 SEC Filings.
-----------
(a) Excite@Home has filed all forms, reports and documents
required to be filed by Excite@Home with the SEC since Excite@Home became a
reporting company under the 1934 Act, and has made available to Worldprints such
forms, reports and documents in the form filed with the SEC. All such required
forms, reports and documents (including those that Excite@Home may file
subsequent to the date hereof) are referred to herein as the "Excite@Home SEC
Reports." Item 4.5(a) of the Excite@Home Disclosure Letter sets forth a list of
the Excite@Home SEC Reports. As of their respective dates, the Excite@Home SEC
Reports (i) were prepared in accordance with the requirements of the 1933 Act or
the 1934 Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Excite@Home 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
Excite@Home SEC Report. Excite@Home has filed with the SEC as exhibits to the
Excite@Home SEC Reports all agreements, documents and instruments required to be
so filed, and such exhibits are true and complete copies of such agreements,
documents or instruments, as the case may be (subject to redaction to preserve
confidential treatment where appropriate). Excite@Home has provided to
Worldprints a copy of any such exhibit that materially affects the rights of the
Worldprints Shareholders to enforce the terms of this Agreement. None of
Excite@Home's subsidiaries is required to file any reports with the SEC under
the 1934 Act. Excite@Home represents and warrants that, as of the Agreement
Date, it is eligible to utilize a Form S-3.
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(b) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the
Excite@Home SEC Reports (the "Excite@Home Financials"), including any
Excite@Home SEC Reports filed after the date hereof until the Closing Date, (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 10-Q, 8-K or any
successor form under the 1934 Act) and (iii) fairly presented in all material
respects the consolidated financial position of Excite@Home and its subsidiaries
as at the respective dates thereof and the consolidated results of Excite@Home'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
Excite@Home contained in Excite@Home SEC Reports as of December 31, 1998 is
hereinafter referred to as the "Excite@Home Balance Sheet." Except as disclosed
in the Excite@Home Financials, since December 31, 1999, neither Excite@Home nor
any of its subsidiaries has any liabilities required under GAAP (applied on a
consistent basis) 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 Excite@Home and
its subsidiaries taken as a whole, except for liabilities incurred since the
date of the Excite@Home Balance Sheet in the ordinary course of business
consistent with past practices and liabilities incurred in connection with this
Agreement.
(c) Since December 31, 1999, there has been no material
disagreement (within the meaning of Item 304(a)(1)(iv) of Regulation S-K under
the 1933 Act) between any of Excite@Home and its subsidiaries, on the one part,
and any of its independent accountants, on the other part, with respect to any
aspect of the manner in which Excite@Home or such subsidiary, as the case may
be, has maintained or maintains its books and records or the manner in which
Excite@Home or the subsidiary, as the case may be, has reported upon the
financial condition and results of operations of any of Excite@Home and its
subsidiaries since such date, that has not been resolved to the satisfaction of
the relevant independent accountants.
4.6 Disclosure. Excite@Home has made available to Worldprints an
----------
investor disclosure package consisting of Excite@Home's annual reports on Form
10-K for its fiscal years ending December 31, 1998 and December 31, 1999,
respectively (the "Fiscal Year End"), all Forms 10-Q and 8-K filed by
Excite@Home with the SEC since the Fiscal Year End and up to the date of this
Agreement and all proxy materials distributed to Excite@Home's stockholders
since the Fiscal Year End and up to the date of this Agreement (the "Excite@Home
Disclosure Package").
4.7 Absence of Certain Changes or Events. Except as set forth in Item
------------------------------------
4.7 of the Excite@Home Disclosure Letter, since December 31, 1999, there has not
been any Material Adverse Change in Excite@Home.
4.8 Litigation. There is no Action pending against Excite@Home or Sub,
----------
or to Excite@Home's knowledge, threatened against Excite@Home or Sub, that
restricts in any material respect or prohibits (or, if successful, would
materially restrict or prohibit) the conclusion of the Merger or any of the
transactions contemplated herein or in any of the Excite@Home Ancillary
Agreements or Sub Ancillary Agreements. There is no Action pending against any
of Excite@Home and its subsidiaries, or to Excite@Home's knowledge, threatened
against any of
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Excite@Home and its subsidiaries, that involves the Merger or any of the
transactions contemplated herein or in any of the Excite@Home Ancillary
Agreements or Sub Ancillary Agreements or any property owned, leased, licensed
or used by any of Excite@Home and its subsidiaries, as the case may be, that,
individually or in the aggregate, if determined adversely to any of them, would
reasonably be expected to have a Material Adverse Effect on Excite@Home.
4.9 Compliance with Laws. None of Excite@Home and its subsidiaries is
--------------------
in, and none of them has received written notice of, a violation of or default
with respect to, any Legal Requirement, except for such violations or defaults
that, individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect on Excite@Home. Each of Excite@Home and its
subsidiaries hold all Governmental Permits, other than those as to which the
failure to hold, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Excite@Home.
4.10 Tax Matters. The representations of Excite@Home and Sub set forth in
-----------
Schedule 4.10 are true and correct in all respects.
Article 5
Pre Closing Covenants of Worldprints
During the time period from the Agreement Date until the earlier to
occur of (i) the Effective Time or (ii) the termination of this Agreement in
accordance with the provisions of Article 10, Worldprints and each Worldprints
Founder covenants and agrees with Excite@Home as follows:
5.1 Advice of Changes. Worldprints and each Worldprints Founder will
-----------------
promptly advise Excite@Home in writing (a) of any event occurring subsequent to
the Agreement Date that would render any representation or warranty of
Worldprints or a Worldprints Founder contained in Article 3 of this Agreement,
if made on or as of the date of such event or the Closing Date, untrue or
inaccurate and (b) of any event that would reasonably be expected to have a
Material Adverse Effect on Worldprints.
5.2 Maintenance of Business. Worldprints will carry on and preserve its
-----------------------
business and its relationships with customers, advertisers, suppliers,
employees, users of the Worldprints Websites and others with whom Worldprints
has contractual relations in substantially the same manner as it has prior to
the Agreement Date. If Worldprints or any Worldprints Founder becomes aware of
a material deterioration in the relationship with any key customer, key
advertiser, key supplier or key employee, it or such Worldprints Founder will
promptly bring such information to the attention of Excite@Home in writing and,
if requested by Excite@Home, will use reasonable commercial efforts to promptly
restore the relationship.
5.3 Conduct of Business. Worldprints will continue to conduct its
-------------------
business and maintain its business relationships in the ordinary and usual
course (including paying any taxes as the same shall become due), and neither
Worldprints nor any of its subsidiaries will, without the prior written consent
and approval of Excite@Home:
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(a) borrow or lend any money, other than reasonable and
normal advances to employees for bona fide travel expenses that are incurred in
the ordinary course of Worldprints' business consistent with Worldprints' past
practices and other than debt represented by the Replacement Notes;
(b) enter into any material transaction or agreement or
take any other action not in the ordinary course of Worldprints' business
consistent with Worldprints' past practices;
(c) grant any Encumbrance on any of its assets, other than
to secure payment of the Replacement Notes as is consistent with the terms of
that certain Security Agreement dated as of November 29, 1999 between
Worldprints and Excite@Home (the "Security Agreement");
(d) sell, transfer or dispose of any of its assets except
in the ordinary course of Worldprints' business consistent with Worldprints'
past practices;
(e) enter into any material lease or contract for the
purchase or sale of any property, whether real or personal, tangible or
intangible;
(f) other than 1999 holiday or year-end bonuses not to
exceed, in the aggregate, $50,000, pay any bonus, increased salary or special
remuneration to any officer, director, employee or consultant (except for normal
salary increases consistent with Worldprints' past practices and not to exceed
5% of such officer's, employee's or consultant's base annual compensation, and
except pursuant to existing arrangements previously disclosed to and approved in
writing by Excite@Home) or enter into any new employment or consulting agreement
with any such person;
(g) change any of its accounting methods;
(h) declare, set aside or pay any cash or stock dividend or
other distribution in respect of its capital stock, redeem, repurchase or
otherwise acquire any of its capital stock or other securities (except for the
repurchase of stock from employees, directors, consultants or contractors of
Worldprints in connection with the termination of their services with
Worldprints at the original purchase price of such stock), pay or distribute any
cash or property to any shareholder or security holder of Worldprints or make
any other cash payment to any shareholder or security holder of Worldprints that
is unusual, extraordinary, or not made in the ordinary course of Worldprints'
business consistent with its past practices;
(i) amend or terminate any contract, agreement or license
to which Worldprints or any of its subsidiaries is a party except those amended
or terminated in the ordinary course of Worldprints' business, consistent with
its past practices, and which are not material in amount or effect;
(j) guarantee or act as a surety for any obligation of any
third party;
(k) waive or release any material right or claim except in
the ordinary course of Worldprints' business;
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<PAGE>
(l) issue, sell, create or authorize any shares of its
capital stock of any class or series or any other of its securities, or issue,
grant or create any warrants, obligations, subscriptions, options (other than
New Worldprints Options), convertible securities, or other commitments to issue
shares of its capital stock or any securities that are potentially exchangeable
for, or convertible into, shares of its capital stock, other than the issuance
of the Replacement Notes or the World Warrants consistent with the terms of the
Security Agreement;
(m) subdivide or split or combine or reverse split the
outstanding shares of its capital stock of any class or series or enter into any
recapitalization affecting the number of outstanding shares of its capital stock
of any class or series or affecting any other of its securities;
(n) merge, consolidate or reorganize with, or acquire, or
enter into any other business combination with, any corporation, partnership,
limited liability company or any other entity (other than Excite@Home or Sub) or
enter into any negotiations, discussions or agreement for such purpose;
(o) amend its Articles of Incorporation or Bylaws;
(p) license any of its technology or Intellectual Property,
or acquire any Intellectual Property (or any license thereto) from any third
party except for any such license in the ordinary course of Worldprints'
business;
(q) materially change any insurance coverage;
(r) agree to any audit assessment by any tax authority or
file any federal or state income or franchise tax return unless copies of such
returns have first been delivered to Excite@Home for its review at a reasonable
time prior to filing;
(s) modify or change the exercise or conversion rights or
exercise or purchase prices of any capital stock of Worldprints, any Worldprints
stock options, warrants or other Worldprints securities, or accelerate or
otherwise modify (i) the right to exercise any option, warrant or other right to
purchase any capital stock or other securities of Worldprints or (ii) the
vesting or release of any shares of capital stock or other securities of
Worldprints from any repurchase options or rights of refusal held by Worldprints
or any other party or any other restrictions; or
(t) agree to do any of the things described in the
preceding clauses 5.3(a) through 5.3(s).
5.4 Regulatory Approvals. Worldprints will promptly execute and file, or
--------------------
join in the execution and filing, of any application, notification or any other
document that may be necessary in order to obtain the authorization, approval or
consent of any Governmental Authority, whether federal, state, local or foreign,
which may be reasonably required, or which Excite@Home may reasonably request,
in connection with the consummation of the Merger or any other transactions
contemplated by this Agreement or any Worldprints Ancillary Agreement.
Worldprints will use reasonably diligent efforts to obtain, and to cooperate
with Excite@Home to promptly obtain, all such authorizations, approvals and
consents.
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5.5 Necessary Consents. Worldprints will use reasonably diligent efforts
------------------
to promptly obtain such written consents and authorizations of third parties,
give notices to third parties and take such other actions as may be necessary or
appropriate in addition to those set forth in the foregoing Sections of this
Article 5 in order to effect the consummation of the Merger and the other
transactions contemplated by this Agreement, to enable Excite@Home to carry on
Worldprints' business immediately after the Effective Time and to keep in effect
and avoid the breach, violation of, termination of, or adverse change to, any
agreement or contract to which Worldprints or any of its subsidiaries is a party
or is bound or by which any of their assets is bound.
5.6 Litigation. Worldprints and each Worldprints Founder will notify
----------
Excite@Home in writing promptly after learning of any claim, action, suit,
arbitration, mediation, proceeding or investigation by or before any court,
arbitrator or arbitration panel, board or governmental agency, initiated by or
against it or any of its subsidiaries, or known by it to be threatened against
Worldprints or any of its subsidiaries or any of their officers, directors,
employees or shareholders in their capacity as such.
5.7 No Other Negotiations. During the time period commencing on the
---------------------
Agreement Date and ending on the earlier to occur of (a) termination of this
Agreement in accordance with the provisions of Article 10 or (b) consummation of
the Merger, Worldprints and each Worldprints Founder will not, and Worldprints
and each Worldprints Founder will not authorize, encourage or permit any
officer, director, employee, shareholder, affiliate or agent of Worldprints or
any subsidiary of Worldprints or any attorney, investment banker or other person
on Worldprints' or their behalf to, directly or indirectly: (i) solicit,
initiate, encourage or induce the making, submission or announcement of, any
offer or proposal from any party concerning any Alternative Transaction (as
defined below) or take any other action that could reasonably be expected to
lead to an Alternative Transaction or a proposal therefor; (ii) consider any
inquiry, offer or proposal received from any party concerning any Alternative
Transaction; (iii) furnish any information regarding Worldprints to any person
or entity in connection with or in response to any inquiry, offer or proposal
for or regarding any Alternative Transaction; (iv) participate in any
discussions or negotiations with any person or entity with respect to any
Alternative Transaction; (v) otherwise cooperate with, facilitate or encourage
any effort or attempt by any person or entity (other than Excite@Home) to effect
any Alternative Transaction; or (vi) execute, enter into or become bound by any
letter of intent, agreement, commitment or understanding between Worldprints and
any third party that is related to, provides for or concerns any Alternative
Transaction. During the foregoing time period identified in the preceding
sentence, Worldprints and each Worldprints Founder will promptly notify
Excite@Home orally and in writing of any inquiries or proposals received by
Worldprints or any of its subsidiaries, directors, officers, shareholders,
employees or agents regarding any Alternative Transaction and will, identify the
party making the inquiry or proposal and the nature and terms of any inquiry or
proposal. Any violation of the restrictions set forth in this section by any
officer, director or employee of Worldprints or any of its subsidiaries or any
attorney, investment banker or other director or representative of Worldprints
shall be deemed a breach of this Section 5.7 by Worldprints. As used herein, the
term "Alternative Transaction" means any commitment, agreement or transaction
involving or providing for (a) the possible disposition of all or any
substantial portion of Worldprints' business, assets or capital stock, whether
by way of merger, consolidation, sale of assets, sale of stock, stock exchange,
tender offer and/or any other form of business combination or (b) any initial
public offering of capital stock or other securities of Worldprints pursuant to
a registration statement filed under the 1933 Act.
