<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 15, 2000
HEALTHCENTRAL.COM
-----------------
(Exact name of registrant as specified in its charter)
-----------------------------------------------------
Delaware 000-27567 94-3250851
- ------------------------ -------------------- ------------------------
State of Incorporation Commission File No. IRS Employer ID Number
HealthCentral.com
6001 Shellmound Street, Suite 800
Emeryville, CA 94608
-------------------------------------------------------
Address, including zip code, of registrant's principal executive office
(510) 250-2500
-------------------------------------------------
Registrant's telephone number, including area code
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ITEM 5. OTHER EVENTS
On March 16, 2000, HealthCentral.com (the "Company") announced that it had
entered into an Agreement and Plan of Reorganization and Merger, dated as of
March 15, 2000 (the "Merger Agreement"), by and among Vitamins.com, Inc.
("Vitamins.com"), HCC Acquisition Corp. ("Merger Sub") and the Company. Under
the terms of the Merger Agreement, Merger Sub will merge with and into
Vitamins.com, and Vitamins.com will become a wholly owned subsidiary of the
Company (the "Merger").
Under the terms of the Merger Agreement, the Company will issue
approximately $103,500,000 of common stock in exchange for all of the capital
stock of Vitamins.com. The Merger is subject to various conditions set forth in
the Merger Agreement, including the adoption of the Merger Agreement by the
shareholders of the Company.
A copy of the press release announcing the Merger is attached hereto as
Exhibit 99.1, and incorporated herein by reference in its entirety. A copy of
the Merger Agreement is attached hereto as Exhibit 99.2, and incorporated herein
by reference in its entirety.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
(c) Exhibits.
EXHIBIT DESCRIPTION
- ------- -----------
99.1 Press Release of HealthCentral.com dated March 16, 2000
announcing the execution of the definitive merger agreement.
99.2 Agreement and Plan or Reorganization and Merger Among
HealthCentral.com, HCC Acquisition Corp. and Vitamins.com,
Inc., dated as of March 15, 2000.
<PAGE>
Pursuant to the Requirements of the Securities Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HealthCentral.com
By: /s/ C. Fred Toney
------------------
Name: C. Fred Toney
Title: Executive Vice President
and Chief Financial Officer
2
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Exhibit Index
-------------
EXHIBIT DESCRIPTION
- ------- -----------
99.1 Press Release of HealthCentral.com dated March 16, 2000
announcing the execution of the definitive merger agreement.
99.2 Agreement and Plan of Reorganization and Merger Among
HealthCentral.com, HCC Acquisition Corp. and Vitamins.com,
Inc., dated as of March 15, 2000.
<PAGE>
EXHIBIT 99.1
[HealthCentral Letterhead]
For Immediate Release
- ---------------------
HealthCentral.com to Acquire Vitamins.com
-Company Moves to Forefront of Online Health e-Commerce and Content Category-
Emeryville, Calif. - March 16, 2000 -- HealthCentral.com (Nasdaq: HCEN), a
leading online provider of healthcare e-commerce and content, today announced
that it has signed a definitive agreement to acquire Vitamins.com, a leading e-
commerce provider of vitamins, minerals and supplements.
Vitamins.com had $30.5 million in 1999 proforma net revenues, and, upon
completion of the transaction with HealthCentral.com, will add 200,000 new
Internet customers to the HealthCentral.com e-commerce platform. Vitamins.com
also has a mail order business with an additional 175,000 active customers that
purchased products in 1999. The Vitamins.com annual mail order catalog
circulation totals more than 7 million. Vitamins.com has 4 retail demonstration
stores and 6 other retail stores in the greater Washington, D.C. metropolitan
area. Demonstration stores serve to showcase Vitamins.com's products, and offer
Internet services and consultants to assist in web site registration and product
purchasing. Utilizing a clicks and bricks strategy, the combined companies
intend to better service customers, increase brand awareness, expand customer
reach to include customers that are not yet online, and lower customer
acquisition costs relative to pure play Internet sites.
Under the terms of the proposed transaction, HealthCentral.com will issue
approximately $103.5 million in common stock to acquire Vitamins.com. The
actual number of shares to be issued will be based upon the average closing
price of HealthCentral.com's common stock for the 10 trading days prior to one
day before the closing date. Based on HealthCentral.com's recent trading price
of $7 per share, approximately 14.8 million shares would be issued if this price
per share remained constant, resulting in 36% of the fully diluted shares of the
combined companies. The proposed transaction is subject to the approval of
shareholders of HealthCentral.com and it is expected that the transaction will
close prior to the end of the second quarter of 2000. The transaction is
expected to be accounted for as a pooling of interests.
Commenting on the deal, president and CEO Albert Greene stated, "American
consumers are projected to spend $16.6 billion in 2003 for vitamins, minerals
and supplements due to the rising popularity of alternative medicines and
therapies, and we are now poised to take advantage of this market opportunity.
Combining our product portfolios will provide consumers with an enhanced and
personalized shopping experience and adds an additional "bricks-and-mortar"
legitimacy to our e-pharmacy business. We believe this represents one of the
many steps we are taking to become the most comprehensive consumer-centric super
health portal."
Vitamins.com's product lines will be integrated into HealthCentral.com's online
drugstore, HealthCentralRx.com, increasing current offerings from 23,000 to
31,000 SKUs, 5,000 of which will represent prescription drugs and 26,000 of
which will include health, beauty, wellness, personal care, vitamins, minerals,
supplements and other products.
"We anticipate that the integration of Vitamins.com will add significant
momentum to our growth strategy and result in new revenue generation, new
customer development and retention and more favorable
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customer acquisition costs," stated Fred Toney, executive vice president and
chief financial officer of HealthCentral.com. "This improves our financial
outlook by accelerating our path to profitability."
Robert Haft, president and CEO of Vitamins.com, will continue to serve as
president of the new wholly owned subsidiary. Mr. Haft has extensive experience
in the retailing sector having been Chairman of Phar-Mor, guiding the turnaround
of the company, and founder of Crown Books and other retail chains. In his
career, he has opened more than 600 new retail stores and brings to
HealthCentral.com a team of e-commerce retailing experts. Mr. Haft will be
responsible for directing HealthCentral.com's e-commerce initiative by
leveraging his expertise and vast retail experience to build a strong franchise.
"We, at Vitamins.com, are pleased to become part of the HealthCentral.com
family," stated Mr. Haft. "Due to the synergies in our marketing philosophies,
we believe that together we can enhance the personalized shopping experience
already being offered by HealthCentralRx.com. Combined, we can leverage our
customer base to bring a significant number of on-line and off-line customers to
the HealthCentral.com network."
Upon completion of the acquisition, Robert Haft, President of Vitamins.com, and
C. Sage Givens, Managing General Partner of Acacia Venture Partners, an investor
in Vitamins.com, will be appointed to HealthCentral.com's board of directors.
For additional information, you are invited to listen to the conference call and
i/cast, which will be broadcast over the Internet at
http://www.noonanrusso.com/www/wwwHC/hcen.ihtml. To listen to the live call,
please go to the Web site at least 15 minutes early to register and ensure all
the necessary components are installed. Alternatively, you can dial (800) 553-
0351 to participate on the conference call. The i/cast replay will be available
until April 16, 2000.
HealthCentral.com and Vitamins.com executives are also available for comment.
To coordinate an interview, contact:
Megan Guffey
Noonan/Russo Communications
[email protected]
212-696-4455 ext. 342
About HealthCentral.com
- ------------------------
HealthCentral.com provides online healthcare content and e-commerce to consumers
through the HealthCentral.com network. This network of information services
provides consumers with highly personalized interactive tools, including custom
newsletters, personalized health information pages and personalized risk
assessments. HealthCentral.com's online drug store, HealthCentralRx.com, carries
over 23,000 SKUs of health-related products and has access to 85 PBM contracts.
HealthCentral.com also acts as an application service provider by designing,
hosting and maintaining private label Web sites for hospitals and health plans.
About Vitamins.com
- ------------------
Vitamins.com, a Web-based marketer founded in 1997, offers vitamins, minerals,
supplements and other products. The company operates the Vitamins.com Web site,
has 10 retail stores (including four demonstration stores) and a direct mail
retail catalog operation with its own order fulfillment center.
<PAGE>
Forward Looking Statements
Except for historical information, the statements in this news release are
forward-looking statements, involving risks and uncertainties that could cause
actual results to differ materially from those in such forward-looking
statements. Potential risks and uncertainties include, but are not limited to,
the Company's limited operating history and need to generate revenues, a failure
to integrate the Vitamins.com acquisition and other acquisitions or manage
growth, the substantial competition in the eHealth market, the Company's
substantial payment obligations, risks inherent in operating an online pharmacy,
possible liability related to content on or accessed through the Company's Web
sites, the need to build a brand name quickly, the effect of substantial and
changing government regulation, possible systems interruptions, and a failure to
attract and retain key employees and risks related to intellectual property.
Further information regarding these and other risks is included in
HealthCentral.com's S-1 registration statement, filed with the SEC.
# # #
For More Information, Contact:
Media: Financial:
Fiona Hughes Fred Toney
Bairey & Bedford Public Relations EVP and Chief Financial Officer
(925) 672-9547 HealthCentral.com
Fax: (925) 672-9388 (510) 250-2603
[email protected] [email protected]
Megan Guffey Belinda Brouder-Hayes
Noonan/Russo Communications Noonan/Russo Communications
212-696-4455 ext. 342 (212) 696-4455 ext. 224
[email protected] [email protected]
<PAGE>
EXHIBIT 99.2
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
Among
HEALTHCENTRAL.COM, HCC ACQUISITION CORP.
and VITAMINS.COM, INC.
March 15, 2000
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TABLE OF CONTENTS
<TABLE>
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Article I DEFINITIONS.................................................... 1
1.1 Acquisition Proposal........................................... 1
1.2 Affiliate Agreement............................................ 1
1.3 Affiliates..................................................... 1
1.4 Cause.......................................................... 1
1.5 Certificates................................................... 1
1.6 Closing........................................................ 1
1.7 Closing Date................................................... 1
1.8 Code........................................................... 1
1.9 Dissenting VCI Shares.......................................... 2
1.10 Effective Time................................................. 2
1.11 Effectiveness Period........................................... 2
1.12 Escrow Agreement............................................... 2
1.13 Escrow Fund.................................................... 2
1.14 Escrow Holder.................................................. 2
1.15 Exchange Act................................................... 2
1.16 Exchange Agent................................................. 2
1.17 Exchange Ratio................................................. 2
1.18 GAAP........................................................... 2
1.19 Governmental Entity............................................ 2
1.20 Hazardous Material............................................. 2
1.21 Hazardous Materials Activities................................. 2
1.22 HCC Disclosure Schedule........................................ 2
1.23 HCC Employee Benefit Plans..................................... 2
1.24 HCC ERISA Affiliate............................................ 2
1.25 HCC Parties.................................................... 2
1.26 HCC SEC Reports................................................ 2
1.27 Holders........................................................ 2
1.28 HSR Act........................................................ 2
1.29 Indemnified Party.............................................. 3
1.30 Indemnifying Party............................................. 3
1.31 Intellectual Property.......................................... 3
1.32 Loss or Losses................................................. 3
1.33 Material Adverse Effect........................................ 3
1.34 Merger......................................................... 3
1.35 Merger Agreement............................................... 3
1.36 Merger Shares.................................................. 3
1.37 Most Recent VCI Balance Sheet.................................. 3
1.38 Most Recent HCC Balance Sheet.................................. 3
1.39 1933 Act....................................................... 3
1.40 Numerator...................................................... 3
1.41 Ordinary Course of Business.................................... 3
1.42 Permits........................................................ 3
1.43 Proxy Statement................................................ 3
1.44 Registrable Securities......................................... 3
1.45 Registration Expenses.......................................... 3
1.46 Registration Statement......................................... 4
1.47 Rule 145 Affiliate............................................. 4
1.48 SEC............................................................ 4
</TABLE>
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TABLE OF CONTENTS--(Continued)
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1.49 Security Interest............................................ 4
1.50 Selling Expenses............................................. 4
1.51 Stockholder Representative................................... 4
1.52 Subsidiary................................................... 4
1.53 Taxes........................................................ 4
1.54 Tax Returns.................................................. 4
1.55 Underwritten Offering........................................ 4
1.56 VCI Disclosure Schedule...................................... 4
1.57 VCI Employee Benefit Plans................................... 4
1.58 VCI ERISA Affiliate.......................................... 4
1.59 VCI Parties.................................................. 4
1.60 Voting Agreement............................................. 4
1.61 Written Consent and Agreement................................ 4
Article II MERGER, CLOSING AND CONVERSION OF SHARES..................... 5
2.1 Merger....................................................... 5
2.2 Closing...................................................... 5
2.3 Conversion of Shares......................................... 6
2.4 Escrow....................................................... 6
2.5 VCI Options.................................................. 7
2.6 Exchange of Certificates..................................... 7
2.7 Dissenting VCI Shares........................................ 7
2.8 Tax Free Reorganization...................................... 7
2.9 Voting Agreement............................................. 8
2.10 Representation on HCC Board of Directors..................... 8
2.11 Affiliate Agreements......................................... 8
2.12 Escrow Agreement............................................. 8
2.13 Securities Exemption; Stockholders Letter.................... 8
2.14 Employment and Noncompetition Agreement...................... 8
Article III REPRESENTATIONS OF VCI....................................... 8
3.1 Organization................................................. 8
3.2 Capitalization of VCI........................................ 9
3.3 Subsidiaries................................................. 9
3.4 Authorization................................................ 9
3.5 Compliance with Laws and Other Instruments................... 9
3.6 VCI Financial Statements..................................... 10
3.7 No Undisclosed Liabilities................................... 10
3.8 Absence of Certain Changes or Events......................... 10
3.9 Tax Matters.................................................. 11
3.10 Assets....................................................... 12
3.11 Intellectual Property........................................ 12
3.12 Contracts.................................................... 13
3.13 Accounts Receivable.......................................... 14
3.14 Insurance.................................................... 14
3.15 Litigation................................................... 14
3.16 Employees and Consultants.................................... 15
3.17 Employee Benefits............................................ 15
3.18 Environmental and OSHA....................................... 16
3.19 Permits...................................................... 17
3.20 Certain Business Relationships with Affiliates............... 17
</TABLE>
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TABLE OF CONTENTS--(Continued)
<TABLE>
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3.21 Brokers' Fees................................................. 17
3.22 Minute Books.................................................. 17
3.23 Customers and Suppliers....................................... 17
3.24 Year 2000..................................................... 17
3.25 Disclosure.................................................... 18
Article IV REPRESENTATIONS OF HCC AND ACQUISITION CORP................... 18
4.1 Organization.................................................. 18
4.2 HCC Capital Structure......................................... 18
4.3 Subsidiaries.................................................. 18
4.4 HCC's Authorization........................................... 19
4.5 SEC Filings; Financial Statements............................. 19
4.6 No Undisclosed Liabilities.................................... 19
4.7 Tax Matters................................................... 20
4.8 Assets........................................................ 20
4.9 Intellectual Property......................................... 20
4.10 Contracts..................................................... 21
4.11 Accounts Receivable........................................... 21
4.12 Litigation.................................................... 22
4.13 Employee Benefits............................................. 22
4.14 Environmental and OSHA........................................ 23
4.15 Brokers' Fees................................................. 23
4.16 Customers and Suppliers....................................... 24
4.17 Year 2000..................................................... 24
4.18 Disclosure.................................................... 24
Article V CERTAIN COVENANTS OF VCI...................................... 24
5.1 Conduct of Business and Certain Key Employees................. 24
5.2 Absence of Material Changes................................... 24
5.3 Reports, Taxes................................................ 25
5.4 Non-Solicitation.............................................. 25
5.5 Option Plans.................................................. 25
Article VI ADDITIONAL COVENANTS.......................................... 25
6.1 Proxy Statement............................................... 25
6.2 Access to Information......................................... 26
6.3 Stockholders Meetings......................................... 26
6.4 Legal Conditions to Merger.................................... 26
6.5 Public Disclosure............................................. 26
6.6 Tax-Free Reorganization....................................... 26
6.7 Pooling Accounting............................................ 26
6.8 Nasdaq Quotation.............................................. 26
6.9 Consents...................................................... 26
6.10 FIRPTA........................................................ 26
6.11 Securities Laws............................................... 27
6.12 Expenses...................................................... 27
6.13 Commercially Reasonable Efforts and Further Assurances........ 27
6.14 Registration of Shares issued to VCI Shareholders............. 27
6.15 Tax Matters................................................... 34
6.16 Interim Operations of VCI..................................... 35
6.17 Issuance of Additional Shares by HCC.......................... 35
6.18 Payment of Dividends by HCC................................... 35
</TABLE>
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TABLE OF CONTENTS--(Continued)
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Article VII CONDITIONS TO THE MERGER..................................... 36
7.1 Conditions to Obligations of Each Party to Effect the
Merger....................................................... 36
7.2 Additional Conditions to Obligations of HCC and Acqusition
Corp. ....................................................... 36
7.3 Additional Conditions to Obligations of VCI.................. 37
Article VIII TERMINATION.................................................. 37
8.1 Termination.................................................. 37
8.2 Effect of Termination........................................ 38
8.3 HCC Obligation to Purchase VCI Shares........................ 38
Article IX SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.. 38
9.1 Survival of Representations and Warranties................... 38
9.2 Indemnification by Holders................................... 38
9.3 Indemnification by HCC....................................... 39
9.4 Limitation................................................... 39
9.5 Claims for Indemnification................................... 39
9.6 Defense by Indemnifying Party................................ 40
9.7 Arbitration.................................................. 40
9.8 Subrogation.................................................. 41
9.9 Section 6.14(f) Indemnification.............................. 41
Article X MISCELLANEOUS................................................ 41
10.1 Amendment.................................................... 41
10.2 Entire Agreement............................................. 41
10.3 Governing Law................................................ 41
10.4 Headings..................................................... 41
10.5 Notices...................................................... 41
10.6 Severability................................................. 42
10.7 Waiver....................................................... 42
10.8 Assignment................................................... 42
10.9 Counterparts................................................. 42
10.10 Third Party Beneficiaries.................................... 42
10.11 Attorneys' Fees.............................................. 42
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
AMONG HEALTHCENTRAL.COM, HCC ACQUISITION CORP.
AND VITAMINS.COM, INC.
This Agreement and Plan of Reorganization and Merger ("Agreement") is made
as of March 15, 2000 among HealthCentral.com, a Delaware corporation ("HCC"),
HCC Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
HCC ("Acquisition Corp."), and Vitamins.com, Inc., a Delaware corporation
("VCI").
RECITAL:
The parties hereto desire that Acquisition Corp. be merged with and into
VCI; that VCI be the surviving corporation and become a wholly-owned
subsidiary of HCC; and that the shares of capital stock of VCI outstanding
immediately prior to the Effective Time of the merger, other than those shares
subject to a demand for appraisal pursuant to Section 262 of the Delaware
General Corporation Law (the "DCL"), be converted as set forth in this
Agreement into shares of common stock of HCC ("HCC common stock").
NOW THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article I shall, for purposes of this Agreement,
have the meanings specified in this Article I unless the context requires
otherwise:
1.1 Acquisition Proposal. "Acquisition Proposal" shall have the meaning set
forth in Section 5.4(a) of this Agreement.
1.2 Affiliate Agreement. "Affiliate Agreement" shall mean the Affiliate
Agreement in the form of Exhibit F attached to this Agreement.
1.3 Affiliates. "Affiliates" of any party to the Agreement shall be persons
that directly or indirectly through one or more intermediaries, control, or
are controlled by, or are under common control with, such party.
1.4 Cause. "Cause" shall mean for purposes of Section 2.10, (i) intentional
failure to perform duties as a director of HCC after written notice thereof
from HCC to the director and the failure to cure within thirty (30) days of
receipt of such notice; (ii) intentional misrepresentation or the commission
of an act of fraud in the performance of duties as a director of HCC; (iii)
breach of fiduciary duty involving personal profit including, without
limitation, embezzlement, misrepresentation or conversion of assets or
opportunities of HCC; (iv) willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) in connection with the
performance of duties as a director; or (v) a director, together with his or
her Affiliates, owns less than fifty percent (50%) of the total number of
shares of HCC Common Stock owned by them immediately following consummation of
the Merger and the related transactions contemplated under this Agreement.
1.5 Certificates. "Certificates" shall have the meaning set forth in
Section 2.6(c) of this Agreement.
1.6 Closing. "Closing" shall mean the delivery by the parties hereto of the
various documents contemplated by this Agreement or otherwise required in
order to consummate the Merger.
1.7 Closing Date. "Closing Date" shall have the meaning set forth in
Section 2.2 of this Agreement.
1.8 Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1
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1.9 Dissenting VCI Shares. "Dissenting VCI Shares" shall mean all shares,
if any, of the outstanding capital stock of VCI for which appraisal rights
shall be perfected under Section 262 of the DCL.
1.10 Effective Time. "Effective Time" shall mean the time when the Merger
becomes effective under the DCL.
1.11 Effectiveness Period. "Effectiveness Period" shall have the meaning
set forth in Section 6.14(a) of this Agreement.
1.12 Escrow Agreement. "Escrow Agreement" shall mean the Agreement relating
to an escrow of certain shares of HCC common stock pursuant to Section 2.4 of
this Agreement, in the form attached to this Agreement as Exhibit C.
1.13 Escrow Fund. "Escrow Fund" shall have the meaning set forth in Section
2.4 of this Agreement.
1.14 Escrow Holder. "Escrow Holder" shall mean U.S. Bank Trust National
Association.
1.15 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
1.16 Exchange Agent. "Exchange Agent" shall have the meaning set forth in
Section 2.6(a) of this Agreement.
1.17 Exchange Ratio. "Exchange Ratio" shall have the meaning set forth in
Section 2.3 of this Agreement.
1.18 GAAP. "GAAP" shall mean United States generally accepted accounting
principles.
1.19 Governmental Entity. "Governmental Entity" means any government,
municipality or political subdivision thereof, whether federal, state, local
or foreign, or any governmental or quasi-governmental agency, authority,
board, bureau, commission, department, instrumentality or public body, or any
court, arbitrator, administrative tribunal or public utility.
1.20 Hazardous Material. "Hazardous Material" shall have the meaning set
forth in Section 3.18(a) of this Agreement.
1.21 Hazardous Materials Activities. "Hazardous Materials Activities" shall
have the meaning set forth in Section 3.18(b) of this Agreement.
1.22 HCC Disclosure Schedule. "HCC Disclosure Schedule" shall have the
meaning set forth in Article IV of this Agreement.
1.23 HCC Employee Benefit Plans. "HCC Employee Benefit Plans" shall have
the meaning set forth in Section 4.13 of this Agreement.
1.24 HCC ERISA Affiliate. "HCC ERISA Affiliate" shall have the meaning set
forth in Section 4.13(a) of this Agreement.
1.25 HCC Parties. "HCC Parties" shall have the meaning set forth in Section
9.2(a) of this Agreement.
1.26 HCC SEC Reports "HCC SEC Reports" shall have the meaning set forth in
Section 4.5(a) of this Agreement.
1.27 Holders. "Holders" shall mean the holders of VCI capital stock
immediately prior to the Effective Time.
1.28 HSR Act. HSR Act means The Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
2
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1.29 Indemnified Party. "Indemnified Party" shall mean the HCC Parties or
the VCI Parties, as the case may be, who or which are asserting a claim for
indemnification under Section 9.2 or 9.3 hereof.
1.30 Indemnifying Party. "Indemnifying Party" shall mean the HCC Parties or
the VCI Parties, as the case may be, against whom or which an indemnification
claim has been asserted under Section 9.2 or 9.3 hereof.
1.31 Intellectual Property. "Intellectual Property" shall have the meaning
set forth in Section 3.11(a) of the Agreement.
1.32 Loss or Losses. "Loss" or "Losses" shall have the meaning set forth in
Section 9.2(a) of this Agreement.
1.33 Material Adverse Effect. "Material Adverse Effect" means, with respect
to a party, a material adverse change in the assets, liabilities, business,
financial condition or the results of operations of such party and its
Subsidiaries, taken as a whole. The parties acknowledge and agree that (i) VCI
and HCC are both engaged in Internet-based start-up enterprises that are in
highly competitive and dynamic markets; (ii) because of the volatility in
these markets, VCI and HCC are each subject to a variety of external factors
that can impact their businesses in a very quick time frame with potential
significant effects on their assets, liabilities, business, financial
conditions and results of operations; and (iii) accordingly, changes in the
assets, liabilities, business, financial conditions or results of operations
of either VCI or HCC arising out of external factors or economic conditions
that affect the industry generally shall not be a "Material Adverse Effect"
for purposes of this Agreement.
1.34 Merger. "Merger" shall mean the merger of Acquisition Corp. with and
into VCI.
1.35 Merger Agreement. "Merger Agreement" shall mean the Agreement of
Merger in the form attached to this Agreement as Exhibit A.
1.36 Merger Shares. "Merger Shares" shall have the meaning set forth in
Section 6.14(a) of this Agreement.
1.37 Most Recent VCI Balance Sheet. "Most Recent VCI Balance Sheet" shall
have the meaning set forth in Section 3.6 of this Agreement.
1.38 Most Recent HCC Balance Sheet. "Most Recent HCC Balance Sheet" shall
have the meaning set forth in Section 4.5(b) of this Agreement.
1.39 1933 Act. "1933 Act" shall mean the Securities Act of 1933, as
amended.
1.40 Numerator. "Numerator" shall have the meaning set forth in Section
2.3(a) of this Agreement.
1.41 Ordinary Course of Business. "Ordinary Course of Business" shall have
the meaning set forth in Section 3.7 of this Agreement.
1.42 Permits. "Permits" shall have the meaning set forth in Section 3.19 of
this Agreement.
1.43 Proxy Statement. "Proxy Statement" shall mean the proxy statement to
be mailed to the stockholders of HCC in connection with the Merger in order to
obtain the approval of the stockholders of HCC as required by the rules of the
Nasdaq National Market.
1.44 Registrable Securities. "Registrable Securities" shall have the
meaning set forth in Section 6.14(b)(ii) of this Agreement.
1.45 Registration Expenses. "Registration Expenses" shall have the meaning
set forth in Section 6.14(c) of this Agreement.
3
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1.46 Registration Statement. "Registration Statement" shall have the
meaning set forth in Section 6.14(a) of this Agreement.
1.47 Rule 145 Affiliate. "Rule 145 Affiliate" shall have the meaning set
forth in Section 6.8 of this Agreement.
1.48 SEC. "SEC" shall mean the Securities and Exchange Commission.
1.49 Security Interest. "Security Interest" shall have the meaning set
forth in Section 3.10 of this Agreement.
1.50 Selling Expenses. "Selling Expenses" shall have the meaning set forth
in Section 6.14(c) of this Agreement.
1.51 Stockholder Representative. "Stockholder Representative" shall mean
the individual authorized by the stockholders of VCI to act as the
representative of the stockholders of VCI under this Agreement and in
connection with the transactions contemplated herein, and any substitute
representatives selected in accordance with the Written Consent and Agreement.
1.52 Subsidiary. "Subsidiary" shall mean, with respect to a particular
party hereto, any corporation or other organization, whether incorporated or
unincorporated, of which at least a majority of the securities or interests
are directly or indirectly owned by such party or by one or more Subsidiaries
of such party.
1.53 Taxes. "Taxes" means all taxes, charges, fees, levies or other similar
assessments or liabilities, including without limitation income, gross
receipts, ad valorem, premium, value-added, excise, real property, personal
property, sales, use, transfer, withholding, employment, payroll and franchise
taxes imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the
United States or any such government, and any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof.
1.54 Tax Returns. "Tax Returns" means all reports, returns, declarations,
statements or other information required to be supplied to a taxing authority
in connection with Taxes.
1.55 Underwritten Offering. "Underwritten Offering" shall mean an offering
of Merger Shares pursuant to a Registration Statement that is effected in the
form of a registration statement pursuant to which the Merger Shares are sold
to an underwriter for reoffering to the public.
1.56 VCI Disclosure Schedule. "VCI Disclosure Schedule" shall have the
meaning set forth in Article III of this Agreement.
1.57 VCI Employee Benefit Plans. "VCI Employee Benefit Plans" shall have
the meaning set forth in Section 3.17 of this Agreement.
1.58 VCI ERISA Affiliate. "VCI ERISA Affiliate" shall have the meaning set
forth in Section 3.17(a) of this Agreement.
1.59 VCI Parties. "VCI Parties" shall have the meaning set forth in Section
9.3 of this Agreement.
1.60 Voting Agreement. "Voting Agreement" shall have the meaning set forth
in Section 2.9 of this Agreement.
1.61 Written Consent and Agreement. "Written Consent and Agreement" shall
mean the Written Consent and Agreement in the form of Exhibit E attached
hereto.
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ARTICLE II
MERGER, CLOSING AND CONVERSION OF SHARES
2.1 Merger. Subject to and in accordance with the terms and conditions of
this Agreement and the Merger Agreement, HCC, Acquisition Corp. and VCI shall
execute and file the Merger Agreement with the Secretary of State of Delaware,
and Acquisition Corp. shall, pursuant to the terms thereof, be merged with and
into VCI pursuant to Section 251 of the DCL.
2.2 Closing. The Closing shall take place at the offices of Howard, Rice,
Nemerovski, Canady, Falk & Rabkin, at 10:00 a.m., within 5 business days
following the date on which the Merger has been approved by the stockholders
of HCC or on such other day and time as shall be agreed to by the parties (the
"Closing Date").
2.3 Conversion of Shares.
(a) In accordance with the Merger Agreement, (i) each share of
Acquisition Corp. common stock issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted at and as of the Effective
Time into one share of common stock of VCI, and (ii) each share of capital
stock of VCI issued and outstanding immediately prior to the Effective Time
(except those shares which are Dissenting VCI Shares) shall, by virtue of
the Merger and without any action on the part of the Holders, be converted
at and as of the Effective Time into the right to receive that number of
shares of HCC common stock, as illustrated on Exhibit B attached hereto,
equal to the amount determined by dividing the (1) lesser of (A)
$103,500,000 (less any adjustments required by Section 6.12 hereof) (the
"Numerator") divided by the average closing price of HCC common stock on
the Nasdaq National Market (or if not so listed, the average closing bid
price on such other market in which such prices are regularly quoted) for
the ten consecutive trading days immediately preceding the business day
prior to the Closing Date as reported in The Wall Street Journal, and (B)
the number of shares that is equal to the number of shares of HCC common
stock outstanding immediately prior to the Effective Time less one share,
by (2) the total number of shares of capital stock of VCI outstanding
immediately prior to the Closing (including for this purpose any capital
stock of VCI issuable under then outstanding options, warrants or other
convertible securities, in each case whether or not vested or exercisable)
and carrying the quotient thereof out to three decimal places (the
"Exchange Ratio"). The Holders shall receive only whole shares of HCC
common stock (or if the provisions of Section 2.3(b)(ii) are applicable,
the surviving corporation's or acquiring corporation's capital stock) and,
in lieu of any fractional share of HCC common stock, Holders shall receive
in cash the fair market value of such fractional share (rounded up or down
to the nearest whole number, with a fractional interest equal to .5 rounded
to the next whole number), valuing HCC common stock (or if the provisions
of Section 2.3(b)(ii) are applicable, the surviving corporation's or
acquiring corporation's capital stock) at the closing price for such stock
on the Nasdaq National Market on the trading day immediately preceding the
Closing Date.
(b) If on or before the Effective Time (i) the issued and outstanding
shares of HCC common stock are changed into a different number of shares by
reason of any recapitalization, stock split or stock dividend, then the
number of shares of HCC common stock received by the Holders pursuant to
Section 2.3(a) above (the "Conversion Stock") shall be adjusted to that
number and class of shares of common stock of HCC, that would have been
issued to the Holders if the Conversion Stock had been issued to the
Holders immediately prior to such recapitalization, stock split or stock
dividend; or (ii) there shall be a merger, share exchange or consolidation
of HCC with or into another corporation or entity, as part of such merger,
share exchange or consolidation, then the Conversion Stock shall be
adjusted to that number and class of shares of stock of the surviving
corporation resulting from such merger or consolidation or the acquiring
corporation in such share exchange, that would have been issued to the
Holders if the Conversion Stock had been issued to the Holders immediately
prior to such merger, share exchange or consolidation. For purposes of this
Section 2.3(b), (i) the determination of the adjustment to the number and
class of shares shall be based on the formula set forth in Section
2.3(a)(ii), assuming that the Effective Time is the day immediately prior
to the subject recapitalization, stock split, stock dividend, merger, share
exchange or
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consolidation and (ii) in the event of a merger, share exchange or
consolidation of HCC prior to the Effective Time, the shares of VCI common
stock being converted under Section 2.3(a) shall be converted into shares
of the surviving corporation's or the acquiring corporation's capital
stock.