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5.8 Access to Information. Until the earlier of the Closing or the
---------------------
termination of this Agreement in accordance with the provisions of Article 10,
Worldprints will allow Excite@Home and its agents access at reasonable times to
the files, books, records, technology, contracts, personnel and offices of
Worldprints (other than the Excluded Materials), including, without limitation,
any and all written information relating to Worldprints' taxes, commitments,
contracts, leases, licenses, and real, personal and intangible property and
financial condition, subject to the terms of the Letter Agreement between
Worldprints and Excite@Home dated as of November 29, 1999 and that certain
letter from Worldprints to Excite@Home dated as of November 29, 1999 (the
"Confidentiality Agreements"). Worldprints will cause its accountants to
cooperate with Excite@Home and its agents in making available all financial
information reasonably requested by Excite@Home, including without limitation
the right to examine all working papers pertaining to all financial statements
prepared or audited by such accountants.
5.9 Satisfaction of Conditions Precedent. Worldprints and each
------------------------------------
Worldprints Founder will use its diligent efforts to satisfy or cause to be
satisfied all the conditions precedent which are set forth in Article 9, and
Worldprints will use its diligent efforts to cause the Merger and the other
transactions contemplated by this Agreement to be consummated in accordance with
this Agreement.
5.10 Worldprints Employee Plans and Benefit Arrangements. Upon the
---------------------------------------------------
request of Excite@Home, Worldprints will terminate any Worldprints Benefit Plan,
conditioned on the occurrence of, and effective immediately prior to, the
Effective Time.
5.11 Amendment of Existing Worldprints Options and Worldprints Warrants.
------------------------------------------------------------------
Worldprints shall, conditioned on the occurrence of, and effective immediately
prior to, the Effective Time, use its commercially reasonable efforts to amend
and to obtain the written consent of each holder of Worldprints Options listed
on Schedule 5.11 hereto and each holder of Worldprints Warrants to amend: (i)
-------------
outstanding Worldprints Options granted to each such holder to eliminate
acceleration of vesting under such Worldprints Option, and (ii) each outstanding
Worldprints Warrant to permit such warrants upon the Closing of the Merger to be
exercisable into only Excite@Home Common Stock, and shall provide such holders
of Worldprints Warrants with the notices required under the terms of their
respective Worldprints Warrant.
5.12 Determination Concerning Worldprints Options. Worldprints shall,
--------------------------------------------
conditioned on and effective immediately prior to, the Effective Time, determine
and provide that outstanding Worldprints Options (including Worldprints Options
granted outside of the Worldprints Plan) to be assumed by Excite@Home at the
Effective Time, shall be exercisable solely for Excite@Home Common Stock and
that such consideration is equal in fair market value to the per share
consideration to be received by the holders of Worldprints Common Stock in the
Merger.
5.13 New Worldprints Options. Worldprints shall, conditioned on the
-----------------------
occurrence of, and effective immediately prior to, the Effective Time, grant the
New Worldprints Options pursuant to the Worldprints Plan to employees of
Worldprints and in share amounts and with vesting and other terms set forth on
Schedule 5.13.
- --------------
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Article 6
Excite@Home Covenants
During the time period from the Agreement Date until the earlier to
occur of (i) the Effective Time, (ii) the termination of this Agreement in
accordance with Article 10 or (iii) such later period as is set forth in Section
6.5, Excite@Home covenants and agrees as follows:
6.1 Advice of Changes. Excite@Home will promptly advise Worldprints in
-----------------
writing of any event occurring subsequent to the date of this Agreement that
would render any representation or warranty of Excite@Home or Sub contained in
this Agreement, if made on or as of the date of such event or the Closing Date,
to be untrue or inaccurate in any material respect, or which would reasonably be
expected to have a Material Adverse Effect on Excite@Home.
6.2 Regulatory Approvals. Excite@Home and Sub will execute and file, or
--------------------
join in the execution and filing, of any application, notification or other
document that may be necessary in order to obtain the authorization, approval or
consent of any governmental body, federal, state, local or foreign, which may be
reasonably required, in connection with the consummation of the Merger and the
other transactions contemplated by this Agreement and the Excite@Home Ancillary
Agreements and Sub Ancillary Agreements in accordance with the terms of this
Agreement. Excite@Home and Sub will use diligent efforts to obtain all such
authorizations, approvals and consents. Notwithstanding anything in this
Agreement to the contrary, neither Excite@Home 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 Excite@Home, or any of its affiliates or Worldprints, or the
holding separate of the shares of Worldprints Common Stock or imposing or
seeking to impose any limitation on the ability of Excite@Home 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 Worldprints
Common Stock.
6.3 Satisfaction of Conditions Precedent. Each of Excite@Home and Sub
------------------------------------
will use its diligent efforts to satisfy or cause to be satisfied all of the
conditions precedent which are set forth in Article 8, and each of Excite@Home
and Sub will use its diligent efforts to cause the transactions contemplated by
this Agreement to be consummated in accordance with the terms of this Agreement.
6.4 Listing of Additional Shares. Excite@Home will use its diligent
----------------------------
efforts to cause the shares of (i) Excite@Home Common Stock to be issued in the
Merger upon conversion of Worldprints Common Stock, and (ii) when issued, the
shares of Excite@Home capital stock issued upon conversion of the Excite@Home
Preferred Stock to be issued in the Merger upon conversion of Worldprints Common
Stock and shares of Excite@Home capital stock to be issued upon exercise of
Worldprints Options and Worldprints Warrants assumed by Excite@Home in the
Merger, to be approved for listing on the Nasdaq National Stock Market, subject
only to official notice of issuance.
6.5 Directors and Officers Indemnification. Excite@Home agrees for the
--------------------------------------
benefit of the Indemnified Persons that, for six years after the Effective Time,
the Surviving Corporation and its subsidiaries shall indemnify each person who
is now, or has been at any time prior to the date of this Agreement, a director,
officer, employee or agent of any of Worldprints and its subsidiaries,
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and the successors and assigns of such persons (collectively, "Indemnified
Persons"), to the same extent and in the same manner as is now provided in the
Articles of Incorporation and Bylaws of Worldprints, and the Operating Agreement
of Chautauqua Publishing Group, LLC, each as in effect immediately prior to the
Effective Time. Excite@Home hereby guarantees the prompt performance of the
obligations of the Surviving Corporation provided for under this Section.
6.6 SEC Documents. Promptly after filing any publicly available report,
-------------
schedule, form, statement or other document with the SEC, Excite@Home shall
deliver a copy thereof to Worldprints.
6.7 New Worldprints Options. It is acknowledged and agreed that, if any
-----------------------
New Worldprints Options are allocated to a Worldprints employee who terminates
employment prior to the Effective Time or otherwise forfeits any rights to New
Worldprints Options prior to the Effective Time, such New Worldprints Options
and any Worldprints Options previously issued to such Worldprints employee will
expire according to their terms and Excite@Home shall not request or require
that Worldprints reallocate such terminated New Worldprints Options to any other
employee.
Article 7
Closing Matters
7.1 The Closing. Subject to termination of this Agreement as provided in
-----------
Article 10 below, the closing of the transactions to consummate the Merger (the
"Closing") will take place at the offices of Fenwick & West LLP, Two Palo Alto
Square, Palo Alto, California at 10:00 a.m., Pacific Time, no later than the
second business day after all of the conditions to Closing set forth in Sections
8 and 9 hereof have been satisfied and/or waived in accordance with this
Agreement, or on such other day as Excite@Home and Worldprints may mutually
agree upon (the "Closing Date"). Concurrently with the Closing, the Plan of
Merger will be filed with the Colorado Secretary of State.
7.2 Exchange of Certificates.
------------------------
7.2.1 At the Effective Time, shares of Worldprints Common Stock
that are outstanding immediately prior thereto (other than Dissenting Shares for
which dissenters rights have been or will be perfected in accordance with
applicable law), will, by virtue of the Merger and without further action, cease
to exist, and all such shares will be converted into the right to receive from
Excite@Home the number of shares of Excite@Home Common Stock and Excite@Home
Preferred Stock to which such holder is entitled pursuant to Section 2.1.2,
subject to the provisions of Section 2.1.4 (regarding the elimination of
fractional shares of Excite@Home Common Stock) and Section 2.5 (regarding the
withholding of Escrow Shares). At the Closing, each holder of shares of
Worldprints Common Stock that are outstanding immediately prior thereto (other
than Dissenting Shares), will surrender either (i) the certificate(s) for such
shares (each a "Worldprints Certificate"), duly endorsed to Excite@Home for
cancellation as of the Effective Time, or (ii) an affidavit of lost certificate
and an indemnity in form and substance reasonably satisfactory to Excite@Home
(the "Affidavit"). Promptly after the Effective Time and receipt of such
Worldprints Certificate or Affidavit (as the case may be): (a) Excite@Home or
its transfer agent will issue to each tendering holder of a Worldprints
Certificate or an Affidavit, certificates (a
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"Tendering Worldprints Holder") for the number of shares of Excite@Home Common
Stock and Excite@Home Preferred Stock to which such holder is entitled pursuant
to Section 2.1.2, subject to the provisions of Section 2.1.4 (regarding the
elimination of fractional shares of Excite@Home Common Stock) and Section 2.5
(regarding the withholding of Escrow Shares); and (b) Excite@Home or its
transfer agent will pay by check to each Tendering Worldprints Holder cash in
the amounts payable to such holder in accordance with the provisions of Sections
2.1.4.
7.2.2 No dividends or distributions payable to holders of record of
Excite@Home Common Stock or Excite@Home Common Stock after the Effective Time
will be paid to the holder of any unsurrendered Worldprints Certificate unless
and until the holder of such unsurrendered Worldprints Certificate surrenders
such Worldprints Certificate or an Affidavit to Excite@Home as provided above.
Subject to the effect, if any, of applicable escheat and other laws, following
surrender of any Worldprints Certificate or Affidavit, there will be delivered
to the person entitled thereto, without interest, the amount of any dividends
and distributions theretofore paid with respect to Excite@Home Common Stock and
Excite@Home Preferred Stock so withheld as of any date subsequent to the
Effective Time and prior to such date of delivery.
7.2.3 After the Effective Time, there will be no further
registration of transfers on the stock transfer books of Worldprints or its
transfer agent of any shares of capital stock of Worldprints that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Worldprints Certificates or an Affidavit are presented for any reason,
they will be canceled and exchanged as provided in this Section 7.2.
7.2.4 Until Worldprints Certificates or an Affidavit representing
shares of Worldprints Common Stock that are outstanding immediately prior to the
Effective Time are surrendered pursuant to Section 7.2.1 above, such Worldprints
Certificates will be deemed, for all purposes, to evidence ownership of the
number of shares of Excite@Home Common Stock and Excite@Home Preferred Stock
into which such shares of Worldprints Common Stock will have been converted
pursuant to Section 2.1.2, subject to the provisions of Section 2.1.4 (regarding
the elimination of fractional shares of Excite@Home Common Stock) and Section
2.5 (regarding the withholding of Escrow Shares).
Article 8
Conditions to Obligations of Worldprints
Worldprints' obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Worldprints, but only in a writing signed
by Worldprints):
8.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Excite@Home and Sub set forth in Article 4 (a) that are qualified
as to materiality will be true and correct and (B) that are not qualified as to
materiality shall be true and correct in all material respects, in each case on
and as of the Closing with the same force and effect as if they had been made on
the Closing Date (except for any such representations or warranties that, by
their terms, speak only as of a specific date or dates, in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and such representations and warranties that are not qualified
as to materiality shall be true and correct in all material respects, on and as
of such
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specified date or dates), and Worldprints will have received a certificate to
such effect executed by an officer of Excite@Home.
8.2 Covenants. Each of Excite@Home and Sub will have performed and
---------
complied in all material respects with all of its covenants contained in this
Agreement on or before the Closing (to the extent that such covenants require
performance by Excite@Home on or before the Closing), and Worldprints will have
received a certificate to such effect signed by an officer of Excite@Home and
Sub.
8.3 No Material Adverse Change. There will not have been any Material
--------------------------
Adverse Change in Excite@Home, whether or not resulting from a breach in any
representation, warranty or covenant in this Agreement, and Worldprints will
have received a certificate to such effect signed by an officer of Excite@Home.
8.4 Requisite Approvals. This Agreement will have been duly and validly
-------------------
approved and adopted by Excite@Home's Board of Directors in accordance with
applicable law and Excite@Home's Certificate of Incorporation and Bylaws, each
as amended. This Agreement will have been approved and adopted by Sub's Board
of Directors and sole stockholder in accordance with applicable law and Sub's
Certificate of Incorporation and Bylaws, each as amended.
8.5 Compliance with Law; No Legal Restraints; No Litigation. There will
-------------------------------------------------------
not be issued or enacted or adopted, or threatened in writing by any
Governmental Authority, any order, decree, temporary, preliminary or permanent
injunction, legislative enactment, statute, regulation, action or proceeding, or
any judgment or ruling by any Governmental Authority that prohibits or renders
illegal or imposes limitations on the Merger or any other material transaction
contemplated by this Agreement or any Worldprints Ancillary Agreement. No
litigation or proceeding will be threatened or pending for the purpose or with
the probable effect of enjoining or preventing the consummation of the Merger or
any of the other material transactions contemplated by this Agreement, or which
would be reasonably expected to have a Material Adverse Effect on Excite@Home.
8.6 Government Consents. There will have been obtained at or prior to the
-------------------
Closing Date such permits or authorizations, and there will have been taken all
such other actions by any regulatory authority having jurisdiction over the
parties and the actions herein proposed to be taken, as may be required to
lawfully consummate the Merger, including, but not limited to, requirements
under applicable federal and state securities laws.
8.7 Opinion of Excite@Home's Counsel. Worldprints will have received
--------------------------------
from Fenwick & West LLP, counsel to Excite@Home, an opinion opining to the
matters set forth in Exhibit E.
---------
8.8 Worldprints Tax Opinion. Worldprints shall have received an opinion
-----------------------
of Dorsey & Whitney LLP, counsel to Worldprints, in the form attached as Exhibit
-------
F to this Agreement (the "Worldprints Tax Opinion"), on the basis of certain
- -
facts, representations and assumptions set forth in such opinion, dated the
Closing Date, to the effect that the Merger will be treated for federal income
tax purposes as a reorganization under Section 368(a) of the Code and that each
of Excite@Home, Sub and Worldprints will be a party to the reorganization within
the meaning of Section 368(b) of the Code and that none of the Worldprints
Shareholders shall recognize gain or loss for federal income tax purposes as a
result of the Merger, other than with respect to any cash
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paid in lieu of fractional shares of Excite@Home Common Stock. In rendering such
opinion, such counsel shall be entitled to rely upon representation letters
signed by officers of Worldprints, Excite@Home and Sub in the forms attached as
Attachments 1 and 2 to the Worldprints Tax Opinion.
8.9 Nasdaq Listing. The shares of Excite@Home Common Stock that are
--------------
issuable upon the conversion of outstanding shares of Worldprints Common Stock,
upon the conversion of Excite@Home Preferred Stock issued in the Merger and upon
exercise of outstanding Worldprints Options and Worldprints Warrants assumed by
Excite@Home in the Merger shall be authorized for listing on the Nasdaq National
Stock Market (subject only to official notice of issuance).
8.10 Certificate of Designation Effective. The Certificate of Designation
------------------------------------
shall have been duly adopted by Excite@Home by all necessary corporate action,
and shall have been duly filed with and accepted by the Secretary of State of
the State of Delaware.
8.11 Hart-Scott-Rodino Compliance. All applicable waiting periods under
----------------------------
the HSR Act shall have expired or early termination shall have been granted by
both the Federal Trade Commission and the United States Department of Justice.
8.12 Worldprints Debt. Immediately prior to the Closing, Excite@Home
----------------
shall have paid off Debt of Worldprints in an aggregate principal amount not to
exceed $4,000,000 and accrued interest under the World Notes and any Replacement
Notes.
Article 9
Conditions to Obligations of Excite@Home
The obligations of Excite@Home hereunder are subject to the fulfillment
or satisfaction on, and as of the Closing, of each of the following conditions
(any one or more of which may be waived by Excite@Home, but only in a writing
signed by Excite@Home):
9.1 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Worldprints and each Worldprints Founder set forth in Article 3
(a) that are qualified as to materiality will be true and correct and (B) that
are not qualified as to materiality shall be true and correct in all material
respects, in each case on and as of the Closing with the same force and effect
as if they had been made at the Closing Date (except for any such
representations or warranties that, by their terms, speak only as of a specific
date or dates, in which case such representations and warranties that are
qualified as to materiality shall be true and correct, and such representations
and warranties that are not qualified as to materiality shall be true and
correct in all material respects, on and as of such specified date or dates),
and Excite@Home will have received a certificate to such effect executed by
Worldprints' President or Chief Executive Officer and by Worldprints' Chief
Operating Officer. The representations and warranties of each Worldprints
Shareholder set forth in such Worldprints' Shareholder's Investment
Representation Letter shall be true and correct in all material respects.
9.2 Covenants. Worldprints will have performed and complied in all
---------
material respects with all of its covenants contained in this Agreement on or
before the Closing, and Excite@Home will have received a certificate to such
effect signed by Worldprints' Chief Executive Officer or
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President and by Worldprints' Chief Operating Officer. Each Worldprints Founder
shall have performed and complied in all material respects with his covenants
contained in this Agreement before the Closing.
9.3 No Material Adverse Change. There will not have been any Material
--------------------------
Adverse Change in Worldprints, whether or not resulting from a breach in any
representation, warranty or covenant in this Agreement, and Excite@Home will
have received a certificate to such effect signed by Worldprints' President or
Chief Executive Officer and Worldprints' Chief Operating Officer.
9.4 Compliance with Law; No Legal Restraints; No Litigation. There will
-------------------------------------------------------
not be any outstanding or threatened in writing, or enacted or adopted, any
order, decree, temporary, preliminary or permanent injunction, legislative
enactment, statute, regulation, action or proceeding by any Governmental
Authority that prohibits or renders illegal or imposes limitations on: (i) the
Merger or any other material transaction contemplated by this Agreement or any
Worldprints Ancillary Agreement; or (ii) Excite@Home's right (or the right of
any Excite@Home subsidiary) to own, retain, use or operate any of its products,
properties or assets (including but not limited to properties or assets of
Worldprints) on or after consummation of the Merger or seeking a disposition or
divestiture of any such properties or assets. No litigation or proceeding will
be threatened or pending for the purpose or with the probable effect of
enjoining or preventing the consummation of any of the transactions contemplated
by this Agreement, or which could be reasonably expected to have a Material
Adverse Effect on Worldprints.
9.5 Government Consents. There will have been obtained at or prior to
-------------------
the Closing Date such permits or authorizations, and there will have been taken
all such other actions, as may be required to lawfully consummate the Merger by
any governmental or regulatory authority having jurisdiction over the parties
and the actions herein proposed to be taken.
9.6 Opinion of Worldprints' Counsel. Excite@Home will have received from
-------------------------------
Dorsey & Whitney LLP, counsel to Worldprints, an opinion opining to the matters
set forth in Exhibit G.
---------
9.7 Excite@Home Tax Opinion. Excite@Home shall have received an opinion
-----------------------
of Fenwick & West LLP, counsel to Excite@Home, in the form attached as Exhibit H
---------
to this Agreement (the "Excite@Home Tax Opinion"), on the basis of certain
facts, representations and assumptions set forth in such opinion, dated the
Closing Date, to the effect that the Merger will be treated for federal income
tax purposes as a reorganization under Section 368(a) of the Code and that each
of Excite@Home, Sub and Worldprints will be a party to the reorganization within
the meaning of Section 368(b) of the Code. In rendering such opinion, such
counsel shall be entitled to rely upon representation letters signed by officers
of Worldprints, Excite@Home and Sub in the forms attached as Attachments 1 and 2
to the Excite@Home Tax Opinion.
9.8 Consents. Excite@Home will have received duly executed copies of all
--------
material third-party consents, approvals, assignments, notices, waivers,
authorizations or other certificates (including those set forth in Item 3.12 to
the Worldprints Disclosure Letter) contemplated by this Agreement, the
Worldprints Disclosure Letter or deemed reasonably necessary to provide for the
continuation in full force and effect of any and all material contracts,
agreements and leases of Worldprints and its subsidiaries after the Merger and
the preservation of Worldprints' IP Rights and other assets and properties after
the Merger and for Excite@Home to consummate the Merger and
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the other transactions contemplated by this Agreement, the Excite@Home Ancillary
Agreements and the Worldprints Ancillary Agreements, in each case in form and
substance reasonably satisfactory to Excite@Home.
9.9 Requisite Approvals. This Agreement, the Merger and the Worldprints
-------------------
Ancillary Agreements will have been duly and validly approved and adopted, as
required by applicable law and Worldprints' Articles of Incorporation and
Bylaws, by (a) all of the members of Worldprints' Board of Directors, and (b)
the valid and affirmative vote of at least 96% of the outstanding shares of
Worldprints Common Stock.
9.10 Investment Representation Letters; Exemptions Available.
-------------------------------------------------------
Excite@Home: (a) will have received an executed counterpart of the Investment
Representation Letter executed by each Worldprints Shareholder who, immediately
prior to the Effective Time, owns any shares of Worldprints Common Stock; (b)
must be reasonably satisfied that there are not more than thirty-five
Worldprints Shareholders who are not "accredited investors" within the meaning
of Regulation D promulgated under the 1933 Act; and (c) must be reasonably
satisfied that the issuance of shares of Excite@Home Common Stock and
Excite@Home Preferred Stock pursuant to this Agreement is exempt from the
registration requirements of the 1933 Act by virtue of the exemptions provided
by Section 4(2) of the 1933 Act and/or Regulation D under the 1933 Act and any
exemptions from the registration and/or qualification requirements of all
applicable state "blue sky" securities laws.
9.11 Continued Employment of Certain Personnel. Robert Schmelzer (a) will
-----------------------------------------
have continued to be employed as a full-time employee of Worldprints at all
times from the Agreement Date through the Effective Time and (b) will have
executed and delivered to Excite@Home an employment agreement substantially in
the form attached hereto as Exhibit I (the "Employment Agreements").
---------
9.12 Founder Consulting Agreement. Each of Richard Schmelzer, Jon Gordon
----------------------------
and Lew Visscher (a) will have continued to be employed as a full-time employee
of Worldprints at all times from the Agreement Date through the Effective Time
and (b) will have executed and delivered to Excite@Home a consulting agreement
in the form of Exhibit J (the "Founder Consulting Agreement").
---------
9.13 Resignation of Directors and Officers. The directors and officers of
-------------------------------------
Worldprints in office immediately prior to the Effective Time will have resigned
as directors and officers of the Surviving Corporation in writing effective as
of the Effective Time.
9.14 Certificate of Designation Effective. The Certificate of Designation
------------------------------------
shall have been duly adopted by Excite@Home by all necessary corporate action,
and shall have been duly filed with and accepted by the Secretary of State of
the State of Delaware.
9.15 Hart-Scott-Rodino Compliance. All applicable waiting periods under
----------------------------
the HSR Act shall have expired or early termination shall have been granted by
both the Federal Trade Commission and the United States Department of Justice.
9.16 Amendment of Existing Worldprints Options and Worldprints Warrants.
------------------------------------------------------------------
Each outstanding Worldprints Option listed on Schedule 5.11 hereto shall have
been duly amended to eliminate acceleration of vesting, and each outstanding
Worldprints Warrant listed on Schedule 2.7
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hereto shall have been duly amended to permit such warrants to be exercisable
for only Excite@Home Common Stock upon the closing of the Merger, and
Worldprints shall have provided each such holder with the notices required under
the terms of such Worldprints Warrant.
9.17 Determination Concerning Worldprints Options. Worldprints shall have
--------------------------------------------
determined and provided that outstanding Worldprints Options (including
Worldprints Options granted outside of the Worldprints Plan) to be assumed by
Excite@Home at the Effective Time, will be exercisable solely for Excite@Home
Common Stock and that such consideration is equal in fair market value to the
per share consideration to be received by the holders of Worldprints Common
Stock in the Merger.
9.18 New Worldprints Options. Worldprints shall have granted New
-----------------------
Worldprints Options set forth on Schedule 5.13.
9.19 Worldprints Debt. Immediately prior to the Closing, Worldprints
----------------
shall have paid off all Debt of Worldprints existing immediately prior to the
Effective Time, other than (i) principal in an aggregate amount not to exceed
$4,000,000 and accrued interest under the World Notes and any Replacement Notes,
(ii) any outstanding amounts loaned by Excite@Home to Worldprints, and (iii)
outstanding trade payables of Worldprints incurred in the ordinary course of its
business consistent with past practice, all of which amounts are set forth on
Schedule 1.14 to this Agreement and which will be updated as of the Closing.
- -------------
9.20 Settlement Agreement and Release. Worldprints and World Venture
--------------------------------
Partners, Inc. shall have entered into and delivered the Settlement Agreement
and Release substantially in the form attached hereto as Exhibit K.
----------
9.21 Development Assignment and Confidentiality Agreement. Worldprints
----------------------------------------------------
and each of Richard Schmelzer, Rob Schmelzer, Jon E. Gordon, Kevin O'Connell,
and Lewis Visscher shall have executed and delivered the Development Assignment
and Confidentiality Agreement attached hereto as Exhibit L.
---------
Article 10
Termination of Agreement
10.1 Termination by Mutual Consent. This Agreement may be terminated at
-----------------------------
any time prior to the Effective Time by the mutual written consent of
Excite@Home and Worldprints.
10.2 Unilateral Termination.
----------------------
10.2.1 Either Excite@Home or Worldprints, by giving written notice
to the other, may terminate this Agreement if a court of competent jurisdiction
or other Governmental Authority shall have issued a nonappealable final order,
decree or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger.