2.4 Escrow. In order to provide indemnification in accordance with Article
IX of this Agreement and with the Escrow Agreement, at the Effective Time or
as soon thereafter as possible, stock certificates representing in the
aggregate 10% of the shares of HCC common stock (rounded to the nearest whole
share) into which the Holders' shares of capital stock of VCI were converted
pursuant to Section 2.3 of this Agreement (the "Escrow Fund") shall be
delivered to the Escrow Holder (which shares shall be withheld from each
Holder ratably based on the number of shares of capital stock of VCI held by
such Holder immediately prior to the Effective Time). The Stockholder
Representative is authorized to act hereunder and under the Escrow Agreement
with the powers and authority provided for herein and therein, as the
representative of the Holders and their successors. Approval of this Agreement
and the Merger by the Holders shall constitute approval of the terms and
conditions of the Escrow Agreement and ratification of the selection of the
Stockholder Representative and of his authority to act hereunder and under the
Escrow Agreement on behalf of the Holders and their successors. Any rights of
the Holders to receive any shares placed in such escrow shall in no
circumstances be sold, assigned or otherwise transferred by them other than by
will or pursuant to the laws of descent and distribution. All certificates
representing securities delivered to the Escrow Holder shall be accompanied by
separate stock powers endorsed in blank by the Stockholder Representative on
behalf of the Holders. Subject to the Escrow Agreement, the Holders shall
retain their voting rights with respect to securities deposited with the
Escrow Holder in accordance with this Section 2.4.
2.5 VCI Options.
(a) At the Effective Time, each of the outstanding options to purchase
common stock of VCI shall be assumed by HCC and shall automatically be
converted into options to purchase the number of shares of HCC common stock
determined by multiplying the number of shares of common stock of VCI
covered by the option by the Exchange Ratio, at an exercise price for each
full share of HCC common stock equal to the quotient obtained by dividing
(a) the exercise price per share of VCI common stock with respect to such
option by (b) the Exchange Ratio, which exercise price per share shall be
rounded to the nearest whole cent, as illustrated on Exhibit B attached
hereto. The number of shares of HCC common stock that may be purchased by a
holder under any option assumed by HCC hereunder shall not include any
fractional share of HCC common stock but shall be rounded up to the next
higher whole share of HCC common stock. Notwithstanding the foregoing, VCI
stock options which meet the requirements of Section 422 of the Code will
be converted into HCC stock options in a manner which complies with Section
424(a) of the Code. The assumption by HCC of the options hereunder shall
not terminate or modify (except as required hereunder) (i) the VCI 1999
Stock Incentive Plan, dated August 15, 1999 (the "VCI Plan"), any Stock
Option Agreement issued pursuant to the VCI Plan or the terms of any stock
option agreements issued by VCI other than under the VCI Plan; (ii) any
right, vesting schedule, or other restriction on transferability relating
to the VCI Plan, any Stock Option Agreement issued pursuant to the VCI Plan
or any stock option agreement issued by VCI other than under the VCI Plan;
or (iii) give the holders of such options any additional benefits which
they did not have immediately prior to the Effective Time. Continuous
employment with VCI shall be credited to an optionee for vesting purposes
after the Effective Time. Nothing contained in this Section 2.5(a) shall
require HCC to offer or sell shares of HCC common stock upon the exercise
of options assumed by HCC hereunder if, in the reasonable judgment of HCC
or its counsel, such offer or sale would not be in accordance with the
applicable federal or state securities laws, provided that HCC shall use
its reasonable best efforts to take such actions, if any, as are necessary
for such offer or sale to be in accordance with such laws, including
without limitation the filing with the SEC within 45 days following the
Effective Time of a registration statement on Form S-8 under the 1933 Act
covering the shares of HCC common stock issuable upon exercise of options
assumed hereunder by HCC.
(b) If on or before the Effective Time (i) the issued and outstanding
shares of HCC common stock are changed into a different number of shares by
reason of any recapitalization, stock split or stock dividend,
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then the number of shares of HCC common stock issuable upon exercise of VCI
options assumed and converted pursuant to Section 2.5(a) above shall be
correspondingly adjusted to that number and class of shares of common stock
of HCC, if such options had been converted into options to acquire HCC
common stock immediately before such recapitalization, stock split or stock
dividend and the exercise price thereof shall be correspondingly adjusted;
or (ii) there shall be a merger, share exchange or consolidation of HCC
with or into another corporation or entity, then, as part of such merger,
share exchange or consolidation, the VCI options to be assumed and
converted pursuant to Section 2.3(a) above shall be equitably converted
into options to acquire that number and class of shares of stock of the
surviving corporation resulting from such merger or consolidation or the
acquiring corporation in such share exchange, as if such VCI options had
been converted into options to acquire HCC shares of common stock
immediately prior to such merger, share exchange or consolidation, and the
exercise price thereof shall be correspondingly and equitably adjusted.
2.6 Exchange of Certificates.
(a) Prior to the Closing Date, HCC shall appoint U.S. Stock Transfer
Corporation to act as exchange agent (the "Exchange Agent") in the Merger.
(b) Promptly after the Closing Date, but in no event later than three
business days thereafter, HCC shall give instructions to the Exchange Agent
to make available within three business days thereafter for exchange in
accordance with this Section 2.6, the shares of HCC common stock issuable
pursuant to Section 2.3 in exchange for outstanding shares of capital stock
of VCI, subject to the issuance of 10% of the shares of HCC common stock
issuable to the Holders into escrow pursuant to Section 2.4 hereof.
(c) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each Holder of record of a stock certificate that,
immediately prior to the Effective Time, represented outstanding shares of
capital stock of VCI (a "Certificate"), whose shares are being converted
into HCC common stock pursuant to Section 2.3, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other customary provisions as HCC may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates evidencing HCC common stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such
letter of transmittal, duly executed, the Holder of such Certificate shall
be entitled to receive in exchange therefor and HCC shall cause the
Exchange Agent to deliver to such Holder the number of shares of HCC common
stock and payments in lieu of fractional shares to which the Holder is
entitled pursuant to Section 2.3 hereof, subject to the provisions of
Section 2.4 hereof. Until surrendered as contemplated by this Section
2.6(c), each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender such whole
number of shares of HCC common stock and payments for fractional shares as
is provided for in Section 2.3.
(d) No dividends or distributions payable to holders of record of HCC
common stock after the Effective Time, or cash payable in lieu of
fractional shares, shall be paid to the Holder of any unsurrendered
Certificate until the Holder of the Certificate shall surrender such
Certificate.
2.7 Dissenting VCI Shares. Holders of Dissenting VCI Shares shall have
those rights, but only those rights, of holders who perfect their appraisal
rights under Section 262 of the DCL. VCI shall give HCC prompt notice of any
demand, purported demand, objection, notice, petition, or other communication
received from stockholders or provided to stockholders by VCI with respect to
any Dissenting VCI Shares or shares claimed to be Dissenting VCI Shares, and
HCC shall have the right to participate in all negotiations and proceedings
with respect to such shares. VCI agrees that, without the prior written
consent of HCC, it shall not voluntarily make any payment with respect to, or
settle or offer to settle, any demand or purported demand respecting such
shares.
2.8 Tax Free Reorganization. The parties intend to adopt this Agreement as
a plan of reorganization and to consummate the Merger in accordance with the
provisions of Section 368(a) of the Code.
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2.9 Voting Agreement. Concurrently with the execution of this Agreement,
the holders of at least forty percent (40%) of the outstanding voting capital
stock of HCC shall enter into Voting Agreements with VCI in the form attached
hereto as Exhibit D, pursuant to which they shall agree, subject to the terms
and conditions of the Voting Agreement, to vote all the shares of capital
stock of HCC or VCI, as applicable, held by them or by the entities they
represent in favor of the Merger. HCC agrees to use its reasonable best
efforts to maintain the percentage of outstanding voting capital stock of HCC
subject to the Voting Agreements at no less than 40% through the date of the
HCC stockholders' meeting for the purpose of approving the Merger. In
addition, concurrently with the execution of this Agreement, Holders of at
least ninety-eight percent (98%) of the outstanding voting capital stock of
VCI shall execute and deliver a Written Consent and Agreement in the form
attached hereto as Exhibit E, pursuant to which the Holders shall authorize
and approve the Merger and agree to certain other terms and conditions. There
shall be no amendments or modifications to the Voting Agreement or the Written
Consent and Agreement without the written consent of VCI and HCC,
respectively.
2.10 Representation on HCC Board of Directors. At the Effective Time, HCC
shall take all necessary actions so that, immediately following the Effective
Time, the following persons shall be appointed to three-year terms on the
Board of Directors of HCC: Robert M. Haft and Sage Givens. The approval by the
HCC stockholders of the Merger shall constitute their vote in favor of the
appointment of Robert M. Haft and Sage Givens as members of the HCC Board of
Directors. Robert M. Haft and Sage Givens may not be removed as a member of
the Board of Directors during their three-year terms for any reason other than
Cause.
2.11 Affiliate Agreements. Concurrently with the execution of this
Agreement, each affiliate of VCI, within the meaning of Rule 145 promulgated
under the 1933 Act ("Rule 145 Affiliates"), shall execute and deliver an
Affiliate Agreement, in the form of Exhibit F attached hereto, which shall be
effective as of the Closing Date, under which each Rule 145 Affiliate of VCI
agrees to comply with the applicable requirements of Rule 145 and any
requirements under the rules applicable to pooling of interests accounting
treatment. HCC shall be entitled to place appropriate legends on the
certificates evidencing any HCC common stock to be received by such Rule 145
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the HCC common stock,
consistent with the terms of the Affiliate Agreements.
2.12 Escrow Agreement. Concurrently with the execution of this Agreement,
HCC, the Stockholder Representative and the Escrow Holder shall have executed
the Escrow Agreement, which shall be effective as of the Closing Date.
2.13 Securities Exemption; Stockholders Letter. Concurrently with the
execution of this Agreement, each stockholder of VCI shall have executed and
delivered a Stockholder's letter in the form of Exhibit G hereto, which shall
be effective no later than the date hereof.
2.14 Employment and Noncompetition Agreement. Concurrently with the
execution of this Agreement, HCC shall have received an Employment Agreement
and a Noncompetition Agreement in the forms of Exhibits H and I hereto
executed by Robert M. Haft and Bruce Kudeviz, each of which shall be effective
as of the Closing Date.
ARTICLE III
REPRESENTATIONS OF VCI
VCI represents and warrants to HCC that, except as set forth in the
Disclosure Schedule dated as of the date hereof and signed by the Chief
Executive Officer of VCI (the "VCI Disclosure Schedule"), each of which
exceptions shall specifically identify the relevant Section hereof to which it
relates or be specifically enough stated to make it clear that it is also
relevant to such Section:
3.1 Organization. VCI and each of its Subsidiaries are corporations or
limited liability companies duly organized, validly existing and in good
standing under the laws of the jurisdictions of their incorporation or
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formation (as the case may be), and have all requisite power and authority to
own their properties and to carry on their businesses as now being conducted.
VCI has all requisite power to execute and deliver this Agreement and the
agreements contemplated herein, and to consummate the transactions
contemplated hereby and thereby. VCI and its Subsidiaries are duly qualified
to do business and in good standing in all jurisdictions in which ownership of
property or the character of their business requires such qualification and
where failure to be so qualified would reasonably be expected to have a
Material Adverse Effect. Copies of the Certificates of Incorporation and
Bylaws or Certificate of Formation and limited liability company agreement (as
applicable) of VCI and its Subsidiaries, as amended to date, have been
previously delivered to HCC, are complete and correct, and no amendments have
been made thereto or have been authorized since the date thereof.
3.2 Capitalization of VCI. VCI's authorized capital stock consists of
66,650,000 shares of common stock, of which 12,974,414 shares are issued and
outstanding on the date hereof, and 49,666,498 shares of Preferred Stock,
classified into three series, as follows: 11,627,573 shares of Series A
Convertible Preferred Stock, of which 11,627,573 shares are issued and
outstanding on the date hereof; 10,038,925 shares of Series B Convertible
Preferred Stock, of which 10,038,925 shares are issued and outstanding as of
the date hereof; and 28,000,000 shares of Series C Convertible Preferred
Stock, of which 23,325,000 shares are issued and outstanding as of the date
hereof. Section 3.2(a) of the VCI Disclosure Schedule sets forth the number of
authorized shares of each class of VCI capital stock and the number of issued
and outstanding shares of each class of capital stock and the record owner
thereof. Shares of Preferred Stock are convertible into shares of Common Stock
on a one share-for-one share basis. All issued and outstanding shares of VCI's
capital stock are duly authorized, validly issued, fully paid and non-
assessable, and were issued in compliance with applicable federal and state
securities laws. There are options outstanding covering 969,016 shares of
common stock of VCI; all of such options, to the extent not exercised prior to
the Effective Time, shall be assumed by HCC and converted into options to
purchase HCC common stock pursuant to the provisions of Section 2.5 hereof and
no consents of optionholders are required with respect to such assumption.
Except for such Preferred Stock and outstanding options and except as set
forth in Section 3.2(b) of the VCI Disclosure Schedule, there are not
outstanding (i) any options, warrants or other rights to purchase from VCI any
capital stock of VCI; (ii) any securities convertible into or exchangeable for
shares of capital stock of VCI; or (iii) any other commitments or rights of
any kind for the issuance by VCI of additional shares of capital stock or
options, warrants or other securities of VCI.
3.3 Subsidiaries. The only Subsidiaries of VCI are those listed in Section
3.3 of the VCI Disclosure Schedule. All of the outstanding shares of capital
stock of each of VCI's Subsidiaries which is a corporation are duly
authorized, validly issued, fully paid and nonassessable and all such shares
are owned by VCI or another Subsidiary of VCI free and clear of all security
interests, liens, claims, pledges, agreements, limitations on VCI's voting
rights, charges or other encumbrances of any nature. VCI owns all of the
membership interests in Vitamins.com, LLC, a Delaware limited liability
company, free and clear of all security interests, liens, claims, pledges,
agreements, limitations on VCI's voting rights, charges or other encumbrances
of any nature.
3.4 Authorization. The execution and delivery by VCI of this Agreement and
the agreements provided for herein, and the consummation by VCI of all
transactions contemplated hereunder and thereunder by VCI, have been duly
authorized by all requisite corporate action. This Agreement has been duly
executed and delivered by VCI. This Agreement and all other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which VCI is a party constitute the valid and legally
binding obligations of VCI enforceable against it in accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other similar laws
affecting the rights of creditors generally and subject to equitable remedies.
3.5 Compliance with Laws and Other Instruments. Except as set forth in
Section 3.5 of the VCI Disclosure Schedule, neither VCI nor any of its
Subsidiaries is in violation or default (a) of any provision of its
Certificate of Incorporation or Bylaws or Certificate of Formation or limited
liability company agreement (as the case may be), or of any instrument,
judgment, order, writ or decree, or (b) except for when any such violation or
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default would not reasonably be expected to have a Material Adverse Effect, of
any lease, license, permit, contract or other arrangement to which it is a
party or by which it is bound, of any copyright laws with respect to its use
and posting of information on its website or of any other provision of any
federal or state statute, rule or regulation applicable to VCI or any of its
Subsidiaries. The execution, delivery and performance by VCI of this Agreement
and the agreements provided for herein, and the consummation by VCI of the
transactions contemplated hereby and thereby, do not and will not, with or
without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to VCI (assuming
compliance with the requirements of the HSR Act), and which would reasonably
be expected to have a Material Adverse Effect; (b) violate the provisions of
the Certificate of Incorporation or Bylaws or Certificate of Formation or
limited liability company agreement (as the case may be) of VCI or any of its
Subsidiaries; (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator applicable to VCI; (d) except as set forth in
Section 3.5 of the VCI Disclosure Schedule, conflict with, contravene,
constitute a default or breach of, result in an acceleration of, or create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any instrument, judgment, order, writ,
decree, lease, license, permit, contract, lease, or other agreement or other
arrangement to which VCI or any of its Subsidiaries is a party or by which VCI
or any Subsidiaries is bound or to which its assets are subject and which
would reasonably be expected to have a Material Adverse Effect; or (e)
constitute an event that results in the creation of any lien, charge or
encumbrance upon any assets of VCI or any of its Subsidiaries or the
suspension, revocation, impairment, forfeiture, or nonrenewal of any permit,
license, authorization, or approval applicable to VCI or any of its
Subsidiaries, their businesses or operations or any of their assets or
properties and which would reasonably be expected to have a Material Adverse
Effect.
3.6 VCI Financial Statements. VCI has delivered to HCC the audited
consolidated balance sheets of VCI as of December 31, 1999 ("Most Recent VCI
Balance Sheet") and December 31, 1998 and the related statements of income,
changes in shareholders' equity and cash flows. Such financial statements have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby, fairly present in all material respects the
financial condition, results of operations and cash flows of VCI as of the
respective dates thereof and for the periods referred to therein and are
consistent with the books and records of VCI.
3.7 No Undisclosed Liabilities. Except as set forth in Section 3.7 of the
VCI Disclosure Schedule, VCI and its Subsidiaries have no liability (whether
absolute or contingent, whether liquidated or unliquidated and whether due or
to become due), and there is no existing condition, situation or set of
circumstances which would reasonably be expected to result in such a
liability, except for (a) liabilities shown on the Most Recent VCI Balance
Sheet, (b) liabilities which have arisen since December 31, 1999 in the
ordinary course of business consistent with past custom and practice for start
up internet e-commerce enterprises ("Ordinary Course of Business"), (c)
contractual liabilities incurred in the Ordinary Course of Business which are
not required by GAAP to be reflected on a balance sheet or disclosed in the
notes thereto under GAAP, and (d) liabilities for accounting, investment
banking and legal fees incurred in connection with the Merger and the
transactions contemplated thereby; provided that any difference between the
adjusted tax basis and the fair market value of any asset held by VCI or its
Subsidiaries on the Closing Date shall not be treated as an existing
condition, situation or set of circumstances for purposes of this Section 3.7.
3.8 Absence of Certain Changes or Events. Except as contemplated by this
Agreement and as set forth in Section 3.8 of the Disclosure Schedule, since
December 31, 1999, neither VCI nor any of its Subsidiaries has entered into
any transaction that is not in the Ordinary Course of Business or has:
(a) suffered any Material Adverse Effect or had any event occur which
reasonably would be expected to result in a Material Adverse Effect;
(b) incurred any material obligation or liability for borrowed money
other than in the Ordinary Course of Business;
(c) discharged or satisfied any lien or encumbrance or paid any
obligation or liability other than (i) current liabilities reflected in the
Most Recent VCI Balance Sheet or (ii) those incurred in the Ordinary Course
of Business since the date of the Most Recent VCI Balance Sheet;
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(d) made any material amendment to or termination of any contract or
lease or done any act or omitted to do any act which would cause a breach
of any contract or lease where such breach would reasonably be expected to
have a Material Adverse Effect;
(e) suffered any loss of personal or real property in excess of $50,000
in the aggregate, or waived any rights of any value;
(f) authorized any declaration or payment of dividends, or paid any such
dividends, or authorized any transfer of assets of any kind whatsoever to
any of its stockholders (other than payments or transfers by any Subsidiary
of VCI to VCI);
(g) made any material change in the terms, status or funding condition
of any VCI Employee Benefit Plan;
(h) made any capital expenditure in excess of $50,000 in any instance or
$500,000 in the aggregate;
(i) acquired or disposed of, or committed to acquire or dispose of, any
asset, or entered or committed to enter into any contract, agreement or
commitment, in any such case which involves the payment in the case of an
acquisition of more than $50,000, or in the case of a disposition of more
than $500,000, except agreements, commitments or transactions involving the
purchase of inventory or supplies in the ordinary course of business
consistent with past practice and which do not have a remaining term
exceeding twelve months;
(j) increased or agreed to increase the compensation or bonuses payable
or to become payable to any employees with annual salaries exceeding
$50,000, or increased any salaries or bonuses payable or to become payable
to any employees in any manner not in the Ordinary Course of Business;
(k) made or agreed to make any loan to any of its employees, officers,
stockholders or directors, other than travel advances made in the Ordinary
Course of Business;
(l) granted or agreed to grant to any person any option, right or
warrant or other commitment calling for the issuance or sale of any shares
of capital stock, bonds or other corporate securities (other than options
granted in the Ordinary Course of Business to employees, consultants and
members of the Board of Directors of VCI and which are being assumed
pursuant to Section 2.5 hereof); or
(m) granted or voluntarily subjected any material asset to a lien or
encumbrance (other than any purchase money security interest, conditional
title retention arrangement, mechanic's lien, lien for taxes not yet due or
lien arising by operation of law).
3.9 Tax Matters.
(a) VCI and its Subsidiaries have filed all Tax Returns that they were
required to file and all such Tax Returns were correct and complete in all
material respects. VCI and its Subsidiaries have paid all Taxes owed in
respect of the periods covered by such Tax Returns whether or not shown as
due on such Tax Return. The unpaid Taxes of VCI and its Subsidiaries for
tax periods through December 31, 1999 do not exceed the accruals and
reserves for Taxes set forth on the Most Recent VCI Balance Sheet. VCI has
no actual or, to its knowledge, potential liability for any Tax obligation
of any taxpayer (including without limitation any affiliated group of
corporations or other entities that included VCI during a prior period)
other than VCI or its Subsidiaries. Except as set forth in Section 3.9 of
the VCI Disclosure Schedule, all Taxes that VCI is or was required by law
to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper Governmental Entity.
(b) Except as set forth in Section 3.9 of the VCI Disclosure Schedule,
none of VCI and its Subsidiaries has ever had any examination report issued
or statement of deficiencies assessed against it which have not been
resolved or satisfied. For taxable periods ending after December 31, 1994,
except as set forth in Section 3.9 of the VCI Disclosure Schedule, no Tax
Returns of VCI have been audited by any Governmental Entity. Except as set
forth in Section 3.9 of the VCI Disclosure Schedule, no examination or
audit of any
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Tax Returns of VCI by any Governmental Entity is currently in progress or,
to the knowledge of VCI, threatened or contemplated. None of VCI and its
Subsidiaries has waived any statute of limitations with respect to Taxes or
agreed to an extension of time with respect to a tax assessment or
deficiency, which is currently in effect.
(c) VCI is not a "consenting corporation" within the meaning of Section
341(f) of the Code and none of the assets of VCI are subject to an election
under Section 341(f) of the Code. VCI has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the preceding five (5) years. VCI is not a party to any Tax
allocation or sharing agreement.
(d) VCI is not and has never been a member of an "affiliated group" of
corporations (within the meaning of Section 1504 of the Code) other than
the "affiliated group" of which VCI is the common parent corporation. VCI
has not made an election under Treasury Reg. Section 1.1502-20(g). VCI is
not and has not been required to make a basis reduction pursuant to
Treasury Reg. Section 1.1502-20(b) or Treasury Reg. Section 1.337(d)-2T(b),
except as may be required if VCI does not join in the filing of Federal
consolidated returns with HCC after the Closing Date.
(e) As of the date of this Agreement and as of the Closing Date, VCI has
not, and will not have, taken any action that could reasonably be expected
to cause the Merger to fail to qualify as a reorganization within the
meaning of Section 368(a) of the Code.
(f) None of VCI and its Subsidiaries will be required to report any
amount in taxable income in any taxable period ending after the Closing
pursuant to Section 481 of the Code by reason of a change of accounting
method occurring in a taxable period ending on or before the Effective
Time.
(g) Since the date of its incorporation, VCI has been reporting its
income in accordance with the accrual method of accounting.
3.10 Assets. VCI and its Subsidiaries do not own any real property. VCI and
its Subsidiaries have good and defensible title to all of their respective
personal properties, as reflected in the Most Recent VCI Balance Sheet (except
properties sold or otherwise disposed of since December 31, 1999 in the
Ordinary Course of Business) or acquired after December 31, 1999, or with
respect to leased properties and assets, valid leasehold interests in, free
and clear of all Security Interests, except as listed in Section 3.10 of the
VCI Disclosure Schedule. The plants, property and equipment of VCI and its
Subsidiaries that are used in the operations of their respective businesses
are in good operating condition and repair subject to ordinary wear and tear
and to requirements for periodic maintenance. All properties used in the
operations of VCI and its Subsidiaries, except for those acquired after
December 31, 1999, are reflected in the Most Recent VCI Balance Sheet to the
extent required by GAAP. Section 3.10 of the VCI Disclosure Schedule
identifies all personal property leases of VCI and its Subsidiaries. For
purposes of this Agreement, "Security Interest" means any mortgage, pledge,
security interest, encumbrance, charge, or other lien (whether arising by
contract or by operation of law), other than (i) mechanic's, materialmen's,
and similar liens, (ii) liens arising under worker's compensation,
unemployment insurance, social security, retirement, and similar legislation,
(iii) liens on goods in transit incurred pursuant to documentary letters of
credit, and (iv) liens for Taxes not yet due and payable, in each case arising
in the Ordinary Course of Business of VCI or its Subsidiaries and not material
to VCI and its Subsidiaries, as a whole.
3.11 Intellectual Property.
(a) VCI and its Subsidiaries own, or license or otherwise possess
legally enforceable rights to use, all patents, trademarks, trade names,
service marks, Internet domain names, copyrights, and any applications for
such patents, trademarks, trade names, service marks, Internet domain names
and copyrights, schematics, technology, trade secrets, know-how, computer
software programs or applications, processes and other tangible or
intangible proprietary information or material that are used to conduct
their respective businesses as currently conducted, including without
limitation the technology, information, databases, data lists, data
compilations, and all proprietary rights developed or discovered or used in
connection with or contained in all versions and implementations of any
World Wide Web sites, except as set forth in Section 3.11 of the
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VCI Disclosure Schedule, free and clear of all liens, claims and
encumbrances (including without limitation licensing and distribution
rights), all of which are "Intellectual Property." Section 3.11 of the VCI
Disclosure Schedule contains an accurate and complete (i) list of all
patents and patent applications and all trademarks (indicating registered
and unregistered trademarks) and applications therefor, registered
copyrights, trade names, service marks and Internet domain names owned or
licensed by VCI, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any
such application for such issuance or registration has been filed,
(ii) list of all written licenses, sublicenses and other agreements to
which VCI or any of its Subsidiaries is a party and pursuant to which any
person is authorized to use any Intellectual Property rights of VCI or any
of its Subsidiaries, and (iii) list of all written licenses, sublicenses
and other agreements as to which VCI or any of its Subsidiaries is a party
and pursuant to which VCI or any of its Subsidiaries is authorized to use
any third party Intellectual Property. Neither VCI nor any of its
Subsidiaries is a party to any oral license, sublicense or agreement which,
if reduced to written form, would be required to be listed in Section 3.11
of the VCI Disclosure Schedule under the terms of this Section 3.11(a).
(b) All of the patents, copyrights, trademarks, trade names or Internet
domain name registrations of VCI and its Subsidiaries related to their
businesses are valid and in full force and effect and will not be altered
or impaired by the consummation of the transactions contemplated hereby.
Neither VCI nor any of its Subsidiaries is, and will not be as a result of
the execution and delivery of this Agreement or the performance of VCI's
obligations under this Agreement, in breach of any license, sublicense or
other agreement relating to VCI's Intellectual Property or third party
Intellectual Property rights.
(c) Except as set forth in Section 3.11 of the VCI Disclosure Schedule,
neither VCI or any of its Subsidiaries, nor to VCI's knowledge any of the
employees of VCI or any of its Subsidiaries, has received a claim, or is
aware of a reasonable basis for a claim, of infringement or violation of
any Intellectual Property right of any third party. To VCI's knowledge, the
manufacturing, marketing, licensing or sale of the products or performance
of the service offerings of VCI and its Subsidiaries do not infringe or
violate any Intellectual Property right of any third party; and, to the
knowledge of VCI, the Intellectual Property rights of VCI and its
Subsidiaries are not being infringed or violated by activities, products or
services of any third party.
3.12 Contracts. Section 3.12 of the VCI Disclosure Schedule lists all
material written agreements to which VCI or any of its Subsidiaries is a party
or by which it is bound, including but not limited to:
(a) any written arrangement for the provision of products or services to
customers or other third parties;
(b) any written arrangement for the purchase of raw materials,
commodities, supplies, products or other personal property or for the
receipt of consulting or other services;
(c) any written arrangement establishing a partnership, joint venture
development, marketing or distribution arrangement;
(d) any written arrangement under which it has created, incurred,
assumed, or guaranteed (or may create, incur, assume, or guarantee)
indebtedness (including capitalized lease obligations) or under which it
has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(e) any written arrangement concerning confidentiality or noncompetition
(other than standard confidentiality agreements with employees, consultants
or directors);
(f) any written agreement, contract or commitment that calls for fixed
and/or contingent payments or expenditures (including without limitation
any advertising or revenue sharing arrangement);
(g) any written outstanding sales or advertising contract, commitment or
proposal (including, without limitation, insertion orders, slotting
agreements or other agreements under which VCI or any of its Subsidiaries
has allowed third parties to advertise on or otherwise be included in World
Wide Web sites of VCI or any of its Subsidiaries)
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(h) any written agreements, contracts or commitments with officers,
employees, agents, consultants, advisors, salesmen, sales representatives,
distributors or dealers that are not cancelable "at will" and without
liability, penalty or premium.
(i) any written employment, independent contractor or similar agreement,
contract or commitment that is not terminable on thirty (30) days' notice
or less without penalty, liability or premium of any type, including,
without limitation, severance or termination pay.
(j) any written arrangement involving any VCI shareholders or their
Affiliates.
Neither VCI nor any of its Subsidiaries is a party to any oral contract,
agreement or other arrangement which, if reduced to written form, would be
required to be listed in Section 3.12 of the VCI Disclosure Schedule. All of
the agreements listed in the VCI Disclosure Schedule to which VCI or any of
its Subsidiaries is a party are valid, binding, in full force and effect and
enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and except that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor
may be brought (whether at law or in equity). Except as set forth in Section
3.12 of the VCI Disclosure Schedule, no such contract contains any liquidated
damages, penalty or similar provision. To VCI's knowledge, no party to any
such contract intends to cancel, withdraw, modify or amend such contract,
agreement or arrangement. Except as set forth in Section 3.12 of the VCI
Disclosure Schedule, neither VCI nor any of its Subsidiaries is in default
under or in breach or violation of, nor, to VCI's knowledge, is there any
valid basis for any claim of default by VCI or any of its Subsidiaries under,
or breach or violation by VCI or any of its Subsidiaries of, any material
provision of any contract listed on the VCI Disclosure Schedule. Except as set
forth in Section 3.12 of the VCI Disclosure Schedule, to VCI's knowledge no
other party is in default under or in breach or violation of, nor is there any
valid basis for any claim of default by any other party under or any breach or
violation by any other party of, any such contract.
3.13 Accounts Receivable. All accounts receivable reflected on the Most
Recent VCI Balance Sheet are valid receivables, and, to VCI's knowledge, are
subject to no setoffs or counterclaims and are current and collectible (within
90 days after the date on which it first became due and payable), net of the
applicable reserve for bad debts on the Most Recent VCI Balance Sheet. All
accounts receivable reflected in the financial or accounting records of VCI
and its Subsidiaries that have arisen since the Most Recent VCI Balance Sheet
Date are valid receivables, and to VCI's knowledge, subject to no setoffs or
counterclaims and are collectible, net of a reserve for bad debts in an amount
proportionate to the reserve shown on the Most Recent VCI Balance Sheet.