10.2.2 Either Excite@Home or Worldprints, by giving written notice
to the other, may terminate this Agreement if the Merger shall not have been
consummated by midnight Pacific Time on the Termination Date; provided, however,
that the right to terminate this Agreement pursuant to this Section 10.2.2 shall
not be available to any party whose failure to perform in any
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material respect any of its obligations or covenants under this Agreement
results in the failure of any condition set forth in Article 8 or Article 9 or
if the failure of such condition results from facts or circumstances that
constitute a material breach of a representation or warranty or covenant made
under this Agreement by such party, if the other party has performed in all
material respects its obligations under this Agreement and if the
representations and warranties of such other party to this Agreement are true
and correct in all material respects as of the Termination Date.
10.2.3 Either Excite@Home or Worldprints may terminate this
Agreement at any time prior to the Closing if the other has committed (or, in
the case of a termination by Worldprints, Sub has committed, and, in the case of
a termination by Excite@Home, a Worldprints Founder has committed) a material
breach of (a) any of its representations and warranties under Article 3 or
Article 4 of this Agreement, as applicable; or (b) any of its covenants under
Article 5 or Article 6 of this Agreement, as applicable, and has not cured such
material breach within ten days after the party seeking to terminate this
Agreement has given the other party written notice of the material breach and
its intention to terminate this Agreement pursuant to this Section 10.2.3.
10.3 No Liability for Termination. Termination of this Agreement by a
----------------------------
party (the "Terminating Party") in accordance with the provisions of this
Section 10 will not give rise to any obligation or liability on the part of the
Terminating Party on account of such termination; provided, however, that
nothing herein shall relieve a party from liability for a willful breach of this
Agreement. The provisions of Article 10 and Article 13 shall survive any
termination of this Agreement.
Article 11
Survival of Representations, Indemnification
and Remedies, Continuing Covenants
11.1 Survival of Representations. Except as set forth in the following
---------------------------
sentence, all representations, warranties and covenants of the parties to this
Agreement contained in this Agreement (other than covenants which by their
express terms survive for a different period) will remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any of
the parties to this Agreement, until that date (the "Release Date") which is the
earlier of (i) the termination of this Agreement or (ii) March 31, 2001.
Notwithstanding the foregoing, Excite@Home may seek recovery of Special Damages
(as defined in Section 11.3(b) or Shareholder Damages (as defined in Section
11.2(b)) at any time prior to the expiration of the applicable statute of
limitations for the claim which seeks recovery of such Special Damages or
Shareholder Damages.
11.2 Agreement to Indemnify.
----------------------
(a) (i) Except as hereinafter provided in this Article 11,
the Worldprints Founders will jointly and severally, indemnify and hold
harmless, and (ii) the Worldprints Shareholders who are not Worldprints Founders
will severally, but not jointly, on a pro rata basis based upon their respective
ownership interests in Worldprints Common Stock set forth besides their names on
Schedule 3.4.1(a) to this Agreement, indemnify and hold harmless, Excite@Home
and the Surviving Corporation and their respective officers, directors, agents,
representatives stockholders and employees, and each person, if any, who
controls or may control Excite@Home or
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the Surviving Corporation within the meaning of the 1933 Act or the 1934 Act
(each hereinafter referred to individually as an "Excite@Home Indemnified
Person" and collectively as "Excite@Home Indemnified Persons") from and against
any and all claims, demands, suits, actions, causes of actions, losses, costs,
damages, liabilities and expenses including, without limitation, reasonable
attorneys' fees, other professionals' and experts' reasonable fees and court or
arbitration costs (hereinafter collectively referred to as "Damages") directly
or indirectly incurred, resulting or and arising out of: (a) any inaccuracy,
misrepresentation, breach of, or default in, any of the representations,
warranties or covenants given or made by Worldprints or a Worldprints Founder in
this Agreement or in the Worldprints Disclosure Letter or in any certificate,
document or instrument delivered by or on behalf of Worldprints or an officer of
Worldprints pursuant hereto; or (b) any Excess Transaction Expenses (as defined
in Section 13.7) (collectively, "Ordinary Damages"). Except with respect to
claims arising from Special Damages or Shareholder Damages, which may be raised
after the Release Date, any claim of indemnity made by an Excite@Home
Indemnified Person under this Section 11.2(a) must be raised in a writing
delivered to the Representative (as defined below) by no later than the Release
Date, and, if raised by such date, such claim shall survive the Release Date
until final resolution thereof. Notwithstanding anything to the contrary in this
Agreement, in no event shall a Worldprints Shareholder that is not also a
Worldprints Founder be required to indemnify or hold harmless Excite@Home
Indemnified Persons from Damages resulting from any inaccuracy,
misrepresentation, breach of, or default in any representation, warranty or
covenant given or made by a Worldprints Founder in this Agreement that is not
also given or made by Worldprints.
(b) Except as hereinafter provided in this Article 11, each
Worldprints Shareholder (including each Worldprints Founder) severally (and not
jointly) indemnifies and holds harmless Excite@Home Indemnified Persons from and
against all Damages incurred or suffered by any such persons or arising from, by
reason of or in connection with (i) any misrepresentation or breach of or
default in connection with any of the representations, warranties, covenants or
agreements given or made by such Worldprints Shareholder in the Investment
Representation Letter executed by such Worldprints Shareholder pursuant to this
Agreement, or (ii) the failure of any Worldprints Shareholder to have good,
valid and marketable title to the issued and outstanding Worldprints Common
Stock or Worldprints Preferred Stock held by such stockholders, free and clear
of all Encumbrances, or to have full right, capacity and authority to vote such
Worldprints Common Stock in favor of the Merger and the other transactions
contemplated by this Agreement (collectively "Shareholder Damages").
(c) Each Worldprints Shareholder (including each
Worldprints Founder) jointly and severally indemnifies and holds harmless the
Excite@Home Indemnified Persons from and against Special Damages (as hereinafter
defined) incurred or suffered by any such Excite@Home Indemnified Persons
arising from, by reason of, or in connection with, (i) any fraudulent conduct,
fraudulent misrepresentation or other willful misconduct on the part of
Worldprints or any officer, director, employee or agent of Worldprints or any
Worldprints subsidiary, or (ii) any inaccuracy, misrepresentation, breach of, or
default in, the representations or warranties of Worldprints set forth in
Section 3.4 (Capitalization) or Section 3.7 (Taxes) of this Agreement.
(d) Each Worldprints Founder severally (and not jointly)
indemnifies and holds harmless the Excite@Home Indemnified Persons from and
against Special Damages incurred
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or suffered by any such Excite@Home Indemnified Persons arising from, by reason
of, or in connection with, (i) any fraudulent conduct, fraudulent
misrepresentation or other willful misconduct on the part of such Worldprints
Founder, or (ii) any inaccuracy, misrepresentation, breach of, or default in,
the representations or warranties of such Worldprints Founder set forth in
Section 3.4 (Capitalization) or Section 3.7 (Taxes) of this Agreement.
11.3 Limitation.
----------
(a) Basic Cap On Indemnity Obligation. Except with respect
---------------------------------
to claims for indemnification for Special Damages and Shareholder Damages, in no
event will the maximum aggregate liability of any Worldprints Shareholder
(including a Worldprints Founder) exceed the dollar amount that results from
multiplying (x) the Excite@Home Average Price Per Share by (y) the product of
one thousand (1000) times the total number of shares of Excite@Home Preferred
Stock (including fractions of a share thereof) issued at the Effective Time to
such Worldprints Shareholder pursuant to Article 2 hereof by (z) 0.7 (seventy
percent). In seeking indemnification for Damages under Section 11.2, the
Excite@Home Indemnified Persons shall first exercise their remedies with respect
to the Escrow Shares and any other assets deposited in escrow pursuant to the
terms of Section 2.5 and Article 11 hereof (including any shares of Excite@Home
capital stock or other securities into which Excite@Home Preferred Stock is
converted or exchanged or which is received in respect of such shares of
Excite@Home Preferred Stock or other capital stock and securities), and then may
seek recovery of such Damages against any other assets of the Worldprints
Shareholder or the Worldprints Founders (as the case may be). For purposes of
satisfying claims for Damages, the value of each share of Excite@Home Common
Stock shall be deemed to be equal to the Excite@Home Average Price Per Share,
and the value of each share of Excite@Home Preferred Stock shall be deemed to be
equal to one thousand (1,000) times the Excite@Home Average Price Per Share, in
each case regardless of its actual fair market value as of the time that a claim
for indemnification may be made against such share. Each Worldprints Shareholder
and each Worldprints Founder agrees that claims for indemnification against such
Person under this Article 11 may be satisfied by the forfeiture of such Person's
shares of Excite@Home Preferred Stock (including fractions of a share thereof)
as provided for in this Article 11 and that, except as provided herein, no
Excite@Home Indemnified Person shall have any obligation to exercise its
remedies against any other assets of such Worldprints Shareholder or Worldprints
Founder prior to exercising them against such shares of Excite@Home Preferred
Stock. In the event of a Capital Change after the Effective Time, the
Excite@Home Average Price Per Share will, for purposes of this Section 11.3, be
proportionally and equitably adjusted.
(b) Basket. The indemnification provided for in Section
------
11.2(a) shall not apply unless and until the aggregate Damages for which one or
more Excite@Home Indemnified Persons seeks or has sought indemnification
hereunder exceeds a cumulative aggregate of Two Hundred and Fifty Thousand
Dollars (the "Basket"), in which event Worldprints Shareholders and the
Worldprints Founders shall, subject to the other limitations herein, be liable
to indemnify the Excite@Home Indemnified Persons for all Damages; provided,
however, that the Basket and the foregoing provisions of this sentence shall not
apply to any indemnification claim for (i) fraudulent conduct, fraudulent
misrepresentation or other willful misconduct on the part of Worldprints or any
officer, director, employee or agent of Worldprints, Worldprints Founder,
Worldprints Shareholder or any subsidiary of Worldprints, or (ii) Excess
Transaction Expenses. As used herein, "Special Damages" means Damages resulting
from (a) any fraudulent conduct, fraudulent misrepresentation
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or other willful misconduct on the part of Worldprints or any officer, director,
employee or agent of Worldprints, Worldprints Founder, Worldprints Shareholder,
or any subsidiary of Worldprints, or (b) any inaccuracy, misrepresentation,
breach of, or default in, the representations and warranties of Worldprints or
the Worldprints Founders set forth in Section 3.4 (Capitalization) or Section
3.7 (Taxes) of this Agreement.
(c) Special Cap On Indemnity Obligation. Except with
-----------------------------------
respect to claims for indemnification against a Worldprints Founder for any
fraudulent conduct, fraudulent misrepresentation or other willful misconduct on
the part of Worldprints or any officer, director, employee or agent of
Worldprints, such Worldprints Founder or any subsidiary of Worldprints (which,
for Worldprints Founders, shall not be limited), in no event will the maximum
aggregate liability of any Worldprints Shareholder for Special Damages or of a
Worldprints Shareholder for Shareholder Damages exceed the dollar amount that
results from multiplying (a) the closing price of a share of Excite@Home Common
Stock on the Nasdaq National Market on the Closing Date, by (b) the sum of the
(i) total number of shares of Excite@Home Common Stock and (ii) one thousand
(1000) times the total number of shares of Worldprints Preferred Stock
(including fractions of a share thereof) issuable at the Effective Time to such
Worldprints Shareholder pursuant to Section 2.
11.4 Appointment of Representative.
-----------------------------
(a) By voting in favor of the Merger, each of the Worldprints
Shareholders approves the designation of and designates Jon E. Gordon as the
representative of the Worldprints Shareholders (the "Representative") and as the
attorney-in-fact and agent for and on behalf of each Worldprints Shareholder
with respect to claims for indemnification under Article 11 for Ordinary Damages
and/or Special Damages, except Special Damages asserted against any of the
Worldprints Founders pursuant to Section 11.2(d) (each a "Representative
Claim"), and the taking by the Representative of any and all actions and the
making of any decisions required or permitted to be taken by the Representative
under this Agreement, including, without limitation, the exercise of the power
to: (a) authorize the release or delivery to Excite@Home of shares of
Excite@Home Preferred Stock and any other assets deposited in escrow pursuant to
the terms of Section 2.5 and Article 11 hereof (including any shares of
Excite@Home capital stock or other securities into which Excite@Home Preferred
Stock is converted or exchanged or which is received in respect of such shares
of Excite@Home Preferred Stock or other capital stock and securities) in
satisfaction of Representative Claims by Excite@Home or any other Excite@Home
Indemnified Person (as defined herein) pursuant to Article 11; (b) agree to,
negotiate, enter into settlements and compromises of, demand arbitration of, and
comply with orders of courts and awards of arbitrators with respect to, such
Representative Claims; (c) arbitrate, resolve, settle or compromise any
Representative Claim made pursuant to Article 11; and (d) take all actions
necessary in the judgment of the Representative for the accomplishment of the
foregoing. The Representative will have authority and power to act on behalf of
each Worldprints Shareholder with respect to the disposition, settlement or
other handling of all Representative Claims under Article 11 hereof and all
rights or obligations arising under Article 11 related to Representative Claims.
The Worldprints Shareholders will be bound by all actions taken and documents
executed by the Representative in connection with Representative Claims, and
Excite@Home will be entitled to rely on any action or decision of the
Representative related thereto. The Worldprints Shareholders hereby acknowledge
and agree that (i) in performing the functions specified in this Agreement, the
Representative will not be liable to any Worldprints Shareholder in the absence
of gross negligence or willful
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misconduct on the part of the Representative; and (ii) any claims against the
Representative shall be properly asserted against the Representative only in the
Representative's capacity as the Representative and shall not be asserted
against any corporation, firm, enterprise or organization of which the
Representative is an officer, director, partner, agent, shareholder, employee or
independent contractor. Any out-of-pocket costs and expenses reasonably incurred
by the Representative in connection with actions taken by the Representative
pursuant to the terms of Article 11 (including, without limitation, the hiring
of legal counsel and the incurring of legal fees and costs) will be paid by the
Worldprints Shareholders to the Representative pro rata in proportion to their
respective percentage equity interests as reflected in Schedule 3.4.1(a) to this
Agreement.