3.14 Insurance. Section 3.14 of the VCI Disclosure Schedule sets forth a
true, correct and complete list of all insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, software
errors and omissions, employees, officers and directors of VCI and its
Subsidiaries and all claims made under any insurance policy since January 1,
1998. Except as set forth in Section 3.14 of the VCI Disclosure Schedule,
there is no claim by VCI or any of its Subsidiaries 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 paid and VCI and its Subsidiaries
are otherwise in compliance in all material respects with the terms of such
policies and bonds. VCI has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
3.15 Litigation. Section 3.15 of the VCI Disclosure Schedule identifies,
and contains a brief description of, (a) any unsatisfied judgment, order,
decree, stipulation or injunction issued by or enforceable by a Governmental
Entity, (b) any written claim, demand, complaint, action, suit, proceeding, or
hearing or, to VCI's knowledge any investigation of or in, any Governmental
Entity or before any arbitrator to which VCI or any of its Subsidiaries or is
a party or, to the knowledge of VCI, is threatened to be made a party, and (c)
any written claims by third persons of which VCI is aware and any reasonable
basis for any third party claims. None of the demands, claims, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
3.15 of the VCI Disclosure Schedule would reasonably be expected to have a
Material Adverse Effect.
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3.16 Employees and Consultants. Section 3.16 of the VCI Disclosure Schedule
contains a list of all current employees and consultants of VCI and its
Subsidiaries, along with the position and the annual rate of compensation of
each such person. Except as specified in Section 3.16 of the VCI Disclosure
Schedule, each current management level employee, key employee and consultant
to VCI and its Subsidiaries has entered into a confidentiality and assignment
of inventions agreement with VCI, a copy of each of which has previously been
delivered to HCC. To the knowledge of VCI, no key employee or consultant or
group of employees or consultants has any plans to terminate employment or the
provision of consulting services with VCI or any of its Subsidiaries. Except
as set forth in Section 3.16 of the VCI Disclosure Schedule, neither VCI nor
any of its Subsidiaries is a party to or bound by any collective bargaining
agreement, nor has it experienced any strikes, grievances, and claims of
unfair labor practices or other collective bargaining disputes. Except as set
forth in Section 3.16 of the VCI Disclosure Schedule, VCI has no knowledge of
any organizational effort made or threatened, either currently or since its
inception, by or on behalf of any labor union with respect to employees of VCI
or any of its Subsidiaries. Neither VCI nor any of its Subsidiaries has any
agreements or arrangements with persons titled as independent contractors or
consultants, as a result of which, by virtue of the control exercised by VCI
or any of its Subsidiaries, the type of work performed by the persons or any
other circumstances, such persons could reasonably be deemed to be employees
of VCI or any of its Subsidiaries. VCI and its Subsidiaries have complied in
all material respects with all record keeping and tax reporting obligations
relating to income and employment taxes due with respect to compensation paid
to employees or independent contractors providing services to VCI or any of
its Subsidiaries.
3.17 Employee Benefits.
(a) Section 3.17 of the VCI Disclosure Schedule contains a complete and
accurate list of all VCI Employee Benefit Plans (as defined below) which
are maintained, or contributed to, by VCI, or any VCI ERISA Affiliate (as
defined below). For purposes of this Agreement, "VCI Employee Benefit Plan"
means any "employee pension benefit plan" (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
any "employee welfare benefit plan" (as defined in Section 3(1) of ERISA),
and any other written or oral plan, agreement or arrangement involving
direct or indirect compensation, including without limitation insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation
or other forms of incentive compensation or post-retirement compensation
maintained, or contributed to, by VCI or any VCI ERISA Affiliate. For
purposes of this Agreement, "VCI ERISA Affiliate" means any entity which is
a member of (i) a controlled group of corporations (as defined in Section
414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes VCI.
Complete and accurate copies of (i) all VCI Employee Benefit Plans which
have been reduced to writing, (ii) written summaries, if any, of all
unwritten VCI Employee Benefit Plans, (iii) all related trust agreements,
insurance contracts and summary plan descriptions, if any, and (iv) the
most recent annual report filed, if any, on IRS Form 5500, 5500C or 5500R
for each VCI Employee Benefit Plan, have been delivered to the Buyer. Each
VCI Employee Benefit Plan has been administered in all material respects in
accordance with its terms, and each of VCI and the VCI ERISA Affiliates has
in all material respects met its obligations with respect to such VCI
Employee Benefit Plan and has made all contributions thereto which are
required to be made prior to the date hereof. To the knowledge of VCI, VCI
and all VCI Employee Benefit Plans are in compliance in all material
respects with the currently applicable provisions of ERISA and the Code and
the regulations thereunder.
(b) There are no termination proceedings or other claims (except claims
for benefits payable in the normal operation of VCI Employee Benefit Plans
and proceedings with respect to qualified domestic relations orders) suits
or proceedings and, to VCI's knowledge, there are no investigations by any
Governmental Entity, against or involving any VCI Employee Benefit Plan or
asserting any rights or claims to benefits under any VCI Employee Benefit
Plan that could give rise to any material liability.
(c) All VCI Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from
the Internal Revenue Service to the effect that such VCI Employee
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Benefit Plans are qualified and the plans and the trusts related thereto
are exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, no such determination letter has been revoked
and, revocation has not been threatened, and no such VCI Employee Benefit
Plan has been amended since the date of its most recent determination
letter in any respect which would adversely affect such letter, and, to
VCI's knowledge, no act or omission has occurred, that would adversely
affect its qualification or materially increase its cost.
(d) Except as set forth in Section 6.17 of the VCI Disclosure Schedule,
neither VCI nor any VCI ERISA Affiliate has ever maintained a VCI Employee
Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.
(e) At no time has VCI or any VCI ERISA Affiliate been obligated to
contribute to any "multi-employer plan" (as defined in Section 4001(a)(3)
of ERISA).
(f) Except as set forth in Section 3.17 of the VCI Disclosure Schedule,
there are no unfunded obligations under any VCI Employee Benefit Plan
providing benefits after termination of employment to any employee of VCI
or any VCI ERISA Affiliate (or to any beneficiary of any such employee),
including but not limited to retiree health coverage and deferred
compensation, but excluding continuation of health coverage required to be
continued under Section 4980B of the Code and insurance conversion
privileges under state law.
(g) To the knowledge of VCI, no act or omission has occurred and no
condition exists with respect to any VCI Employee Benefit Plan that would
subject VCI or any VCI ERISA Affiliate to any material fine, penalty, tax
or fiduciary liability imposed under ERISA or the Code.
(h) No VCI Employee Benefit Plan is funded by, associated with, or
related to a "voluntary employee's beneficiary association" within the
meaning of Section 501(c)(9) of the Code.
(i) Except as set forth in Section 3.17 of the VCI Disclosure Schedule,
no VCI Employee Benefit Plan, plan documentation or agreement, summary plan
description or other written communication distributed generally to
employees by its terms prohibits VCI or any VCI ERISA Affiliate from
amending or terminating any such VCI Employee Benefit Plan.
(j) Section 3.17 or 3.12 of the VCI Disclosure Schedule discloses each:
(i) written, and, to VCI's knowledge, oral, agreement with any director,
officer or other employee of VCI and Affiliates (A) the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving VCI or its Affiliates of the nature
of any of the transactions contemplated by this Agreement, (B) providing
any term of employment or compensation guarantee or (C) providing severance
benefits or other benefits after the termination of employment of such
director, officer or employee; (ii) agreement, plan or arrangement under
which any person may as a result of the Merger receive payments from VCI or
its affiliates that may be subject to the tax imposed by Section 4999 of
the Code or included in the determination of such person's "parachute
payment" under Section 280G of the Code; and (iii) agreement or plan
binding VCI or its affiliates, including without limitation any stock
option plan, stock appreciation right plan, restricted stock plan, stock
purchase plan, severance benefit plan, or any VCI Employee Benefit Plan,
any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
3.18 Environmental and OSHA.
(a) Hazardous Material. Except as set forth in Section 3.18 of the VCI
Disclosure Schedule, no material amount of any substance that is regulated
by any Governmental Entity or that has been designated by any Governmental
Entity to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment, including, without limitation, PCBs, asbestos, urea-
formaldehyde and all substances listed pursuant to the United States
Comprehensive Environmental Response, Compensation, and Liability Act of
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1980, as amended from time to time, and the United States Resource Recovery
and Conservation Act of 1976, as amended from time to time, and the
regulations and publications promulgated pursuant to said laws (a
"Hazardous Material"), is, to the knowledge of VCI, present as a result of
the actions of VCI or any of its Subsidiaries (or, to the knowledge of VCI,
as a result of any actions of any third party or otherwise) in violation of
any law in effect on or before the Closing Date, in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that VCI or any of its Subsidiaries has at any time
operated, occupied or leased.
(b) Hazardous Materials Activities. Neither VCI nor any of its
Subsidiaries has transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has VCI
or any of its Subsidiaries disposed of, transferred, sold or manufactured
any product containing a Hazardous Material (collectively "Hazardous
Materials Activities") in violation of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Recovery and Conservation Act of 1976, the Toxic Substances Control Act of
1976, and other applicable state or federal acts (including the rules and
regulations thereunder) as in effect on or before the Closing Date.
(c) Permits. VCI currently holds no environmental approvals, permits,
licenses, clearances and consents and none are necessary for the conduct of
VCI's Hazardous Material Activities, if any, and other business activities
of VCI as such activities are currently being conducted.
3.19 Permits. Section 3.19 of the VCI Disclosure Schedule sets forth a list
of all permits, licenses, registrations, certificates, orders or approvals
from any Governmental Entity (including without limitation those issued or
required under Environmental Laws and those relating to the occupancy or use
of owned or leased real property) ("Permits") issued to or held by VCI that
are material to the operation of its business. Such listed Permits are the
only Permits that are required for VCI to conduct its business as conducted,
except for those the absence of which could not reasonably be expected to have
any Material Adverse Effect. Each such Permit is in full force and effect.
3.20 Certain Business Relationships with Affiliates. Except as set forth in
Section 3.20 of the VCI Disclosure Schedule, no Affiliate of VCI (a) owns any
property or right, tangible or intangible, which is used in the business of
VCI, (b) has any claim or cause of action against VCI, (c) owes any money to
VCI, or (d) has loaned any money to VCI. Section 3.20 of the VCI Disclosure
Schedule describes any transactions or relationships between VCI and any
Affiliate thereof.
3.21 Brokers' Fees. VCI has no liability or obligation to pay any fees or
commissions to any broker, investment banker, finder or agent with respect to
the transactions contemplated by this Agreement other than to Donaldson,
Lufkin & Jenrette.
3.22 Minute Books. The minute books and other similar records of VCI and
its Subsidiaries which are corporations contain true and materially complete
records of all actions taken at any meetings of VCI's shareholders, Board of
Directors or any committee thereof and of all written consents executed in
lieu of the holding of any such meeting, and all charter and bylaw documents
and amendments thereto.
3.23 Customers and Suppliers. No material licensor to or supplier of VCI or
any of its Subsidiaries has indicated that it will stop, or decrease the rate
of, licensing intellectual property or supplying materials, products or
services to VCI or any of its Subsidiaries and no material customer of VCI or
any of its Subsidiaries has indicated that it will stop, or decrease the rate
of, buying, leasing or licensing materials, products or services from VCI or
any of its Subsidiaries. Section 3.23 of the VCI Disclosure Schedule sets
forth a list of each supplier of vitamins, nutritional supplements and
minerals that is the sole supplier of any such significant product to VCI or
to any of its Subsidiaries.
3.24 Year 2000. To VCI's knowledge, the systems and facilities operated by
or on behalf of VCI or any of its Subsidiaries in the conduct of their
respective businesses are capable of providing uninterrupted and error-
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free recordation, storage, processing, output and presentation of data,
including calendar dates falling before, on or after January 1, 2000. As of
the date hereof, VCI and its Subsidiaries have operated without any material
Year 2000 problems.
3.25 Disclosure. No representation or warranty by VCI contained in this
Agreement, and no statement contained in the VCI Disclosure Schedule or in any
other transaction document delivered to or to be delivered by VCI pursuant to
this Agreement, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading, as a whole.
ARTICLE IV
REPRESENTATIONS OF HCC AND ACQUISITION CORP.
HCC and Acquisition Corp. represent and warrant to VCI and the Holders
that, except as set forth in the Disclosure Schedule dated as of the date
hereof and signed by the Chief Executive Officer of HCC (the "HCC Disclosure
Schedule"), each of which exceptions shall specifically identify the relevant
Section hereof to which it relates or be specifically enough stated to make it
clear that it is also relevant to such Section:
4.1 Organization. HCC and each of its Subsidiaries are corporations duly
organized, validly existing and in good standing under the laws of the
jurisdictions of their incorporation, and have all requisite power and
authority to own their properties and to carry on their business as now being
conducted. HCC has all requisite power to execute and deliver this Agreement
and the agreements contemplated herein, and to consummate the transactions
contemplated hereby and thereby. HCC and its Subsidiaries are duly qualified
to do business and in good standing in all jurisdictions in which their
ownership of property or the character of their business requires such
qualification and where failure to be so qualified would reasonably be
expected to have a Material Adverse Effect. Certified copies of the
Certificates of Incorporation and the Bylaws of HCC and Acquisition
Corporation, as amended to date, have been previously delivered to VCI, are
complete and correct, and no amendments have been made thereto or have been
authorized since the date thereof.
4.2 HCC Capital Structure. The authorized capital stock of HCC consists of
100,000,000 shares of common stock and 5,000,000 shares of preferred stock. As
of March 14, 2000, (i) 22,651,630 shares of HCC common stock were issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable, (ii) no shares of HCC preferred stock were outstanding, and
(iii) 7,637,395 shares of HCC common stock were reserved for future issuance
pursuant to HCC's stock option plans and outstanding warrants. Section 4.2 of
the HCC Disclosure Schedule sets forth the outstanding shares of common stock
that were not covered by the S-1 registration statement that became effective
on December 7, 1999 and the record owners thereof. All of the outstanding
shares of capital stock of each of HCC's Subsidiaries are duly authorized,
validly issued, fully paid and nonassessable and all such shares are owned by
HCC free and clear of all security interests, liens, claims, pledges,
agreements, limitations on HCC's voting rights, charges or other encumbrances
of any nature. The shares of HCC common stock issued pursuant to this
Agreement will, when issued, be duly authorized, validly issued, fully paid
and nonassessable. The shares of HCC common stock owned of record and
beneficially by the HCC stockholders executing the Voting Agreement comprise
not less than forty percent (40%) of the total voting power of HCC as of the
date of this Agreement.
4.3 Subsidiaries. The only Subsidiaries of HCC are those listed in the HCC
Disclosure Schedule. All of the outstanding shares of capital stock of each of
HCC's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares are owned by HCC free and clear of all
security interests, liens, claims, pledges, agreements, limitations on HCC's
voting rights, charges or other encumbrances of any nature. Acquisition Corp.
has been formed by HCC for the purpose of effecting the Merger and has no
significant assets or liabilities (other than its obligations under this
Agreement) and has not engaged in any material activities except as are
related to the Merger.
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4.4 HCC's Authorization. Subject to the obtaining of the approval of HCC's
stockholders, the execution and delivery by HCC and Acquisition Corp. of this
Agreement, and the agreements provided for herein, and the consummation by HCC
and Acquisition Corp. of the transactions contemplated hereby and thereby,
have been duly authorized by all requisite corporate action. This Agreement
has been duly executed and delivered by HCC and Acquisition Corp. Subject to
the obtaining of approval of HCC's stockholders, this Agreement and all such
other agreements and written obligations entered into and undertaken in
connection with the transactions contemplated hereby constitute the valid and
legally binding obligations of HCC and Acquisition Corp., enforceable against
them in accordance with their respective terms subject to applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or other similar
laws affecting the rights of creditors generally and subject to equitable
remedies. The execution, delivery and performance of this Agreement and the
agreements provided for herein, and the consummation by HCC and Acquisition
Corp. of the transactions contemplated hereby and thereby, do not and will
not, with or without the giving of notice of the passage of time or both,
(a) violate the provisions of any law, rule or regulation applicable to HCC
(assuming compliance with the requirements of the HSR Act) and which would
reasonably be expected to have a Material Adverse Effect; (b) violate the
provisions of the Certificates of Incorporation or Bylaws of HCC or
Acquisition Corp.; (c) violate any judgment, decree, order or award of any
court, governmental body or arbitrator; or (d) conflict with or result in the
breach or termination of any term or provision of, or constitute a default
under, or cause any acceleration under, or cause the creation of any lien,
charge or encumbrance upon the properties or assets of HCC or of any of its
Subsidiaries pursuant to, any indenture, mortgage, deed of trust or other
agreement or instrument to which HCC or any of its Subsidiaries is a party or
by which HCC or any of its Subsidiaries is or may be bound and which would
reasonably be expected to have a Material Adverse Effect.
4.5 SEC Filings; Financial Statements.
(a) HCC has filed and provided to VCI all forms, reports and documents,
including all exhibits thereto, required to be filed by HCC with the SEC
since December 7, 1999 (the date on which its initial public offering
became effective), including its Form 10-K filed for the year ended
December 31, 1999 (collectively, the "HCC SEC Reports"). The HCC SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the
case may be, 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 in such HCC SEC Reports
or necessary in order to make the statements in such HCC SEC Reports, in
the light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the HCC SEC Reports, including HCC's
audited consolidated balance sheet as of December 31, 1999 ("Most Recent
HCC Balance Sheet") complied as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto,
was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved and fairly presented in all material
respects the consolidated financial position of HCC as at the respective
dates and the consolidated results of its operations and cash flows for the
periods indicated.
(c) Since December 31, 1999, HCC has not suffered any Material Adverse
Effect, and no event has occurred which reasonably would be expected to
result in a Material Adverse Effect.
4.6 No Undisclosed Liabilities. HCC and its Subsidiaries have no liability
whether absolute or contingent, whether liquidated or unliquidated and whether
due or to become due), and there is no existing condition, situation or set of
circumstances which would reasonably be expected to result in such a
liability, except for (a) liabilities shown on the Most Recent HCC Balance
Sheet, (b) liabilities which have arisen since December 31, 1999 in the
Ordinary Course of Business, (c) contractual liabilities incurred in the
Ordinary Course of Business which are not required by GAAP to be reflected on
a balance sheet or disclosed in the notes thereto under GAAP, and (d)
liabilities for accounting, investment banking and legal fees incurred in
connection with the Merger and the transactions contemplated thereby.
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4.7 Tax Matters. Except as disclosed on the HCC Disclosure Schedule:
(a) HCC and each of its Subsidiaries (together the "HCC Group") have
filed all Tax Returns (as defined below) that they were required to file
and all such Tax Returns were correct and complete in all material
respects. The HCC Group has paid all Taxes owed in respect of the periods
covered by such Tax Returns whether or not shown as due on such Tax Return.
The unpaid Taxes of the HCC Group for tax periods through December 31, 1999
do not exceed the accruals and reserves for Taxes set forth on the Most
Recent HCC Balance Sheet. The HCC Group has no actual or, to HCC's
knowledge, potential liability for any Tax obligation of any taxpayer
(including without limitation any affiliated group of corporations or other
entities that included any member of the HCC Group during a prior period)
other than members of the HCC Group. All Taxes that any member of the HCC
Group is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the
proper Governmental Entity.
(b) The HCC Group has never had any examination report issued or
statements of deficiencies assessed against it which have not been resolved
or satisfied. No Tax Returns of the HCC Group have been audited by any
Governmental Entity. No examination or audit of any Tax Returns of the HCC
Group by any Governmental Entity is currently in progress or, to the
knowledge of HCC, threatened or contemplated. The HCC Group has not waived
any statute of limitations with respect to taxes or agreed to an extension
of time with respect to a tax assessment or deficiency.
(c) The HCC Group is not a "consenting corporation" within the meaning
of Section 341(f) of the Code and none of the assets of the HCC Group are
subject to an election under Section 341(f) of the Code. HCC has not been a
United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(l)(A)(ii) of the Code. The HCC Group is not a party to any
Tax allocation or sharing agreement.
(d) The HCC Group is not and has never been a member of an "affiliated
group" of corporations (within the meaning of Section 1504 of the Code)
other than an affiliated group of which HCC was the common parent. The HCC
Group has not made an election under Treasury Reg. Section 1.1502-20(g).
HCC is not and has not been required to make a basis reduction pursuant to
Treasury Reg. Section 1.1502-20(b) or Treasury Reg. Section 1.337(d)-2T(b).
(e) As of the date of this Agreement and as of the Closing Date, HCC and
its Affiliates are not aware of any existing condition or circumstance (and
have not, and will not have, taken any action) that would cause the Merger
to fail to qualify as a reorganization within the meaning of Section 368(a)
of the Code.
4.8 Assets. HCC and its Subsidiaries do not own any real property. HCC and
its Subsidiaries have good and defensible title to all of their respective
properties as reflected in the Most Recent HCC Balance Sheet (except
properties, interests in properties and assets sold or otherwise disposed of
since December 31, 1999 in the Ordinary Course of Business) or acquired after
December 31, 1999, or with respect to leased properties and assets, valid
leasehold interests in, free and clear of all Security Interest, except as
listed in Section 4.8 of the HCC Disclosure Schedule. The plants, property and
equipment of HCC and its Subsidiaries that are used in the operations of their
respective businesses are in good operating condition and repair subject to
ordinary wear and tear and to requirements for periodic maintenance. All
properties used in the operations of HCC and its Subsidiaries, except for
those acquired after the Most Recent Balance Sheet Date, are reflected in
HCC's Most Recent Balance Sheet to the extent required by GAAP. Section 4.8 of
the HCC Disclosure Schedule identifies all personal property leases of HCC.
4.9 Intellectual Property.
(a) HCC and its Subsidiaries own, or license or otherwise possess
legally enforceable rights to use, all Intellectual Property free and clear
of all liens, claims and encumbrances (including, without limitation,
licensing and distribution rights). Section 4.9 of the HCC Disclosure
Schedule contains an accurate and complete (i) list of all patents and
patent applications and all trademarks (indicating registered and
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unregistered trademarks) and applications therefor, registered copyrights,
trade names, service marks and Internet domain names owned or licensed by
HCC or any of its Subsidiaries, including the jurisdictions in which each
such Intellectual Property right has been issued or registered or in which
any such application for such issuance or registration has been filed, (ii)
list of all written licenses, sublicenses and other agreements to which HCC
or any of its Subsidiaries is a party and pursuant to which any person is
authorized to use any Intellectual Property rights of HCC or any of its
Subsidiaries, and (iii) list of all written licenses, sublicenses and other
agreements as to which HCC or any of its Subsidiaries is a party and
pursuant to which HCC or any of its subsidiaries is authorized to use any
third party Intellectual Property. Neither HCC nor any of its Subsidiaries
is a party to any oral license, sublicense or agreement which, if reduced
to written form, would be required to be listed in Section 4.9 of the HCC
Disclosure Schedule under the terms of this Section 4.9(a).
(b) All of the patents, copyrights, trademarks, trade names or Internet
domain name registrations of HCC and its Subsidiaries related to their
current or currently proposed businesses are valid and in full force and
effect and will not be altered or impaired by the consummation of the
transactions contemplated hereby. Neither HCC nor any of its Subsidiaries
is, and will not be as a result of the execution and delivery of this
Agreement or the performance of HCC's obligations under this Agreement, in
breach of any license, sublicense or other agreement relating to HCC's
Intellectual Property or third party Intellectual Property rights.
(c) Neither HCC or any of its Subsidiaries, nor to HCC's knowledge any
of the employees of HCC or any of its Subsidiaries has received a claim, or
is aware of a reasonable basis for a claim, of infringement or violation of
any Intellectual Property right of any third party. To HCC's knowledge, the
manufacturing, marketing, licensing or sale of the products or performance
of the service offerings of HCC and its Subsidiaries do not infringe or
violate any Intellectual Property right of any third party and, to the
knowledge of HCC, the Intellectual Property rights of HCC and its
Subsidiaries are not being infringed or violated by activities, products or
services of any third party.
4.10 Contracts. All material written agreements to which HCC or any of its
Subsidiaries is a party or by which it is bound are listed in HCC's Form 10-K
for the year ended December 31, 1999 or set forth in Section 4.10 of the HCC
Disclosure Schedule. All of the agreements so listed are valid, binding, in
full force and effect and enforceable in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought (whether at law or in equity). No such contract
contains any liquidated damages, penalty or similar provision. To HCC's
knowledge, no party to any such contract intends to cancel, withdraw, modify
or amend such contract, agreement or arrangement. Neither HCC nor any of its
Subsidiaries is in default under or in breach or violation of, nor, to HCC's
knowledge, is there any valid basis for any claim of default by HCC or any of
its Subsidiaries under, or breach or violation by HCC or any of its
Subsidiaries of, any material provision of any contract so listed. To HCC's
knowledge, no other party is in default under or in breach or violation of,
nor is there any valid basis for any claim of default by any other party under
or any breach or violation by any other party of, any such contract.
4.11 Accounts Receivable. All accounts receivable reflected on the Most
Recent HCC Balance Sheet are valid receivables, and, to HCC's knowledge, are
subject to no setoffs or counterclaims and are current and collectible (within
90 days after the date on which it first became due and payable), net of the
applicable reserve for bad debts on the Most Recent HCC Balance Sheet. All
accounts receivable reflected in the financial or accounting records of HCC
and its Subsidiaries that have arisen since the Most Recent HCC Balance Sheet
Date are valid receivables, and to HCC's knowledge, subject to no setoffs or
counterclaims and are collectible, net of a reserve for bad debts in an amount
proportionate to the reserve shown on the Most Recent HCC Balance Sheet.
4.12 Litigation. Section 4.12 of the HCC Disclosure Schedule identifies,
and contains a brief description of, (a) any unsatisfied judgment, order,
decree, stipulation or injunction issued by or enforceable by a
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Governmental Entity, (b) any written claim, demand, complaint, action, suit,
proceeding, or hearing or, to HCC's knowledge any investigation of or in, any
Governmental Entity or before any arbitrator to which HCC or any of its
Subsidiaries or is a party or, to the knowledge of HCC, is threatened to be
made a party, and (c) any written or oral claims by third persons of which HCC
is aware and any reasonable basis for any third party claims. None of the
demands, claims, complaints, actions, suits, proceedings, hearings, and
investigations set forth in Section 4.12 of the HCC Disclosure Schedule would
reasonably be expected to have a Material Adverse Effect.
4.13 Employee Benefits.
(a) Section 4.13 of the HCC Disclosure Schedule contains a complete and
accurate list of all HCC Employee Benefit Plans (as defined below) which
are maintained, or contributed to, by HCC, or any HCC ERISA Affiliate (as
defined below). For purposes of this Agreement, "HCC Employee Benefit Plan"
means any "employee pension benefit plan" (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
any "employee welfare benefit plan" (as defined in Section 3(1) of ERISA),
and any other written or oral plan, agreement or arrangement involving
direct or indirect compensation, including without limitation insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation
or other forms of incentive compensation or post-retirement compensation
maintained, or contributed to, by HCC or any HCC ERISA Affiliate. For
purposes of this Agreement, "HCC ERISA Affiliate" means any entity which is
a member of (i) a controlled group of corporations (as defined in Section
414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes HCC.
Complete and accurate copies of (i) all HCC Employee Benefit Plans which
have been reduced to writing, (ii) written summaries, if any, of all
unwritten HCC Employee Benefit Plans, (iii) all related trust agreements,
insurance contracts and summary plan descriptions, if any, and (iv) the
most recent annual report filed, if any, on IRS Form 5500, 5500C or 5500R
since HCC's inception for each HCC Employee Benefit Plan, have been
delivered to the Buyer. Each HCC Employee Benefit Plan has been
administered in all material respects in accordance with its terms, and
each of HCC, and HCC ERISA Affiliates has in all material respects met its
obligations with respect to such HCC Employee Benefit Plan and has made all
contributions thereto which are required to be made prior to the date
hereof. To the knowledge of HCC, HCC and all HCC Employee Benefit Plans are
in compliance in all material respects with the currently applicable
provisions of ERISA and the Code and the regulations thereunder.
(b) There are no termination proceedings or other claims (except claims
for benefits payable in the normal operation of HCC Employee Benefit Plans
and proceedings with respect to qualified domestic relations orders) suits
or proceedings and, to HCC's knowledge, there are no investigations by any
Governmental Entity, against or involving any HCC Employee Benefit Plan or
asserting any rights or claims to benefits under any HCC Employee Benefit
Plan that could give rise to any material liability.
(c) All HCC Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from
the Internal Revenue Service to the effect that such HCC Employee Benefit
Plans are qualified and the plans and the trusts related thereto are exempt
from federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code, no such determination letter has been revoked and, revocation
has not been threatened, and no such HCC Employee Benefit Plan has been
amended since the date of its most recent determination letter in any
respect which would adversely affect such letter, and, to HCC's knowledge,
no act or omission has occurred, that would adversely affect its
qualification or materially increase its cost.
(d) Neither HCC nor any HCC ERISA Affiliate has ever maintained an HCC
Employee Benefit Plan subject to Section 412 of the Code or Title IV of
ERISA.
(e) At no time has HCC or any HCC ERISA Affiliate been obligated to
contribute to any "multi-employer plan" (as defined in Section 4001(a)(3)
of ERISA).
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(f) There are no unfunded obligations under any HCC Employee Benefit
Plan providing benefits after termination of employment to any employee of
HCC or any HCC ERISA Affiliate (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and
deferred compensation, but excluding continuation of health coverage
required to be continued under Section 4980B of the Code and insurance
conversion privileges under state law.
(g) To the knowledge of HCC, no act or omission has occurred and no
condition exists with respect to any HCC Employee Benefit Plan that would
subject HCC, or any HCC ERISA Affiliate to any material fine, penalty, tax
or fiduciary liability imposed under ERISA or the Code.
(h) No HCC Employee Benefit Plan is funded by, associated with, or
related to a "voluntary employee's beneficiary association" within the
meaning of Section 501(c)(9) of the Code.
(i) No HCC Employee Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed
generally to employees by its terms prohibits HCC or any HCC ERISA
Affiliate from amending or terminating any such HCC Employee Benefit Plan.
(j) Section 4.13 of the HCC Disclosure Schedule discloses each: (i)
written, and, to HCC's knowledge, oral, agreement with any director,
officer or other employee of HCC and affiliates (A) the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving HCC or its Affiliates of the nature
of any of the transactions contemplated by this Agreement, (B) providing
any term of employment or compensation guarantee or (C) providing severance
benefits or other benefits after the termination of employment of such
director, officer or employee; (ii) agreement, plan or arrangement under
which any person may receive payments from HCC or its Affiliates that may
be subject to the tax imposed by Section 4999 of the Code or included in
the determination of such person's "parachute payment" under Section 280G
of the Code; and (iii) agreement or plan binding HCC or its affiliates,
including without limitation any stock option plan, stock appreciation
right plan, restricted stock plan, stock purchase plan, severance benefit
plan, or any HCC Employee Benefit Plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement
or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement.
4.14 Environmental and OSHA.
(a) Hazardous Material. No material amount of any Hazardous Material is,
to the knowledge of HCC, present as a result of the actions of HCC or any
of its Subsidiaries (or, to the knowledge of HCC, as a result of any
actions of any third party or otherwise) in violation of any law in effect
on or before the Closing Date, in, on or under any property, including the
land and the improvements, ground water and surface water thereof, that HCC
or any of its Subsidiaries has at any time owned, operated, occupied or
leased.
(b) Hazardous Materials Activities. Neither HCC nor any of its
Subsidiaries has transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has HCC
or any of its Subsidiaries engaged in any "Hazardous Materials Activities")
in violation of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Resource Recovery and Conservation
Act of 1976, the Toxic Substances Control Act of 1976, and other applicable
state or federal acts (including the rules and regulations thereunder) as
in effect on or before the Closing Date.
(c) Permits. HCC currently holds no environmental approvals, permits,
licenses, clearances and consents and none are necessary for the conduct of
HCC's Hazardous Material Activities, if any, and other business activities
of HCC as such activities are currently being conducted.
4.15 Brokers' Fees. HCC has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement other than Pacific Growth.
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4.16 Customers and Suppliers. No material licensor to or supplier of HCC
has indicated that it will stop, or decrease the rate of, licensing
intellectual property or supplying materials, products or services to HCC and
no material customer of HCC has indicated that it will stop, or decrease the
rate of, buying, leasing or licensing materials, products or services from
HCC. Section 4.16 of the HCC Disclosure Schedule sets forth a list of each
supplier that is the sole supplier of any significant product, component or
service to HCC.
4.17 Year 2000. To HCC's knowledge, the systems and facilities operated by
or on behalf of HCC or any of its Subsidiaries in the conduct of their
respective businesses are capable of providing uninterrupted and error-free
recordation, storage, processing, output and presentation of data, including
calendar dates falling before, on or after January 1, 2000. As of the date
hereof, HCC and its Subsidiaries have operated without any material Year 2000
problems.
4.18 Disclosure. No representation or warranty by HCC contained in this
Agreement, and no statement contained in the HCC Disclosure Schedule or in any
other transaction document delivered to or to be delivered by HCC pursuant to
this Agreement, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading, as a whole.
ARTICLE V
CERTAIN COVENANTS OF VCI
From and after the date hereof and until the earlier of the Closing Date or
termination of this Agreement pursuant to Article VIII hereof and subject to
Section 6.17 hereof:
5.1 Conduct of Business and Certain Key Employees. VCI and its Subsidiaries
shall carry on their businesses in the Ordinary Course of Business. All of the
property of VCI and its Subsidiaries shall be used, operated, repaired and
maintained in a manner consistent with past practice. VCI will use its
commercially reasonable efforts to maintain the relationships of VCI and its
Subsidiaries with their employees, customers and suppliers.
5.2 Absence of Material Changes. Without the prior written consent of HCC,
which consent shall not be unreasonably delayed, conditioned or withheld,
neither VCI nor any of its Subsidiaries shall:
(a) take any action to amend its charter documents or bylaws;
(b) issue any stock (except upon the exercise of outstanding options or
warrants to purchase common stock in exchange for full payment), bonds or
other corporate securities or grant any option or issue any warrant to
purchase or subscribe for any of such securities or issue any securities
convertible into such securities;
(c) incur any obligation or liability (absolute or contingent), except
in the Ordinary Course of Business;
(d) declare or make any payment or distribution to its stockholders or
purchase or redeem any shares of its capital stock;
(e) mortgage, pledge, or subject to any lien, charge or any other
encumbrance any of their assets or properties, other than mechanic's liens
or liens arising by operation of law;
(f) sell, assign, or transfer any of their assets, except in the
Ordinary Course of Business;
(g) cancel any material debts or claims, except in the Ordinary Course
of Business;
(h) merge or consolidate with or into any corporation or other entity;
(i) make any election or give any consent under the Code or the tax
statutes of any state or other jurisdiction, except that on or before the
Closing VCI may make an election under Section 1501 of the Code
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to file a consolidated tax return without the prior written consent of HCC,
or make any termination, revocation or cancellation of any such election or
any consent or compromise or settle any claim for past or present tax due;
or
(j) enter into any lease, contract, agreement or understanding, other
than those entered into in the ordinary course of business calling for
payments by VCI and its Subsidiaries which in the aggregate do not exceed
$50,000 for each such lease, contract, agreement or understanding or extend
for more than one year from the date hereof.
5.3 Reports, Taxes. VCI and its Subsidiaries shall duly and timely file all
reports or returns required to be filed with federal, state, local and foreign
authorities on or prior to the Closing Date and will promptly pay all federal,
state, local and foreign taxes, assessments and governmental charges levied or
assessed upon them or any of their properties (unless contesting such in good
faith and adequate provision has been made therefor).
5.4 Non-Solicitation.
(a) VCI shall not, directly or indirectly, through any officer,
director, employee, representative or agent, (i) solicit, initiate, or
encourage any inquiries or proposals that constitute, or could reasonably
be expected to lead to, a proposal or offer for a merger, consolidation,
business combination, sale of substantial assets, or sale of shares of
capital stock, other than the transactions contemplated by this Agreement
(any of the foregoing inquiries or proposals being referred to in this
Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or
discussions concerning, or provide any non-public information to any person
or entity relating to, any Acquisition Proposal, or (iii) agree to, enter
into, accept, approve or recommend any Acquisition Proposal.
(b) VCI shall notify HCC immediately (and no later than 24 hours) after
receipt by VCI (or its advisors), of any Acquisition Proposal or any
request for nonpublic information in connection with an Acquisition
Proposal or for access to the properties, books or records of VCI by any
person or entity that informs VCI that it is considering making an
Acquisition Proposal. Such notice to HCC shall be made orally and in
writing and shall indicate in reasonable detail the identity of the offeror
and the terms and conditions of such proposal, inquiry or contact.
5.5 Option Plans. VCI agrees to take all actions necessary to ensure that
all outstanding options to acquire capital stock of VCI can be assumed by HCC
and converted into options to purchase HCC common stock pursuant to Section
2.6 of this Agreement. VCI also agrees not to take any action that would
result in acceleration of vesting of any such options beyond any acceleration
that is presently required by the options.
ARTICLE VI
ADDITIONAL COVENANTS
6.1 Proxy Statement.
(a) As promptly as practical after the execution of this Agreement, HCC
shall prepare, and VCI shall reasonably cooperate with the preparation of,
the Proxy Statement and HCC shall file the Proxy Statement with the SEC.
(b) The information supplied by HCC and VCI for inclusion in the Proxy
Statement shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated in the Proxy Statement or
necessary in order to make the statements in the Proxy Statement, in the
light of the circumstances under which they were made, not misleading.
6.2 Access to Information. Upon reasonable notice, HCC and VCI shall each
afford to the officers, employees, accountants, counsel and other
representatives of the other, access, during normal business hours during the
period prior to the Effective Time, to all information concerning its
business, properties and personnel as may reasonably be requested. Unless
otherwise required by law, the parties will hold any such information
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that is nonpublic in confidence. No information or knowledge obtained in any
investigation pursuant to this Section 6.2 shall affect or be deemed to modify
any representation or warranty construed in this Agreement or the conditions
to the obligations of the parties to consummate the Merger.
6.3 Stockholders Meetings. HCC shall call a meeting of its stockholders to
be held as promptly as practicable for the purpose of voting upon this
Agreement as required by the rules of the Nasdaq Market. Subject to
satisfaction of the conditions contained in this Agreement, and except as
otherwise required based upon the exercise of applicable fiduciary duties in
reliance upon the advice of counsel, HCC will, through its Board of Directors,
recommend to its stockholders approval of this Agreement and the Merger, and
shall use its commercially reasonable efforts to hold such meeting as soon as
practicable after the date hereof.
6.4 Legal Conditions to Merger. Each of HCC and VCI shall take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on itself with respect to the Merger (which actions shall
include, without limitation, furnishing all information required under the HSR
Act) and in connection with approvals of or filings with any other
governmental entity and will promptly cooperate with and furnish information
to each other in connection with any such requirements imposed in connection
with the Merger.
6.5 Public Disclosure. HCC and VCI shall consult with each other before
issuing any press release or otherwise making any public statement with
respect to the Merger or this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except
as may be required by law.
6.6 Tax-Free Reorganization. HCC and VCI shall each use commercially
reasonable efforts to cause the Merger to be treated as a reorganization
within the meaning of Section 368(a) of the Code. If HCC or VCI shall at any
time before the Closing become aware of any event, circumstance or other
condition which may cause the Merger to fail to qualify as a reorganization
within the meaning of Section 368(a) of the Code, HCC or VCI, as the case may
be, shall immediately give notice thereof to the other. After the Closing,
each of HCC and its Affiliates shall not take any action (or fail to take any
action) which action or failure to act would cause the Merger to fail to
qualify as a reorganization within the meaning of Section 368(a) of the Code.
HCC, VCI and each of the Holders agree that they will report in their
respective income Tax Returns that the Merger qualified as a reorganization
under Section 368(a) of the Code (unless there is no reasonable basis for such
a reporting position), and will properly file with their federal income Tax
Returns all information required by Treas. Regs. (S)1.368-3.
6.7 Pooling Accounting. HCC and VCI shall each use their reasonable best
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling of interests.
6.8 Nasdaq Quotation. HCC shall use its reasonable best efforts to cause
the shares of HCC common stock to be issued in the Merger to be approved for
quotation on the Nasdaq National Market, subject to official notice of
issuance, prior to the Effective Time.
6.9 Consents. Each of HCC and VCI shall use commercially reasonable efforts
to obtain all necessary consents, waivers and approvals under any of their
material agreements, contracts, licenses or leases in connection with the
Merger.
6.10 FIRPTA. VCI shall, prior to the Closing Date, provide HCC with a
properly executed Foreign Investment and Real Property Tax Act of 1980
("FIRPTA") Notification Letter, which states that shares of capital stock of
VCI do not constitute "United States real property interests" under Section
897(c) of the Code, for purposes of satisfying HCC's obligations under
Treasury Regulation Section 1.1445-2(c)(3). In addition, simultaneously with
delivery of such Notification Letter, VCI shall have provided to HCC, as agent
for VCI, a form of notice to the Internal Revenue Service in accordance with
the requirements of Treasury Regulation Section 1.897-2(h)(2), hereto along
with written authorization for HCC to deliver such notice form to the Internal
Revenue Service on behalf of VCI upon the Closing of the Merger.
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6.11 Securities Laws. HCC shall take such steps as may be reasonably
necessary to comply with the securities and blue sky laws of all jurisdictions
that are applicable to the issuance of the HCC common stock in connection with
the Merger. VCI shall use its commercially reasonable efforts to assist HCC as
may be necessary to comply with the securities and blue sky laws of all
jurisdictions that are applicable in connection with the issuance of HCC
Common Stock in connection with the Merger. The HCC common stock will be
issued under a Section 4(2) "private placement" exemption from the
registration requirements of federal securities laws.
6.12 Expenses. Whether or not the Merger is consummated, all fees, costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such fee,
cost or expense; provided, however, that any transaction fees (including but
not limited to legal, accounting, banking, investment banking and other
advisory fees), costs and expenses (including but not limited to all filing
fees and other non-fee disbursements and expenses such as copy, fax and word
processing charges) in excess of $100,000 incurred in connection with the
consummation of this Agreement on behalf of VCI (other than those that are
paid directly by VCI stockholders or any of their affiliates or are reimbursed
to VCI by VCI stockholders or any of their affiliates) shall reduce dollar for
dollar the Numerator.
6.13 Commercially Reasonable Efforts and Further Assurances. Each of the
parties to this Agreement shall use its commercially reasonable efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement. Each party hereto,
at the reasonable request of another party hereto, shall execute and deliver
such other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
6.14 Registration of Shares issued to VCI Shareholders.
(a) Shelf Registration. Within thirty (30) days after the expiration of
the 180 day period commencing as of the Effective Time (but in no event
prior to December 7, 2000), HCC shall prepare and file with the SEC a
"Shelf" registration statement (such registration statement including the
prospectus, amendments and supplements to such registration statement or
prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement, a "Registration
Statement") covering all of the shares of HCC common stock into which VCI's
shares of common stock are converted as a result of the Merger (including
any shares of HCC capital stock issued or issuable as a dividend on or in
exchange for or otherwise with respect to such shares of HCC common stock,
the "Merger Shares") for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3
(except if HCC is not then eligible to register for resale the Merger
Shares on Form S-3, in which case such registration shall be on Form S-1 or
another appropriate form in accordance herewith as the Holders, by vote of
the Holders of a majority of the Merger Shares, may consent). HCC shall use
its reasonable best efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible after
the filing thereof, and shall use its reasonable best efforts to keep such
Registration Statement continuously effective under the Securities Act
until the date which is two (2) years after the date that such Registration
Statement is declared effective by the SEC or such earlier date when all
Merger Shares covered by such Registration Statement have been sold or may
be sold without volume restrictions pursuant to Rule 144(k) as determined
by the counsel to HCC pursuant to a written opinion letter to such effect
(the "Effectiveness Period"). Anything to the contrary contained herein
notwithstanding, HCC shall not voluntarily take any action that would
result in the Holders not being able to sell the Merger Shares during the
Effectiveness Period, unless such action is required under applicable law,
as evidenced by an opinion of counsel to HCC or such other evidence as the
Holders may deem acceptable, or HCC has, upon written advice of counsel,
filed a post-effective amendment to the Registration Statement and the SEC
has not declared it effective.
(b) Piggyback Registration Rights. If at any time beginning after 180
days after the Effective Time and expiring on the third anniversary
thereof, HCC shall determine to register any of its securities either for
its own account or the account of a security holder or holders exercising
demand registration rights, other
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than a registration relating solely to employee benefit plans, or a
registration relating solely to a Rule 145 transaction, or a registration
on any registration form which does not permit secondary sales, HCC will:
(i) promptly give to the Holders written notice thereof; and
(ii) include in such registration the (A) the Merger Shares and (B)
any other shares of HCC common stock held by HCC stockholders who have
the right to and elect to sell shares in such offering ("Registrable
Securities") specified in a written request made by the Holders within
ten (10) days after receipt of the written notice from HCC described in
clause (i) above, except as set forth in Section 6.14(b) below.
Notwithstanding the foregoing, HCC shall not be required to include in any
such registration shares a Holder requests be included in the registration
if all of such shares could then be sold by such Holder pursuant to Rule
144 under the Securities Act or, if such registration will not cover an
Underwritten Offering, pursuant to the "Shelf" registration statement
provided for in Section 6.14(a) hereof.
If the registration of which HCC gives notice is for a registered public
offering involving an underwriting, HCC shall so advise the Holders as a
part of the written notice given pursuant to this Section 6.14(b). In such
event the right of the Holders to registration pursuant to this Section
6.14(b) shall be conditioned upon the Holders participation in such
underwriting and the inclusion of the Holder's Registrable Securities in
the underwriting to the extent provided herein. The Holder shall, if it
proposes to distribute its securities through such underwriting (together
with HCC and other shareholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with
the representative of the underwriter or underwriters selected by HCC.
Notwithstanding any other provision of this Section 6.14(b), if the
representative of the underwriters advises HCC that marketing factors
require a limitation or elimination on the number of shares to be
underwritten, the representative may limit the number of Registrable
Securities to be included in the registration and underwriting. HCC shall
so advise all holders of securities that are entitled to be included in the
registration and underwriting and participation shall be allocated first to
HCC for securities being sold for its own account, and the balance, if any,
of the number of shares that may be included in the registration statement
and underwriting shall be allocated among the Holders and other
shareholders in proportion, as nearly as practicable, to the respective
amounts of shares which they had requested to be included in such
registration at the time of filing the registration statement.
(c) Expenses of Registration. HCC shall pay all Registration Expenses
(as hereafter defined) in connection with any registration, qualification
or compliance pursuant to this Section 6.14, and each Holder shall pay all
Selling Expenses (as hereafter defined) and other expenses that are not
Registration Expenses relating to the Registrable Securities resold by him
or her. For purposes of this Section 6.14, "Registration Expenses" shall
mean all expenses, except as otherwise stated below, incurred by HCC in
complying with Sections 6.14(a), 6.14(b) and 6.14(d), including, without
limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for HCC, blue sky
fees and expenses and the expense of any special audits incident to or
required by any such registration and the reasonable fees and expenses of
one counsel for all of the selling Holders up to a maximum of $25,000. For
purposes of this Section 6.14(c), "Selling Expenses" shall mean all selling
discounts, commissions and stock transfer or other Taxes applicable to the
Registrable Securities and all fees and disbursements of counsel for any
Holder.
(d) Registration Procedures. In the case of any registration effected by
HCC pursuant to this Section 6.14, HCC will keep each Holder advised in
writing as to the initiation of each registration and as to the completion
thereof. HCC will:
(i) Not less than ten (10) days prior to the filing of a
Registration Statement or any related prospectus or any amendment or
supplement thereto (including any document that would be incorporated
or deemed to be incorporated therein by reference), (A) furnish to the
Holders and their
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designated counsel, and any managing underwriters, copies of all such
documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject
to the review of such Holders, their counsel and such managing
underwriters, and (B) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries
as shall be necessary, in the reasonable opinion of respective counsel
to such Holders and such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act.
(ii) (A) Prepare and file with the SEC such amendments, including
post-effective amendments, to the Registration Statement and the
prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective for the Effectiveness
Period; (B) cause the related prospectus to be amended or supplemented
by any required prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions
then in force); (C) respond as promptly as reasonably possible to any
comments received from the SEC with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all
correspondence from and to the SEC relating to the Registration
Statement; and (D) comply in all material respects with the provisions
of the Securities Act and the Exchange Act with respect to the
disposition of all Merger Shares covered by the Registration Statement
during the Effectiveness Period.
(iii) File such supplements or attach "stickers" to the Registration
Statement or prospectus as and when required by the SEC to evidence a
material amount of resales by a Holder pursuant to a prospectus.
(iv) Notify the Holders of Merger Shares to be sold, their
designated counsel and any managing underwriters as promptly as
reasonably possible (and, in the case of (A)(1) below, not less than
five (5) days (or, in the case of a supplement or "sticker" required to
be filed or attached, within two (2) days) prior to such filing) and
(if requested by any such person) confirm such notice in writing no
later than two (2) days following the day (A)(1) when a prospectus or
any prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (2) when the SEC
notifies HCC whether there will be a "review" of such Registration
Statement and whenever the SEC comments in writing on such Registration
Statement (HCC shall provide true and complete copies thereof and all
written responses thereto to each of the Holders and to their
designated counsel); and (3) with respect to the Registration Statement
or any post-effective amendment, when the same has become effective;
(B) of any request by the SEC or any other Governmental Entity for
amendments or supplements to the Registration Statement or prospectus
or for additional information; (C) of the issuance by the SEC of any
stop order suspending the effectiveness of the Registration Statement
covering any or all of the Merger Shares or the initiation of any
proceedings for that purpose; and (D) in the case of Underwritten
Offerings, if at any time any of the representations and warranties of
HCC contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material
respects; (E) of the receipt by HCC of any notification with respect to
the suspension of the qualification or exemption from qualification of
any of the Merger Shares for sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose; and (F)
of the occurrence of any event or passage of time that makes the
financial statements included in the Registration Statement ineligible
for inclusion therein or any statement made in the Registration
Statement or prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, prospectus
or other documents so that, in the case of the Registration Statement
or the prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(v) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (A) any order suspending the
effectiveness of the Registration Statement, or (B) any suspension of
the
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qualification (or exemption from qualification) of any of the Merger
Shares for sale in any jurisdiction, at the earliest practicable
moment.
(vi) If requested by any managing underwriter or the Holders of a
majority of the Merger Shares to be sold in connection with an
Underwritten Offering, (A) promptly incorporate in a prospectus
supplement or post-effective amendment to the Registration Statement
such information as such managing underwriters and such Holders
reasonably agree should be included therein, and (B) make all required
filings of such prospectus supplement or such post-effective amendment
as soon as practicable after HCC has received notification of the
matters to be incorporated in such prospectus supplement or post-
effective amendment; provided, however, that HCC shall not be required
to take any action pursuant to this subsection (vi) that would, in the
opinion of counsel for HCC, violate applicable law or be materially
detrimental to the business prospects of HCC.
(vii) Furnish to each Holder, their designated counsel and any
managing underwriters, without charge, at least one (1) conformed copy
of each Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the
extent requested by such person (including those previously furnished
or incorporated by reference) promptly after the filing of such
documents with the SEC.
(viii) Promptly deliver to each Holder, their designated counsel,
and any underwriters, without charge, as many copies of the prospectus
or prospectuses (including each form of prospectus) and each amendment
or supplement thereto as such persons may reasonably request; and HCC
hereby consents to the use of such prospectus and each amendment or
supplement thereto by each of the selling Holders and any underwriters
in connection with the offering and sale of the Merger Shares covered
by such prospectus and any amendment or supplement thereto.
(ix) Prior to any public offering of Merger Shares, use its
commercially reasonable efforts to register or qualify or cooperate
with the selling Holders, any underwriters and their designated counsel
in connection with the registration or qualification (or exemption from
such registration or qualification) of such Merger Shares for offer and
sale under the securities or Blue Sky laws of such jurisdictions within
the United States as any Holder or underwriter requests in writing, to
keep each such registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Merger Shares covered by a Registration Statement;
provided, however, that HCC shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or
to take any action that would subject it to general service of process
in any such jurisdiction where it is not then so subject or subject HCC
to any material tax in any such jurisdiction where it is not then so
subject.
(x) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates
representing Merger Shares to be delivered to a transferee pursuant to
a Registration Statement, which certificates shall be free of all
restrictive legends, and to enable such Merger Shares to be in such
denominations and registered in such names as any such managing
underwriters or Holders may request.
(xi) Upon the occurrence of any event contemplated by Section
(iv)(F) hereof, as promptly as reasonably possible, prepare a
supplement or amendment, including a post-effective amendment, to the
Registration Statement or a supplement to the related prospectus or any
document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such prospectus will
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(xii) Use its reasonable best efforts to cause all Merger Shares
relating to such Registration Statement to be listed on each securities
exchange or quotation system on which similar securities issued by HCC
are then listed or quoted, and in connection therewith to file with the
Nasdaq National
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Market (or such other exchange or quotation system as is then the
principal trading market for HCC's common stock) an application for
listing of additional shares with respect to the Merger Shares.
(xiii) Provide a transfer agent and registrar for all Merger Shares
registered pursuant to the Registration Statement and a CUSIP number
for all such Merger Shares, in each case not later than the effective
date of the Registration Statement.
(xiv) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings) and take all such other reasonable actions in connection
therewith (including those reasonably requested by any managing
underwriters and the Holders of a majority of the Merger Shares being
sold) in order to expedite or facilitate the disposition of such Merger
Shares, and whether or not an underwriting agreement is entered into,
(A) make such representations and warranties to such Holders and such
underwriters as are customarily made by issuers to underwriters in
underwritten public offerings (subject to the scheduling of appropriate
exceptions to insure such representations and warranties are accurate),
and confirm the same if and when requested; (B) in the case of an
Underwritten Offering obtain and deliver copies thereof to each Holder
and the managing underwriters, if any, of opinions of counsel to HCC
and updates thereof addressed to each Holder and each such underwriter,
in form, scope and substance reasonably satisfactory to any such
managing underwriters and the designated counsel of the selling Holders
covering the matters customarily covered in opinions requested in
Underwritten Offerings and such other matters as may be reasonably
requested by such designated counsel and underwriters; (C) use its
reasonable best efforts immediately prior to the effectiveness of the
Registration Statement, and, in the case of an Underwritten Offering,
at the time of delivery of any Merger Shares sold pursuant thereto,
deliver copies to the Holders and the managing underwriters, if any, of
"cold comfort" letters and updates thereof obtained from the
independent certified public accountants of HCC (and, if necessary, any
other independent certified public accountants of any subsidiary of HCC
or of any business acquired by HCC for which financial statements and
financial data is, or is required to be, included in the Registration
Statement); (D) if an underwriting agreement is entered into, the same
shall contain customary indemnification provisions and procedures
acceptable to the managing underwriters, if any, and holders of a
majority of Merger Shares participating in such Underwritten Offering);
and (E) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority of the Merger Shares being sold,
their designated counsel and any managing underwriters to evidence the
continued validity of the representations and warranties made pursuant
to clause (A) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement
entered into by HCC.
(xv) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any
disposition of Merger Shares, and any attorney or accountant retained
by such selling Holders or underwriters, at the offices where normally
kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of HCC and its
subsidiaries, and cause the officers, directors, agents and employees
of HCC and its subsidiaries to supply all information in each case
reasonably requested by any such Holder, representative, underwriter,
attorney or accountant in connection with the Registration Statement;
provided, however, that any information that is determined in good
faith by HCC in writing to be of a confidential nature at the time of
delivery of such information shall be kept confidential by such
Persons, unless (W) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of
regulatory authorities; (X) disclosure of such information, in the
opinion of counsel to such person, is required by law; (Y) such
information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard by such person; or (Z)
such information becomes available to such person from a source other
than HCC and such source is not known by such person to be bound by a
confidentiality agreement with HCC.
(xvi) Comply with all applicable rules and regulations of the SEC.
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(e) Information by Holder. Each Holder of Registrable Securities shall
furnish to HCC such information regarding such Holder and the distribution
proposed by such Holder as HCC may reasonably request in connection with
any registration, qualification or compliance referred to in this Section
6.14, but only to the extent that such information is required in order for
HCC to comply with its obligations under all applicable securities and
other laws and to ensure that the Registration Statement relating to such
Registrable Securities conforms to the applicable requirements of the
Securities Act and the rules and regulations thereunder. Each Holder
covenants that it will promptly notify HCC of any changes in the
information set forth in the Registration Statement or otherwise provided
by such Holder to HCC regarding such Holder or such Holder's plan of
distribution as a result of which the Registration Statement or any
prospectus relating to the Registrable Securities contains or would contain
an untrue statement of a material fact regarding such Holder or its
intended method of distribution of such Registrable Securities or omits to
state any material fact regarding such Holder or its intended method of
distribution of such Registrable Securities required to be stated therein
or necessary to make the statements therein, not misleading.
(f) Indemnification and Contribution.
(i) HCC agrees to indemnify and hold harmless each Holder from and
against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which such Holder may become subject
(under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement, alleged untrue
statement, omission or alleged omission of a material fact in the
Registration Statement, any prospectus included in the Registration
Statement, or any amendment or supplement to the Registration Statement
or any such prospectus, or any violation or alleged violation by HCC of
the Securities Act, the Exchange Act, any state law, rule or regulation
promulgated thereunder, and HCC will, as incurred, reimburse such
Holder for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the indemnity contained in
this Section 6.14(f)(1) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of HCC (which consent shall
not be unreasonably withheld), nor shall HCC be liable in any such case
to the extent that such loss, claim, damage or liability arises out of,
or is based upon (A) an untrue statement or alleged untrue statement
made in such Registration Statement in reliance upon and in conformity
with written information furnished to HCC by such Holder specifically
furnished for use in preparation of the Registration Statement, (B) the
failure of such Holder to comply with any of the covenants and
agreements contained in this Section 6.14, or (C) any untrue statement
in any prospectus that is corrected in any subsequent prospectus that
was delivered to the Holder prior to the pertinent sale or sales by the
Holder.
(ii) Each Holder, severally and not jointly, agrees to indemnify and
hold harmless HCC from and against any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) to which HCC
may become subject (under the Securities Act or otherwise) insofar as
such losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) arise out of, or are based upon (A) an untrue
statement, alleged untrue statement, omission or alleged omission of a
material fact in the Registration Statement, any prospectus included in
the Registration Statement, or any amendment or supplement to the
Registration Statement or any such prospectus in reliance upon and in
conformity with written information furnished to HCC by such Holder in
an instrument executed by such Holder and specifically stated to be for
use in preparation of the Registration Statement, or any violation or
alleged violation by Holder of the Securities Act, the Exchange Act,
any state law, rule or regulation promulgated thereunder, provided,
however, the indemnity contained in this Section 6.14(f)(ii) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent
of Holder (which consent shall not be unreasonably withheld), and
provided that no Holder shall be liable in any such case for any untrue
statement included in any Prospectus which statement has been corrected
in a writing delivered to HCC at least two business days before the
sale from which such loss arose, (B) the failure of such Holder to
comply
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with any of the covenants and agreements contained in Section 6.14, or
(C) any untrue statement in any Prospectus that is corrected in any
subsequent Prospectus that was delivered to the Holder prior to the
pertinent sale or sales by the Holder; and each Holder, severally and
not jointly, will, as incurred, reimburse HCC for any legal or other
expenses reasonably incurred in investigating, defending or preparing
to defend any such action, proceeding or claim. In no event shall the
amount payable by any Holder to HCC pursuant to this Section 6.14(f) by
reason of a sale of HCC Common Stock by such Holder exceed the amount
of the net proceeds to such Holder from the sale of HCC Common Stock
from which such liability arose.
(iii) Promptly after receipt by any indemnified person under
subsections (i) or (ii) above of a notice of a claim or the beginning
of any action in respect of which indemnity is to be sought against an
indemnifying person pursuant to this Section 6.14(f), such indemnified
person shall notify the indemnifying person in writing of such claim or
of the commencement of such action (provided, however, that no failure
to provide such notice shall relieve any indemnifying person of any
liability hereunder except to the extent that such indemnifying person
is prejudiced thereby), and, subject to the provisions hereinafter
stated, in case any such action shall be brought against an indemnified
person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and,
to the extent that it shall wish, to assume the defense thereof, with
counsel reasonably satisfactory to the indemnified person. After notice
from the indemnifying person to such indemnified person of the
indemnifying person's election to assume the defense thereof, the
indemnifying person shall not be liable to such indemnified person for
any legal expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided, however, that, if the
indemnifying person shall propose that the same counsel represent it
and the indemnified person, and if counsel for the indemnified person
shall reasonably have concluded that there is an actual conflict of
interest posed by the representation proposed by the indemnifying
person, the indemnified person shall be entitled to retain its own
counsel reasonably satisfactory to the indemnifying person at the
expense of such indemnifying person; provided, however that if more
than one indemnified person makes a claim against an indemnifying
person based on substantially similar facts, the indemnifying person
shall not be responsible for the fees of more than one counsel for all
indemnified persons whose claims are based on substantially similar
facts.
(iv) if the indemnification provided for in this Section 6.14(f) is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (i) or (ii) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of
such losses, claims, damages or liabilities (or actions in respect
thereof), in such proportion as is appropriate to reflect the relative
fault of each such party, as well as any other relevant equitable
considerations, provided, however, that any contribution by a Holder
shall not exceed the net proceeds to such Holder for the sale of HCC
Common Stock from which such liability arose, except in the case of
willful fraud by such Holder. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by HCC on the one
hand or a Holder on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. HCC and the Holders agree that it would not
be just and equitable if contribution pursuant to this Section 6.14(f)
were determined by any method of allocation which does not take account
of the equitable considerations referred to above in this Section
6.14(f)(iv). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, or liabilities (or actions in
respect thereof) referred to above in this Section 6.14(f)(iv) shall be
deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending
any such action, proceeding or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
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(v) The obligations of the HCC and the Holders under this Section
6.14(f) shall be in addition to any liability which HCC and the
respective Holders may otherwise have and shall extend, upon the same
terms and conditions, to each director and officer of HCC or any
Holder, and to each person, if any, who controls HCC or any Holder
within the meaning of the Securities Act or the Exchange Act.
(g) Restrictive Legend. Each certificate representing Merger Shares
shall bear substantially the following legend (in addition to any legends
required under applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
And with respect to Affiliates of VCI, shall bear the following additional
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
APPLIES, AND MAY ONLY BE TRANSFERRED (1) IN CONFORMITY WITH RULE
145, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (3) IN
ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE
TO THE ISSUER, IN FORM AND SUBSTANCE TO THE EFFECT THAT SUCH
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933.
The legends contained in this Section 6.14(g) shall be removed from a
certificate in connection with any sale in compliance with the terms of
this Agreement and pursuant to the Resale Registration Statement or a
registration statement covered by Section 6.14(b), or pursuant to Rule 144
(if accompanied by any legal opinion reasonably required by the HCC), but
shall not be removed in any other circumstance without HCC's prior written
consent (which consent shall not be unreasonably withheld or delayed and
shall be granted if such legend is no longer appropriate).
(h) Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC which may at any time permit the
sale of the Registrable Securities to the public without registration, HCC
agrees to use its reasonable best efforts to:
(i) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all
times after the Merger;
(ii) File with the SEC in a timely manner all reports and other
documents required of HCC under the Securities Act and the Exchange
Act; and
(iii) So long as a Holder owns any Registrable Securities, to
furnish to that Holder forthwith upon request a written statement by
HCC as to its compliance with the reporting requirements of said
Rule 144, and of the Securities Act and the Exchange Act, a copy of the
most recent annual or quarterly report of HCC, and such other reports
and documents of HCC as such Holder may reasonably request in availing
itself of any rule or regulation of the SEC allowing such Holder to
sell any such Registrable Securities without registration.
6.15 Tax Matters.
(a) HCC shall cause to be prepared and filed any required Tax Returns
due to be filed by VCI or any of its Subsidiaries after the Closing Date.
The Stockholder Representative shall be responsible for preparation and
filing of Tax Returns of Vitamins.com, LLC for its final taxable year ended
August 15, 1999. HCC shall timely pay or cause to be paid all Taxes shown
to be due on such Tax Returns, without prejudice to any right to indemnity
which the HCC Parties may have pursuant to Section 9.2 of this Agreement
with respect to such Taxes.