(b) The Representative will serve without compensation; provided,
however, that the Representative will be compensated at an hourly rate of $150
for any time in excess of fifty hours in the aggregate that he spends in
performing the duties of the Representative, in addition to any reasonable
expenses the Representative may incur in performing the duties of the
Representative. The Representative shall be entitled to make an assessment
against any Worldprints' Shareholder in respect of the Representative's time
charges or expenses. Such assessment shall be made by a written notice to the
Worldprints' Shareholders in the manner provided in this Agreement for the
giving of notice, in an amount equal to each Worldprints Shareholder's pro rata
share of any assessment (such pro rata share being based upon the respective
ownership interests of the Worldprints' Shareholders set forth beside their
names on Schedule 3.4.1(a) of this Agreement) and the due date for payment of
the assessment and shall specify in reasonable detail the facts or circumstances
giving rise to the assessment. Each Worldprints' Shareholder shall make payment
in full of its share of an assessment no later than ten calendar days after the
payment date specified in the notice of assessment. In the event a Worldprints'
Shareholder does not pay the full amount of the assessment, the Representative
shall be entitled to payment from such Worldprints Shareholder of the amount
shown in the notice of assessment, plus an additional 25% of the requested
assessment as liquidated damages (and not as a penalty) for failure to timely
pay the assessment, in addition to any costs of collection, including reasonable
attorneys' fees and court costs. Pending application of the proceeds of an
assessment, the Representative shall deposit the proceeds of an assessment in a
money market demand account at a commercial bank having an office in Boulder,
Colorado. Such account will also serve as the depository for any excess funds
remaining after application of the proceeds of an assessment, provided that any
assessment funds that remain unused for a period of 90 days shall be returned to
the appropriate Worldprints' Shareholders.
11.5 Notice of Claim. Claims for indemnification under Article 11 that are
---------------
not Representative Claims shall be made upon the Worldprints Shareholder
(including Worldprints Founder) as to which such claim applies (each such claim
being an "Individual Claim"). Excite@Home (and only Excite@Home) may give notice
of a Representative Claim or an Individual Claim under this Agreement whether
for its own Ordinary Damages, Special Damages or Shareholder Damages or for
Ordinary Damages, Special Damages or Shareholder Damages incurred by any other
Excite@Home Indemnified Person, and Excite@Home will give written notice of a
Claim executed by an officer of Excite@Home (a "Notice of Claim") to the
Representative, and, in the case of an Individual Claim, to the Worldprints
Shareholder against whom such Individual Claim is made, promptly after
Excite@Home becomes aware of the existence of any potential claim by an
Excite@Home Indemnified Person for indemnity from the Worldprints Shareholders
or a Worldprints Shareholder under Article 11, but in any event before the
Release Date arising from or relating to:
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(i) (a) any Ordinary Damages, (b) any Special Damages or
(c) any Shareholder Damages; or
(ii) the assertion, whether orally or in writing, against
Excite@Home or against any other Excite@Home Indemnified Person of a claim,
demand, suit, action, arbitration, investigation, inquiry or proceeding brought
by a third party against such Indemnified Person that is based upon, or includes
assertions that would, if true, constitute (in each such case, a "Third-Party
Claim"): (a) any Ordinary Damages, (b) any Special Damages or (c) any
Shareholder Damages.
Excite@Home agrees that it will make Claims only as permitted by
Article 11. No delay on the part of Excite@Home in giving the Representative
and/or a Worldprints Shareholder a Notice of Claim will relieve the
Representative or any Worldprints Shareholder from any of its obligations under
Article 11 unless (and then only to the extent) that the Representative or the
Worldprints Shareholders are materially prejudiced thereby. A Notice of Claim
shall identify with reasonable particularity that the subject claim asserted in
the Notice of Claim is a claim for Ordinary Damages, Special Damages and/or
Shareholder Damages, it being understood and agreed that such identification of
a claim as a claim for Ordinary Damages, Special Damages and/or Shareholder
Damages is an irrevocable election by Excite@Home to pursue such claim in
accordance with the procedures, conditions and limitations set forth in this
Article 11. The parties hereto acknowledge, however, that a claim may consist of
elements that combine more than one of Ordinary Damages, Special Damages and/or
Shareholder Damages, provided, however, that Excite@Home may not make multiple
recoveries for Damages arising out of the same specific set of facts and
circumstances by asserting a claim as more than one of Ordinary Damages, Special
Damages and/or Shareholder Damages.
11.6 Defense of Third-Party Claims.
-----------------------------
(a) Excite@Home shall defend any Third-Party Claim, and the
costs and expenses incurred by Excite@Home in connection with such defense
(including, but not limited to, reasonable attorneys' fees, other professionals'
and experts' fees and court or arbitration costs) shall be included in the
Ordinary Damages, Special Damages or Shareholder Damages for which Excite@Home
may seek indemnity pursuant to a Representative Claim or an Individual Claim
made by any Excite@Home Indemnified Person hereunder.
(b) The Representative and, if the claim includes an
Individual Claim, the Worldprints Shareholder against whom such Individual Claim
is made, shall have the right to receive copies of all pleadings, notices and
communications with respect to the Third-Party Claim to the extent that receipt
of such documents by the Representative and such Worldprints Shareholder does
not affect any privilege relating to the Excite@Home Indemnified Person, and may
participate in settlement negotiations with respect to the Third-Party Claim. No
Excite@Home Indemnified Person shall enter into any settlement of a Third-Party
Claim without the prior written consent of the Representative or, if such claim
is an Individual Claim, the Worldprints Shareholder against whom such Individual
Claim has been made (which consent shall not be unreasonably withheld),
provided, that if the Representative shall have consented to any such settlement
of a Representative Claim, then the Representative shall have no power or
authority to object to any Representative Claim by any Excite@Home Indemnified
Person for indemnity under Section 11.2 hereof for the amount of such
settlement, and that if a Worldprints Shareholder shall have consented
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to any settlement of an Individual Claim, then the Worldprints Shareholder shall
have no power or authority to object to any Individual Claim by an Excite@Home
Indemnified Person for indemnity under Section 11.2 hereof for the amount of
such settlement, and that, in each case, the Worldprints Shareholders will
remain responsible to indemnify all Excite@Home Indemnified Person(s) for all
Ordinary Damages, Special Damages or Shareholder Damages they may incur arising
out of, resulting from or caused by the Third-Party Claim to the fullest extent
provided in Article 11 hereof.
11.7 Contents of Notice of Claim. Each Notice of Claim by Excite@Home
---------------------------
given pursuant to Section 11.5 will contain the following information:
(i) Excite@Home's good faith estimate of the reasonably
foreseeable maximum amount of the alleged Ordinary Damages, Special Damages or
Shareholder Damages arising from such Representative Claim or Individual Claim
(which amount may be the amount of damages claimed by a third party in an action
brought against any Excite@Home Indemnified Person based on alleged facts, which
if true, would give rise to liability for Ordinary Damages, Special Damages or
Shareholder Damages to such Excite@Home Indemnified Person under Article 11);
and
(ii) a brief description, in reasonable detail (to the
extent reasonably available to Excite@Home), of the facts, circumstances or
events giving rise to the alleged Ordinary Damages, Special Damages or
Shareholder Damages based on Excite@Home's good faith belief thereof, including,
without limitation, the identity and address of any third-party claimant (to the
extent reasonably available to Excite@Home) and copies of any formal demand or
complaint.
11.8 Resolution of Notice of Claim. Any Notice of Claim received by the
-----------------------------
Representative and/or Worldprints Shareholder pursuant to Section 11.5 and
Section 11.7 above will be resolved as follows:
(a) Uncontested Claims. In the event that, within thirty
------------------
calendar days after the Notice of Claim containing a statement of the claimed
Ordinary Damages, Special Damages or Shareholder Damages is received by the
Representative and/or Worldprints Shareholder pursuant to Section 11.5 and
Section 11.7, the Representative, in the case of a Representative Claim, or the
applicable Worldprints Shareholder in the case of an Individual Claim, does not
contest such Notice of Claim in writing to Excite@Home as provided in Section
11.8(b) (an "Uncontested Claim"), the Representative in the case of a
Representative Claim will be conclusively deemed to have consented, on behalf of
all Worldprints Shareholders (including the Worldprints Founders), or the
Worldprints Shareholder in the case of an Individual Claim will be conclusively
deemed to have consented, to the recovery by the Excite@Home Indemnified Person
of the full amount of Ordinary Damages, Special Damages or Shareholder Damages
specified in the Notice of Claim in accordance with this Article 11, including
the forfeiture of shares of Excite@Home Preferred Stock and any other assets
deposited in escrow pursuant to the terms of Section 2.5 and Article 11 hereof
(including any shares of Excite@Home capital stock or other securities into
which Excite@Home Preferred Stock is converted or exchanged or which is received
in respect of such shares of Excite@Home Preferred Stock or other capital stock
and securities), in accordance with Section 11.3(a) and, without further notice,
to have stipulated to the entry of a final judgment for Damages against the
Worldprints Shareholders (including the Worldprints Founders)
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(in the case of a Representative Claim) or a Worldprints Shareholder (in the
case of an Individual Claim) for such amount in the Superior Court for the
County of San Mateo, the United States District Court for the Northern District
of California or the United States District Court of the District of Colorado,
or any other court having jurisdiction over the matter where venue is proper.
(b) Contested Claims. In the event that the
----------------
Representative, or in the case of an Individual Claim, the applicable
Worldprints Shareholder, gives Excite@Home written notice contesting all or any
portion of a Notice of Claim (a "Contested Claim") within the thirty day period
specified in Section 11.8(a), then such Contested Claim will be resolved by
either (A) a written settlement agreement executed by Excite@Home and the
Representative in the case of a Representative Claim, or Excite@Home and the
applicable Worldprints Shareholder in the case of an Individual Claim, or (B) in
the absence of such a written settlement agreement, by binding arbitration
between Excite@Home and the Representative in the case of a Representative
Claim, or Excite@Home and the applicable Worldprints Shareholder in the case of
an Individual Claim, in accordance with the terms and provisions of Section
11.8(c). Upon receipt by Excite@Home of written notice contesting all or any
portion of a Notice of Claim, it shall transmit stock certificates representing
Escrow Shares equal in value to the amount of Damages asserted in the Notice of
Claim (such Escrow Shares to be valued in accordance with Section 11.3) to a
third-party escrow agent mutually acceptable to Excite@Home and the
Representative (if Excite@Home and the Representative cannot agree within five
business days on a third-party escrow agent, then such escrow agent shall be
Chase Manhattan Bank and Trust Company National Association) (the "Escrow
Agent") and the parties to this Agreement will, at such time, enter into a
customary and reasonable escrow agreement, if any, required and provided by the
Escrow Agent, governing the terms of the Escrow Agent's service. With respect to
any of the Escrow Shares held by the Escrow Agent, the Escrow Agent will hold
and release shares in accordance with the procedures set forth in Section 2.5 of
this Agreement and this Article 11. Any fees or expenses charged by the Escrow
Agent in connection with its service pursuant to this Agreement shall be paid by
Excite@Home.
(c) Arbitration of Contested Claims. Each of Excite@Home,
-------------------------------
Worldprints and the Worldprints Shareholders agree that any Contested Claim will
be submitted to mandatory, final and binding arbitration before
J.A.M.S./ENDISPUTE or its successor ("J.A.M.S."), pursuant to the United States
Arbitration Act, 9 U.S.C., Section 1 et seq. and that any such arbitration will
be conducted in Boulder County, Colorado. Either Excite@Home or the
Representative in the case of a Representative Claim, or Excite@Home or the
applicable Worldprints Shareholder in the case of an Individual Claim, may
commence the arbitration process called for by this Agreement by filing a
written demand for arbitration with J.A.M.S. and giving a copy of such demand to
each of the other parties to this Agreement. The arbitration will be conducted
in accordance with the provisions of J.A.M.S's Streamlined Arbitration Rules and
Procedures in effect at the time of filing of the demand for arbitration,
subject to the provisions of Section 11.8(c) of this Agreement. The parties will
cooperate with J.A.M.S. and with each other in promptly selecting an arbitrator
from J.A.M.S.'s panel of neutrals, and in scheduling the arbitration proceedings
in order to fulfill the provisions, purposes and intent of this Agreement. The
parties covenant that they will participate in the arbitration in good faith,
and that they will share in its costs in accordance with subparagraph (i) below.
The provisions of this Section 11.8(c) may be enforced by any court of competent
jurisdiction, and the party seeking enforcement will be entitled to an award of
all costs, fees and expenses, including attorneys' fees, to be paid by the party
against whom enforcement is ordered.
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Subject to the provisions of subparagraph (vii) below, judgment upon the award
rendered by the arbitrator may be entered in any court having competent
jurisdiction.
(i) Payment of Costs. Excite@Home on the one hand, and
----------------
Worldprints Shareholders or a Worldprints Shareholder (through the
Representative in the case of a Representative Claim), on the other hand, will
bear the expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery as
an addition or offset to any award. The arbitrator will award to the prevailing
party, as determined by the arbitrator, all reasonable costs, fees and expenses
related to the arbitration, including reasonable fees and expenses of attorneys,
accountants and other professionals incurred by the prevailing party. If such an
award would result in manifest injustice, however, the arbitrator may apportion
such costs, fees and expenses between the parties in such a manner as the
arbitrator deems just and equitable.
(ii) Burden of Proof. Except as may be otherwise expressly
---------------
provided herein, for any Contested Claim submitted to arbitration, the burden of
proof will be as it would be if the claim were litigated in a judicial
proceeding governed by California law exclusively.
(iii) Award. Upon the conclusion of any arbitration
-----
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a final written arbitration award setting forth the basis
and reasons for any decision reached (the "Final Award") and will deliver such
documents to the Representative, or the applicable Worldprints Shareholder (in
the case of an Individual Claim) and Excite@Home, together with a signed copy of
the Final Award. Subject to the provisions of subparagraph (vii) below, the
Final Award will constitute a conclusive determination of all issues in
question, binding upon the Worldprints Shareholders (including the Worldprints
Founders) in the case of a Representative Claim, or the applicable Worldprints
Shareholder in the case of an Individual Claim, the Representative in the case
of a Representative Claim and Excite@Home, and will include an affirmative
statement to such effect. Awards of Damages will be subject to the provisions
regarding the "Basket" (as defined in Section 11.3); provided, however, that
awards of (i) Special Damages arising out of fraudulent conduct, fraudulent
misrepresentation or other willful misconduct on the part of Worldprints or any
officer, director, employee or agent of Worldprints, Worldprints Shareholder or
any subsidiary of Worldprints, (ii) Shareholder Damages arising out of the
failure of a Worldprints Shareholder to have good, valid and marketable title to
the issued and outstanding Worldprints Common Stock or Worldprints Preferred
Stock held by such Worldprints Shareholder, free and clear of all Encumbrances,
or (iii) Excess Transaction Expenses will not be subject to such provisions
regarding the "Basket".
(iv) Timing. The Representative or the applicable
------
Worldprints Shareholder, Excite@Home and the arbitrator will conclude each
arbitration pursuant to this Section 11.8 as promptly as possible for the
Contested Claim being arbitrated.
(v) Terms of Arbitration. The arbitrator chosen in
--------------------
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
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(vi) Exclusive Remedy. Following the Effective Time, except
----------------
as specifically otherwise provided in this Agreement, arbitration conducted in
accordance with this Agreement will be the sole and exclusive remedy of the
parties for any Representative Claim or Individual Claim made pursuant to
Article 11.
(vii) Treatment of Damages. Upon issuance and delivery of
--------------------
the Final Award as provided in subparagraph (iii) above, Excite@Home will
immediately be entitled to recover the amount of any Damages determined and
awarded to Excite@Home under such Final Award.
Article 12
Registration Rights
12.1 Certain Definitions. For purposes of this Article 12:
-------------------
(a) Registration. The terms "register," "registered," and
------------
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the 1933 Act, and the declaration or
ordering of effectiveness of such registration statement.
(b) Registrable Securities. The term "Registrable
----------------------
Securities" means (i) the shares of Excite@Home Common Stock that are issued to
the Worldprints Shareholders in the Merger pursuant to Section 2.1.2 hereof
(which shares are not Escrow Shares or subject to any restrictions on transfer
set forth in the Investment Representation Letter), (ii) the shares of
Excite@Home Common Stock that are issued to holders of the Worldprints Warrants
listed on Schedule 2.7 hereto upon exercise of such Worldprints Warrants, and
(iii) any shares of Excite@Home Common Stock that may be issued as a dividend or
other distribution (including shares of Excite@Home Common Stock issued in a
subdivision and split of Excite@Home's outstanding Common Stock) with respect
to, or in exchange for, or in replacement of, shares of Excite@Home Common Stock
described in clauses (i) or (ii) of this Section 12.1(b) or in this clause
(iii); excluding in all cases, however, from the definition of "Registrable
---------
Securities" any such shares that are: (w) registered under the 1933 Act other
than pursuant to a registration statement filed pursuant to this Agreement; (x)
sold by a person in a transaction in which rights under this Agreement with
respect to such shares are not assigned in accordance with the terms of this
Agreement; (y) sold pursuant to a registration statement filed pursuant to this
Agreement; or (z) sold pursuant to Rule 144 promulgated under the 1933 Act or
otherwise sold to the public. Only shares of Excite@Home Common Stock shall be
Registrable Securities. Except as provided in clauses (ii) and (iii) of the
first sentence of this Section 12.1(b), without limitation, the term
"Registrable Securities" does not include any shares of Excite@Home Common Stock
that were not issued in connection with the Merger.
(c) Holder. The term "Holder" means an Worldprints
------
Shareholder who is the original holder of any Registrable Securities or any
assignee of record of any Registrable Securities to whom rights under this
Agreement have been duly assigned in accordance with the provisions of this
Agreement.
(d) Form S-3. The term "Form S-3" means a registration
--------
statement filed under Form S-3 under the 1933 Act, as such is in effect at the
Effective Time, or any successor form
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of registration statement under the 1933 Act subsequently adopted by the SEC
which permits inclusion or incorporation of a substantial amount of information
by reference to other documents filed by Excite@Home with the SEC.
(e) Rule 415. The term "Rule 415" means Rule 415
--------
promulgated under the 1933 Act, as such Rule may be amended from time to time,
or any similar or successor rule or regulation hereafter adopted by the SEC.
12.2 Form S-3 Shelf Registration.
---------------------------
(a) Filing and Registration Period. Subject to the terms
------------------------------
and conditions of this Agreement, as promptly as practicable following the
Effective Time of the Merger but no later than two whole business days
thereafter, and consistent with the requirements of applicable law, Excite@Home
shall prepare and file with the SEC a registration statement on Form S-3 for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the then outstanding Registrable Securities (the "Shelf Registration").
Excite@Home shall use commercially reasonable efforts to have such Shelf
Registration declared effective as soon as practicable after its filing and to
keep the Shelf Registration continuously effective under the 1933 Act for a
continuous period of time (such period of time being hereinafter called the
"Registration Period") commencing on the date the Shelf Registration is declared
effective under the 1933 Act by the SEC (the "Date of Effectiveness") and ending
(i) for purposes of Registrable Securities identified under Section 12.1(b)(i)
above (including any shares of Excite@Home Common Stock which are Registrable
Securities by virtue of Section 12.1(b)(iii) which are be issued as a dividend
or other distribution with respect to the Registrable Securities identified in
Section 12.1(b)(i)), on the date that is the first anniversary of the Effective
Time of the Merger (subject to the normal blackout policies of Excite@Home); and
(ii) for purposes of Registrable Securities identified under Section 12.1(b)(ii)
above (including any shares of Excite@Home Common Stock which are Registrable
Securities by virtue of Section 12.1(b)(iii) which are be issued as a dividend
or other distribution with respect to the Registrable Securities identified in
Section 12.1(b)(ii)), on the date that is the second anniversary of the
Effective Time of the Merger (subject to the normal blackout policies of
Excite@Home). Excite@Home shall have no duty or obligation to keep the Shelf
Registration (or any Subsequent Registration, as defined below) effective after
the expiration of the applicable Registration Period. Accordingly, the
Worldprints Shareholders acknowledge that the Registrable Securities identified
under Section 12.1(b)(i) (including any shares of Excite@Home Common Stock which
are Registrable Securities by virtue of Section 12.1(b)(iii) which are to be
issued as a dividend or other distribution with respect to the Registrable
Securities identified in Section 12.1(b)(i)) will not be registered under the
1933 Act beginning one year after the Effective Time of the Merger. The
Worldprints Shareholders and the holders of Worldprints Warrants listed on
Schedule 2.7 hereto further acknowledge that the Registrable Securities
identified under Section 12.1(b)(ii) (including any shares of Excite@Home Common
Stock which are Registrable Securities by virtue of Section 12.1(b)(iii) which
are to be issued as a dividend or other distribution with respect to the
Registrable Securities identified in Section 12.1(b)(ii)) will not be registered
under the 1933 Act beginning two years after the Effective Time of the Merger.
(b) Subsequent Registration. If the Shelf Registration is
-----------------------
filed with the SEC and becomes effective under the 1933 Act, and the Shelf
Registration or a Subsequent Registration (as defined below) thereafter ceases
to be effective for any reason at any time during
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the Registration Period, then Excite@Home shall use all reasonable efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall, within thirty days of such cessation of effectiveness,
file an amendment to the Shelf Registration seeking to obtain the withdrawal of
the order suspending the effectiveness thereof, or file an additional "shelf"
registration statement pursuant to Rule 415 covering all of the then outstanding
Registrable Securities (a "Subsequent Registration"). If a Subsequent
Registration is filed, Excite@Home shall use its best efforts to cause the
Subsequent Registration to be declared effective as soon as practicable after
such filing and to keep such registration statement continuously effective until
the end of the Registration Period.
(c) Supplements and Amendments. Subject to the provisions
--------------------------
of Section 12.2(g), during the Registration Period Excite@Home shall supplement
and amend the Shelf Registration if, as and when required by the 1933 Act, the
rules and regulations promulgated thereunder or the rules, regulations or
instructions applicable to the registration form used by Excite@Home for such
Shelf Registration.
(d) Timing and Manner of Sales. Any sale of Registrable
--------------------------
Securities pursuant to a Shelf Registration or a Subsequent Registration under
this Section 12.2 may be made only during a "Permitted Window" (as defined in
Section 12.2(g) below). In addition, any sale of Registrable Securities pursuant
to a Shelf Registration or a Subsequent Registration under this Section 12.2 may
only be made in accordance with the method or methods of distribution of such
Registrable Securities that are described in the registration statement for the
Shelf Registration (or Subsequent Registration, as applicable) and permitted by
such form of registration statement, which methods of distribution will be
specified by the Holders in their Notice of Resale (as defined below). Subject
to any other agreements between the Holder and Excite@Home or Surviving
Corporation, a Holder may also sell Registrable Securities in a bona fide
private offering if the selling Holder provides Excite@Home with a written
opinion of counsel, satisfactory to counsel to Excite@Home, that such offer and
sale is an exempt transaction under the 1933 Act and applicable state securities
laws, complies with all requirements for such exemptions and is not made with
use of the prospectus for the Shelf Registration (or Subsequent Registration, if
applicable).
(e) No Underwritings. No sale of Registrable Securities
-----------------
under any Shelf Registration (or Subsequent Registration) effected pursuant to
this Section 12.2 may be effected pursuant to any underwritten offering without
Excite@Home's prior written consent, which may be withheld in its sole and
absolute discretion.
(f) Notice of Resale. Before any Holder may make any sale,
----------------
transfer or other disposition of any Registrable Securities under the Shelf
Registration (or a Subsequent Registration) during the Registration Period, a
Holder or Holders who own at least five percent of the Registrable Securities
then outstanding must first give written notice to Excite@Home (a "Notice of
Resale") of such Holder's or Holders' present intention to so sell, transfer or
otherwise dispose of some or all of such Holder's or Holders' Registrable
Securities, and the number of Registrable Securities such Holder or Holders
propose(s) to so sell, transfer or otherwise dispose of. In addition, a Notice
of Resale shall contain the information required to be included therein under
Section 12.2(g).
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(g) Permitted Window; Sale Procedures.
---------------------------------
(i) A "Permitted Window" is a period of ten consecutive
trading days commencing upon Excite@Home's written notification to the
Worldprints Shareholders in response to a Notice of Resale that the prospectus
contained in the Form S-3 registration statement filed pursuant to Section 12.2
of this Agreement is available to be used for resales of Registrable Securities
pursuant to the Shelf Registration (or a Subsequent Registration, as
applicable).
(ii) Before a Holder can make a sale of any Registrable
Securities pursuant to the Shelf Registration (or a Subsequent Registration),
and in order to cause a Permitted Window to commence, such Holder must first
give Excite@Home a Notice of Resale indicating such Holder's intention to sell
Registrable Securities pursuant to the Shelf Registration (or Subsequent
Registration, as applicable) and such Holder's intended plan of distribution of
such Registrable Securities (which must conform to the plan of distribution
contained in the prospectus for the Shelf Registration (or Subsequent
Registration, as applicable)).
(iii) Upon receipt of such Notice of Resale (unless a
certificate of Excite@Home is delivered as provided in Section 12.3(b) below),
Excite@Home will give written notice to all Holders as soon as practicable, but
in no event more than three business days after Excite@Home's receipt of such
Notice of Resale that either: (A) the prospectus contained in the registration
statement for the Shelf Registration (or Subsequent Registration, if applicable)
is current (it being acknowledged that it may be necessary for Excite@Home to
supplement the prospectus or make an appropriate filing under the 1934 Act so as
to cause the prospectus to become current) and that (as applicable) (1) the
Permitted Window will commence on the date of such notice by Excite@Home; or (B)
Excite@Home is required under the 1933 Act and the regulations thereunder to
amend the registration statement for the Shelf Registration (or Subsequent
Registration, as applicable) in order to cause the prospectus to be current. In
the event that Excite@Home determines that an amendment to the registration
statement is necessary as provided above, it will file and cause such amendment
to become effective as soon as practicable; whereupon it will notify the Holders
that the Permitted Window will then commence.
(iv) Excite@Home shall not be obligated to keep the
registration statement for the Shelf Registration (or any Subsequent
Registration) current during any period other than a Permitted Window. The
Holders may elect to withdraw a request for registration pursuant to a Notice of
Resale; provided however, that if Excite@Home has commenced preparation of any
supplement or amendment to the registration statement or any part thereof in
response to such Notice of Resale prior to receiving written notice from the
Holders' of the withdrawal of their request for registration, then the Holders
who originally gave Excite@Home such Notice of Resale will promptly reimburse
Excite@Home for its actual costs and expenses incurred in preparing and/or
filing such supplement and/or amendment.