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(b) For each Tax Return that HCC shall prepare (or cause to be prepared)
with respect to VCI or any Subsidiary for any taxable period which includes
any period ending on or prior to the Closing Date, HCC shall, not less than
30 days prior to the date on which each such Tax Return is required to be
filed, provide a copy of such Tax Return to the Stockholder Representative
for comment and review. The Stockholder Representative shall have the right
to direct HCC to adopt any filing position in such Tax Return if (i) such
position is supported by a "more likely than not" opinion of reputable tax
counsel and (ii) the reporting position initially proposed by HCC on such
Tax Return would result in Holders' liability for indemnification pursuant
to Section 9.2 hereof. HCC shall cause all such Tax Returns to be prepared
in a manner consistent with the methodology of VCI and its Subsidiaries
used in prior taxable years, except as otherwise required by applicable law
or regulations.
(c) HCC shall not file, nor cause to be filed, on behalf of VCI or any
Subsidiary any amended Tax Return with respect to a taxable period (or
portion of a period) ending on or prior to the Closing Date without the
prior written consent of the Stockholder Representative (which consent
shall not be unreasonably withheld or delayed), unless (i) HCC agrees to
release the Holders from liability for indemnification pursuant to Section
9.2 hereof, if any, which results from such amended Tax Return, or
(ii) such amendment is compelled by the relevant taxing authority.
(d) HCC and VCI and the Stockholder Representative agree to cooperate
with one another in the preparation of any Tax Return pursuant to this
Section 6.15 and amendment of any Tax Return for periods referred to in
Section 6.15(c) hereof, and to negotiate in good faith regarding the Tax
reporting positions to be taken on such Tax Returns. Any costs of preparing
an amended Tax Return at the request of the Stockholder Representative
shall be subject to reimbursement or indemnification out of the Escrow
Fund. VCI shall be entitled to direct an election to file consolidated,
combined or unitary returns with its Subsidiaries for the taxable period
ending on or before the Closing Date by notice to HCC on or before the
Closing Date, unless HCC agrees to release the Holders from liability for
indemnification pursuant to Section 9.2 hereof for any increase in tax
liability attributable to the failure to file on a consolidated basis as
requested by VCI.
6.16 Interim Operations of VCI. HCC agrees that during the period
commencing on the date of this Agreement and ending on the Closing Date it
shall advance to or on behalf of VCI such amounts in cash, up to a maximum of
$3,000,000, as may be reasonably requested by VCI from time to time in writing
to allow VCI to operate in the Ordinary Course of Business. Each amount
advanced by HCC to VCI shall be represented by a promissory note providing for
interest at the rate of the Wells Fargo Bank prime rate plus 3% per annum and
payment on the earlier of (i) one year after the date thereof, or (ii) the
closing by VCI of any financing that raises $10,000,000 or more.
6.17 Issuance of Additional Shares by HCC. Commencing on the date of this
Agreement and continuing through Closing, if HCC shall issue or sell any
shares of its capital stock which, in the aggregate, exceeds two percent (2%)
of the total issued and outstanding shares of HCC capital stock, as determined
on the date of this Agreement, HCC shall use commercially reasonable efforts
to obtain Voting Agreements with respect to such excess shares issued.
6.18 Payment of Dividends by HCC. Between the date of this Agreement and
the Closing Date, HCC agrees not to, without the consent of VCI (such consent
not to be unreasonably withheld), declare or pay any dividend or otherwise
make a distribution with respect to its capital stock, other than a stock
dividend of shares of HCC common stock, or to repurchase or offer to
repurchase any shares of HCC capital stock (other than repurchases of HCC
capital stock pursuant to written agreements with its employees which were in
existence on the date of this Agreement).
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ARTICLE VII
CONDITIONS TO THE MERGER
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
(a) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order or prohibition
issued by any Governmental Entity shall be in effect, nor shall any action
or proceeding seeking any of the foregoing be pending, that would prevent
the consummation of the Merger or restrict the operation of the business of
VCI.
(b) Governmental Approval. HCC, VCI and Acquisition Corporation and
their respective subsidiaries shall have timely obtained from each
Governmental Entity all approvals, waivers and consents necessary for
consummation of or in connection with the Merger and the several
transactions contemplated hereby, including such approvals, waivers and
consents as may be required under the Securities Act under state blue sky
laws and DCL.
(c) HSR Act Compliance. All waiting, review and investigation periods
(and any extensions thereof) applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
7.2 Additional Conditions to Obligations of HCC and Acquisition Corp. The
obligations of HCC and Acquisition Corp. to consummate the Merger are subject
to the fulfillment, at or before the Closing of all the following conditions,
any one or more of which may be waived by HCC.
(a) Representations and Warranties. The representations and warranties
of VCI contained in this Agreement shall be true in all material respects
(except for such representations and warranties as are qualified by their
terms by a reference to materiality, which representations and warranties
as so qualified shall be true in all respects) as of the Closing as though
such representations were made on and as of such time; provided, however,
that if as of the Closing Date the sum of (1) reasonably anticipated Losses
arising out of the failure of the representations and warranties to be true
and correct in all material respects as of the date of this Agreement and
(2) reasonably anticipated Losses arising out of the failure of the
representations and warranties that were true and correct in all material
respects as of the date of this Agreement to be true and correct as of the
Closing Date is no more than 10% of the Numerator, then in such event HCC
shall not have the right to terminate this Agreement based upon the non-
satisfaction of this condition but rather shall have recourse for such
Losses against the Escrow Fund in accordance with the terms and procedures
of the Escrow Agreement.
(b) Covenants Performed. All of the obligations of VCI to be performed
at or before the Closing pursuant to the terms of this Agreement shall have
been duly performed in all material respects.
(c) Certificate. At the Closing, HCC shall have received a certificate
signed by the Chief Executive Officer of VCI to the effect that the
conditions set forth in Sections 7.2(a) and 7.2(b) have been satisfied.
(d) Stockholder Approval. The stockholders of HCC shall have duly
approved this Agreement and the Merger Agreement in accordance with the
rules of the Nasdaq National Market.
(e) Dissenting VCI Shares. The aggregate number of Dissenting VCI Shares
shall not exceed 2 percent of the aggregate of the outstanding shares of
capital stock of VCI.
(f) Opinion of Counsel to VCI. Counsel to VCI, shall have issued an
opinion in favor of HCC in the form of Exhibit J hereto.
(g) Resignations. VCI shall have delivered to HCC signed resignations
from the Board of Directors of VCI and its Subsidiaries.
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(h) Merger Agreement. The Merger Agreement shall have been filed with
the Secretary of State of the State of Delaware and shall have become
effective.
7.3 Additional Conditions to Obligations of VCI. The obligations of VCI to
consummate the Merger are subject to the fulfillment, at or before the
Closing, of all of the following conditions, any one or more of which may be
waived by VCI:
(a) Representations and Warranties True at Closing. The representations
and warranties of HCC and Acquisition Corp. contained in this Agreement
shall be true in all material respects except for such representations and
warranties as are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true in all
respects as of the Closing, as though such representations were made on and
as of such time.
(b) Covenants Performed. All of the obligations of HCC and Acquisition
Corp. to be performed at or before the Closing pursuant to the terms of
this Agreement shall have been duly performed in all material respects.
(c) Certificate. At the Closing, VCI shall have received a certificate
signed by the Chief Executive Officer of each of HCC and Acquisition Corp.
to the effect that the conditions set forth in Sections 7.3(a) and 7.3(b)
have been satisfied.
(d) Stockholder Approval. The stockholders of Acquisition Corp. and HCC
shall have duly approved this Agreement and the Merger Agreement.
(e) Opinion of Counsel to HCC. Counsel to HCC, shall have issued an
opinion in favor of VCI in the form of Exhibit K.
(f) Nasdaq Notification. HCC shall have notified Nasdaq of the proposed
issuance of HCC common stock pursuant to the Merger and upon exercise of
the stock options of VCI assumed by HCC pursuant to the Merger and such
stock shall have been approved for quotation on the Nasdaq National Market.
(g) Merger Agreement. The Merger Agreement shall have been filed with
the Secretary of State of the State of Delaware and shall have become
effective.
ARTICLE VIII
TERMINATION
8.1 Termination. At any time prior to the Effective Time, whether before or
after approval of the matters presented in connection with the Merger by the
shareholders of HCC or VCI, this Agreement be terminated:
(a) by mutual consent of HCC and VCI;
(b) by VCI, by giving written notice to HCC that HCC is in material
breach of any representation, warranty, or covenant of HCC contained in
this Agreement, which breach shall not have been cured, if subject to cure,
within 15 calendar days following receipt by HCC of written notice of such
breach;
(c) by HCC, by giving written notice to the Stockholder Representative
that VCI is in material breach of any representation or warranty (unless,
the Stockholder Representative has exercised its option pursuant to Section
7.2(a) hereof to increase the Escrow Fund) or covenant contained in this
Agreement, which breach shall not have been cured, if subject to cure,
within 15 calendar days following receipt by the Stockholder Representative
of written notice of such breach.
(d) by HCC, by giving written notice to VCI, if the Closing shall not
have occurred on or before September 30, 2000, or such later date as is
agreed to by the Boards of Directors of both VCI and HCC, by reason of the
failure of any condition precedent under Section 7.1 or 7.2 (unless the
failure results primarily from a breach by HCC of any representation,
warranty, or covenant of HCC contained in this Agreement or HCC's failure
to fulfill a condition precedent to closing or other default); or
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(e) by VCI, by giving written notice to HCC, of the Closing shall not
have occurred on or before September 30, 2000, or such later date as is
agreed to by the Boards of Directors of both VCI and HCC, by reason of the
failure of any condition precedent under Section 7.1 or 7.3 (unless the
failure results primarily from a breach by VCI of any representation,
warranty, or covenant of VCI contained in this Agreement or VCI's failure
to fulfill a condition precedent to closing or other default).
8.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of HCC or VCI or their
respective officers, directors, shareholders or affiliates, except to the
extent that such termination results from the material breach by a party
hereto of any of its representations, warranties or covenants set fort in this
Agreement; provided that, the provisions of Section 6.2 relating to
confidentiality this Section 8.2, Section 8.3 and Section 9.2 shall remain in
full force and effect and survive any termination of this Agreement.
8.3 HCC Obligation to Purchase VCI Shares. In the event that Closing does
not occur for any reason whatsoever, other than as the direct result of VCI's
breach of any of its representations, warranties and covenants hereunder, HCC
shall upon written demand promptly given by VCI purchase from VCI for $1.00
per share the number of shares of VCI's Series C Preferred Stock determined by
subtracting from $6,000,000 the amount owed to HCC as a result of loans made
pursuant to Section 6.16 hereof and dividing the result thereof by $1.00.
Closing on such purchase shall occur at VCI's principal office within 15
calendar days after any such demand. At the closing of such purchase, HCC
shall tender by wire transfer to VCI's designated account the purchase price
so determined, and VCI shall tender to HCC a stock certificate representing
the shares purchased. The dollar and share amounts provided for herein shall
be appropriately adjusted in the event of any stock dividend, stock split or
other similar change in the capitalization of VCI.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 Survival of Representations and Warranties. All statements contained in
any exhibit, certificate, schedule or other instrument delivered or to be
delivered by or on behalf of the parties hereto, or in connection with the
transactions contemplated hereby, shall be deemed representations and
warranties hereunder. All such representations, warranties, and
indemnification rights contained herein shall survive the Closing and any
audit or investigation made by or on behalf of the parties, but shall expire
on the earlier of the date that is twelve (12) months after the Effective Time
or the date on which HCC issues its first independent audit report for the
combined entities, and no claims for indemnification hereunder may be made
after such date.
9.2 Indemnification by Holders.
(a) The Holders, by their approval of this Agreement and the Merger,
shall be deemed to have agreed jointly, but only to the extent of the
Escrow Fund, to indemnify and hold HCC and its directors, officers,
employees, fiduciaries, agents and Affiliates, and each other person, if
any, who controls such persons (collectively, the "HCC Parties") harmless
against any claims, actions, suits, proceedings, investigations, losses,
expenses, damages, obligations, liabilities, judgments, fines, fees, costs
and expenses (including costs and reasonable attorneys' fees) and amounts
paid in settlement of any pending, threatened or completed claim, action,
suit, proceeding or investigation (collectively "Loss" or "Losses") which
arise out of or result from or are related to (i) any breach by or failure
of VCI to perform any of its covenants or agreements set forth herein, (ii)
the inaccuracy of any representation or warranty made by VCI herein, or
(iii) any amounts paid, in settlement or otherwise, of the matters
described in Sections 3.2(b) and 3.15 of the VCI Disclosure Schedule.
(b) If the HCC Parties are entitled to indemnification under this
Agreement, they shall be entitled to recover shares of HCC common stock
pursuant to the Escrow Agreement (subject to each Holder's right under the
Escrow Agreement to satisfy all or any part of any indemnification
obligation by paying cash in
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lieu of HCC common stock) having an aggregate value, based on the average
closing price used to calculate the Exchange Ratio, equal to the amount of
its Loss or Losses. The aggregate liability of the Holders for
indemnification under this Article IX shall not exceed the Escrow Fund and
the HCC Parties sole and exclusive remedy for indemnification claims under
this Article IX shall be to seek recovery against the Escrow Fund.
9.3 Indemnification by HCC. HCC agrees to indemnify and hold VCI, the
Holders and VCI's directors, officers, employees, fiduciaries, agents and
Affiliates and each other person, if any, who controls such persons (the "VCI
Parties") harmless against any Loss or Losses which arise out of or result
from or are related to (a) any breach by or failure of HCC to perform any of
its covenants or agreements set forth herein, or (b) the inaccuracy of any
representation or warranty made by HCC herein.
9.4 Limitation.
(a) Notwithstanding the foregoing, the Holders shall be liable for
Losses incurred as a result of any breach, failure or inaccuracy of any
representation, warranty, covenant or agreement made by VCI herein only if
the aggregate of such Losses exceeds $300,000, and HCC shall be liable for
Losses incurred as a result of any breach, failure or inaccuracy of any
representation, warranty, covenant or agreement made by it herein only if
the aggregate of such Losses exceeds $300,000; provided, however, that the
$300,000 limitation shall not apply with respect to any breach, failure or
inaccuracy of any representation and warranty contained in Section 3.2
hereof or the covenant contained in Section 5.5 hereof or as to the matters
described in Section 3.2(b) of the VCI Disclosure Schedule. The aggregate
liability of the Holders for Losses incurred as a result of any breach,
failure or inaccuracy of any representation, warranty, covenant or
agreement made by VCI herein shall not exceed the Escrow Fund and the
aggregate liability of HCC for Losses incurred as a result of any breach,
failure or inaccuracy of any representation, warranty, covenant or
agreement made by it herein shall not exceed 10% of the Numerator. The
liability of the Holders for Losses incurred as a result of any breach,
failure or inaccuracy of any representation, warranty, covenant or
agreement of VCI shall be limited to the return of the HCC Common Stock in
the Escrow Fund, as provided in the Escrow Agreement.
(b) Notwithstanding anything to the contrary in this Agreement, any
amounts payable by the Holders pursuant to Section 9.1(a) or by HCC
pursuant to Section 9.2(b) hereof, shall be appropriately adjusted to take
into account (i) the amount of any insurance proceeds received by VCI and
Holders or HCC, as the case may be, in connection with the indemnification
claim, (ii) the income tax consequences associated with the tax treatment
of the Loss item in question and any related indemnity payment and (iii)
any recovery under third party indemnification of VCI.
9.5 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder, the Indemnified Party shall notify in writing
within 30 days (or such earlier time as might be required to avoid prejudicing
the Indemnifying Party's position) of receiving notice of or obtaining actual
knowledge of facts constituting the basis of such claim (whichever occurs
first), the Indemnifying Party of the claim and, when known, the facts
constituting the basis for such claim. The failure to notify the Indemnifying
Party will not vitiate the right of the Indemnified Party to indemnity to the
extent the Indemnifying Party is not prejudiced as a result of such failure.
In the event of any claim for indemnification, the Indemnified Party shall be
entitled to full indemnification in the amount claimed unless, within 30 days
after receipt of written notice of a claim for indemnification, the
Indemnifying Party delivers a written notice to the Indemnified Party
objecting to the claim for indemnification, which notice specifies in
reasonable detail the basis for the objection. If the parties are unable to
resolve the dispute within 30 days, the claim for indemnification shall be
settled pursuant to Section 9.7 hereof. In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice to the Indemnifying Party shall
specify, if known, the amount or an estimate of the amount of the liability
arising therefrom. The Indemnified Party shall not settle or compromise any
claim by a third party for which it is entitled to indemnification hereunder
without the prior written consent of the Indemnifying Party, which consent
shall not be unreasonably delayed, conditioned or withheld, unless suit
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shall have been instituted against the Indemnified Party and the Indemnifying
Party shall not have taken control of such suit after notification thereof as
provided in Section 9.6 below.
9.6 Defense by Indemnifying Party. In connection with any claims giving
rise to indemnity hereunder resulting from or arising out of any claim or
legal proceeding by a person who is not a party to this Agreement, the
Indemnifying Party at its sole cost and expense may, upon written notice to
the Indemnified Party, assume the defense of any such claim or legal
proceedings; provided that, if by reason of the claim of such third party a
lien, attachment, garnishment or execution has been placed on any material
portion of the property or assets of the Indemnified Party at the time of such
election, the Indemnifying Party, if it desires to exercise the right to
assume the defense, shall furnish a satisfactory indemnity bond to obtain the
release of such lien, attachment, garnishment or execution. The Indemnified
Party shall be entitled to participate in (but not control) the defense of any
such action, with its counsel and at its own expense. If the Indemnifying
Party assumes the defense, it shall take all actions and steps reasonably
necessary to defend or settle any claim against the Indemnified Party. The
Indemnified Party shall reasonably cooperate with the Indemnifying Party in
such defense. In the event that the Indemnifying Party proposes a settlement
to any such claim or legal proceeding, which settlement is satisfactory to the
party instituting such claim or legal proceeding and includes (i) an
unconditional release of the Indemnified Party, from all liability with
respect to such claim or litigation, to the extent that it is reasonably
necessary to provide assurance to the Indemnified Party that the claim will be
finally settled without further liability to the Indemnified Party or the
dismissal of such claim or litigation against the Indemnified Party with
prejudice and (ii) provision that all damages and settlement payments are to
be made by the Indemnifying Party (subject to the limitations in Section 9.4
hereof), and the Indemnified Party withholds its consent to such settlement,
then in any such case the Indemnifying Party shall have no obligation to
indemnify the Indemnified Party under this Agreement against and in respect of
the amount by which the damages resulting from a final judgment relating to
such claim or legal proceeding exceeds the amount of the proposed settlement.
In the event that the Indemnifying Party shall assume the defense of any such
claim or legal proceeding and it is later determined that such claim was not a
claim for which the Indemnifying Party is required to indemnify the
Indemnified Party under this Article IX, the Indemnified Party shall reimburse
the Indemnifying Party for all its reasonable costs and expenses with respect
to such defense, including reasonable attorneys' fees and disbursements. If
the Indemnifying Party does not assume the defense of any such claim or legal
proceeding resulting therefrom within 30 days after the date of receipt of the
notice referred to in Section 9.5 above (or, if earlier, by the tenth day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
(a) the Indemnified Party may defend against such claim or legal proceeding,
in such manner as it may deem appropriate, including, but not limited to,
settling such claim or legal proceeding on such terms as the Indemnified Party
may deem appropriate, and (b) the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with its counsel
and at its own expense. Notwithstanding the foregoing, (i) the Holders may not
control any matter involving the consolidated, or combined or unitary Tax
Returns of HCC or any Affiliate of HCC for any taxable period ending after the
Closing Date and (ii) in any such case, HCC agrees to keep the Stockholder
Representative fully informed with respect to such matter which may be the
subject to indemnification hereunder and not to settle or resolve any such
matter without the consent of the Stockholder Representative (which consent
may not be unreasonably withheld or delayed).
9.7 Arbitration.
(a) Either HCC or the Stockholders Representative may submit a dispute
that has not been resolved pursuant to the provisions of Section 9.5 above
to arbitration by filing a written demand for arbitration with the American
Arbitration Association ("AAA") in Wilmington, Delaware with written notice
to the other party. The arbitration shall be conducted in accordance with
the Commercial Dispute Resolution procedures of the AAA, and shall be
conducted by a single arbitrator who shall be qualified by experience in
complex commercial disputes and chosen in accordance with the procedures of
the AAA. The arbitrator so designated shall not be a current or former
employee, consultant, officer, director or stockholder of any party hereto
or any Affiliate of any party to this Agreement.
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(b) The determination of the arbitrator as to the resolution of any
dispute shall be binding and conclusive upon all parties hereto. All
rulings of the arbitrator shall be in writing and shall be delivered to the
parties hereto. The arbitrator shall have full discretion to award to
either party or allocate between them the costs of the arbitration
proceedings, including reasonable attorneys fees.
(c) Any arbitration pursuant to this Section 9.7 shall be conducted in
Wilmington, Delaware. Any arbitration award may be entered in and enforced
by any court having jurisdiction and the parties hereby consent and commit
themselves to the jurisdiction of the courts of the State of Delaware and
the United States District Court for the District of Delaware for purposes
of the enforcement of any arbitration award.
9.8 Subrogation. In the event VCI or the Holders shall be required to
provide indemnification under this Article IX, then, to the extent of any such
indemnification, VCI and/or the Holders shall subrogate to, assume and enjoy
the benefit of all of the rights and claims (including cross-claims and
counter-claims) of the HCC Parties in connection with the Loss for which
indemnification is provided, including, without limitation, any rights of the
HCC Parties to any surety, indemnification, reimbursement or contribution
against or from other parties.
9.9 Section 6.14(f) Indemnification. Nothing in this Article 9, shall
affect the provisions in Section 6.14(f) of this Agreement.
ARTICLE X
MISCELLANEOUS
10.1 Amendment. This Agreement shall not be amended except by a writing
duly executed by both parties and shall not be amended after it has been
approved by the stockholders of HCC or VCI, without further stockholder
approval, if the amendment would alter or change the Exchange Ratio or have a
material adverse effect on the stockholders of HCC or VCI.
10.2 Entire Agreement. This Agreement, including the Exhibits, Schedules,
and other documents delivered pursuant to this Agreement, contains all the
terms and conditions agreed upon by the parties relating to the subject matter
of this Agreement and supersedes all prior agreements, negotiations,
correspondence, undertakings, and communications of the parties, whether oral
or written, respecting that subject matter.
10.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to principles
of conflicts of law.
10.4 Headings. The headings contained in this Agreement are intended for
convenience and shall not be used to determine the rights of the parties.
10.5 Notices. All notices, requests, demands, and other communications made
in connection with this Agreement shall be in writing and shall be deemed to
have been duly given on the date of delivery if delivered by hand delivery or
by facsimile to the persons identified below or two days after mailing by air
courier addressed as follows:
If to HCC or Acquisition Corp.:
HealthCentral.com
6001 Shellmound Street, Suite 800
Emeryville, CA 94608
Attn: C. Fred Toney
Tel. No. (510) 250-2500
Facsimile No. (510) 250-2525
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With a copy to:
Howard, Rice, Nemerovski, Canady,Falk & Rabkin
A Professional Corporation
Three Embarcadero Center, Seventh Floor
San Francisco, California 94111
Attention: Richard W. Canady
Tel. No. (415) 434-1600
Facsimile No. (415) 217-5910
If to VCI (prior to Closing) or Stockholder Representative (after the
Closing):
Vitamins.com, Inc.
2924 Telestar Court
Falls Church, VA 22042
Attn: Robert M. Haft
Tel. No. (703) 849-0800
Facsimile No. (703) 849-8227
With a copy to:
Venable, Baetjer, Howard and Civiletti, LLP
1615 L Street, N.W., Suite 400
Washington, DC 20036
Attention: Michael A. Schlesinger
Tel. No. (202) 429-3288
Facsimile No. (202) 429-3231
Such addresses may be changed, from time to time by means of a notice given
in the manner provided in this section.
10.6 Severability. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the parties to the extent
possible. In any event, all other provisions of this Agreement shall be deemed
valid and enforceable to the full extent.
10.7 Waiver. Waiver of any term or condition of this Agreement by any party
shall not be construed as a waiver of a subsequent breach or failure of the
same term or condition, or a waiver of any other term or condition in this
Agreement.
10.8 Assignment. Neither party may assign, by operation of law or
otherwise, all or any portion of its rights or duties under this Agreement
without the prior written consent of the other party, which consent may be
withheld in the absolute discretion of the party asked to give consent;
provided, however, that Holders may assign their rights under Section 6.14
hereof to any transferee of their shares of HCC common stock without the
requirement of such consent.
10.9 Counterparts. This Agreement may be signed in counterparts with the
same effect as if the signatures to each party were upon a single instrument.
All counterparts shall be deemed an original of this Agreement.
10.10 Third Party Beneficiaries. The Holders shall be third party
beneficiaries of this Agreement.
10.11 Attorneys' Fees. In the event any dispute arises hereunder, the
arbitrator or the court, as the case may be, shall have the authority to award
costs and attorneys' fees to the prevailing party.
42
<PAGE>
IN WITNESS WHEREOF, HCC, Acquisition Corp. and VCI have executed this
Agreement as of the date first above written.
HEALTHCENTRAL.COM
By: /s/ Albert Greene
-----------------------------------
Title: President and Chief Executive
Officer
HCC ACQUISITION CORP.
By: /s/ C. Fred Toney
-----------------------------------
Title: President
VITAMINS.COM, INC.
By: /s/ Robert M. Haft
-----------------------------------
Title: President
43
<PAGE>
EXHIBIT A
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (the "Merger Agreement") is made and entered
into as of ___________, 2000, by and among VC Corporation, a Delaware
corporation (the "Company"), HCC Corporation, a Delaware corporation ("HCC") and
HCC Acquisition Corp., a Delaware corporation ("Acquisition Corp.").
W I T N E S S E T H
WHEREAS, the Company is a corporation duly organized and validly
existing under the laws of the State of Delaware, with authorized capital stock
consisting of 66,650,000 shares of Common Stock, $0.001 par value per share, of
which 12,974,414 shares are issued and outstanding on the date hereof, and
49,666,498 shares of Preferred Stock, classified into three series, as follows:
11,627,573 shares of Series A Convertible Preferred Stock, of which 11,627,573
shares are issued and outstanding on the date hereof; 10,038,925 shares of
Series B Convertible Preferred Stock, of which 10,038,925 shares are issued and
outstanding as of the date hereof; and 28,000,000 shares of Series C Convertible
Preferred Stock, of which 23,325,000 shares are issued and outstanding as of the
date hereof;
WHEREAS, HCC is a corporation duly organized, validly existing and good
standing in the State of Delaware, with authorized capital stock consisting of
100,000,000 shares of Common Stock, $.001 par value ("HCC Common Stock"), of
which _________ shares were issued and outstanding as of _______________, 2000
and ________ 5,000,000 shares of Preferred Stock, of which no shares were issued
and outstanding as of ________________.
WHEREAS, there are options outstanding covering 969,016 shares of Common
Stock of the Company, all of which options shall be converted into options to
acquire HCC Common Stock pursuant to the provisions hereof; and
WHEREAS, Acquisition Corp. is a corporation duly organized and validly
existing under the laws of the State of Delaware, with authorized capital stock
consisting of 1,000 shares of common stock (the "Acquisition Corp. Common
Stock"), of which 100 shares are issued and outstanding and owned by HCC; and
<PAGE>
WHEREAS, the respective Boards of Directors of the Company, HCC and
Acquisition Corp. have determined that it is advisable and to the advantage of
such corporations and their shareholders that Acquisition Corp. merge with and
into the Company (the "Merger") upon the terms and conditions herein provided;
and
WHEREAS, the Boards of Directors of the Company, HCC and Acquisition
Corp. have approved this Merger Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, it is agreed as follows:
1. Merger. Acquisition Corp. shall be merged with and into the Company
------
on the terms and conditions hereinafter expressed (the "Merger"). At the
Effective Time (as defined hereinafter), the separate existence of Acquisition
Corp. shall cease and the Company shall be the surviving entity (the "Surviving
Entity"). The Merger shall be effective upon the filing of this Merger
Agreement, with the Secretary of State of Delaware in the manner required by
Section 251 of the Delaware Corporation Law (the "Effective Time").
2. Directors and Officers and Governing Documents. The Certificate of
----------------------------------------------
Incorporation of the Company, as in effect at the Effective Time, shall continue
to be the Certificate of Incorporation of the Surviving Entity as the surviving
corporation without change or amendment. The Bylaws of the Company as amended
and in effect at the Effective Time, shall continue to be the Bylaws of the
Surviving Entity as the surviving corporation without further change or
amendment. The directors and officers of the Surviving Entity as of the
Effective Time shall be the following: _______________________.
3. Succession. At the Effective Time, the Surviving Entity shall
----------
succeed to Acquisition Corp. in the manner set forth in Section 259 of the
Delaware Corporation Law.
4. Conversion of Shares. At the Effective Time, by virtue of the
--------------------
Merger and without any action by the holders thereof:
(a) each share of Acquisition Corp. Common Stock issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted at and as of the Effective Time into one share of Common Stock of
the Company;
<PAGE>
(b) each share of Common Stock and Preferred Stock of the Company
issued and outstanding immediately prior to the Effective Time, except those
shares as to which the holder thereof perfects appraisal rights in
accordance with the provisions of Section 262 of the Delaware Corporation
Law ("Dissenting Shares"), shall, by virtue of the Merger and without any
action on the part of the holders thereof, be converted at and as of the
Effective Time into ________ of a share of HCC Common Stock. Only whole
shares of HCC Common Stock shall be issued; in lieu of any fractional share
of HCC Common Stock, each such holder shall receive in cash the fair market
value of such fractional share, valuing HCC Common Stock at the closing
price for such stock on the Nasdaq National Market on the trading day
immediately preceding the day on which the Merger becomes effective.
5. Escrow. In order to provide indemnification in accordance with
------
Article IX of the Agreement and Plan of Reorganization and Merger among HCC,
Acquisition Corp. and the Company, dated as of ______________, 2000 (the
"Agreement") and with the Escrow Agreement (as defined in the Agreement), at the
Effective Time or as soon thereafter as possible, a stock certificate
representing 10% of the whole shares of HCC Common Stock (rounded to the nearest
whole share) into which the shares of capital stock of the Company were
converted pursuant to Section 4(b) of this Merger Agreement shall be delivered
to the Escrow Holder (as defined in the Escrow Agreement) (which shares shall be
withheld from the former holders of Common Stock and Preferred Stock of the
Company ratably based on the number of shares of stock of the Company held by
such holder immediately prior to the Effective Time).
6. Company Options. At the Effective Time and pursuant to the terms of
---------------
the Agreement, each of the outstanding options to purchase Common Stock of the
Company shall thereafter entitle the holder thereof to receive for each share of
Common Stock of the Company subject to such option, upon exercise thereof,
_______ of a share of HCC Common Stock, at an exercise price for each full share
of HCC Common Stock equal to the quotient obtained by dividing (a) the exercise
price per share of Common Stock of the Company with respect to such option by
(b) __________, which exercise price per share shall be rounded to the nearest
whole cent. The number of shares of HCC Common Stock that may be purchased by a
holder under any option assumed by HCC hereunder shall not include any
fractional share of HCC Common Stock, but shall be rounded up to the next higher
whole share of HCC Common Stock.
7. Dissenting Shares. Any holder of Dissenting Shares shall have the
-----------------
rights given such holder under Section 262 of the Delaware Corporation Law.
<PAGE>
The Company shall be the entity obligated for the payment of the fair value of
any shares held by a shareholder who has complied with the requirements of
Section 262 of the Delaware Corporation Law.
8. Surrender of Stock Certificates; Payment.
----------------------------------------
On and after the Effective Time, all of the outstanding certificates
which prior to that time represented Common or Preferred Stock of the Company,
except for certificates representing Dissenting Shares, shall be deemed for all
purposes to evidence ownership of and the right to receive the HCC Common Stock
into which the stock represented by such certificates has been converted as
provided herein. At or as soon as practicable after the Effective Time, each
holder of record of a certificate or certificates that immediately prior to the
Effective Time represented Common or Preferred Stock of the Company, except for
Dissenting Shares, shall surrender such certificates to U.S. Stock Transfer
Corporation as the Exchange Agent of HCC in accordance with the provisions
contained in the Agreement and the Exchange Agent, in exchange for the surrender
of such certificates, shall deliver to such holder the consideration which such
holder is entitled to receive pursuant to Section 4(b) above, subject to the
provisions of Section 5 above.
<PAGE>
IN WITNESS WHEREOF, this Merger Agreement, having first been duly
approved by resolutions of the Boards of Directors and shareholders of the
Company, HCC and Acquisition Corp., is hereby executed on behalf of each of said
corporations by their respective officers thereunto duly authorized. Each of
the undersigned affirms and acknowledges, under penalties of perjury, that this
Merger Agreement is the act and deed of each such undersigned party and that the
facts stated herein are true.
VCC CORPORATION, a Delaware corporation
By: _____________________________________
Title ___________________________________
HCC CORPORATION, a Delaware corporation
By: _____________________________________
Title ___________________________________
HCC ACQUISITION CORP., a Delaware
corporation
By: _____________________________________
Title ___________________________________
<PAGE>
EXHIBIT B
Assumptions for purposes of this Exhibit B:
1. The number of outstanding shares of HCC common stock as of the
Effective Time is 22,591,214.
2. The average closing price of HCC common stock for the ten consecutive
trading days immediately preceding the business day prior to the Closing Date is
$7.00 per share.
3. The number of shares of capital stock of VCI outstanding immediately
prior to the Closing (including options) is 58,934,928.
4. There are no adjustments to the $103,500,000 purchase price.
Section 2.3(a) Illustration
Each share of VCI stock is converted into that number of shares of HCC
common stock equal to the amount determined by dividing (1) the lesser of (A)
$103,500,000 7 or (B) 22,591,214 - 1 by (2) 58,934,928.
(1) (A) $103,500,000 divided by = 14,785,714.29
(B) 22,591,213
(2) 14,785,714.29 (the lesser of (A) and (B)) divided by 58,934,928 =
.250 (the "Exchange Ratio")
Thus, each share of VCI common stock is converted into .250 shares of HCC
common stock. If a Holder has 50,000 shares of VCI stock, such Holder's VCI
stock will be converted into 12,500 shares of HCC common stock, calculated as
follows:
50,000 x .250 = 12,500 shares of HCC common stock
Section 2.5 (a) Illustration
VCI stock options are converted into options to purchase the number of
shares of HCC common stock determined by multiplying (1) the number of shares of
common stock of VCI covered by the option by (2) the Exchange Ratio (rounded to
the next higher whole share of HCC common stock). The exercise price for each
converted VCI stock option shall be equal to quotient obtained by dividing (1)
the exercise price of each VCI stock option by (2) the Exchange Ratio (rounded
to the nearest whole cent).
<PAGE>
Assuming an optionee has an option to purchase 20,000 shares of VCI common
stock at an exercise price of $1.50 per share, such option will be converted
into an option to purchase 5,000 shares of HCC common stock at an exercise price
of $6.00 per share, calculated as follows:
20,000 x .250 = 5,000
$1.50 divided by .250 = $6.00
<PAGE>
EXHIBIT C
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") is made as of March 15, 2000 by
and among HealthCentral.com, a Delaware corporation ("HCC"); Robert M. Haft (the
"Stockholder Representative"); and U.S. Bank Trust National Association, (the
"Escrow Holder").
RECITALS
1. Pursuant to an Agreement and Plan of Reorganization and Merger (the
"Agreement"), dated as of March 15, 2000, among HCC, HCC Acquisition Corp., a
wholly-owned subsidiary of HCC ("Acquisition Corp."), and Vitamins.com, Inc., a
Delaware corporation (the "Company"), Acquisition Corp. will be merged with and
into the Company and the Company will be the surviving corporation and become a
wholly-owned subsidiary of HCC (the "Merger").
2. This Escrow Agreement is being entered into pursuant to Section 2.4
and Article IX of the Agreement. Execution and delivery of this Escrow Agreement
is a condition to the obligation of HCC to consummate the Merger.
3. As set forth in Section 2.4 of the Agreement, by their approval of the
Agreement and the Merger, those persons who immediately prior to the effective
time of the Merger (the "Effective Time") were the holders of shares of capital
stock of the Company (exclusive of dissenters, the "Holders") have authorized
the Stockholder Representative to act as their representative under this Escrow
Agreement with the powers and authority provided herein.
4. Pursuant to the Agreement, the shares of the capital stock of the
Company that are outstanding immediately prior to the Effective Time, other than
dissenting shares, will be converted into shares of the common stock of HCC.
5. Section 2.4 of the Agreement provides that at the Effective Time,
certain of the shares of the common stock of HCC issued in the Merger shall be
delivered on behalf of the Holders to the Escrow Holder in order to secure the
indemnification obligations of the Holders set forth in Article IX of the
Agreement.
NOW, THEREFORE, the parties agree as follows:
<PAGE>
Article I
DEFINITIONS
Unless otherwise defined herein, capitalized terms used herein shall have
the meanings set forth in the Agreement. In addition, for the purposes of this
Escrow Agreement, the following terms shall have the following meanings:
1.1 Claim Certificate. "Claim Certificate" shall mean a certificate
-----------------
signed by an officer of HCC stating (i) that HCC has incurred or reasonably
believes it will in the future incur the amount of Losses specified in such
Claim Certificate, (ii) in reasonable detail, the facts alleged as the basis for
such claim and the section or sections of the Agreement alleged to have been
violated, and (iii) the number of Escrowed Shares to which HCC believes it is
entitled with respect to such Losses.
1.2 Escrow Fund. "Escrow Fund" shall mean the Escrowed Shares then held
-----------
by the Escrow Holder, plus any cash received pursuant to Section 3.4 hereof, but
shall not include any normal, regular cash dividends paid with respect to the
Escrowed Shares which dividends shall be for the benefit of, and distributed to,
the Holders with respect to such Escrowed Shares.
1.3 Escrowed Share. An "Escrowed Share" shall mean a share of HCC common
--------------
stock delivered to the Escrow Holder by the Exchange Agent on behalf of the
Holders in accordance with Sections 2.4 and Section 2.6 of the Agreement,
together with any and all other shares of HCC common stock, or other securities
of HCC received or receivable in respect of such escrowed share of HCC common
stock, including, without limitation, any and all securities, to be issued or
distributed in connection with any recapitalization, reclassification, split-up,
merger, consolidation, exchange, stock dividend, stock split or similar event
declared or effected with respect to shares of HCC common stock.
1.4 Value. "Value," when used with respect to an Escrowed Share, shall
-----
have the meaning set forth in Section 9.2(b) of the Agreement.
Article II
CREATION OF ESCROW
2.1 Purpose. This Escrow Agreement is being executed and delivered, and
-------
the deposit of the Escrow Fund hereunder is being made in accordance with
Section 2.4 of the Agreement, for the purpose of securing the
2
<PAGE>
indemnification obligations of the Holders set forth in Article IX of the
Agreement.
2.2 Creation of Escrow Fund. At or promptly after the Effective Time, the
-----------------------
Stockholder Representative shall instruct the Exchange Agent to deposit with the
Escrow Holder certificates representing those shares of HCC common stock
required to be so deposited under Section 2.4 of the Agreement. HCC and the
Holders agree that any other securities, which thereafter are to become part of
the Escrow Fund as provided in Section 1.4 of this Escrow Agreement, shall be
promptly deposited with the Escrow Holder upon receipt by or on behalf of the
Holders, and receipt by the Escrow Holder on behalf of the Holders shall be
deemed receipt by the Holders. Certificates representing securities deposited in
the Escrow Fund shall be accompanied by separate stock powers endorsed in blank
by the Stockholder Representative on behalf of the Holders.
2.3 Tax Reporting With Respect to Escrow Fund. All parties hereto agree
-----------------------------------------
that for all income tax purposes (including any tax reporting obligations) the
Holders shall be treated as the owners of the Escrowed Shares transferred by
such Holder to the Escrow Fund until distributed from the Escrow Fund pursuant
to the terms of this Escrow Agreement. The Holders agree to report on their own
tax returns any income, gain or loss with respect to the Escrowed Shares held in
the Escrow Fund.
Article III
CLAIMS
3.1 Payment After Delivery of Claim Certificate. If HCC gives the Escrow
-------------------------------------------
Holder and the Stockholder Representative a Claim Certificate, then, as soon as
practicable after the expiration of the period ending thirty (30) days after the
Escrow Holder's receipt of such Claim Certificate, the Escrow Holder, subject to
the provisions of Section 3.2 hereof (including, without limitation, issuance by
the Stockholder Representative of a Dispute Notice), shall deliver to HCC, from
the Escrow Fund, on behalf of HCC or other parties indemnified under the
provisions of Section 9.2(a) of the Agreement that number of Escrowed Shares
having a Value (to the extent the Escrow Fund is sufficient for such purpose)
equal to the Losses specified in such Claim Certificate. Any Escrowed Shares to
be delivered by the Escrow Holder under this Section 3.1 shall be allocated
among the Holders, pro rata, in accordance with the number of shares of Company
capital stock held by the Holders immediately prior to the Effective Time. The
Escrow Holder will promptly provide notice to the Stockholder Representative of
the Escrow Holder's receipt of the Claim Certificate, which such notice shall
specify
3
<PAGE>
the date of the Escrow Holder's receipt thereof and shall attach a complete copy
of the Claim Certificate.
3.2 Disputes Respecting Claims. Unless, within 30 days after the Escrow
--------------------------
Holder's receipt of any Claim Certificate the Escrow Holder receives a written
notice ("Dispute Notice") from the Stockholder Representative stating that the
--------------
Stockholder Representative questions the accuracy of or otherwise disputes a
matter asserted in such Claim Certificate, such Claim Certificate shall
constitute full authority to the Escrow Holder to take the action provided for
in Section 3.1 and shall be conclusive and binding on all parties hereto and on
the Holders. If, however, the Stockholder Representative timely gives such a
notice, the Escrow Holder shall not make any distribution to HCC of that portion
of the Escrow Fund which the Stockholder Representative asserts in his notice
should not be so distributed until the Escrow Holder receives (i) the written
instructions of the Stockholder Representative and HCC or (ii) a final decision
of a court of competent jurisdiction in the case of third party claims or of an
arbitrator in the case of a dispute between HCC and the Stockholder
Representative with respect to the Claim Certificate; in each case specifying
the manner in which such distribution shall be made. For this purpose, a final
decision shall mean the final judgment of any court of competent jurisdiction
from which no appeal is then allowed or a final decision of an arbitrator
pursuant to Article IX of the Agreement.
3.3 Notice and Defense of Third Party Claims. Notice and defense of third
----------------------------------------
party claims shall be handled in the manner provided in Article IX of the
Agreement.
3.4 Right to Substitute Cash Payment. The Stockholder Representative may,
--------------------------------
if any Holder so requests, elect to have such Holder's pro rata share of any
Loss that is claimed in a Claim Certification satisfied by a cash payment by
such Holder to the Escrow Holder. In such case, the Escrow Holder shall, upon
receipt of such payment, release to the Stockholder Representative on behalf of
such Holder an amount of Escrow Shares having a Value equal to the amount of
such payment and transfer the cash received from such Holder to the person or
persons entitled to receive such indemnity payment.
4
<PAGE>
Article IV
DISTRIBUTION OF ESCROW FUND
4.1 Distribution of Undisputed Amounts. Subject to Section 4.2 hereof, on
----------------------------------
the date that is the earlier of the date that is twelve (12) months after the
Effective Time or within two business days after the Escrow Holder receives
written notification that HCC has issued its first independent audit report
showing the combined results of operations of HCC and VCI (the "Escrow
------
Termination Date"), the Escrow Holder shall promptly distribute the entire
- ----------------
remaining Escrow Fund to the Stockholder Representative for the benefit of the
Holders, or to the Holders if and as the Stockholder Representative shall
direct, pro rata according to the number of shares of Company capital stock held
by the Holders immediately prior to the Effective Time.
4.2 Distribution of Disputed Amounts. Notwithstanding the provisions of
--------------------------------
Section 4.1 hereof, if, prior to the Escrow Termination Date, HCC shall have
given a Claim Certificate to the Stockholder Representative and the Escrow
Holder and a dispute, in accordance with Section 3.2 hereof, respecting that
Claim Certificate or the subject matter of such Claim Certificate has not yet
been resolved in accordance with Section 3.2, then the Escrow Holder shall
continue to hold that portion of the Escrow Fund which is the subject of such
dispute. Any portion of the Escrow Fund so withheld shall continue to be held by
the Escrow Holder until it receives authorization to distribute the portion of
the Escrow Fund so withheld in accordance with the second sentence of Section
3.2.
Article V
ESCROW HOLDER
5.1 The Escrow Holder shall have no duties or responsibilities whatsoever
with respect to the Escrow Fund except as are specifically set forth herein. The
Escrow Holder shall neither be responsible for or under, nor chargeable with
knowledge of the terms and conditions of, any other agreement, instrument or
document in connection herewith other than Section 2.4 and Article IX of the
Agreement. The Escrow Holder may conclusively rely upon, and shall be fully
protected from all liability, loss, cost, damage or expense in acting or
omitting to act pursuant to any written notice, instrument, request, consent,
certificate, document, letter, telegram, opinion, order, resolution or other
writing hereunder without being required to determine the authenticity of such
document, the correctness of any fact stated therein, the propriety of the
service thereof or the
5
<PAGE>
capacity, identity or authority of any party purporting to sign or deliver such
document. The Escrow Holder shall have no responsibility for the contents of any
such writing contemplated herein and may rely without any liability upon the
contents thereof.
6
<PAGE>
5.2 The Escrow Holder shall not be liable for any action taken or omitted
by it in good faith and reasonably believed by it to be authorized hereby or
with the rights or powers conferred upon it hereunder, nor for action taken or
omitted by it in good faith, and in accordance with advice of counsel (which
counsel may be of the Escrow Holder's own choosing), and shall not be liable for
any mistake of fact or error of judgment or for any acts or omissions of any
kind except for its own willful misconduct or gross negligence.
5.3 HCC and each of the Holders jointly and severally agrees to indemnify
the Escrow Holder and its employees, directors, officers and agents and hold
each harmless against any and all liabilities incurred by it hereunder as a
consequence of such party's action, and the parties agree to indemnify the
Escrow Holder and hold it harmless against any losses, costs, payments, and
expenses (including the fees and expenses of counsel) and all liabilities
incurred by it in connection with the performance of its duties hereunder,
except in either case for losses, costs, payments and expenses (including the
fees and expenses of counsel) and liabilities incurred by the Escrow Holder
resulting from its own willful misconduct or gross negligence.
5.4 The Escrow Holder may resign as such following the giving of 60 days'
prior written notice to HCC and the Stockholder Representative. Similarly, the
Escrow Holder may be removed and replaced following the giving of 60 days' prior
written notice to the Escrow Holder jointly by HCC and the Stockholder
Representative. In either event, the duties of the Escrow Holder shall terminate
60 days after the date of such notice (or at such earlier date as may be
mutually agreeable), except for its obligations to hold and deliver the Escrow
Fund to the successor Escrow Holder; and the Escrow Holder shall then deliver
the balance of the Escrow Fund then in its possession to such a successor Escrow
Holder as shall be appointed by HCC and the Stockholder Representative as
evidenced by a written notice filed with the Escrow Holder. If HCC and the
Stockholder Representative are unable to agree upon a successor Escrow Holder by
the effective date of such resignation or removal, the then acting Escrow Holder
may petition any court of competent jurisdiction for the appointment of a
successor Escrow Holder or other appropriate relief, and any such resulting
appointment shall be binding upon all of the parties hereto. Upon acknowledgment
by any successor Escrow Holder of the receipt of the then remaining balance of
the Escrow Fund, the then acting Escrow Holder shall be fully released and
relieved of all duties, responsibilities and obligations under this Escrow
Agreement.
5.5 The Escrow Holder shall not be bound in any way by any agreement,
other than this Escrow Agreement. A copy of the Agreement has been
<PAGE>
provided to the Escrow Holder in connection with the execution of this Escrow
Agreement and the Escrow Holder understands that the terms of the Holders'
indemnification obligations are set forth in Article IX of the Agreement. The
Agreement forms an integral part of this Escrow Agreement and, therefore,
Article IX thereof is hereby incorporated by reference herein.
5.6 The Escrow Holder shall be under no duty to institute or defend any
arbitration or legal proceeding with respect to the Escrow Fund or under this
Escrow Agreement and none of the costs or expenses or any such proceeding shall
be borne by the Escrow Holder. The costs and expenses of any such proceeding
shall be borne as decided by the arbitrators or court and shall be direct
obligations of HCC or the Holders, as the case may be, and shall not be
satisfied in any way by the Escrow Fund.
5.7 The Escrow Holder shall be entitled to payment from HCC for customary
fees and expenses for all services rendered by it hereunder in accordance with
Exhibit A attached hereto (as such schedule may be amended from time to time).
- ---------
Article VI
STOCKHOLDER REPRESENTATIVE
6.1 The Stockholder Representative shall have full power and authority to
represent all Holders with respect to all matters arising under
this Escrow Agreement (except that the Holders shall retain the right to vote
the Escrowed Shares). All action taken by the Stockholder Representative
hereunder shall be conclusive and binding upon the Holders as if expressly
confirmed and ratified in writing by each of them. Without limiting the
generality of the foregoing, the Stockholder Representative shall have full
power and authority on behalf of all of the Holders to interpret all the terms
and provisions of this Escrow Agreement, to give all approvals and take any
other actions with respect to the Holders in connection with the subject matter
of this Agreement and to consent to any amendment hereof. HCC may deal solely
with and rely solely upon the Stockholder Representative as the representative
of all the Holders. The Stockholder Representative shall incur no liability to
the Holders except by reason of his willful misconduct or gross negligence. The
Stockholder Representative may resign at any time and be relieved of his duties
as Stockholder Representative, in which case, the Stockholder Representative
shall designate in writing another Holder to serve as successor Stockholder
Representative. The Stockholder
2
<PAGE>
Representative's appointment and authority will survive the death, incapacity or
incompetence of any Holder. The Stockholder Representative shall not be liable
to any party hereto for any act which he may do or omit to do hereunder in good
faith.
Article VII
MISCELLANEOUS
7.1 Notices. Except as expressly provided in this Escrow Agreement, all
-------
notices (including any Claim Certificate) given in connection with this Escrow
Agreement shall be deemed to have been duly given on the date of delivery if
delivered by hand delivery or by nationally-recognized overnight courier with
receipt therefor, addressed as follows:
If to HCC:
---------
HealthCentral.com
6001 Shellmound Street, Suite 800
Emeryville, CA 94608
Attn: C. Fred Toney
With a copy to:
--------------
Howard, Rice, Nemerovski, Canady,
Falk & Rabkin
A Professional Corporation
Three Embarcadero Center, Seventh Floor
San Francisco, California 94111
Attention: Richard W. Canady
If to the Stockholder Representative:
------------------------------------
Robert M. Haft
2346 Massachusetts Avenue, N.W.
Washington, DC 20008
3
<PAGE>
With a copy to:
--------------
Venable, Baetjer, Howard & Civiletti, LLP
1615 L Street, N.W., Suite 400
Washington, DC 20036
Attention: Michael Schlesinger
If to the Escrow Holder:
-----------------------
U.S. Bank Trust National Association
One California Street, 4th Floor
San Francisco, CA 94111
Attn: Ann Gadsby
Such addresses may be changed from time to time by means of a notice
given in the manner provided in this Section 7.1.
7.2 Successors and Assigns. The Escrow Holder, the Stockholder
----------------------
Representative (except as provided in Article VI hereof) and HCC may not assign,
by operation of law or otherwise, all or any portion of its or their rights,
obligations or liabilities under this Escrow Agreement without the prior written
consent of the other parties hereto, which consent may be withheld in the
absolute discretion of the party being asked for the Consent. Any attempted
assignment in violation of this Section 7.2 shall be voidable. This Escrow
Agreement and all action taken hereunder in accordance with its terms shall be
binding upon and inure to the benefit of HCC and the other indemnified parties
and their respective successors, assigns, heirs, executors, administrators and
legal representatives, the Holders and their respective successors, assigns,
heirs, executors, administrators and legal representatives, the Escrow Holder
and its successors and the Stockholder Representatives and their successors,
assigns, heirs, executors, administrators and legal representatives.
7.3 Headings. The headings contained in this Escrow Agreement are
--------
intended principally for convenience and shall not, by themselves, determine the
rights of the parties to this Escrow Agreement.
7.4 Waiver. Waiver of any term or condition of this Escrow Agreement by
------
any party shall not be construed as a waiver of a subsequent breach or failure
of the same term or condition, or a waiver of any other term or condition of
this Escrow Agreement.
4
<PAGE>
7.5 Governing Law. This Escrow Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware as applied to
agreements entered into and entirely to be performed within the state.
7.6 Arbitration. The parties hereto agree that if any Claim for Losses is
-----------
made and not resolved, such Claim shall be submitted to arbitration under
Article IX of the Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be signed the day and year first above written.
HEALTHCENTRAL.COM
By:_________________________________________
Title:______________________________________
STOCKHOLDER REPRESENTATIVE:
____________________________________________
By: Robert M. Haft
U.S. BANK TRUST NATIONAL
By:_________________________________________
Title:______________________________________
6
<PAGE>
EXHIBIT D
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is made and entered into as of
March __, 2000 by and among HealthCentral.com, a Delaware corporation ("HCC"),
Vitamins.com, Inc., a Delaware corporation (the "Company") and the undersigned
stockholder ("Stockholder") of HCC.
RECITALS
A. Concurrently with the execution of this Agreement, HCC, HCC
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of HCC
("Acquisition Corp."), and the Company have entered into an Agreement and Plan
of Reorganization and Merger (the "Reorganization Agreement"), which together
with a related Agreement of Merger (collectively, the "Merger Agreement")
provide for the merger of Acquisition Corp. with and into the Company (the
"Merger"). Pursuant to the Merger, all outstanding capital stock of the Company
will be exchanged for HCC common stock.
B. Stockholder is the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of such
number of shares of the outstanding Common Stock and such number of shares of
the outstanding Preferred Stock, of HCC as is indicated on the final page of
this Agreement (the "Shares").
C. The agreements of the Stockholder contained herein are in
consideration of the execution of the Reorganization Agreement by the Company
and the Company would not have executed the Reorganization Agreement but for
Stockholder's execution of this Agreement and its commitment to perform its
obligations hereunder.
NOW, THEREFORE, in consideration of the foregoing and subject to the
terms and conditions of the Reorganization Agreement the parties agree as
follows:
1. Agreement to Retain Shares.
--------------------------
1.1 Transfer and Encumbrance. Stockholder agrees not to transfer,
------------------------
sell, exchange, pledge (except in connection with a bona fide loan transaction,
provided that any pledgee agrees not to transfer, sell, exchange, pledge or
otherwise dispose or encumber the Shares or any New Shares (as defined in
Section 1.2 below) prior to the
<PAGE>
Expiration Date (as defined below)) or otherwise dispose of or encumber the
Shares or any New Shares or to make any offer or agreement relating thereto, at
any time prior to the Expiration Date, except that nothing herein, subject to
applicable securities laws, shall prevent a transfer or sale of the Shares or
any New Shares to another party if such party agrees in writing to be bound by
all of the terms of this Voting Agreement. As used herein, the term "Expiration
Date" shall mean the earlier to occur of (i) such date and time as the Merger
shall become effective in accordance with the terms and provisions of the Merger
Agreement or (ii) the termination of the Reorganization Agreement in accordance
with its terms.
1.2 New Shares. Stockholder agrees that any shares of capital stock
----------
of HCC that Stockholder purchases or with respect to which Stockholder otherwise
acquires beneficial ownership, or otherwise is granted a voting proxy with
respect thereto, after the date of this Agreement and prior to the Expiration
Date ("New Shares") shall be subject to the terms and conditions of this
Agreement to the same extent as if they constituted Shares.
2. Agreement to Vote Shares. Unless the Reorganization Agreement is
------------------------
terminated pursuant to the provisions of Article VIII thereof, at every meeting
of the stockholders of HCC held prior to the Effective Time called with respect
to the Merger Agreement and the Merger, and at every adjournment thereof, and on
every action or approval by written consent of the stockholders of HCC with
respect to the same, Stockholder shall vote the Shares and any New Shares in
favor of approval of the Merger Agreement and the Merger and any matter that
could reasonably be expected to facilitate the Merger.
3. Representation and Warranty of Stockholder. Stockholder represents and
------------------------------------------
warrants and covenants that Stockholder: (i) is the beneficial owner of the
Shares, which at the date of this Agreement and at all times up until the
Expiration Date will be free and clear of any liens, claims, options, charges or
other encumbrances; (ii) does not beneficially own any shares of capital stock
of HCC other than the Shares (excluding shares as to which Stockholder currently
disclaims beneficial ownership in accordance with applicable law); and (iii) has
full power and authority to make, enter into and carry out the terms of this
Agreement.
4. Termination. This Agreement shall terminate and shall have no further
-----------
force or effect as of the Expiration Date.
<PAGE>
5. Miscellaneous.
-------------
5.1 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
5.2 Binding Effect and Assignment. This Agreement and all of the
-----------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without the prior written consent of the other.
5.3 Amendments and Modification. This Agreement may not be modified,
---------------------------
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by the parties hereto.
5.4 Specific Performance; Injunctive Relief. The parties acknowledge
---------------------------------------
that the Company will be irreparably harmed and that there will be no adequate
remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to the Company upon any such violation, the
Company shall have the right to enforce such covenants and agreements by
specific performance, injunctive relief or by any other means available to the
Company at law or in equity.
5.5 Notices. All notices and other communications pursuant to this
-------
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed to have been duly given on the date of
delivery if delivered by hand delivery or by facsimile to the persons identified
below or two days after mailing by air courier addressed as follows:
If to HCC:
6001 Shellmound Street, Suite 800
Emeryville, CA 94608
Phone: (510) 250-2500
Telecopy: (510) 250-2525
Attn: C. Fred Toney
<PAGE>
With a copy to:
Howard, Rice, Nemerovsky, Canady, Falk & Rabkin
Three Embarcadero Center, 7th Floor
San Francisco, CA 94111
Phone: (415) 434-1600
Telecopy: (415) 217-5910
Attn: Richard Canady, Esq.
If to the Company:
2924 Telestar Court
Falls Church, VA 22042
Phone: (703) 849-0800
Telecopy: (703) 849-8227
Attn: Robert M. Haft
With a copy to:
Venable, Baetjer, Howard and Civiletti, LLP
1615 L. Street, N.W., Suite 400
Washington, DC 20036
Phone: (202) 452-8600
Telecopy: (202) 429-3231
Attn: Michael A. Schlesinger, Esq.
If to Stockholder:
To the address for notice set forth on the last page hereof.
Such addresses may be changed from time to time by means of a notice
given in the manner provided in this section.
<PAGE>
5.6 Governing Law. This Agreement shall be governed by, construed
-------------
and enforced in accordance with the internal laws of the State of Delaware.
5.7 Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
5.8 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
5.9 Effect of Headings. The section headings herein are for
------------------
convenience only and shall not affect the construction or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
STOCKHOLDER
By:_______________________________
Stockholder's Address for Notice:
_______________________________
_______________________________
_______________________________
_______________________________
Shares of HCC Common Stock of which
you are the record owner or over
which you have voting control:
__________ shares
<PAGE>
HEALTHCENTRAL.COM
By:______________________________
Chief Executive Officer
VITAMINS.COM, INC.
By:______________________________
Chief Executive Officer
<PAGE>
EXHIBIT E
WRITTEN CONSENT AND AGREEMENT
OF STOCKHOLDERS OF VITAMINS.COM, INC.
THIS WRITTEN CONSENT AND AGREEMENT OF STOCKHOLDERS OF VITAMINS.COM,
INC. (this "Agreement") is made and entered into as of March 15, 2000 between
VITAMINS.COM, INC., a Delaware corporation (the "Company"), and the undersigned
stockholders (each, a "Stockholder" and, collectively, the "Stockholders") of
the Company.
RECITALS
A. The Company desires to enter into that certain Agreement and Plan of
Reorganization and Merger with HealthCentral.com, a Delaware corporation
("HCC"), and HCC Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of HCC ("Acquisition Corp.") [the "Merger Agreement"], under which,
at the Effective Time (as defined in the Merger Agreement), Acquisition Corp.
will merge into the Company and the Company will be the survivor (the "Merger
Transaction").
B. Each Stockholder is the record owner of such number and class of
shares of the outstanding shares of capital stock of the Company as has been
stated on the signature page for such Stockholder to this Agreement (the
"Shares").
NOW, THEREFORE, in consideration of the foregoing and subject to the terms
and conditions of the Merger Agreement the parties agree as follows:
1. Defined Terms. Unless otherwise defined herein, the capitalized
-------------
terms in this Agreement shall have the meaning ascribed thereto in the Merger
Agreement.
2. Approval of Merger. The undersigned hereby authorizes,
------------------
approves, ratifies and adopts the Merger Transaction and the Merger Agreement in
substantially the form attached to this Agreement as Exhibit A, together with
each document attached thereto, in substantially the forms which have been
reviewed by the stockholders of the Company, under which Acquisition Corp. shall
merge with and into the Company, with the Company as the surviving corporation.
The execution of this Agreement by the undersigned shall constitute, by written
consent in lieu of a Special Meeting of Stockholders pursuant to Section 228 of
the DGCL, the undersigned's irrevocable consent, approval and authorization, for
all purposes and in all respects including, without limitation, the specific
series voting rights contained in Section IV, E., 2 of the Company's Restated
Certificate of Incorporation, of the Merger Agreement and the transactions
contemplated thereby, and the undersigned hereby irrevocably approves,
authorizes, empowers and directs the officers of the Company to execute and
deliver the Merger Agreement, together with the documents attached thereto, and
to perform the obligations thereunder and to take all such steps and to do and
authorize to be done all such acts and things as may be necessary, advisable,
convenient or proper for the purpose of carrying out the
<PAGE>
foregoing resolutions and the intent thereof, and for the purposes of fully
effectuating and carrying out the Merger Transaction. By executing this
Agreement, the undersigned waives any and all rights of appraisal, and any
notice of such rights, in connection with the Merger Transaction, including,
without limitation, rights under Section 262 of the DGCL. The undersigned agrees
not to take any action that would modify, amend or revoke its approval of the
Merger Transaction, and the undersigned further agrees that it shall not take
any action that would negate, frustrate or make impossible the performance of
the Company under the Merger Agreement. By executing this Agreement, the
undersigned waives notice of the time, place and purpose of the Special Meeting
of the Stockholders and agrees to the transaction of the business of the Special
Meeting by written consent of the Stockholders in lieu of such Special Meeting.
The undersigned agrees reasonably to cooperate with the Company in connection
with the Merger Transaction and to provide such further assurances as the
Company may reasonably request.
3. Appointment of Stockholder Representative.
-----------------------------------------
(a) The undersigned hereby irrevocably and unconditionally
appoints Robert M. Haft as Stockholder Representative under the Merger Agreement
and the Escrow Agreement with all rights, powers and authorities as the
undersigned's Stockholder Representative to act on behalf of and bind the
undersigned in connection with matters arising under Article IX of the Merger
Agreement and the Escrow Agreement, including, without limitation, (a) control
of claims for indemnification under Section 9.5 of the Merger Agreement, (b)
control of the defense of indemnification claims pursuant to Section 9.6 of the
Merger Agreement, (c) control of any arbitration under Section 9.7 of the Merger
Agreement, (d) to cause the Escrow Shares to be deposited with the Escrow
Holder, (e) to give and receive notices pursuant to the Escrow Agreement, (f) to
assert, pursue, defend, settle and resolve claims under the Escrow Agreement and
(g) to receive for the benefit of the undersigned any distributions from the
Escrow Fund.
(b) HCC and the Escrow Holder will be entitled to rely on any
communication from the Stockholder Representative with respect or pursuant to
the Merger Agreement and the Escrow Agreement, and to distribute or pay all
amounts due to the undersigned notwithstanding any contrary communication from
any other person (including without limitation the undersigned).