(h) Trading Window Compliance. The Holders acknowledge that
-------------------------
Excite@Home maintains an Insider Trading Compliance Program and an Insider
Trading Policy, as such may be amended (the "Excite@Home Trading Policy") and
that the Excite@Home Trading Policy requires that those directors, officers and
employees of Excite@Home and its subsidiaries and those other persons whom
Excite@Home determines to be "Access Personnel" or otherwise subject to the
"trading window" and pre-clearance requirements of the Excite@Home Trading
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Policy (and members of their immediate families and households) are permitted to
effect trades in Excite@Home securities: (i) only during those specified time
periods ("trading windows") in which such persons are permitted to make sales,
purchases or other trades in Excite@Home's securities under the "trading window"
provisions of the Excite@Home Trading Policy; and (ii) only after pre-clearance
of such sales, purchases or other trades with Excite@Home's Insider Trading
Compliance Officer. If a Holder is or becomes subject to the "trading window"
and/or "pre-clearance" provisions of the Excite@Home Trading Policy described
above, then, notwithstanding anything herein to the contrary, such Holder may
sell, transfer and dispose of Registrable Securities only during those trading
windows during which such Excite@Home Access Personnel are permitted to effect
trades in Excite@Home stock under the Excite@Home Trading Policy and only after
pre-clearing such trades with Excite@Home's Insider Trading Compliance Officer
as provided in the Excite@Home Trading Policy.
12.3 Limitations. Notwithstanding the provisions of Section 12.2 above,
-----------
Excite@Home shall not be obligated to effect any registration, qualification or
compliance of Registrable Securities pursuant to Section 12.2 of this Agreement,
and the Holders shall not be entitled to sell Registrable Securities pursuant to
any registration statement filed under Section 12.2 of this Agreement, as
applicable:
(a) if Form S-3 is not then available for such offering by
the Holders;
(b) if Excite@Home shall furnish to the Holders a
certificate signed by an officer of Excite@Home stating that, in the good faith
judgment of such officer, it would be detrimental to Excite@Home and its
stockholders for such Permitted Window to be in effect at such time, due, for
example, to the existence of a material development or potential material
development involving Excite@Home which Excite@Home would be obligated to
disclose in the prospectus contained in the Shelf Registration (or Subsequent
Registration, as applicable), which disclosure would, in the good faith judgment
of such officer, be premature or otherwise inadvisable at such time or would
have a material adverse affect upon Excite@Home and its stockholders, in which
event Excite@Home will have the right to defer a Permitted Window for a period
of not more than forty days after receipt of a Notice of Resale from the Holder
or Holders pursuant to this Section 12.3(b), provided that in the event that a
Permitted Window is deferred by Excite@Home pursuant to this Section 12.3(b)
then Excite@Home shall extend the Registration Period hereunder by the number of
days that such Permitted Window was so deferred;
(c) if Excite@Home is acquired and Excite@Home Common Stock
ceases to be publicly traded;
(d) in any particular jurisdiction in which Excite@Home
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance,
unless Excite@Home is already subject to service of process in such
jurisdiction; or
(e) if the SEC refuses to declare such registration
effective due to the participation of any particular Holder in such registration
(unless such Holder withdraws all such Holder's Registrable Securities from such
registration statement); or if the manner in which any Registrable Securities
are disposed of pursuant to the Shelf Registration (or Subsequent
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<PAGE>
Registration, as applicable) is not included within the plan of distribution set
forth in the prospectus for the Shelf Registration (or Subsequent Registration,
as applicable).
12.4 Shares Otherwise Eligible for Resale. Notwithstanding anything
------------------------------------
herein to the contrary, Excite@Home shall not be obligated to effect or continue
to keep effective any such registration, registration statement, qualification
or compliance with respect to the Registrable Securities held by any particular
Holder:
(a) if Excite@Home or its legal counsel shall have received
a "no-action" letter or similar written confirmation from the SEC that all the
Registrable Securities then held by such Holder may be resold by such Holder
within a three month period without registration under the 1933 Act pursuant to
the provisions of Rule 144 promulgated under the 1933 Act (or successor
provisions), or otherwise;
(b) if legal counsel to Excite@Home shall deliver a written
opinion to Excite@Home, its transfer agent and the Holders, in form and
substance reasonably acceptable to Excite@Home and one legal counsel for the
Holders as a group, to the effect that all the Registrable Securities then held
by such Holder may be resold by such Holder within a three month period without
registration under the 1933 Act pursuant to the provisions of Rule 144
promulgated under the 1933 Act, or otherwise; or
(c) after expiration or termination of the Registration
Period.
12.5 Expenses. Excite@Home shall pay all expenses incurred in connection
--------
with any registration effected by Excite@Home pursuant to this Agreement
(excluding brokers' discounts and commissions), including, without limitation,
all filing, registration and qualification, printers', legal (including, the
reasonable fees and expenses of one counsel for the Holders as a group) and
accounting fees.
12.6 Obligations of Excite@Home. Subject to Sections 12.2, 12.3 and 12.4
--------------------------
above, when required to effect the registration of any Registrable Securities
under the terms of this Agreement, Excite@Home will, as expeditiously as
reasonably possible:
(a) furnish to the Holders such number of copies of the
prospectus for the Shelf Registration (or Subsequent Registration, as
applicable), including a preliminary prospectus (and amendments or supplements
thereto), in conformity with the requirements of the 1933 Act, and such other
documents as they may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by them;
(b) use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as will be reasonably requested by the
Holders; provided that Excite@Home will not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such state or jurisdiction unless Excite@Home is
already so qualified or subject to service of process, respectively, in such
jurisdiction; and
(c) promptly notify each Holder of Registrable Securities
covered by such registration statement, at any time during a Permitted Window
when a prospectus relating
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thereto is required to be delivered under the 1933 Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
12.7 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of Excite@Home to take any action pursuant to this Article 12 that
the selling Holders will furnish to Excite@Home such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition and plan of distribution of such Registrable Securities as shall be
required to timely effect the registration of their Registrable Securities.
12.8 Delay of Registration. No Holder will have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any registration that is
the subject of this Agreement as the result of any controversy that might arise
with respect to the interpretation or implementation of this Agreement.
12.9 Indemnification.
---------------
(a) By Excite@Home. To the extent permitted by law,
--------------
Excite@Home will indemnify, defend and hold harmless each Holder against any
losses, claims, damages, or liabilities (joint or several) to which such Holder
may become subject under the 1933 Act, the 1934 Act or other U.S. federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively, a "Violation"):
(i) any untrue statement or alleged untrue statement
of a material fact contained in a registration statement filed by Excite@Home
pursuant to this Agreement pursuant to which Registrable Securities are sold,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto;
(ii) the omission or alleged omission to state in such
registration statement, preliminary prospectus or final prospectus or any
amendments or supplements thereto, a material fact required to be stated
therein, or necessary to make the statements therein not misleading; or
(iii) any violation or alleged violation by Excite@Home
of the 1933 Act, the 1934 Act, any U.S. federal or state securities law or any
rule or regulation promulgated under the 1933 Act, the 1934 Act or any U.S.
federal or state securities law in connection with the offering of Registrable
Securities covered by such registration statement;
provided however, that the indemnity agreement contained in this subsection
12.9(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the written
consent of Excite@Home (which consent shall not be unreasonably withheld), nor
shall Excite@Home be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder.
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(b) By Selling Holders. To the extent permitted by law,
------------------
each selling Holder will indemnify and hold harmless Excite@Home, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls Excite@Home within the meaning of the 1933 Act, any
underwriter and any other Holder selling securities under such registration
statement, against any losses, claims, damages or liabilities (joint or several)
to which Excite@Home or any such director, officer, controlling person,
underwriter or other such Holder may become subject under the 1933 Act, the 1934
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will indemnify and reimburse Excite@Home or any such
director, officer, controlling person, underwriter or other Holder for any
reasonable attorneys' fees and other expenses reasonably incurred by Excite@Home
or any such director, officer, controlling person, underwriter or other Holder
in connection with investigating or defending any such loss, claim, damage,
liability or action, as incurred.
(c) Notice. Promptly after receipt by an indemnified party
------
under this Section 12.9 of notice of the commencement of any action (including
any governmental action) against such indemnified party, such indemnified party
will, if a claim for indemnification or contribution in respect thereof is to be
made against any indemnifying party under this Section 12.9, deliver to the
indemnifying party a written notice of the commencement thereof and, if the
indemnifying party is Excite@Home, Excite@Home shall have the right and
obligation to control the defense of such action, and if Excite@Home fails to
defend such action it shall indemnify and reimburse the selling Holders for any
reasonable attorneys' fees and other expenses reasonably incurred by them in
connection with investigating or defending such action; provided, however, that:
-------- -------
(i) Excite@Home shall also have the right, at its option, to assume and control
the defense of any action with respect to which Excite@Home or any person
entitled to be indemnified by the selling Holders under Section 12.9(b) is
entitled to indemnification from the selling Holders; (ii) the indemnified party
or parties shall have the right to participate at its own expense in the defense
of such action and (but only to the extent agreed in writing with Excite@Home
and any other indemnifying party similarly noticed) to assume the defense
thereof with counsel mutually satisfactory to the parties; and (iii) an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses of such counsel to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to an actual or potential conflict
of interests between such indemnified party and any other party represented by
such counsel in such proceeding. The failure of an indemnified party to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to the ability of the
indemnifying party to defend such action, shall relieve such indemnifying party
of any liability to the indemnified party under this Section 12.9, but the
omission so to deliver written notice to the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party otherwise than under this Section 12.9.
(d) Defect Eliminated in Final Prospectus. The foregoing
-------------------------------------
indemnity agreements of Excite@Home and the Holders are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended or supplemented prospectus on file
with the SEC and effective at the time the sale of Registrable
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<PAGE>
Securities under such registration statement occurs (the "Amended Prospectus"),
such indemnity agreement shall not inure to the benefit of any person if a copy
of the Amended Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage in the
action giving rise to indemnity claims under this Section 12.9, at or prior to
the time such action is required by the 1933 Act.
(e) Survival. The obligations of Excite@Home and Holders
--------
under this Section 12.9 shall survive the completion of any offering of
Registrable Securities in a registration statement pursuant to this Agreement,
and otherwise.
12.10 Duration and Termination of Excite@Home's Obligations. Excite@Home
-----------------------------------------------------
will have no obligations pursuant to Section 12.2 of this Agreement with respect
to any Notice of Resale or other request or requests for registration (or
inclusion in a registration) made by any Holder or to maintain or continue to
keep effective any registration or registration statement pursuant hereto: (a)
after the expiration or termination of the Registration Period; (b) with respect
to a particular Holder if, in the opinion of counsel to Excite@Home, all such
Registrable Securities proposed to be sold by such Holder may be sold in a three
month period without registration under the 1933 Act pursuant to Rule 144
promulgated under the 1933 Act or otherwise; or (c) if all Registrable
Securities have been registered and sold pursuant to a registration effected
pursuant to this Agreement and/or have been transferred in transactions in which
registration rights hereunder have not been assigned in accordance with this
Agreement.
12.11 Acknowledgment of Other Agreements. The Holders acknowledge that
----------------------------------
they have been informed by Excite@Home that other stockholders of Excite@Home
currently hold certain Form S-3 and other registration rights that may enable
such other stockholders to sell shares of Excite@Home during one or more
Permitted Windows or at other times (thus potentially adversely affecting the
receptivity of the market to the sale of the Registrable Securities pursuant to
a registration effected pursuant to this Agreement). The Holders further
acknowledge (i) that Excite@Home has agreed not to effect any public sale or
distribution of any of its equity securities or of any security convertible into
or exchangeable or exercisable for any equity security of Excite@Home during the
fourteen days prior to, and during the sixty day period beginning on, the
effective date of any "Demand Registration" (as such term is defined in that
certain Third Amended and Restated Registration Rights Agreement dated as of
April 11, 1997, among Excite@Home and certain holders of Excite@Home capital
stock and attached as Exhibit 4.01 to Excite@Home's Form S-1 filed with the SEC
on May 16, 1997 (except as part of such registration), a copy of which has been
given to Worldprints and its counsel, and (ii) hereby agree not to effect any
public sale or distribution of any Excite@Home capital stock during the periods
described in clause (i) above, in each case including a sale pursuant to Rule
144 promulgated under the 1933 Act; provided, that as to each Holder Excite@Home
shall extend the Registration Period for that number of days which such Holder
of Registrable Securities could have otherwise sold such securities during a
Permitted Window but for the foregoing agreement of the Holders under clause
(ii) above.
12.12 Assignment. Notwithstanding anything herein to the contrary, the
----------
rights of a Holder under Article 12 may be assigned only with Excite@Home's
express prior written consent, which may be withheld in Excite@Home's sole
discretion; provided, however, that the rights of a Holder under Article 12 may
-------- -------
be assigned without Excite@Home's express prior written consent: (a) to a
Permitted Assignee (as defined below); or (b) (if applicable) by will or by the
laws of intestacy,
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<PAGE>
descent or distribution, provided that the assignee first agrees in writing to
be bound by all the obligations of the Holders under this Agreement. Any attempt
to assign any rights of a Holder under Article 12 without Excite@Home's express
prior written consent in a situation in which such consent is required by this
Section shall be null and void and without effect. Subject to the foregoing
restrictions, all rights, covenants and agreements in Article 12 by or on behalf
of the parties hereto will bind and inure to the benefit of the respective
permitted successors and assigns of the parties hereto. Each of the following
parties are "Permitted Assignees" for purposes of this Section 12.12: (a) a
trust whose beneficiaries consist solely of a Holder and such Holder's immediate
family; (b) the personal representative (such as an executor of a Holder's
will), custodian or conservator of a Holder, in the case of the death,
bankruptcy or adjudication of incompetency of that Holder; (c) immediate family
members of a Holder; or (d) partners of a Holder that is a partnership.