(c) If the Stockholder Representative resigns under Section 3(g)
below, the Stockholder Representative may designate in writing an individual who
is either a member of the Company's Board of Directors immediately prior to the
Effective Time or a Holder (an "Eligible Successor") to serve as successor
Stockholder Representative under this Agreement, the Merger Agreement and the
Escrow Agreement ("Successor Representative"). If the Stockholder Representative
dies or is removed by Super Majority Vote of the Holders for Cause, the Holders,
acting by Super Majority Vote, will designate an Eligible Successor to serve as
the Successor Representative. For purposes of this Agreement, "Super Majority
Vote" shall mean the vote of Holders owning in the aggregate sixty percent (60%)
or more of the shares of the Company's outstanding voting capital stock
immediately prior to the Effective Time. For purposes of this Agreement, "Cause"
shall mean the Stockholder Representative's fraud, willful
-2-
<PAGE>
misconduct or gross negligence in the performance of his responsibilities
hereunder resulting in or likely to cause substantial harm to the Holders.
(d) The Stockholder Representative may only be replaced for
Cause and then only by a Super Majority Vote. The Stockholder Representative's
appointment or authority will survive the death, incapacity or incompetence of
any Holder.
(e) The undersigned hereby agrees to bear, severally, the
reasonable out-of-pocket expenses and costs of the Stockholder Representative
and such attorneys' fees, expenses and other costs as may be incurred by
Stockholder Representative in connection with the administration of the
provisions of this Agreement, the Merger Agreement and the Escrow Agreement. In
order to collect any amounts owed to him under this Agreement, the Stockholder
Representative may set off against a Holder's share of the Escrow Fund.
(f) The Stockholder Representative shall not be liable to any
party hereto for any action which he may do or omit to do hereunder in good
faith, and each of the undersigned hereby covenants and agrees, severally, in
accordance with their respective pro rata share of the total number of shares of
--- ----
the Company's outstanding capital stock immediately prior to the Effective Time,
forever to indemnify, save, hold and keep the Stockholder Representative
harmless from any liability or claims (including attorneys' fees, court costs
and arbitration costs) suffered or incurred, directly or indirectly, in
connection with this Agreement, the Merger Agreement and the Escrow Agreement;
provided, however, that the foregoing shall not apply to any and all acts of
willful misconduct, gross negligence or fraud on the part of the Stockholder
Representative.
(g) The Stockholder Representative may at any time resign and be
discharged of the duties imposed hereunder (but without prejudice to any
liability for willful misconduct or fraud hereunder) by giving at least thirty
(30) days' prior written notice to the Holders and HCC of the date on which such
resignation will take effect; in which case, upon the effectiveness of such
resignation:
(i) All cash and property then held by the Stockholder
Representative hereunder shall be delivered by him to the Successor
Representative as may be designated in writing by a Super Majority Vote,
whereupon the Stockholder Representative's obligations hereunder shall cease and
terminate; and
(ii) If for any reason no such Successor Representative is
serving by such date, all obligations of the Stockholder Representative
hereunder shall, nevertheless, cease and terminate on the later of the date so
designated by the Stockholder Representative or such time as the Stockholder
Representative deposits all cash and property then held by him hereunder with a
court of competent jurisdiction.
(h) In the event that a dispute arises among some or all of the
Holders with respect to any matter for which the Stockholder Representative has
authority, directly or indirectly, under this Agreement, the Merger Agreement
and the Escrow Agreement, including any cash or property received by the
Stockholder Representative, the Stockholder Representative
-3-
<PAGE>
may, in his sole discretion, file a suit in interpleader or seek joinder of any
such persons in any pending action for the purpose of having the respective
rights of the claimants adjudicated, and shall be entitled to release that
portion of such cash of property the in dispute in accordance with the final
judgment in such action. For purposes of such adjudication, each of the
undersigned hereby agrees to submit themself to the jurisdiction of any court of
competent jurisdiction in the State of Delaware. All expenses and counsel fees
incurred by the Stockholder Representative in bringing or prosecuting any such
action or in defending any action brought against the Stockholder Representative
by adverse claimants shall be included within expenses of the Stockholder
Representative for purposes of Section 3 hereof.
(i) The Stockholder Representative shall have no liability to
the parties hereto (in his capacity as such) except for Cause.
4. Release. Effective as of the Effective Time, each Stockholder
-------
hereby fully and forever irrevocably waives, releases and discharges the
Company, its subsidiaries and affiliates, and each of their respective officers,
directors, employees, Stockholder Representatives, representatives,
predecessors, successors and assigns (collectively, the "Released Parties") from
any and all actions, causes of action, suits, debts, covenants, contracts,
controversies, agreements, promises, damages, judgments, executions, claims and
demands whatsoever, in law or equity (including, without limitation, any and all
rights, claims or demands under the Company's Restated Certificate of
Incorporation, Bylaws, the Investor Rights Agreement, the Co-Sale Agreement, the
Management Rights Agreement or any other agreement entered into by the
Stockholders pertaining to their respective stock ownership in the Company),
which the undersigned, and each of their respective successors, Stockholder
Representatives, representatives and/or assigns ever had, now has or have or
hereafter can, shall or may have by reason of any matter, cause or thing, know
or unknown, mature or contingent, in any way arising with respect to periods and
events up to and including the Closing Date (as such term is defined in the
Merger Agreement). [For California Stockholders only : The undersigned is aware
of Section 1542 of the California Civil Code, which provides that a general
release does not extend to claims which the creditor does not know or suspect to
exist in its favor at the time of executing the release, which if known by it
must have materially affected its settlement with the debtor. Such provision, to
the extent that it is applicable to this Section 4, and the provisions of any
similar law, statute or regulation, to the extent that they are applicable to
this Section 4, are hereby expressly waived by the undersigned.] The foregoing
shall not apply to any existing written employment agreement to which a
Stockholder is a party.
5. Agreement to Retain Shares. The undersigned agrees not to
--------------------------
transfer, sell, exchange, pledge or otherwise dispose or encumber the Shares
prior to the Expiration Date (as defined below) or to make any offer or
agreement relating thereto, at any time prior to the Expiration Date, except
that nothing herein, subject to applicable securities laws, shall prevent a
transfer or sale of the Shares to another party if such party agrees in writing
to be bound by the provisions of this Agreement. As used herein, the term
"Expiration Date" shall mean the earlier to occur of (i) such date and time as
the Merger shall become effective in accordance with the terms and provisions of
the Merger Agreement or (ii) the termination of the Merger Agreement in
accordance with its terms.
-4-
<PAGE>
6. Representation and Warranty of Stockholder. Each Stockholder
------------------------------------------
represents and warrants and covenants that such Stockholder: (i) is the legal
and beneficial owner of the Shares, which at the date of this Agreement and at
all times up until the Expiration Date will be free and clear of any liens,
claims, options, charges or other encumbrances; (ii) has full power and
authority to make, enter into and carry out the terms of this Agreement; and
(iii) this Agreement is the legal and binding agreement of the Stockholder and
is enforceable against such Stockholder in accordance with its terms.
7. Miscellaneous.
-------------
7.1 Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
7.2 Binding Effect and Assignment. This Agreement and all of
-----------------------------
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor any
of the rights, interests or obligations of the parties hereto may be assigned by
either of the parties without the prior written consent of the other.
7.3 Amendments and Modification. This Agreement may not be
---------------------------
modified, amended, altered or supplemented except by the execution and delivery
of a written agreement executed by the parties hereto.
7.4 Specific Performance; Injunctive Relief. The parties
---------------------------------------
acknowledge that the Company will be irreparably harmed and that there will be
no adequate remedy at law for a violation of any of the covenants or agreements
of Stockholder set forth herein. Therefore, it is agreed that, in addition to
any other remedies that may be available to the Company upon any such violation,
the Company shall have the right to enforce such covenants and agreements by
specific performance, injunctive relief or by any other means available to the
Company at law or in equity.
7.5 Notices. All notices and other communications pursuant to
-------
this Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed to have been duly given on the date of
delivery if delivered by hand delivery or by facsimile to the persons identified
below or two days after mailing by air courier addressed as follows:
-5-
<PAGE>
If to the Company:
Vitamins.com, Inc.
2924 Telestar Court
Falls Church, VA 22042
Attn: President
With a copy to:
Venable, Baetjer, Howard & Civiletti, LLP
1615 L Street, N.W., Suite 400
Washington, D.C. 20036-5612
Attn: Michael A. Schlesinger, Esq.
If to Stockholder:
To the address for notice set forth on the last page hereof.
Such addresses may be changed from time to time by means of a notice
given in the manner provided in this section.
7.6 Governing Law. This Agreement shall be governed by,
-------------
construed and enforced in accordance with the internal laws of the State of
Delaware.
7.7 Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
7.8 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
7.9 Effect of Headings. The section headings herein are for
------------------
convenience only and shall not affect the construction or interpretation of this
Agreement.
7.10 Third-Party Beneficiary. The Stockholder Representative
-----------------------
shall be a third party beneficiary of this Agreement.
7.11 Survival. This Agreement shall survive the Merger and the
--------
consummation of the transactions contemplated thereby.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
[Signature Pages Follow.]
-6-
<PAGE>
Signature page to Written Consent and Agreement of Stockholders.
STOCKHOLDER
By:_________________________________
Stockholder's Address for Notice:
Shares owned of record:
__________ shares of the Company
Common Stock
__________ shares of Company
Series _____ Preferred Stock
VITAMINS.COM, INC.
By:_________________________________
Chief Executive Officer
-7-
<PAGE>
EXHIBIT A
TO
WRITTEN CONSENT AND AGREEMENT
Form of Agreement and Plan of Reorganization and Merger
<PAGE>
Exhibit F
Affiliate Letter
HealthCentral.com
6001 Shellmound Street, Suite 800
Emeryville, CA 94608
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of Vitamins.com, a Delaware corporation ("VCI"), as the term
"affiliate" is (i) defined for purposes of paragraphs (c) and (d) of Rule 145 of
the Rules and Regulations (the "Rules and Regulations") of the Securities and
---------------------
Exchange Commission (the "Commission") under the Securities Act of 1933, as
----------
amended (the "Act"), and/or (ii) used in and for purposes of Accounting Series,
---
Releases 130 and 135, as amended, of the Commission. I have been further
advised that pursuant to the terms of the Agreement and Plan of Reorganization
and Merger dated as of March __, 2000 (the "Merger Agreement") among
------ ---------
HealthCentral.com, a Delaware corporation ("HCC"), HCC Acquisition Corporation,
---
a wholly-owned subsidiary of HCC ("Merger Sub"), and VCI, Merger Sub will be
----------
merged with and into VCI (the "Merger") and that as a result of the Merger, I
------
may receive shares of HCC common stock in exchange for shares of VCI common
stock owned by me.
I represent, warrant and covenant to HCC that in the event I receive any
HCC common stock as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the HCC
common stock in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed its requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of HCC common stock to the extent I believed
necessary with my counsel or counsel for VCI.
C. I have been advised that the issuance of HCC common stock to me
pursuant to the Merger will be exempt from registration under the Act. However,
I have also been advised that, since at the time the Merger will be submitted
for a vote of the shareholders of HCC, I may be deemed to have been an affiliate
of VCI and the distribution by me of HCC common stock has not been registered
under the Act, and that I may not sell, transfer or otherwise dispose of HCC
common stock issued to me in the
<PAGE>
Merger unless (i) such sale, transfer or other disposition has been registered
under the Act, (ii) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by the
Commission under the Act, or (iii) in the opinion of counsel reasonably
acceptable to Purchaser, such sale, transfer or other disposition is otherwise
exempt from registration under the Act.
D. Except as set forth in the Merger Agreement, I understand that HCC
is under no obligation to register the sale, transfer or other disposition of
the HCC common stock by me or on my behalf under the Act or to take any other
action necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
HCC transfer agents with respect to the HCC common stock and that there will be
placed on the certificates for the HCC common stock issued to me, or any
substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM."
and
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT APPLIES, AND MAY ONLY BE
TRANSFERRED IN CONFORMITY WITH RULE 145, PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT, OR IN ACCORDANCE WITH A
WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE
ISSUER, IN FORM AND SUBSTANCE TO THE EFFECT THAT SUCH
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933."
F. I also understand that unless the transfer by me of my HCC common
stock has been registered under the Act or is a sale made in conformity with the
provisions of Rule 145, HCC reserves the right to put the following legend on
the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT
2
<PAGE>
AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT APPLIES. THE SHARES HAVE BEEN ACQUIRED BY
THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF SECURITIES ACT AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT."
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to HCC a copy of a letter from
the staff of the Commission, or an opinion of counsel in form and substance
reasonably satisfactory to HCC, to the effect that such legend is not required
for purposes of the Act.
I further represent to and covenant with HCC that from the date that is
30 days prior to the Effective Time (as defined in the Merger Agreement) I will
not sell, transfer or otherwise dispose of, including entering into any hedging
transaction with respect to, shares of VCI common stock held by me and that I
will not sell, transfer or otherwise dispose of, including entering into any
hedging transaction with respect to, any shares of HCC common stock received by
me in the Merger or other shares of HCC common stock until after such time as
results covering at least 30 days of combined operations of HCC and VCI have
been published by HCC, in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the Commission on
Form 10-K, 10-Q, or 8-K, or any other public filing or announcement which
includes the results of at least 30 days of combined operations; provided,
however, that this paragraph shall not prevent me from selling, transferring or
disposing of such number of shares of VCI common stock or HCC common stock as
will not, in the reasonable judgment of accountants to HCC, interfere with or
prevent the Merger being accounted for as a "pooling of interests," taking into
account the nature, extent and timing of such sale, transfer or disposition and
of similar sales, transfers or dispositions by all other affiliates of VCI and
all affiliates of HCC.
I understand that pursuant to the Merger Agreement, no certificate for
HCC common stock shall be delivered to me in exchange for certificates
representing VCI common stock until I have executed and delivered this
agreement.
3
<PAGE>
Very truly yours,
By:____________________________________
Name:__________________________________
Accepted this ____ day of March, 2000 by HealthCentral.com
By:___________________________________
Name:_________________________________
Title:________________________________
4
<PAGE>
EXHIBIT G
SHAREHOLDER'S LETTER
HealthCentral.com
6001 Shellmound Street, Suite 800
Emeryville, CA 94608
Ladies and Gentlemen:
1. Letter and Agreement. By executing this letter, the undersigned
("Holder") makes the following representations and warranties in connection with
the Agreement and Plan of Reorganization and Merger (the "Agreement"), dated as
of March __, 2000, by and among HCC Corporation, a Delaware corporation ("HCC"),
HCC Acquisition Corp., a Delaware corporation, and VC Corporation, a Delaware
corporation (the "Company"). Holder is a shareholder of the Company. As a part
of the transactions contemplated by the Agreement (the "Merger"), the Holder
shall acquire shares of the common stock of HCC (the "Shares") in exchange for
the shares of common stock of the Company currently held by the Holder (an
"investment").
2. Accredited Investor Status. Certain of the Company's shareholders
are "accredited investors" as that term is defined and construed pursuant to
Regulation D under the Securities Act of 1933, as amended (the "Act"). Please
initial the appropriate space(s) in this section indicating either that Holder
is or is not an accredited investor.
NOT AN ACCREDITED INVESTOR:
Initial ______ The Holder is not an accredited investor (the Holder is
not an accredited investor if it does not qualify as an
accredited investor on the basis of any of the factors
listed in the Appendix).
ACCREDITED INVESTORS:
Initial ______ The Holder is an accredited investor (the Holder is an
accredited investor if it qualifies as an accredited
investor on the basis of any of the factors listed in the
Appendix).
<PAGE>
3. Holder Representations and Warranties. Holder, and each person
signing on behalf of Holder, hereby represents and warrants to, and agrees with,
HCC as follows:
Securities Law Compliance
(a) Holder is acquiring the Shares for investment purposes only and
does not intend to resell, distribute or subdivide the Shares. Except as set
forth in Section 6, Holder is acquiring the Shares for Holder's own account (and
not as a nominee or agent) and no other person will have any beneficial interest
in the Shares.
(b) Holder acknowledges that HCC is offering and selling the Shares
pursuant to exemptions from registration under the Act, and exemptions from
qualification under the securities laws of certain states, for transactions not
involving any public offering, and that HCC is relying on the accuracy of the
representations and warranties included herein to obtain those exemptions.
Holder further represents and warrants to HCC as follows:
i) Holder has the financial ability to bear the economic
risk of his or her investment in HCC (including its possible loss), has adequate
means of providing for his or her current needs and personal contingencies, and
has no need for liquidity with respect to his or her investment in HCC; and
ii) Holder, either alone or with Holder's
representative(s), has such knowledge and experience in financial and business
matters that Holder is capable of evaluating the merits and risks of an
investment in HCC and has obtained, in his or her judgment, sufficient
information from HCC to evaluate the merits and risks of an investment in HCC.
(c) Holder understands that the Shares have not been registered
under the Act or qualified under the securities laws of any state, and therefore
cannot be transferred, resold, pledged, hypothecated, assigned, or otherwise
disposed of unless they are subsequently registered or qualified under the Act
and under applicable state securities laws, or an exemption from registration
and/or qualification is available. Holder will not sell or otherwise transfer
the Shares except pursuant to an effective registration under the Act or
pursuant to an exemption from the registration requirements of the Act.
(d) Holder's legal domicile and principal place of business is
located in the jurisdiction set forth in Section 6(c).
<PAGE>
Basis for Investment; Authorization
(e) Holder has been given the opportunity to ask questions of, and
receive answers from, representatives of HCC and the Company concerning the
terms and conditions of the Merger, and other matters pertaining to this
investment, and has been given the opportunity to obtain such additional
information as is necessary to evaluate the merits and risks of an investment in
HCC. Holder's decision to buy the Shares was made on the basis of Holder's
independent analysis of the terms of the purchase, and arms' length discussions
with representatives of HCC and the Company and the representations, warranties
and covenants of HCC in the Agreement.
(f) Holder has determined that the Shares are a suitable investment
for Holder, in light of Holder's investment goals, ability to sustain losses,
needs for liquidity and previous decisions to invest in securities such as the
Shares or securities bearing similar risks.
4. Miscellaneous.
(a) Indemnity. Holder agrees to indemnify and hold harmless HCC
and each of its shareholders, directors, officers, employees, agents, and
attorneys, from and against any and all loss, liability, claims, damage, and
expense (including any expense reasonably incurred in investigating, preparing
or defending against any litigation commenced or threatened or any claim
whatsoever) related to any false representation or warranty or any breach of
agreement by Holder contained herein.
(b) Applicable Law. THIS LETTER WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS
THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
(c) Forum; Waiver of Jury Trials. All actions and proceedings
arising out of or relating to this letter and related to the Merger, any
agreement delivered in connection with the Merger, the Statement and/or the
investment in HCC shall be heard and determined in any Delaware state or federal
court sitting in the State of Delaware. The undersigned hereby (i) submits to
the exclusive jurisdiction of any Delaware state or federal court sitting in the
State of Delaware for the purpose of any action or proceeding arising out of or
relating to this letter and related to the Merger, any agreement delivered in
connection with the Merger, the Statement and/or the investment in HCC brought
by any party, and (ii) waives, and agrees not to assert
<PAGE>
by way of motion, defense or otherwise, in any such action, any claim that it is
not subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the action or
proceeding is brought in an inconvenient forum, that the venue of the action or
proceeding is improper, or that this letter or any agreement delivered in
connection with the Merger may not be enforced in or by any of the above-named
courts.
THE UNDERSIGNED HEREBY WAIVES TO THE FULLEST
--------------------------------------------
EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT
-----------------------------------------------
MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
-----------------------------------------------
ACTIONS OR PROCEEDINGS DIRECTLY OR INDIRECTLY
---------------------------------------------
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
------------------------------------------------
LETTER AND RELATED TO THE MERGER, ANY AGREEMENT
-----------------------------------------------
DELIVERED IN CONNECTION WITH THE MERGER, THE
--------------------------------------------
STATEMENT AND/OR THE INVESTMENT IN HCC.
--------------------------------------
(d) Counterparts. This letter may be executed through the use of
separate signature pages or in any number of counterparts, and each of such
counterparts will, for all purposes, constitute one agreement binding on all the
parties, notwithstanding that all parties are not signatories to the same
counterpart.
(e) Gender. As used in this letter, the masculine gender shall
include the feminine and neuter, and vice versa, as the context so requires; and
the singular number shall include the plural, and vice versa, as the context so
requires.
(f) Headings. As used in this letter, section headings are for the
convenience of reference only and shall not be used to modify, interpret, limit,
expand or construe the terms of this letter.
5. Holder Information. Please complete the following:
(a) Name of Holder:________________________________________
Name of Joint Holder, if any:__________________________
(b) Holder's Social Security or Taxpayer ID No. (if required by
law):
_______________________________________________________
(c) Holder's legal domicile and principal place of business is
located in
<PAGE>
the State of________________________________________
(d) Address: Mailing Address, if different:
___________________________ ______________________________
___________________________ ______________________________
___________________________ ______________________________
(e) Telephone numbers: (_____) _______-________ (home)
(_____) _______-________ (work)
<PAGE>
DATED: _________________, 2000.
SIGNATURE FOR INDIVIDUAL HOLDER: SIGNATURE FOR CORPORATION, PARTNERSHIP,
TRUST OR OTHER ENTITY HOLDER
____________________________________ _____________________________________
(Print Name of Holder) (Print Name of Holder)
____________________________________ _____________________________________
(Signature) (Signature)
____________________________________ _____________________________________
(Print Name of Joint Holder, if any) (Print Name of Person Signing)
____________________________________ _____________________________________
(Signature of Joint Holder, if any) (Print Title)
ACCEPTED:
- ---------
______________, a Delaware corporation
By:______________________________________
Its:_____________________________________
Date:___________________, 2000
<PAGE>
APPENDIX
Holder is an accredited investor if any of the following apply:
FOR INDIVIDUAL HOLDERS ONLY:
I have an individual net worth/1/, or my spouse and I have a combined
net worth, in excess of $1,000,000.
AND/OR
I had individual income, excluding any income attributable to my spouse,
of more than $200,000 in each of the two calendar years preceding the calendar
year in which this Agreement is submitted, and I reasonably expect to have an
individual income in excess of $200,000 in this calendar year.
AND/OR
My spouse and I had joint income of more than $300,000 in each of the
two calendar years preceding the calendar year in which this Agreement is
submitted, and reasonably expect to have joint income in excess of $300,000
during this calendar year.
FOR CORPORATIONS, PARTNERSHIPS, BUSINESS TRUSTS, OR OTHER ENTITIES:
Holder (i) was not formed for the specific purpose of acquiring the
Shares and (ii) has total assets in excess of $5,000,000.
AND/OR
Each of Holder's equity owners is an accredited investor.
The Holder is an institutional investor described in more detail in Rule
501(a)(1) or (2) of Regulation D, such as a bank, savings and loan association,
registered broker or dealer, insurance company, registered investment company,
business development company or small business investment company. Please
circle the appropriate description in the previous sentence or describe here:_
FOR HOLDERS THAT ARE TRUSTS:
The trustee of the subscribing trust is: (i) a bank (as defined in
Section 3(a)(2) of the Act); (ii) acting in its fiduciary capacity as trustee;
and (iii) subscribing for the purchase of the Shares on behalf of a trust.
___________________________________
/1/ For purposes of this Section, "net worth" means the excess of total assets
at fair market value (including principal residence, home furnishings and
automobiles) over total liabilities.
<PAGE>
AND/OR
(i) The subscribing trust has total assets in excess of $5,000,000; and
(ii) the person making the investment decision on behalf of the trust has such
knowledge and experience in financial and business matters that he or she is
capable of evaluating the merits and risks of an investment in the Shares.
AND/OR
(i) The subscribing trust is a revocable trust that may be amended or
revoked at any time by the grantors thereof; and (ii) all of the grantors are
accredited investors.
FOR INDIVIDUAL RETIREMENT ACCOUNTS:
The participant (i.e., the equity owner) of the subscribing IRA is an
accredited investor.
FOR HOLDERS THAT ARE EMPLOYEE BENEFIT PLANS
(INCLUDING KEOGH PLANS):
Holder is (i) an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); and (ii)
the decision to invest in the Company was made by a plan fiduciary (as defined
in Section 3(21) of ERISA) that is either a bank, savings and loan association,
insurance company, or registered investment adviser. The name of that plan
fiduciary is:
AND/OR
Holder is an employee benefit plan within the meaning of ERISA and has
total assets in excess of $5,000,000.
AND/OR
All of Holder's plan participants are accredited investors.
AND/OR
(i) Holder is a defined contribution or defined benefit plan qualified
under Section 401(a) of the Internal Revenue Code; (ii) the plan provides for
segregated accounts for each plan participant; (iii) the plan documents provide
each plan participant with the authority to direct the plan trustee to make this
investment to the extent of the participant's voluntary contributions plus that
portion of the employer's contributions that have vested to the plan
participant's benefit; (iv) one or more plan participants have directed the plan
trustee to make this investment; and (v) each such plan participant is an
accredited investor.
<PAGE>
FOR 501(c)(3) ORGANIZATIONS:
Holder (i) is an organization described in section 501(c)(3) of the
Internal Revenue Code not formed for the specific purpose of acquiring the
Shares, and (ii) has total assets in excess of $5,000,000.
<PAGE>
EXHIBIT H-1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made as of _______________,
---------
2000, but is only effective as of the Effective Date (as defined below), by and
among HCC Corporation, a Delaware corporation ("HCC"), VC Corporation, a
Delaware corporation ("VC"), and Robert M. Haft ("Employee").
--------
BACKGROUND
This Agreement is entered into in connection with and is ancillary to an
Agreement and Plan of Reorganization and Merger (the "Plan"), dated as of March
----
___, 2000 among HCC, Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of HCC ("Acquisition Corp"), and VC, pursuant to which Acquisition
----------------
Corp is to merge with and into VC (the "Merger"), VC will continue as the
------
surviving corporation in the merger, and the shares of VC capital stock
outstanding immediately prior to the effective time of the merger will be
converted into shares of HCC Common Stock. The date on which the Merger becomes
effective will be the effective date of this Agreement (the "Effective Date").
--------------
In consideration for HCC's entering into and performing under the Plan,
Employee has agreed to concurrently enter into the Confidentiality Agreement and
the Non-Competition Agreement (as provided in Section 5).
VC and HCC are sometimes together referred to herein as the "Company".
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
of the parties contained herein, HCC and Employee hereby agree as follows:
1. Duties. Employee will be employed as a full-time employee of HCC and
------
initially will serve as its President of VC, and agrees to perform such services
as are commensurate with such a position and as may be reasonably required or
directed by the Chief Executive Officer of HCC. Employee agrees to perform such
other duties and responsibilities, commensurate with Employee's position, as may
be reasonably required of him by the Chief Executive Officer of HCC. Employee
agrees that, to the best of Employee's ability and experience, Employee will at
all times conscientiously perform all of the duties and obligations assigned to
Employee in accordance with this Agreement.
2. Full-Time Employment. Employee's employment will be on a full-time
--------------------
basis, in accordance with standard employee policies for HCC. Except for such
activities, if any, as may be set forth in Schedule 1 attached hereto or as may
hereafter be consented to by HCC in its sole discretion, during Employee's
employment hereunder, Employee will not engage in any other business or render
any commercial or professional services, directly or indirectly, to any other
person or organization, whether for compensation or otherwise, provided that
Employee may (i)
<PAGE>
provide incidental assistance to family members on matters of family business,
and (ii) sit on the boards of charitable and nonprofit organizations which do
not compete with HCC, provided in each case that such activities do not conflict
with or materially interfere with Employee's obligations to HCC. Employee may
make personal investments in nonpublicly traded corporations, partnerships or
other entities, which are not engaged in: (i) a pharmacy or retail drugstore
business (including but not limited to a business involved in the provision of
prescription, over-the-counter and health and beauty products) that operates
interactively via electronic media, including over the Internet or (ii) a
business, other than a manufacturing business, that provides health information,
products and services directly to the general public (including linkages between
consumers and health providers, payors and ancillary entities) in various
communications media, including but not limited to radio, television, Internet,
interactive television, interactive cable and satellite (the foregoing
description of business activities and markets shall be referred to in this
Agreement as "Competitive Businesses"). Notwithstanding anything to the contrary
----------------------
contained in this Agreement, Employee may make personal investments in publicly
traded corporations regardless of the business they are engaged in, provided
that Employee does not at any time own in excess of 1% of the issued and
outstanding stock of any such publicly traded corporation that is engaged in any
Competitive Businesses.
3. Place of Employment. During the term of employment, Employee shall
-------------------
render his services principally at the principal executive offices of the
Company, as mutually agreed. In addition, Employee shall do such traveling as
shall be reasonably necessary in connection with his duties and responsibilities
hereunder.
4. Compensation.
------------
(a) Salary. Employee's initial monthly base salary rate shall be
------
$12,500 per month (the "Monthly Base Salary") ($150,000 on an annualized basis),
-------------------
subject to review and increase from time to time thereafter in accordance with
the Company's policies. Such salary shall be paid in accordance with the
Company's normal payroll practices.
(b) Business Expenses. The Company shall reimburse Employee for all
-----------------
reasonable business expenses incurred by Employee in the course of performing
services for HCC the Company under this Agreement in accordance with the
Company's then existing policy relating to reimbursement of business expenses
for the Company's employees.
(c) Other Benefits. Employee will be entitled to participate in or
--------------
receive benefits commensurate with Employee's position and those of similarly
situated employees of HCC in accordance with HCC's standard employee policies in
effect from time to time. HCC may change, amend, modify or terminate any
benefit plan from time to time.
(d) Withholding, Etc. The Company may make such deductions,
----------------
withholdings and other payments from all sums payable pursuant to this Agreement
which are required by law or as Employee requests in writing for taxes and other
charges.
(e) Vacation. Employee shall be entitled to no less than three weeks
--------
of paid vacation or personal time off during each full calendar year of his
employment hereunder (and a
<PAGE>
pro rata portion thereof for any period of such employment that is less than a
full calendar year) or such greater amount of vacation, personal and other leave
as HCC provides to similarly situated employees of HCC.
5. Confidentiality. Simultaneously with the execution of this Agreement,
---------------
Employee is executing and delivering and hereby adopts and agrees to be bound by
the form of Confidential Information and Invention Assignment Agreement attached
hereto as Schedule 2 (the "Confidentiality Agreement").
-------------------------
6. Termination. Employee's employment with the Company will be on an "at
-----------
will" basis, which means that either Employee or HCC may terminate Employee's
employment at any time for any reason or no reason, without further obligation
or liability, subject to the terms and conditions of this Agreement. Except in
the case of Employee's fraud or theft or misappropriation of Company property,
the Company's sole recourse against Employee for breaches under this Agreement
shall be to exercise its right to terminate Employee's employment with the
Company. In particular,
(a) Employee's employment shall terminate upon the death of Employee.
(b) The Company may terminate Employee's employment by written notice
to Employee in the event Employee is unable, for a period of three or more
consecutive months or 150 calendar days during any consecutive twelve-month
period, due to illness, accident or other physical or mental incapacity, to
perform his duties hereunder.
(c) The Company may terminate Employee's employment for "Cause" (as
-----
defined below) by written notice to Employee.
(d) The Company may terminate Employee's employment for any other
reason by written notice to Employee.
(e) Employee may terminate Employee's employment for any reason at any
time by written notice to the Company.
(f) The Confidentiality Agreement, the Non-Competition Agreement
executed by the Employee concurrently herewith and Sections 5, 6, 7, 8 and 9 of
this Agreement shall survive the termination of this Agreement as a result of
the termination of Employee's employment for any reason.
7. Definition of "Cause." As used in this Agreement, the term "Cause"
-------------------- -----
shall mean:
(a) Employee personally engaging in knowing and intentional illegal
conduct which is seriously injurious to HCC or its affiliates;
(b) Employee being convicted of a felony, or committing a material act
of dishonesty or fraud against, or the material misappropriation of property
belonging to, HCC or its affiliates;
<PAGE>
(c) Employee habitually neglecting his duties hereunder,
(d) Employee knowingly and intentionally breaching any material term
of this Agreement, the Confidentiality Agreement or the Noncompetition Agreement
executed by the Employee concurrently herewith (the "Noncompetition Agreement");
(e) Employee's commencement of employment with another employer while
he is an employee of HCC; or
(f) any material breach by Employee of any material provision of this
Agreement or the Confidentiality Agreement or the Non-Competition Agreement
executed by the Employee concurrently herewith which continues uncured for 30
days following notice thereof.
8. Severance Payment. If HCC terminates Employee's employment pursuant
-----------------
to Section 6(d) during the period beginning on the Effective Date and ending one
year thereafter (the "Severance Period"), then HCC will pay Employee on a
----------------
monthly basis and at a monthly rate the Monthly Base Salary for the greater of
(i) six (6) months or (ii) each month remaining in the Severance Period (subject
to proration for any partial month so remaining), subject to Employee's
continued compliance with all the terms of the Confidentiality Information and
the Non-Competition Agreement and the surviving terms of this Agreement, and
provided, however, that if Employee begins rendering services as an employee or
- -------- -------
consultant in excess of thirty (30) hours per week to any person or entity
during the Severance Period and receives salary for such services, then the
=
Company will cease making such severance payments at such time. Employee has no
obligation to seek employment during the Severance Period.
9. Miscellaneous.
-------------
(a) Notices. Any and all notices permitted or required to be given
-------
under this Agreement must be in writing. Notices will be deemed given (i) when
personally received or when sent by facsimile transmission (as evidenced by the
sender's confirmation receipt), (ii) on the first business day after having been
sent by commercial overnight courier with written verification of receipt, or
(iii) seventy-two (72) hours after having been sent by registered or certified
mail from a location on the United States mainland, return receipt requested,
postage prepaid, whichever occurs first, at the address set forth below or at
any new address, notice of which will have been given in accordance with this
Section 9(a):
If to HCC:
Attn: Chief Executive Officer
<PAGE>
If to Employee:
with a copy to:
(b) Entire Agreement; Amendments. This Agreement, the Confidentiality
----------------------------
Agreement and the Noncompetition Agreement contain the entire agreement and
supersede and replace all prior agreements between HCC or Company and Employee
concerning the subject matter contained in this Agreement. This Agreement may
not be changed or modified in whole or in part except by a writing signed by the
party against whom enforcement of the change or modification is sought.
(c) Successors and Assigns. This Agreement will not be assignable by
----------------------
either Employee or HCC, except that the rights and obligations of HCC under this
Agreement may be assigned to a corporation which becomes the successor or HCC to
HCC or Company as the result of a merger or other change of control in the
ownership of HCC or Company.
(d) Governing Law. This Agreement will be governed by and interpreted
-------------
according to the substantive laws of the State of Delaware without regard to
such state's conflicts law. Each party hereto agrees to submit to the
jurisdiction of the state and Federal courts located within the State of
Delaware and agrees that venue for any dispute hereunder shall lie exclusively
in such courts.
(e) No Waiver. The failure of either party to insist on strict
---------
compliance with any of the terms of this Agreement in any instance or instances
will not be deemed to be a waiver of any term of this Agreement or of that
party's right to require strict compliance with the terms of this Agreement in
any other instance.
(f) Severability. Employee and HCC recognize that the limitations
------------
contained herein are reasonably and properly required for the adequate
protection of the interests of HCC. If for any reason a court of competent
jurisdiction or binding arbitration proceeding finds any provision of this
Agreement, or the application thereof, to be unenforceable, the remaining
provisions of this Agreement will be interpreted so as best to reasonably effect
the intent of the parties. The parties further agree that the court or
arbitrator shall replace any such invalid or unenforceable provisions with valid
and enforceable provisions designed to achieve, to the extent possible, the
business purposes and intent of such unenforceable provisions.
(g) Counterparts. This Agreement may be executed in counterparts
------------
which when taken together will constitute one instrument. Any copy of this
Agreement with the original signatures of all parties appended will constitute
an original.
(h) Attorneys' Fees. In the event any dispute arises hereunder the
---------------
court shall
<PAGE>
have the authority to award costs and attorneys' fees to the prevailing
party.
<PAGE>
IN WITNESS WHEREOF, this Agreement is made and effective as of the
Effective Date.
HCC CORPORATION EMPLOYEE
By:__________________________________ ____________________________
VC CORPORATION
By: ________________________________
SIGNATURE PAGE TO EMPLOYMENT AGREEMENT
<PAGE>
SCHEDULE 1
PERMITTED ACTIVITIES
Robert M Haft Insurance Trust 1986
RMH Investment Associates LLC
ROBERT HAFT CAPITAL L.L.C.
ROBERT HAFT GROUP L.L.C.
Home Health L.L.C
Jefferson Chase LLC
Colby Bartlett LLC
Hamilton Morgan LLC
Cropexchange.com
Claimjump.com
Intrepid Connecticut Ave. L.L.C.
Intrepid C Street L.L.C.
<PAGE>
SCHEDULE 2
CONFIDENTIALITY AGREEMENT
<PAGE>
SCHEDULE 3
NONCOMPETITION AGREEMENT
<PAGE>
EXHIBIT H-2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made as of March ___, 2000,
---------
but is only effective as of the Effective Date (as defined below), by and among
HCC Corporation, a Delaware corporation ("HCC"), ________, a Delaware
corporation ("VC"), and Bruce Kudeviz ("Employee").
--------
BACKGROUND
This Agreement is entered into in connection with and is ancillary to
an Agreement and Plan of Reorganization and Merger (the "Plan"), dated as of
----
March ___, 2000 among HCC, Acquisition Corp., a Delaware corporation and wholly
owned subsidiary of HCC ("Acquisition Corp"), and VC, pursuant to which
----------------
Acquisition Corp is to merge with and into VC (the "Merger"), VC will continue
as the surviving corporation in the merger, and the shares of VC capital stock
outstanding immediately prior to the effective time of the merger will be
converted into shares of HCC Common Stock. The date on which the Merger becomes
effective will be the effective date of this Agreement (the "Effective Date").
--------------
In consideration for HCC's entering into and performing under the
Plan, Employee has agreed to concurrently enter into the Confidentiality
Agreement and the Non-Competition Agreement (as provided in Section 5).
VC and HCC are sometimes together referred to herein as the "Company".
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements of the parties contained herein, HCC and Employee hereby agree as
follows:
1. Duties. Employee will be employed as a full-time employee of HCC
------
and initially will serve as its Executive Vice President of VC, and agrees to
perform such services as are commensurate with such a position and as may be
reasonably required or directed by the Senior Vice President of HCC. Employee
agrees to perform such other duties and responsibilities, commensurate with
Employee's position, as may be reasonably required of him by the Senior Vice
President of HCC. Employee agrees that, to the best of Employee's ability and
experience, Employee will at all times conscientiously perform all of the duties
and obligations assigned to Employee in accordance with this Agreement.
2. Full-Time Employment. Employee's employment will be on a full-
--------------------
time basis, in accordance with standard employee policies for HCC. Except for
such activities, if any, as may be set forth in Schedule 1 attached hereto or as
may hereafter be consented to by HCC in its sole discretion, during Employee's
employment hereunder, Employee will not engage in any other business or render
any commercial or professional services, directly or indirectly, to any other
person or organization, whether for compensation or otherwise, provided that
Employee may (i)
<PAGE>
provide incidental assistance to family members on matters of family business,
and (ii) sit on the boards of charitable and nonprofit organizations which do
not compete with HCC, provided in each case that such activities do not conflict
with or materially interfere with Employee's obligations to HCC. Employee may
make personal investments in nonpublicly traded corporations, partnerships or
other entities, which are not engaged in: (i) a pharmacy or retail drugstore
business (including but not limited to a business involved in the provision of
prescription, over-the-counter and health and beauty products) that operates
interactively via electronic media, including over the Internet or (ii) a
business, other than a manufacturing business, that provides health information,
products and services directly to the general public (including linkages between
consumers and health providers, payors and ancillary entities) in various
communications media, including but not limited to radio, television, Internet,
interactive television, interactive cable and satellite (the foregoing
description of business activities and markets shall be referred to in this
Agreement as "Competitive Businesses"). Notwithstanding anything to the contrary
----------------------
contained in this Agreement, Employee may make personal investments in publicly
traded corporations regardless of the business they are engaged in, provided
that Employee does not at any time own in excess of 1% of the issued and
outstanding stock of any such publicly traded corporation that is engaged in any
Competitive Businesses.
3. Place of Employment. During the term of employment, Employee
-------------------
shall render his services principally at the principal executive offices of the
Company, as mutually agreed. In addition, Employee shall do such traveling as
shall be reasonably necessary in connection with his duties and responsibilities
hereunder.
4. Compensation.
------------
(a) Salary. Employee's initial monthly base salary rate shall be
------
$12,500 per month (the "Monthly Base Salary") ($150,000 on an annualized basis),
-------------------
subject to review and increase from time to time thereafter in accordance with
the Company's policies. Such salary shall be paid in accordance with the
Company's normal payroll practices.
(b) Business Expenses. The Company shall reimburse Employee for all
-----------------
reasonable business expenses incurred by Employee in the course of performing
services for the Company under this Agreement in accordance with the Company's
then existing policy relating to reimbursement of business expenses for the
Company's employees.
(c) Other Benefits. Employee will be entitled to participate in or
--------------
receive benefits commensurate with Employee's position and those of similarly
situated employees of HCC in accordance with HCC's standard employee policies in
effect from time to time. HCC may change, amend, modify or terminate any
benefit plan from time to time.
(d) Withholding, Etc. The Company may make such deductions,
----------------
withholdings and other payments from all sums payable pursuant to this Agreement
which are required by law or as Employee requests in writing for taxes and other
charges.
(e) Vacation. Employee shall be entitled to no less than three weeks
--------
of paid vacation or personal time off during each full calendar year of his
employment hereunder (and a
<PAGE>
pro rata portion thereof for any period of such employment that is less than a
full calendar year) or such greater amount of vacation, personal and other leave
as HCC provides to similarly situated employees of HCC.
5. Confidentiality. Simultaneously with the execution of this
---------------
Agreement, Employee is executing and delivering and hereby adopts and agrees to
be bound by the form of Confidential Information and Invention Assignment
Agreement attached hereto as Schedule 2 (the "Confidentiality Agreement").
-------------------------
6. Termination. Employee's employment with the Company will be on an
-----------
"at will" basis, which means that either Employee or HCC may terminate
Employee's employment at any time for any reason or no reason, without further
obligation or liability, subject to the terms and conditions of this Agreement.
Except in the case of Employee's fraud or theft or misappropriation of Company
property, the Company's sole recourse against Employee for breaches under this
Agreement shall be to exercise its right to terminate Employee's employment with
the Company. In particular,
(a) Employee's employment shall terminate upon the death of Employee.
(b) The Company may terminate Employee's employment by written notice
to Employee in the event Employee is unable, for a period of three or more
consecutive months or 150 calendar days during any consecutive twelve-month
period, due to illness, accident or other physical or mental incapacity, to
perform his duties hereunder.
(c) The Company may terminate Employee's employment for "Cause" (as
-----
defined below) by written notice to Employee.
(d) The Company may terminate Employee's employment for any other
reason by written notice to Employee.
(e) Employee may terminate Employee's employment for any reason at any
time by written notice to the Company.
(f) The Confidentiality Agreement, the Non-Competition Agreement
executed by the Employee concurrently herewith and Sections 5, 6, 7, 8 and 9 of
this Agreement shall survive the termination of this Agreement as a result of
the termination of Employee's employment for any reason.
7. Definition of "Cause." As used in this Agreement, the term
--------------------
"Cause" shall mean:
-----
(a) Employee personally engaging in knowing and intentional illegal
conduct which is seriously injurious to HCC or its affiliates;
(b) Employee being convicted of a felony, or committing a material act
of dishonesty or fraud against, or the material misappropriation of property
belonging to, HCC or its affiliates;
<PAGE>
(c) Employee habitually neglecting his duties hereunder,
(d) Employee knowingly and intentionally breaching any material term
of this Agreement, the Confidentiality Agreement or the Noncompetition Agreement
executed by the Employee concurrently herewith (the "Noncompetition Agreement");
(e) Employee's commencement of employment with another employer while
he is an employee of HCC; or
(f) any material breach by Employee of any material provision of this
Agreement or the Confidentiality Agreement or the Non-Competition Agreement
executed by the Employee concurrently herewith which continues uncured for 30
days following notice thereof.
8. Severance Payment. If HCC terminates Employee's employment
-----------------
pursuant to Section 6(d) during the period beginning on the Effective Date and
ending one year thereafter (the "Severance Period"), then HCC will pay Employee
----------------
on a monthly basis and at a monthly rate the Monthly Base Salary for twelve (12)
months, subject to Employee's continued compliance with all the terms of the
Confidentiality Information and the Non-Competition Agreement and the surviving
terms of this Agreement, and provided, however, that if Employee begins
-------- -------
rendering services as an employee or consultant in excess of thirty (30) hours
per week to any person or entity during the Severance Period and receives salary
for such services, then the Company will cease making such severance payments at
such time. Employee has no obligation to seek employment during the Severance
Period.
9. Miscellaneous.
-------------
(a) Notices. Any and all notices permitted or required to be given
-------
under this Agreement must be in writing. Notices will be deemed given (i) when
personally received or when sent by facsimile transmission (as evidenced by the
sender's confirmation receipt), (ii) on the first business day after having been
sent by commercial overnight courier with written verification of receipt, or
(iii) seventy-two (72) hours after having been sent by registered or certified
mail from a location on the United States mainland, return receipt requested,
postage prepaid, whichever occurs first, at the address set forth below or at
any new address, notice of which will have been given in accordance with this
Section 9(a):
If to HCC:
Attn: Chief Executive Officer
If to Employee:
<PAGE>
with a copy to:
(b) Entire Agreement; Amendments. This Agreement, the Confidentiality
----------------------------
Agreement and the Noncompetition Agreement contain the entire agreement and
supersede and replace all prior agreements between HCC or Company and Employee
concerning the subject matter contained in this Agreement. This Agreement may
not be changed or modified in whole or in part except by a writing signed by the
party against whom enforcement of the change or modification is sought.
(c) Successors and Assigns. This Agreement will not be assignable by
----------------------
either Employee or HCC, except that the rights and obligations of HCC under this
Agreement may be assigned to a corporation which becomes the successor or HCC to
HCC or Company as the result of a merger or other change of control in the
ownership of HCC or Company.
(d) Governing Law. This Agreement will be governed by and interpreted
-------------
according to the substantive laws of the State of Delaware without regard to
such state's conflicts law. Each party hereto agrees to submit to the
jurisdiction of the state and Federal courts located within the State of
Delaware and agrees that venue for any dispute hereunder shall lie exclusively
in such courts.
(e) No Waiver. The failure of either party to insist on strict
---------
compliance with any of the terms of this Agreement in any instance or instances
will not be deemed to be a waiver of any term of this Agreement or of that
party's right to require strict compliance with the terms of this Agreement in
any other instance.
(f) Severability. Employee and HCC recognize that the limitations
------------
contained herein are reasonably and properly required for the adequate
protection of the interests of HCC. If for any reason a court of competent
jurisdiction or binding arbitration proceeding finds any provision of this
Agreement, or the application thereof, to be unenforceable, the remaining
provisions of this Agreement will be interpreted so as best to reasonably effect
the intent of the parties. The parties further agree that the court or
arbitrator shall replace any such invalid or unenforceable provisions with valid
and enforceable provisions designed to achieve, to the extent possible, the
business purposes and intent of such unenforceable provisions.
(g) Counterparts. This Agreement may be executed in counterparts
------------
which when taken together will constitute one instrument. Any copy of this
Agreement with the original signatures of all parties appended will constitute
an original.
(h) Attorneys' Fees. In the event any dispute arises hereunder the
---------------
court shall have the authority to award costs and attorneys' fees to the
prevailing party.
<PAGE>
IN WITNESS WHEREOF, this Agreement is made and effective as of the
Effective ate.
HCC CORPORATION EMPLOYEE
By:____________________________ ______________________________
VC CORPORATION
By: _____________________________
<PAGE>
SCHEDULE 1
PERMITTED ACTIVITIES
<PAGE>
SCHEDULE 2
CONFIDENTIALITY AGREEMENT
<PAGE>
SCHEDULE 3
NONCOMPETITION AGREEMENT
<PAGE>
EXHIBIT I
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (this "Agreement") is made as of the __ day
---------
of _____________, 2000 by and between HealthCentral.com, a Delaware corporation
("HCC") and ________________ ("Key Employee").
--- ------------
BACKGROUND
----------
This Agreement is entered into in connection with and is ancillary to an
Agreement and Plan of Reorganization and Merger (the "Plan"), dated as of March
----
15, 2000 among HCC, HCC Acquisition Corp., a Delaware corporation and wholly
owned subsidiary of HCC ("Acquisition Corp"), and Vitamins.com, Inc., a Delaware
----------------
corporation (the "Company"), pursuant to which Acquisition Corp is to merge with
-------
and into Company (the "Merger") and Company will continue as the surviving
------
corporation in the Merger, and the shares of Company capital stock outstanding
immediately prior to the effective time of the Merger will be converted into
shares of HCC Common Stock.
Key Employee is a stockholder of Company and has been actively involved in
the development and/or marketing of the Company's products and services. HCC
intends to continue the business of Company after the Merger and integrate such
business into HCC's ongoing business as a subsidiary of HCC. To preserve and
protect the assets of Company and HCC, including HCC's goodwill, customers and
trade secrets of which Key Employee has and will have knowledge in his or her
role as an employee, and in consideration for HCC's entering into and performing
under the Employment Agreement with Key Employee of even date herewith, Key
Employee has agreed to enter into this Agreement.
Key Employee and HCC believe the limitations as to time, geographical area
and scope of activity contained in this Agreement hereof are reasonably
necessary to, and no greater than that required to, protect the goodwill and
business interests of HCC.
1. For the period beginning on the date on which Key Employee no
longer is an employee of or consultant to the HCC (the "Effective Date") and
--------------
ending on the one-year anniversary of the Effective Date, Key Employee will not,
in the geographical areas referred to in Section 2 below, individually or as an
employee, consultant, partner, officer, director or shareholder or in any other
capacity whatsoever of or for any person, firm, partnership, or corporation
other than HCC or its subsidiaries, work as an employee or consultant, or own,
manage, operate, sell, control or participate in the ownership, management,
operation, sales or control of, any business engaged in the following (the
following being hereinafter referred to as the "Restricted Business"): (i) a
-------------------
pharmacy or retail drugstore business (including but not limited to a business
involved in the provision of prescription, over-the-counter and health and
beauty products) that operates interactively via electronic media, including
over the Internet, or (ii) a business that provides health information, products
and services to the general public (including linkages between consumers and
health providers, payors and ancillary entities) in various
<PAGE>
communications media, including but not limited to radio, television, internet,
interactive television, interactive cable and satellite; provided, however, that
the foregoing shall not prohibit Key Employee from providing services to (a) a
business or a division of a business that is not engaged in the activities
described in (i) and (ii) above (a "Permitted Business Unit") even though
-----------------------
another division or affiliate of the business is engaged in such activities,
provided that Key Employee's duties and responsibilities exclusively relate to
the Permitted Business Unit or (b) a business engaged in the activities
described in (i) and (ii) above, so long as Key Employee is not directly engaged
in or responsible for activities that would constitute a Restricted Business, or
(c) a primarily "bricks and mortar" business which derives less than 15% of its
revenue from the activities described in (i) and (ii) above ((a), (b) and (c)
being collectively referred to as "Permitted Businesses"). Notwithstanding the
--------------------
foregoing or anything to the contrary contained in this Agreement, (a) Key
Employee may make personal investments in nonpublicly traded corporations,
partnerships or other entities, which are not engaged in the Restricted
Business, unless they are Permitted Businesses, and (b) Key Employee may make
personal investments in publicly traded corporations regardless of the business
they are engaged in, provided that Employee does not at any time own in excess
of 1% of the issued and outstanding stock of any such publicly traded
corporation that is engaged in the Restricted Business, unless they are
Permitted Businesses. For purposes of illustrating the foregoing, Key Employee
would not be precluded from employment with Amazon.com so long as Key Employee
was not directly engaged in or responsible for any business of Amazon.com that
is a Restricted Business. Key Employee also would not be precluded from
employment with Target Stores so long as Target Stores does not derive more than
15% of its revenues from Restricted Businesses.
2. The geographical areas in which the restrictions provided for in
this Agreement apply include all cities, counties and states of the United
States, and all other countries in which HCC or Company has engaged in sales or
otherwise conducted business or selling or licensing efforts in any aspect of
the Restricted Business at any time prior hereto or during the term of this
Agreement. Key Employee acknowledges that the scope and period of restrictions
and the geographical area to which the restrictions imposed in this Section 2
applies are fair and reasonable and are reasonably required for the protection
of HCC and that this Agreement accurately describes the business to which the
restrictions are intended to apply.
3. Key Employee acknowledges that any breach of the covenants of this
Agreement will result in immediate and irreparable injury to HCC and,
accordingly, consents to the application of injunctive relief and such other
equitable remedies for the benefit of HCC as may be appropriate in the event
such a breach occurs or is threatened. The foregoing remedies will be in
addition to all other legal remedies to which HCC may be entitled hereunder,
including, without limitation, monetary damages.
4. Miscellaneous.
-------------
(a) Notices. Any and all notices permitted or required to be
given under this Agreement must be in writing. Notices will be deemed given (i)
when personally received or when sent by facsimile transmission (to the
receiving party's facsimile number), (ii) on the first business day after having
been sent by commercial overnight courier with written
<PAGE>
verification of receipt, or (iii) on the third business day after having been
sent by registered or certified mail from a location on the United States
mainland, return receipt requested, postage prepaid, whichever occurs first, at
the address set forth below or at any new address, notice of which will have
been given in accordance with this Section 4(a):
If to HCC:
HealthCentral.com
6001 Shellmound Street, Suite 800
Emeryville, CA 94680
Attn: C. Fred Toney
If to Key Employee:
with a copy to:
(b) Amendments. This Agreement, along with the Confidential
----------
Information and Invention Assignment Agreement between HCC and Key Employee
dated concurrently herewith (the "Confidentiality Agreement") and the Employment
-------------------------
Agreement between HCC and Key Employee dated concurrently herewith (the
"Employment Agreement"), contains the entire agreement and supersedes and
--------------------
replaces all prior agreements between Key Employee and Company or HCC concerning
the subject matter of this Agreement. This Agreement may not be changed or
modified in whole or in part except by a writing signed by the party against
whom enforcement of the change or modification is sought.
(c) Successors and Assigns. This Agreement will not be assignable by
----------------------
either Key Employee or HCC, except that the rights and obligations of HCC under
this Agreement may be assigned to a corporation which becomes the successor or
HCC to HCC or Company as the result of a merger or other change of control in
the ownership of HCC or Company.
(d) Governing Law. This Agreement will be governed by and
-------------
interpreted according to the substantive laws of the State of Delaware without
regard to such state's conflicts law. Each party hereto agrees to submit to the
jurisdiction of the state and Federal courts located within the State of
Delaware and agrees that venue for any dispute hereunder shall lie exclusively
in such courts.
<PAGE>
(e) No Waiver. The failure of either party to insist on strict
---------
compliance with any of the terms of this Agreement in any instance or instances
will not be deemed to be a waiver of any term of this Agreement or of that
party's right to require strict compliance with the terms of this Agreement in
any other instance.
(f) Severability. It is the intent of the parties that the
------------
provisions of this Agreement will be enforced to the fullest extent permissible
under applicable law. Key Employee and HCC recognize that the limitations
contained herein are reasonably and properly required for the adequate
protection of the interests of HCC. If for any reason a court of competent
jurisdiction or binding arbitration proceeding finds any provision of this
Agreement, or the application thereof, to be invalid or unenforceable, this
Agreement will be deemed amended to revise that provision or portion to the
minimum extent necessary to render it enforceable. Such amendment will apply
only with respect to the operation of this paragraph in the particular
jurisdiction in which such adjudication was made, and the remaining provisions
of this Agreement will be interpreted so as best to reasonably effect the intent
of the parties. The parties further agree that the court or arbitrator shall
replace any such invalid or unenforceable provisions with valid and enforceable
provisions designed to achieve, to the extent possible, the business purposes
and intent of such unenforceable provisions.
(g) Counterparts. This Agreement may be executed in counterparts
------------
which when taken together will constitute one instrument. Any copy of this
Agreement with the original signatures of all parties appended will constitute
an original.
(h) Attorneys' Fees. In the event any dispute arises under this
---------------
Agreement, the court shall have the authority to award costs and attorneys'
fees to the prevailing party.
[The remainder of this page is intentionally blank.]
<PAGE>
IN WITNESS WHEREOF, this Agreement is made and effective as of the date
above written.
HEALTHCENTRAL.COM KEY EMPLOYEE
By:__________________________________ ________________________________
Its:_________________________________
SIGNATURE PAGE TO NONCOMPETITION AGREEMENT
<PAGE>
EXHIBIT J
OPINION OF _________________________
(COUNSEL TO VCI)
1. VCI and each of its Subsidiaries are corporations duly incorporated,
validly existing and in good standing under the laws of the states of their
incorporation or formation (as the case may be), with requisite corporate or
limited liability company (as the case may be) power and authority to own and
lease its assets and properties and to conduct its business as it is presently
being conducted.
2. The authorized capitalization of VCI is as set forth in Section 3.2 to
the Agreement. Based upon a review of VCI's corporate books and records made
available to us and on statements and representations made to us by officers or
directors of VCI, which to our knowledge are not inaccurate, to our knowledge:
(a) the issued and outstanding capital stock of VCI consists solely of that
number of shares of capital stock which are specified in Section 3.2 of the
Agreement; (b) all of such capital stock is duly and validly issued, fully paid
and nonassessable; (c) there are no outstanding options, rights or subscriptions
to acquire capital stock of VCI or securities which are convertible into, or
exchangeable for, capital stock of VCI, other than as specified in Section 3.2
of the Agreement; (d) VCI has taken all action necessary under the option plans
of VCI to comply with the provisions of Section 5.5 of the Agreement regarding
the assumption of options by HCC and the conversion of such options into options
to purchase HCC common stock; and (e) VCI does not own any interest in any
corporate subsidiary, partnership or other business entity except as specified
in Section 3.3 of the Agreement.
3. VCI has all requisite corporate power and corporate authority to
execute, deliver and perform its obligations under the Agreement and the Merger
Agreement. The execution and delivery of the Agreement and the Merger Agreement
by VCI and the performance by VCI of its obligations under the Agreement and the
Merger Agreement have been duly authorized by all requisite corporate action on
the part of VCI.
4. The Agreement and the Merger Agreement have been duly executed and
delivered by VCI and constitute valid and binding obligations of VCI,
enforceable against it in accordance with their respective terms, except as such
enforceability may be limited by: (a) bankruptcy, insolvency, reorganization,
moratorium, receivership and/or other laws relating to or affecting the rights
of creditors generally (including, without limitation, fraudulent transfer
laws);
<PAGE>
(b) equitable principles of general applicability (including, without
limitation, equitable subordination, good faith, commercial reasonableness and
the possible unavailability of specific performance or injunctive relief),
regardless of whether considered in a proceeding in equity or at law or whether
codified by statute; or (c) the invalidity or unenforceability, under certain
circumstances, under Delaware or federal law or court decisions, of provisions
indemnifying a party against liability for its own wrongful or negligent acts or
where such indemnification is contrary to public policy. Upon consummation of
the Merger, the Merger Agreement will for purposes of the Delaware General
Corporate Law be effective to convert the capital stock of VCI into the right to
receive the common stock of HCC described therein subject to any appraisal
rights of the stockholders of VCI under Section 262 of the Delaware General
Corporate Law.
5. The execution and delivery of the Agreement and the Merger Agreement
by VCI, and the performance by VCI of its obligations hereunder in accordance
with the terms thereof, do not: (a) contravene the Certificate of Incorporation
or Bylaws of VCI; or (b) to our knowledge, result in a violation of any
judgment, order or decree of any arbitrator to which VCI is named as a party; or
(c) to our knowledge, result in the creation of any mortgage, lien, pledge,
charge, security interest, claim or other encumbrance upon the capital stock or
any material asset of VCI.
6. To our knowledge and except as set forth in the VCI Disclosure
Schedule, there is no action, suit, claim, proceeding or investigation pending
or overtly threatened against or involving VCI or any of its Subsidiaries before
any court, governmental or regulatory authority, agency, commission, or board of
arbitration.
7. To our knowledge, no consent, approval, authorization, or order of any
governmental agency or body or any court not obtained and in effect on the date
hereof is required on behalf of VCI for the lawful consummation by them of the
transactions contemplated by the Agreement and the Merger Agreement.
8. This opinion will be delivered in the standard form used by counsel to
VCI and will be subject to customary assumptions, qualifications and
limitations.
<PAGE>
EXHIBIT K
OPINION OF _________________________
(COUNSEL TO HCC)
1. HCC and each of its Subsidiaries are corporations duly incorporated,
validly existing and in good standing under the laws of the states of their
incorporation, with requisite corporate power and corporate authority to own and
lease its assets and properties and to conduct its business as it is presently
being conducted.
2. The authorized capitalization of HCC is as set forth in Section 4.2 to
the Agreement. The shares of HCC Common Stock to be issued to the former
shareholders of VCI as a result of the Merger have been duly authorized and when
issued, will be validly issued, fully paid and non-assessable. Based upon a
review of HCC's corporate books and records made available to us and on
statements and representations made to us by officers or directors of HCC, which
to our knowledge are not inaccurate, to our knowledge: (a) the issued and
outstanding capital stock of HCC consists solely of that number of shares of
capital stock which are specified in Section 4.2 of the Agreement; (b) all of
such capital stock is duly and validly issued, fully paid and nonassessable; (c)
there are no outstanding options, rights or subscriptions to acquire capital
stock of HCC or securities which are convertible into, or exchangeable for,
capital stock of HCC, other than as specified in Section 4.2 of the Agreement;
(d) HCC has taken all action necessary under the option plan of HCC to comply
with the provisions of Section 2.5 of the Agreement.
3. Each of HCC and Acquisition Corp. has all requisite corporate power
and corporate authority to execute, deliver and perform its obligations under
the Agreement and the Merger Agreement. The execution and delivery of the
Agreement and the Merger Agreement by HCC and by Acquisition Corp. and the
performance by them of their respective obligations under the Agreement and the
Merger Agreement have been duly authorized by all requisite corporate action on
the part of HCC and Acquisition Corp.
4. The Agreement and the Merger Agreement have been duly executed and
delivered by HCC and Acquisition Corp. and constitute valid and binding
obligations of HCC and Acquisition Corp., enforceable against them in accordance
with their respective terms, except as such enforceability may be limited by:
(a) bankruptcy, insolvency, reorganization, moratorium, receivership and/or
other laws relating to or affecting the rights of creditors generally
(including, without limitation, fraudulent transfer laws); (b) equitable
principles of general applicability (including, without limitation, equitable
subordination, good faith, commercial reasonableness and the possible
unavailability of specific performance or injunctive relief), regardless of
whether considered in a proceeding in equity or at law or whether codified by
statute; or (c) the invalidity or unenforceability, under certain circumstances,
under Delaware or federal law or court decisions, of provisions indemnifying a
party against liability for its own wrongful or negligent acts or where such
indemnification is contrary to public policy.
5. The execution and delivery of the Agreement and the Merger Agreement by
HCC and Acquisition Corp., and the performance by HCC and Acquisition Corp. of
their respective obligations thereunder in accordance with the terms thereof, do
not: (a) contravene
<PAGE>
the Certificate of Incorporation or Bylaws of HCC or the Certificate of
Incorporation or Bylaws of Acquisition Corp.; (b) to our knowledge, result in a
violation of any judgment, order or decree of any arbitrator to which HCC or
Acquisition Corp. is named as a party; or (c) to our knowledge, result in the
creation of any mortgage, lien, pledge, charge, security interest, claim or
other encumbrance upon the capital stock or any material asset of the Company.
6. To our knowledge and except as set forth in the HCC Disclosure
Schedule, there is no action, suit, claim, proceeding or investigation pending
or overtly threatened against or involving HCC or Acquisition Corp. before any
court, governmental or regulatory authority, agency, commission, or board of
arbitration.
7. To our knowledge, no consent, approval, authorization, or order of any
governmental agency or body or any court not obtained and in effect on the date
hereof is required on behalf of HCC or Acquisition Corp. for the lawful
consummation by them of the transactions contemplated by the Agreement or the
Merger Agreement.
8. This opinion will be delivered in the standard form used by counsel to
HCC and will be subject to customary assumptions, qualifications and
limitations.