Article 13
Miscellaneous
13.1 Governing Law. The internal laws of the State of California
-------------
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto; provided however, that issues
involving the consummation and effects of the Merger shall be governed by the
laws of the State of Colorado.
13.2 Assignment; Binding Upon Successors and Assigns. Neither party
-----------------------------------------------
hereto may assign any of its rights or obligations hereunder without the prior
written consent of the other party hereto. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Any assignment in violation of this provision shall be
void.
13.3 Severability. If any provision of this Agreement, or the application
------------
thereof, will for any reason and to any extent be invalid or unenforceable, then
the remainder of this Agreement 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 the void or unenforceable provision.
13.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of all
parties reflected hereon as signatories.
13.5 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party hereunder will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other. 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
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<PAGE>
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.
13.6 Amendment and Waivers. Any term or provision of this Agreement may
---------------------
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default. This Agreement may be amended by the parties hereto as
provided in this Section at any time before or after approval of this Agreement
by the shareholders of Worldprints, but, after such approval, no amendment will
be made which by applicable law requires the further approval of the
shareholders of Worldprints without obtaining such further approval. At any time
prior to the Effective Time, each of Worldprints and Excite@Home, by action
taken by its Board of Directors, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other; (ii) waive any inaccuracies in the representations and warranties made to
it contained herein or in any document delivered pursuant hereto; and (iii)
waive compliance with any of the agreements or conditions for its benefit
contained herein. No such waiver or extension will be effective unless signed in
writing by the party against whom such waiver or extension is asserted. The
failure of any party to enforce any of the provisions hereof will not be
construed to be a waiver of the right of such party thereafter to enforce such
provisions.
13.7 Expenses. Each party will bear its respective legal, auditors' and
--------
investment bankers' and financial advisors' fees and other expenses incurred
with respect to this Agreement, the Merger and the transactions contemplated
hereby ("Transaction Expenses"); provided, however, that if the Merger is
successfully consummated, then not more than a maximum of $175,000 of
Worldprints' verified Transaction Expenses incurred by Worldprints in connection
with services rendered to Worldprints by its accountants, attorneys and
investment or financial advisors will be paid by Excite@Home and Excite@Home
will be entitled to indemnification from the Escrow Shares in accordance with
Section 11.2 for an amount equal to the amount (if any) by which Worldprints'
Transaction Expenses exceed $175,000 (such excess amount being hereinafter
called the "Excess Transaction Expenses"), and such indemnification shall not be
subject to the Basket.
13.8 Attorneys' Fees. Should suit be brought to enforce or interpret any
---------------
part of this Agreement, the prevailing party will be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including without limitation, costs, expenses and fees on
any appeal). The prevailing party will be entitled to recover its costs of suit,
regardless of whether such suit proceeds to final judgment.
13.9 Notices. All notices and other communications required or permitted
-------
under this Agreement will be in writing and will be either hand delivered in
person, sent by facsimile, sent by certified or registered first class mail,
postage pre-paid, or sent by nationally recognized express courier service. Such
notices and other communications will be effective upon receipt if hand
delivered or sent by facsimile, five (5) days after mailing if sent by mail, and
one (l) day after
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dispatch if sent by express courier, to the following addresses, or such other
addresses as any party may notify the other parties in accordance with this
Section:
If to Excite@Home:
At Home Corporation
450 Broadway
Redwood City, California 94063
Attention: General Counsel
Fax Number: (650) 482-4606
with copies to:
Fenwick & West LLP
275 Battery Street, Suite 1500
San Francisco, California 94111
Attention: Douglas N. Cogen, Esq.
Samuel B. Angus, Esq.
Fax Number: (415) 281-1350
If to Worldprints:
Worldprints.com International, Inc.
3125 Sterling Circle, Suite 101
Boulder, CO 80301
Attention: Jon E. Gordon and Kevin G. O'Connell
Fax Number: (720) 406-6201
with a copy to:
Dorsey & Whitney LLP
370 17th Street, Suite 4400
Denver, Colorado 80202
Attention: Kevin A. Cudney, Esq.
Fax Number: (303) 629-3450
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If to the Representative:
Jon E. Gordon
1479 Periwinkle Drive
Boulder, CO 80304
Fax Number: (303) 402-9202
If to a Worldprints Shareholder, including any Worldprints
Founder:
To the address specified on the signature page to the
applicable Investment Representation Letter
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 13.9.
13.10 Construction of Agreement. This Agreement has been negotiated by
-------------------------
the respective parties hereto and their attorneys and the language hereof will
not be construed for or against either party. A reference to a Section or an
exhibit will mean a Section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole. 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."
13.11 No Joint Venture. Nothing contained in this Agreement will be
----------------
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other and their status
is, and at all times will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other party. No party will hold itself out as having any authority or
relationship in contravention of this Section.
13.12 Further Assurances. Each party agrees to cooperate fully with the
------------------
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
13.13 Absence of Third Party Beneficiary Rights. No provisions of this
-----------------------------------------
Agreement are intended, nor will be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, partner or any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except as
so provided, all provisions hereof will be personal solely between the parties
to this Agreement.
13.14 Public Announcement. Upon execution of this Agreement, Excite@Home
-------------------
and Worldprints will issue a press release approved by both parties announcing
the Merger. Thereafter, Excite@Home may issue such press releases, and make such
other disclosures regarding the Merger, as it determines are required under
applicable securities laws or regulatory rules. Prior to the publication of such
initial and mutually agreed press release, neither party will make any public
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announcement relating to this Agreement or the transactions contemplated hereby
(except as may be required by law) and Worldprints will use its reasonable
efforts to prevent any trading in Excite@Home Common Stock by its officers,
directors, employees, shareholders and agents. Neither Excite@Home nor
Worldprints will make any disclosures regarding this Agreement or the Merger
that would jeopardize Excite@Home's ability to timely and lawfully issue the
shares of Excite@Home Common Stock in the Merger pursuant to the exemptions
described in Section 2.7.
13.15 Disclosure Letters. The Worldprints Disclosure Letter shall be
------------------
arranged in separate parts corresponding to the numbered and lettered sections
contained in Article 3, and the information disclosed in any numbered or
lettered part shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the corresponding numbered or lettered
section in Article 3, and shall not be deemed to relate to or to qualify any
other representation or warranty. The Excite@Home Disclosure Letter shall be
arranged in separate parts corresponding to the numbered and lettered sections
contained in Article 4, and the information disclosed in any numbered or
lettered part shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the corresponding numbered or lettered
section in Article 4, and shall not be deemed to relate to or to qualify any
other representation or warranty.
13.16 Confidentiality. Worldprints and Excite@Home each confirm that they
---------------
have entered into the Confidentiality Agreement and that they are each bound by,
and will abide by, the provisions of such Confidentiality Agreement (except that
Excite@Home will cease to be bound by the Confidentiality Agreement after the
Merger becomes effective). If this Agreement is terminated, the Confidentiality
Agreement shall remain in full force and effect and all copies of documents
containing confidential information of a disclosing party will be returned by
the receiving party to the disclosing party or be destroyed, as provided in the
Confidentiality Agreement.
13.17 Entire Agreement. This Agreement and the exhibits hereto constitute
----------------
the entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto other than the Confidentiality
Agreement. The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof.
[The remainder of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
At Home Corporation Worldprints.com International, Inc.
By: /s/ Mark Stevens By: /s/ Richard A. Schmelzer
----------------------------- --------------------------
Name: Mark Stevens Richard A. Schmelzer, President and CEO
----------------------------
Title: EVP
-----------------------------
Walter Acquisition Corporation
By: /s/ David Pine
-----------------------------
David Pine, President and CEO
Worldprints Founders
/s/ Richard A Schmelzer /s/ Rob Schmelzer
------------------------------- --------------------------
Richard A. Schmelzer Rob Schmelzer
/s/ Jon E. Gordon
-------------------------------
Jon E. Gordon
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<PAGE>
List of Exhibits and Schedules
Exhibits:
- --------
Exhibit A List of Worldprints Founders
Exhibit B Investment Representation Letter
Exhibit C Certificate of Designation of Series B Preferred Stock and
Certificate of Correction of Certificate of Designation
Exhibit D Plan of Merger
Exhibit E Matters to be Covered in the Opinion of Fenwick & West LLP
Exhibit F Matters to be Covered in the Worldprints Tax Opinion
Exhibit G Matters to be Covered in the Opinion of Dorsey & Whitney LLP
Exhibit H Matters to be Covered in the Excite@Home Tax Opinion
Exhibit I Form of Employment Agreement
Exhibit J Form of Founder Consulting Agreement
Exhibit K Form of Settlement Agreement and Release
Exhibit L Development Assignment and Confidentiality Agreement
Schedules:
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Schedule 1.14 Closing Debt Schedule
Schedule 2.7 List of Worldprints Warrants with Registration Rights
Schedule 3.4.1(a) List of Holders of Worldprints Common Stock
Schedule 3.4.1(b) List of Holders of Worldprints Options and Worldprints
Warrants
Schedule 3.25 Worldprints Tax Representations
Schedule 4.10 Excite@Home and Sub Tax Representations
Schedule 5.11 List of Holders of Amended Worldprints Options
Schedule 5.13 New Worldprints Options
<PAGE>
EXHIBIT 5.02
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April 28, 2000
At Home Corporation
450 Broadway Street
Redwood City, CA 94603
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form S-3
(File Number 333-31530) first filed by At Home Corporation, a Delaware
corporation (the "Company"), with the Securities and Exchange Commission (the
"Commission") on or about March 2, 2000, as subsequently amended, in connection
with the registration under the Securities Act of 1933, as amended, of the offer
and sale of an aggregate of 6,322,003 shares of the Company's Series A common
stock, 1,036,403 shares of which are presently issued and outstanding and will
be sold by certain selling stockholders (the "Selling Stockholders") that
received such shares in connection with the Company's acquisition of
Worldprints.com International, Inc., as described in the Prospectus prepared in
connection with the above-referenced Registration Statement (the "Stock").
In rendering this opinion, we have examined the following:
(1) the Company's Fifth Amended and Restated Certificate of Incorporation,
as certified by the Secretary of the Company on April 5, 2000;
(2) the Company's Bylaws, as certified by the Company's Secretary on April
5, 2000;
(3) the Registration Statement on Form S-3 (File Number 333-31530) filed
with the Commission on March 2, 2000, Amendment No. 1 to such
Registration Statement filed with the Commission on April 10, 2000,
and Amendment No. 2 to such Registration Statement to be filed with
the Commission on or about May 1, 2000, each together with the
Exhibits filed as a part thereof or incorporated therein by reference
(collectively, the "Registration Statement");
(4) the Prospectus prepared in connection with the Registration Statement;
(5) the minutes of meetings and actions by written consent of the
stockholders and Board of Directors that are contained in the
Company's minute books that you have made available to us, including
the minutes of the meeting at which the Board of Directors approved
the filing of the Registration Statement and the sale and issuance of
the Stock;
(6) a certificate from your transfer agent dated as of even date herewith,
verifying the number of the Company's issued and outstanding shares of
Series A common stock as of the date hereof, and representations from
the Company regarding: (i) the authorized, issued and outstanding
capital stock of the Company (including the Company's Series A common
stock and all other series of the Company's
<PAGE>
common stock and preferred stock); and (ii) the outstanding options
and warrants respecting the Company's capital stock and rights to
purchase capital stock, verifying the number of such securities that
are issued, outstanding or reserved for issuance;
(7) a summary of the Company's outstanding securities provided to us by
the Company;
(8) a Management Certificate addressed to us and dated of even date
herewith executed by the Company containing certain factual and other
representations; and
(9) the Agreement and Plan of Reorganization dated April 5, 2000 by and
among the Company, Walter Acquisition Corporation, Worldprints and the
founding shareholders of Worldprints, under which the Selling
Stockholders acquired the Stock to be sold by them, which agreement
was filed as an exhibit to the Registration Statement.
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 persons or
entities 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. We have
also assumed that the certificates representing the Stock have been, or will be
when issued, properly signed by authorized officers of the Company or their
agents.
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 records and documents
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
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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 render
this opinion only with respect to, and express no opinion herein concerning the
application or effect of the laws of any jurisdiction other than, the existing
laws of the United States of America, of the State of California and, with
respect to the validity of corporate action and the requirements for the
issuance of stock, of the State of Delaware.
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 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 the 1,036,403 shares of
Stock to be sold by the Selling Stockholders pursuant to the Registration
Statement are validly issued, fully paid and nonassessable.
<PAGE>
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 use in connection with issuance and
sale the Stock subject to the Registration Statement and is not to be relied
upon for any other purpose.
Very truly yours,
FENWICK & WEST LLP
By: /s/ Jeffrey Vetter
-----------------------------
Jeffrey Vetter, a Partner
<PAGE>
EXHIBIT 23.01
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 2 to the Registration Statement on Form S-3 and related
Prospectus of At Home Corporation for the registration of 6,322,003 shares of
its Series A common stock and to the incorporation by reference therein of our
report dated January 20, 2000, with respect to the consolidated financial
statements and schedule of At Home Corporation included in its Annual Report on
Form 10-K for the year ended December 31, 1999, as amended, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
April 28, 2000
